Document:

2012 EX 10.17

Exhibit 10.17

AMENDMENT TO REPLACE TAX GROSS UP
WITH ALTERNATIVE CAP
IN CHANGE OF CONTROL
SEVERANCE AGREEMENT

AMENDMENT to Replace Tax Gross Up with Alternative Cap in Change of Control Severance Agreement, dated as of the 7th day of January, 2013 (the “Amendment”), by and between Valero Energy Corporation, a Delaware corporation (the “Company”), and William R. Klesse (the “Executive”).
WHEREAS, the Company and Executive previously entered into that certain Change of Control Severance Agreement dated January 18, 2007 (the “Agreement”) and have determined that for good and valuable consideration, it is in the best interests of the Company to amend the Agreement to replace the tax gross up payment provisions contained in Section 8 of the Agreement with an alternative cap on parachutes, as reflected in the amendment of Section 8 below.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
Section 8 of the Agreement (shown below) is hereby amended in its entirety by replacing and superseding the former terms of Section 8 with the terms provided below, as follows:
Section 8.  Potential Limitation on Payments.
(a)Anything in this Agreement to the contrary notwithstanding, if 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) (all such payments and benefits, including the payments and benefits under Section 5 hereof, being hereinafter referred to as the “Total Payments”) 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, after taking into account any reduction in the Total Payments provided by reason of Section 280G of the Code in such other plan, arrangement or agreement, the payments under this Agreement shall be reduced in the order specified below, to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax but only if (i) the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income taxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments) is greater than or equal to (ii) the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which the Executive would be subject in respect of such unreduced Total Payments 

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and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments).  The payments and benefits under this Plan shall be reduced in the following order: (A) reduction of any cash severance payments otherwise payable to the Executive that are exempt from Section 409A of the Code; (B) reduction of any other cash payments or benefits otherwise payable to the Executive that are exempt from Section 409A of the Code, but excluding any payments attributable to any acceleration of vesting or payments with respect to any equity award that are exempt from Section 409A of the Code; (C) reduction of any other payments or benefits otherwise payable to the Executive on a pro-rata basis or such other manner that complies with Section 409A of the Code, but excluding any payments attributable to any acceleration of vesting and payments with respect to any equity award that are exempt from Section 409A of the Code; and (D) reduction of any payments attributable to any acceleration of vesting or payments with respect to any equity award that are exempt from Section 409A of the Code, in each case beginning with payments that would otherwise be made last in time.

(b)Subject to the provisions of Section 8(c) hereof, all determinations required to be made under this Section 8, including whether and when Total Payments should be reduced, the amount of such Total Payments, Excise Taxes and all other related determinations, as well as all assumptions to be utilized in arriving at such determinations, 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 determination by the Accounting Firm shall be binding upon the Company and the Executive.  

(c)For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax, (i) no portion of the Total Payments the receipt or enjoyment of which the Executive shall have waived at such time and in such manner as not to constitute a “payment” within the meaning of Section 280G(b) of the Code shall be taken into account; (ii) no portion of the Total Payments shall be taken into account which, in the written opinion of the Accounting Firm, does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no portion of such Total Payments shall be taken into account which, in the opinion of the Accounting Firm, constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the Base Amount (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation; and (iii) the value of 

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any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Accounting Firm in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.

(d)As a result of uncertainty in the application of Section 280G and Section 4999 of the Code at the time of the initial calculation by the Accounting Firm hereunder, it is possible that the cash severance payment made by the Company will have been less than the Company should have paid pursuant to Section 5 hereof (the amount of any such deficiency, the “Underpayment”), or more than the Company should have paid pursuant to Section 5 hereof (the amount of any such overage, the “Overpayment”).  In the event of an Underpayment, the Company shall pay the Executive the amount of such Underpayment (together with interest at 120% of the rate provided in Section 1274(b)(2)(B) of the Code) not later than five business days after the amount of such Underpayment is subsequently determined, provided, however, such Underpayment shall not be paid later than the end of the calendar year following the calendar year in which the Executive remitted the related taxes.  In the event of an Overpayment, the amount of such Overpayment shall by paid to the Company by the Executive not later than five business days after the amount of such Overpayment is subