exv10w17






Exhibit 10.17




CHANGE OF CONTROL

SEVERANCE AGREEMENT




     AGREEMENT, dated as of the 15th day of March, 2007 (this “Agreement”), by and between Valero
Energy Corporation, a Delaware corporation (the “Company”), and Kimberly S. Bowers (the
“Executive”).



     WHEREAS, the Board of Directors of the Company (the “Board”), has determined that it is in the
best interests of the Company and its stockholders to assure that the Company will have the
continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a
Change of Control (as defined herein). The Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal uncertainties and risks created
by a pending or threatened Change of Control and to encourage the Executive’s full attention and
dedication to the current Company in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefits arrangements upon a Change of Control that
ensure that the compensation and benefits expectations of the Executive will be satisfied and that
are competitive with those of other corporations. Therefore, in order to accomplish these
objectives, the Board has caused the Company to enter into this Agreement.



     NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:



     Section 1. Certain Definitions. (a) “Effective Date” means the first date during the
Change of Control Period (as defined herein) on which a Change of Control occurs. Notwithstanding
anything in this Agreement to the contrary, if a Change of Control occurs and if the Executive’s
employment with the Company is terminated prior to the date on which the Change of Control occurs,
and if it is reasonably demonstrated by the Executive that such termination of employment (1) was
at the request of a third party that has taken steps reasonably calculated to effect a Change of
Control or (2) otherwise arose in connection with or anticipation of a Change of Control, then
“Effective Date” means the date immediately prior to the date of such termination of employment.



     (b) “Change of Control Period” means the period commencing on the date hereof and ending on
the third anniversary of the date hereof; provided, however, that, commencing on the date one year
after the date hereof, and on each annual anniversary of such date (such date and each annual
anniversary thereof, the “Renewal Date”), unless previously terminated, the Change of Control
Period shall be automatically extended so as to terminate three years from such Renewal Date,
unless, at least 60 days prior to the Renewal Date, the Company shall give notice to the Executive
that the Change of Control Period shall not be so extended.



     (c) “Affiliated Company” means any company controlled by, controlling or under common control
with the Company.



     (d) “Change of Control” means:



     (1) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”))



 









 




(a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
20% or more of either (A) the then-outstanding shares of common stock of the Company (the
“Outstanding Company Common Stock”) or (B) the combined voting power of the then-outstanding voting
securities of the Company entitled to vote generally in the election of directors (the “Outstanding
Company Voting Securities”); provided, however, that, for purposes of this Section 1(d)(1), the
following acquisitions of Outstanding Company Common Stock or of Outstanding Company Voting
Securities shall not constitute a Change of Control: (i) any acquisition directly from the
Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any Affiliated Company or (iv) any
acquisition by any corporation pursuant to a transaction that complies with Sections 1(d)(3)(A),
1(d)(3)(B) and 1(d)(3)(C);




     (2) Individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease
for any reason to constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof 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 other than the Board;



     (3) Consummation of a reorganization, merger, statutory share exchange or consolidation or
similar corporate transaction involving the Company or any of its subsidiaries, a sale or other
disposition of all or substantially all of the assets of the Company (each, a “Business
Combination”), in each case unless, following such Business Combination, (A) all or substantially
all of the individuals and entities that were the beneficial owners of the Outstanding Company
Common Stock and the Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares
of common stock and the combined voting power of the then-outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the corporation resulting from
such Business Combination (including, without limitation, a corporation that, as a result of such
transaction, owns the Company or all or substantially all of the Company’s assets either directly
or through one or more subsidiaries) in substantially the same proportions as their ownership
immediately prior to such Business Combination of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Business Combination) beneficially owns, directly
or indirectly, 20% or more of, respectively, the then-outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting power of the
then-outstanding voting securities of such corporation, except to the extent that such ownership
existed prior to the Business Combination, and (C) at least a majority of the members of the board
of directors of the corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for
such Business Combination; or



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     (4) Approval by the stockholders of the Company of a complete liquidation or dissolution of
the Company.



     Section 2. Employment Period. The Company hereby agrees to continue the Executive in
its employ, subject to the terms and conditions of this Agreement, for the period commencing on the
Effective Date and ending on the third anniversary of the Effective Date (the “Employment Period”).
The Employment Period shall terminate upon the Executive’s termination of employment for any
reason.



     Section 3. Terms of Employment. (a) Position and Duties. (1) During the
Employment Period, (A) the Executive’s position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall be at least commensurate in all
material respects with the most significant of those held, exercised and assigned at any time
during the 120-day period immediately preceding the Effective Date and (B) the Executive’s services
shall be performed at the office where the Executive was employed immediately preceding the
Effective Date or at any other location less than 35 miles from such office.



     (2) During the Employment Period, and excluding any periods of vacation and sick leave to
which the Executive is entitled, the Executive agrees to devote reasonable attention and time
during normal business hours to the business and affairs of the Company and, to the extent
necessary to discharge the responsibilities assigned to the Executive hereunder, to use the
Executive’s reasonable best efforts to perform faithfully and efficiently such responsibilities.
During the Employment Period, it shall not be a violation of this Agreement for the Executive to
(A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill
speaking engagements or teach at educational institutions and (C) manage personal investments, so
long as such activities do not significantly interfere with the performance of the Executive’s
responsibilities as an employee of the Company in accordance with this Agreement. It is expressly
understood and agreed that, to the extent that any such activities have been conducted by the
Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive’s responsibilities to the
Company.



     (b) Compensation. (1) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary (the “Annual Base Salary”) at an annual rate at least
equal to 12 times the highest monthly base salary paid or payable, including any base salary that
has been earned but deferred, to the Executive by the Company and the Affiliated Companies in
respect of the 12-month period immediately preceding the month in which the Effective Date occurs.
The Annual Base Salary shall be paid at such intervals as the Company pays executive salaries
generally. During the Employment Period, the Annual Base Salary shall be reviewed at least
annually, beginning no more than 12 months after the last salary increase awarded to the Executive
prior to the Effective Date. Any increase in the Annual Base Salary shall not serve to
limit or reduce any other obligation to the Executive under this Agreement. The Annual Base
Salary shall not be reduced after any such increase and the term “Annual Base Salary” shall refer
to the Annual Base Salary as so increased.



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     (2) Annual Bonus. In addition to the Annual Base Salary, the Executive shall be
awarded, for each fiscal year ending during the Employment Period, an annual bonus (the “Annual
Bonus”) in cash at least equal to the Executive’s highest bonus earned under the Company’s annual
incentive bonus plans, or any comparable bonus under any predecessor or successor plan or plans,
for the last three full fiscal years prior to the Effective Date (or for such lesser number of full
fiscal years prior to the Effective Date for which the Executive was eligible to earn such a bonus,
and annualized in the case of any bonus earned for a partial fiscal year) (the “Recent Annual
Bonus”). (If the Executive has not been eligible to earn such a bonus for any period prior to the
Effective Date, the “Recent Annual Bonus” shall mean the Executive’s target annual bonus for the
year in which the Effective Date occurs.) Each such Annual Bonus shall be paid no later than the
end of the third month of the fiscal year next following the fiscal year for which the Annual Bonus
is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus.



     (3) Incentive, Savings and Retirement Plans. During the Employment Period, the
Executive shall be entitled to participate in all incentive, savings and retirement plans,
practices, policies, and programs applicable generally to other peer executives of the Company and
the Affiliated Companies, but in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with respect to both regular and
special incentive opportunities, to the extent, if any, that such distinction is applicable),
savings opportunities and retirement benefit opportunities, in each case, less favorable, in the
aggregate, than the most favorable of those provided by the Company and the Affiliated Companies
for the Executive under such plans, practices, policies and programs as in effect at any time
during the 120-day period immediately preceding the Effective Date or, if more favorable to the
Executive, those provided generally at any time after the Effective Date to other peer executives
of the Company and the Affiliated Companies.



     (4) Welfare Benefit Plans. During the Employment Period, the Executive and/or the
Executive’s family, as the case may be, shall be eligible for participation in and shall receive
all benefits under welfare benefit plans, practices, policies and programs provided by the Company
and the Affiliated Companies (including, without limitation, medical, prescription, dental, vision,
disability, employee life, group life, accidental death and travel accident insurance plans and
programs) to the extent applicable generally to other peer executives of the Company and the
Affiliated Companies, but in no event shall such plans, practices, policies and programs provide
the Executive with benefits that are less favorable, in the aggregate, than the most favorable of
such plans, practices, policies and programs in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to the Executive,
those provided generally at any time after the Effective Date to other peer executives of the
Company and the Affiliated Companies.



     (5) Expenses. During the Employment Period, the Executive shall be entitled to
receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance
with the most favorable policies, practices and procedures of the Company and the Affiliated
Companies in effect for the Executive at any time during the 120-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and the Affiliated Companies.



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     (6) Fringe Benefits. During the Employment Period, the Executive shall be entitled to
fringe benefits, including, without limitation, tax and financial planning services, payment of
club dues, and, if applicable, use of an automobile and payment of related expenses, in accordance
with the most favorable plans, practices, programs and policies of the Company and the Affiliated
Companies in effect for the Executive at any time during the 120-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and the Affiliated Companies.



     (7) Office and Support Staff. During the Employment Period, the Executive shall be
entitled to an office or offices of a size and with furnishings and other appointments, and to
exclusive personal secretarial and other assistance, at least equal to the most favorable of the
foregoing provided to the Executive by the Company and the Affiliated Companies at any time during
the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive,
as provided generally at any time thereafter with respect to other peer executives of the Company
and the Affiliated Companies.



     (8) Vacation. During the Employment Period, the Executive shall be entitled to paid
vacation in accordance with the most favorable plans, policies, programs and practices of the
Company and the Affiliated Companies as in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of the Company and
the Affiliated Companies.



     (9) Immediate Vesting of Outstanding Equity Incentive Awards. Notwithstanding any
provision in the Company’s stock incentive plans or the award agreements thereunder, effective
immediately upon the occurrence of a Change of Control, (A) all stock options (incentive or
non-qualified) outstanding as of the date of such Change of Control, which are not then exercisable
and vested, shall become fully exercisable and vested to the full extent of the original grant and,
following the Executive’s termination of employment for any reason, shall remain exercisable for
the shorter of (x) five years from the Executive’s date of termination of employment and (y) the
remainder of the original option term; (B) all restrictions and deferral limitations applicable to
any restricted stock awards outstanding as of the date of such Change of Control shall lapse, and
such restricted stock awards shall become free of all restrictions and become fully vested and
transferable to the full extent of the original grant; and (C) all performance share awards
outstanding as of the date of such Change of Control for any outstanding performance periods shall
fully vest and be earned and payable in full based on the deemed achievement of performance at 200%
of target level for the entire performance period.



     Section 4. Termination of Employment. (a) Death or Disability. The
Executive’s employment shall terminate automatically if the Executive dies during the Employment
Period. If the Company determines in good faith that the Executive has a Disability (as defined
herein) that has occurred during the Employment Period (pursuant to the definition of
“Disability”), it may give to the Executive written notice in accordance with Section 11(b) of its
intention to terminate the Executive’s employment. In such event, the Executive’s employment with
the Company shall terminate effective on the 30th day after receipt of such notice by the Executive
(the “Disability Effective Date”), provided that, within the 30 days after such receipt, the



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Executive shall not have returned to full-time performance of the Executive’s duties. “Disability”
means the absence of the Executive from the Executive’s duties with the Company on a full-time
basis for 180 consecutive business days as a result of incapacity due to mental or physical illness
that is determined to be total and permanent by a physician selected by the Company or its insurers
and acceptable to the Executive or the Executive’s legal representative.




     (b) Cause. The Company may terminate the Executive’s employment during the Employment
Period for Cause. “Cause” means:




     (1) the willful and continued failure of the Executive to perform substantially the
Executive’s duties (as contemplated by Section 3(a)(1)(A)) with the Company or any
Affiliated Company (other than any such failure resulting from incapacity due to physical or
mental illness or following the Executive’s delivery of a Notice of Termination for Good
Reason), after a written demand for substantial performance is delivered to the Executive by
the Board or the Chief Executive Officer of the Company that specifically identifies the
manner in which the Board or the Chief Executive Officer of the Company believes that the
Executive has not substantially performed the Executive’s duties, or




     (2) the willful engaging by the Executive in illegal conduct or gross misconduct that
is materially and demonstrably injurious to the Company.



     For purposes of this Section 4(b), no act, or failure to act, on the part of the Executive
shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad
faith or without reasonable belief that the Executive’s action or omission was in the best
interests of the Company. Any act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer of the
Company or a senior officer of the Company or based upon the advice of counsel for the Company
shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith
and in the best interests of the Company. The cessation of employment of the Executive shall not
be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy
of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire
membership of the Board at a meeting of the Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive is given an opportunity, together
with counsel for the Executive, to be heard before the Board), finding that, in the good faith
opinion of the Board, the Executive is guilty of the conduct described in Section 4(b)(1) or
4(b)(2), and specifying the particulars thereof in detail.



     (c) Good Reason. The Executive’s employment may be terminated by the Executive for
Good Reason or by the Executive voluntarily without Good Reason. “Good Reason” means:




     (1) the assignment to the Executive of any duties inconsistent in any respect with the
Executive’s position (including status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by Section 3(a)(1)(A), or any other
action by the Company that results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent
action not taken in bad faith and that is remedied by the Company promptly after receipt of
notice thereof given by the Executive;



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     (2) any failure by the Company to comply with any of the provisions of Section 3(b),
other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and
that is remedied by the Company promptly after receipt of notice thereof given by the
Executive;




     (3) the Company’s requiring the Executive (i) to be based at any office or location
other than as provided in Section 3(a)(1)(B), (ii) to be based at a location other than the
principal executive offices of the Company if the Executive was employed at such location
immediately preceding the Effective Date, or (iii) to travel on Company business to a
substantially greater extent than required immediately prior to the Effective Date;




     (4) any purported termination by the Company of the Executive’s employment otherwise
than as expressly permitted by this Agreement; or




     (5) any failure by the Company to comply with and satisfy Section 10(c).



     For purposes of this Section 4(c), any good faith determination of Good Reason made by the
Executive shall be conclusive. The Executive’s mental or physical incapacity following the
occurrence of an event described above in clauses (1) through (5) shall not affect the Executive’s
ability to terminate employment for Good Reason.



     (d) Notice of Termination. Any termination by the Company for Cause, or by the
Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto
given in accordance with Section 11(b). “Notice of Termination” means a written notice that (1)
indicates the specific termination provision in this Agreement relied upon, (2) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis
for termination of the Executive’s employment under the provision so indicated, and (3) if the Date
of Termination (as defined herein) is other than the date of receipt of such notice, specifies the
Date of Termination (which Date of Termination shall be not more than 30 days after the giving of
such notice). The failure by the Executive or the Company to set forth in the Notice of
Termination any fact or circumstance that contributes to a showing of Good Reason or Cause shall
not waive any right of the Executive or the Company, respectively, hereunder or preclude the
Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the
Executive’s or the Company’s respective rights hereunder.



     (e) Date of Termination. “Date of Termination” means (1) if the Executive’s
employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of
receipt of the Notice of Termination or any later date specified in the Notice of Termination, as
the case may be, (2) if the Executive’s employment is terminated by the Company other than for
Cause or Disability, the Date of Termination shall be the date on which the Company notifies the
Executive of such termination, and (3) if the Executive’s employment is terminated by reason of
death or Disability, the Date of Termination shall be the date of death of the Executive or the
Disability Effective Date, as the case may be.



     Section 5. Obligations of the Company upon Termination. (a) Good Reason; Other
Than for Cause, Death or Disability. If, during the Employment Period, the Company



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terminates the Executive’s employment other than for Cause or Disability or the Executive terminates
employment for Good Reason:





     (1) the Company shall pay to the Executive, in a lump sum in cash within 30 days after
the Date of Termination, the aggregate of the following amounts:




     (A) the sum of (i) the Executive’s Annual Base Salary through the Date of
Termination, (ii) the product of (x) the Recent Annual Bonus and (y) a fraction, the
numerator of which is the number of days in the current fiscal year through the Date
of Termination and the denominator of which is 365, and (iii) any accrued vacation
pay, in each case, to the extent not theretofore paid (the sum of the amounts
described in subclauses (i), (ii) and (iii), the “Accrued Obligations”);




     (B) the amount equal to the product of (i) two and (ii) the sum of (x) the
Executive’s Annual Base Salary and (y) the Recent Annual Bonus;




     (C) an amount equal to the excess of (i) the actuarial equivalent of the
benefit under the Company’s qualified defined benefit retirement plan (the
“Retirement Plan”) (utilizing actuarial assumptions no less favorable to the
Executive than those in effect under the Retirement Plan immediately prior to the
Effective Date) and any excess or supplemental retirement plan in which the
Executive participates (collectively, the “SERP”) that the Executive would receive
if the Executive’s employment continued for two years after the Date of Termination,
assuming for this purpose that (x) the Executive’s age and service credit increase
during the two-year period, (y) all accrued benefits are fully vested and (z) the
Executive’s compensation in each of the two years is that required by Sections
3(b)(1) and 3(b)(2), over (ii) the actuarial equivalent of the Executive’s actual
benefit (paid or payable), if any, under the Retirement Plan and the SERP as of the
Date of Termination; and




     (D) an amount equal to the sum of the Company matching or other Company
contributions under the Company’s qualified defined contribution plans and any
excess or supplemental defined contribution plans in which the Executive
participates that the Executive would receive if the Executive’s employment
continued for two years after the Date of Termination, assuming for this purpose
that (x) the Executive’s benefits under such plans are fully vested, (y) the
Executive’s compensation in each of the two years is that required by Sections
3(b)(1) and 3(b)(2) and (z) to the extent that the Company contributions are
determined based on the contributions or deferrals of the Executive, that the
Executive’s contribution or deferral elections, as appropriate, are those in effect
immediately prior the Date of Termination; and




     (2) for two years after the Executive’s Date of Termination, or such longer period as
may be provided by the terms of the appropriate plan, program, practice or policy, the
Company shall continue benefits to the Executive and/or the Executive’s family at least
equal to those that would have been provided to them in accordance with



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the plans, programs, practices and policies described in Section 3(b)(4) if the Executive’s employment had not
been terminated or, if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and the Affiliated Companies
and their families, provided, however, that, if the Executive becomes reemployed with
another employer and is eligible to receive such benefits under another employer provided
plan, the medical and other welfare benefits described herein shall be secondary to those
provided under such other plan during such applicable period of eligibility. For purposes
of determining eligibility (but not the time of commencement of benefits) of the Executive
for retiree benefits pursuant to such plans, practices, programs and policies, the Executive
shall be considered to have remained employed (for purposes of both age and service credit)
until two years after the Date of Termination and to have retired on the last day of such
period;




          (3) during the 12-month period following the Date of Termination, the Company shall, at
its sole expense as incurred, provide the Executive with outplacement services the scope and
provider of which shall be selected by the Executive in the Executive’s sole discretion,
provided that, the cost of such outplacement shall not exceed $25,000 (as adjusted for
inflation based on the Consumer Price Index or another nationally recognized published
inflation index); and




          (4) to the extent not theretofore paid or provided, the Company shall timely pay or
provide to the Executive any other amounts or benefits required to be paid or provided or
that the Executive is eligible to receive under any plan, program, policy or practice or
contract or agreement of the Company and the Affiliated Companies (such other amounts and
benefits, the “Other Benefits”).



     (b) Death. If the Executive’s employment is terminated by reason of the Executive’s
death during the Employment Period, the Company shall provide the Executive’s estate or
beneficiaries with the Accrued Obligations and the timely payment or delivery of the Other
Benefits, and shall have no other severance obligations under this Agreement. The Accrued
Obligations shall be paid to the Executive’s estate or beneficiary, as applicable, in a lump sum in
cash within 30 days of the Date of Termination. With respect to the provision of the Other
Benefits, the term “Other Benefits” as utilized in this Section 5(b) shall include, without
limitation, and the Executive’s estate and/or beneficiaries shall be entitled to receive, benefits
at least equal to the most favorable benefits provided by the Company and the Affiliated Companies
to the estates and beneficiaries of peer executives of the Company and the Affiliated
Companies under such plans, programs, practices and policies relating to death benefits, if
any, as in effect with respect to other peer executives and their beneficiaries at any time during
the 120-day period immediately preceding the Effective Date or, if more favorable to the
Executive’s estate and/or the Executive’s beneficiaries, as in effect on the date of the
Executive’s death with respect to other peer executives of the Company and the Affiliated Companies
and their beneficiaries.



     (c) Disability. If the Executive’s employment is terminated by reason of the
Executive’s Disability during the Employment Period, the Company shall provide the Executive with
the Accrued Obligations and the timely payment or delivery of the Other Benefits, and shall have no
other severance obligations under this Agreement. The Accrued Obligations shall be



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paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the
provision of the Other Benefits, the term “Other Benefits” as utilized in this Section 5(c) shall
include, and the Executive shall be entitled after the Disability Effective Date to receive,
disability and other benefits at least equal to the most favorable of those generally provided by
the Company and the Affiliated Companies to disabled executives and/or their families in accordance
with such plans, programs, practices and policies relating to disability, if any, as in effect
generally with respect to other peer executives and their families at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the Executive and/or the
Executive’s family, as in effect at any time thereafter generally with respect to other peer
executives of the Company and the Affiliated Companies and their families.




     (d) Cause; Other Than for Good Reason. If the Executive’s employment is terminated
for Cause during the Employment Period, the Company shall provide to the Executive (1) the
Executive’s Annual Base Salary through the Date of Termination, (2) any accrued vacation pay, and
(3) the Other Benefits, in each case, to the extent theretofore unpaid, and shall have no other
severance obligations under this Agreement. If the Executive voluntarily terminates employment
during the Employment Period, excluding a termination for Good Reason, the Company shall provide to
the Executive the Accrued Obligations and the timely payment or delivery of the Other Benefits, and
shall have no other severance obligations under this Agreement. In such case, all the Accrued
Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of
Termination.



     Section 6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive’s continuing or future participation in any plan, program, policy or practice
provided by the Company or the Affiliated Companies and for which the Executive may qualify, nor,
subject to Section 11(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any other contract or agreement with the Company or the Affiliated
Companies. Amounts that are vested benefits or that the Executive is otherwise entitled to receive
under any plan, policy, practice or program of or any other contract or agreement with the Company
or the Affiliated Companies at or subsequent to the Date of Termination shall be payable in
accordance with such plan, policy, practice or program or contract or agreement, except as
explicitly modified by this Agreement. Notwithstanding the foregoing, if the Executive receives
payments and benefits pursuant to Section 5(a) of this Agreement, the Executive shall not be
entitled to any severance pay or benefits under any severance plan, program or policy of the
Company and the Affiliated Companies, unless otherwise specifically provided therein by a specific
reference to this Agreement.



     Section 7. Full Settlement. The Company’s obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by
any set-off, counterclaim, recoupment, defense, or other claim, right or action that the Company
may have against the Executive or others. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement, and such amounts shall not be reduced
whether or not the Executive obtains other employment. The Company agrees to pay as incurred, to
the full extent permitted by law, all legal fees and expenses that the Executive may reasonably
incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive
or others of the validity or enforceability of, or liability under, any



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provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive
about the amount of any payment pursuant to this Agreement), plus, in each case, interest on any
delayed payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of the
Internal Revenue Code of 1986, as amended (the “Code”).




     Section 8. Certain Additional Payments by the Company.



     (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be
determined that any payment or distribution by the Company or its Affiliated Companies to or for
the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise, but determined without regard to any additional payments
required under this Section 8) (a “Payment”) would be subject to the excise tax imposed by Section
4999 of the Code or any interest or penalties are incurred by the Executive with respect to such
excise tax (such excise tax, together with any such interest and penalties, collectively the
“Excise Tax”), then the Executive shall be entitled to receive an additional payment (the “Gross-Up
Payment”) in an amount such that, after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including, without limitation, any
income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed
upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments.



     (b) Subject to the provisions of Section 8(c), all determinations required to be made under
this Section 8, including whether and when a Gross-Up Payment is required, the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be
made by Ernst & Young, LLP, or such other nationally recognized certified public accounting firm as
may be designated by the Executive, subject to the Company’s approval which will not be
unreasonably withheld (the “Accounting Firm”). The Accounting Firm shall provide detailed
supporting calculations both to the Company and the Executive within 15 business days of the
receipt of notice from the Executive that there has been a Payment or such earlier time as is
requested by the Company. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the Change of Control, the Executive, subject
to the Company’s approval which will not be unreasonably withheld, may appoint another nationally
recognized accounting firm to make the determinations required hereunder (which accounting firm
shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant
to this Section 8, shall be paid by the Company to the Executive within 5 days of the receipt of
the Accounting Firm’s determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As
a result of the uncertainty in the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments that
will not have been made by the Company should have been made (the “Underpayment”), consistent with
the calculations required to be made hereunder. In the event the Company exhausts its remedies
pursuant to Section 8(c) and the Executive thereafter is required to make a payment of any Excise
Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any
such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive.



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     (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue
Service that, if successful, would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable, but no later than 10 business days after
the Executive is informed in writing of such claim. The Executive shall apprise the Company of the
nature of such claim and the date on which such claim is requested to be paid. The Executive shall
not pay such claim prior to the expiration of the 30-day period following the date on which the
Executive gives such notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Company notifies the Executive in
writing prior to the expiration of such period that the Company desires to contest such claim, the
Executive shall:




     (1) give the Company any information reasonably requested by the Company relating to
such claim,




     (2) take such action in connection with contesting such claim as the Company shall
reasonably request in writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney reasonably selected by the
Company,




     (3) cooperate with the Company in good faith in order effectively to contest such
claim, and




     (4) permit the Company to participate in any proceedings relating to such claim;



     provided, however, that the Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with such contest, and shall
indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties) imposed as a result of such representation and payment of costs
and expenses. Without limitation on the foregoing provisions of this Section 8(c), the Company
shall control all proceedings taken in connection with such contest, and, at its sole discretion,
may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with
the applicable taxing authority in respect of such claim and may, at its sole discretion, either
pay the tax claimed to the appropriate taxing authority on behalf of the Executive and direct the
Executive to sue for a refund or contest the claim in any permissible manner, and the Executive
agrees to prosecute such contest to a determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that, if the Company pays such claim and directs
the Executive to sue for a refund, the Company shall indemnify and hold the Executive harmless, on
an after-tax basis, from any Excise Tax or income tax (including interest or penalties) imposed
with respect to such payment or with respect to any imputed income in connection with such payment;
and provided, further, that any extension of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to which such contested amount is claimed
to be due is limited solely to such contested amount. Furthermore, the Company’s control of the
contest shall be limited to issues with respect to which the Gross-Up Payment would be payable
hereunder, and the Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.



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     (d) If, after the receipt by the Executive of a Gross-Up Payment or payment by the Company of
an amount on the Executive’s behalf pursuant to Section 8(c), the Executive becomes entitled to
receive any refund with respect to the Excise Tax to which such Gross-Up Payment relates or with
respect to such claim, the Executive shall (subject to the Company’s complying with the
requirements of Section 8(c), if applicable) promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after taxes applicable thereto). If, after
payment by the Company of an amount on the Executive’s behalf pursuant to Section 8(c), a
determination is made that the Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify the Executive in writing of its intent to contest such denial
of refund prior to the expiration of 30 days after such determination, then the amount of such
payment shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.



     (e) Notwithstanding any other provision of this Section 8, the Company may, in its sole
discretion, withhold and pay to the Internal Revenue Service or any other applicable taxing
authority, for the benefit of the Executive, all or any portion of any Gross-Up Payment, and the
Executive hereby consents to such withholding.



     Section 9. Confidential Information. The Executive shall hold in a fiduciary capacity
for the benefit of the Company all secret or confidential information, knowledge or data relating
to the Company or the Affiliated Companies, and their respective businesses, which information,
knowledge or data shall have been obtained by the Executive during the Executive’s employment by
the Company or the Affiliated Companies and which information, knowledge or data shall not be or
become public knowledge (other than by acts by the Executive or representatives of the Executive in
violation of this Agreement). After termination of the Executive’s employment with the Company,
the Executive shall not, without the prior written consent of the Company or as may otherwise be
required by law or legal process, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those persons designated by the Company. In no event shall an
asserted violation of the provisions of this Section 9 constitute a basis for deferring or
withholding any amounts otherwise payable to the Executive under this Agreement.



     Section 10. Successors. (a) This Agreement is personal to the Executive, and,
without the prior written consent of the Company, shall not be assignable by the Executive other
than by will or the laws of descent and distribution. This Agreement shall inure to the
benefit of and be enforceable by the Executive’s legal representatives.



     (b) This Agreement shall inure to the benefit of and be binding upon the Company and its
successors and assigns. Except as provided in Section 10(c), without the prior written consent of
the Executive, this Agreement shall not be assignable by the Company.



     (c) 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 to assume expressly and agree to perform this Agreement in the same manner and to



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the same extent that the Company would be required to perform it if no such succession had taken place.
“Company” means the Company as hereinbefore defined and any successor to its business and/or assets
as aforesaid that assumes and agrees to perform this Agreement by operation of law or otherwise.




     Section 11. Miscellaneous. (a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference to principles of conflict of
laws. The captions of this Agreement are not part of the provisions hereof and shall have no force
or effect. This Agreement may not be amended or modified other than by a written agreement
executed by the parties hereto or their respective successors and legal representatives.



     (b) All notices and other communications hereunder shall be in writing and shall be given by
hand delivery to the other party or by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:



	 	 	 	 	 
	 

	 	if to the Executive:
	 	At the most recent address on file in the Company’s records
	 
	 	 	 	 
	 

	 	if to the Company:
	 	Valero Energy Corporation
	 

	 	 	 	One Valero Way
	 

	 	 	 	San Antonio, Texas 78249
	 

	 	 	 	Attention:   Corporate Secretary





or to such other address as either party shall have furnished to the other in writing in
accordance herewith. Notice and communications shall be effective when actually received by the
addressee.




     (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement.



     (d) The Company may withhold from any amounts payable under this Agreement such United States
federal, state or local or foreign taxes as shall be required to be withheld pursuant to any
applicable law or regulation.



     (e) The Executive’s or the Company’s failure to insist upon strict compliance with any
provision of this Agreement or the failure to assert any right the Executive or the Company may
have hereunder, including, without limitation, the right of the Executive to terminate employment
for Good Reason pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver of
such provision or right or any other provision or right of this Agreement.



     (f) The Executive and the Company acknowledge that, except as may otherwise be provided under
any other written agreement between the Executive and the Company, the employment of the Executive
by the Company is “at will” and, subject to Section 1(a), prior to the Effective Date, the
Executive’s employment may be terminated by either the Executive or the Company at any time prior
to the Effective Date, in which case the Executive shall have no further rights under this
Agreement. From and after the Effective Date, except as specifically provided herein, this
Agreement shall supersede any other agreement between the parties with respect to the subject
matter hereof.



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     IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and, pursuant to the
authorization from the Board, the Company has caused these presents to be executed in its name on
its behalf, all as of the day and year first above written.



	 	 	 	 	 	 	 
	 	 	 	 	 
	 	 	Kimberly S. Bowers
	 	 
	 
	 	 	 	 	 	 
	 	 	VALERO ENERGY CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

Gregory C. King
	 	 
	 

	 	Title:
	 	President	 	 







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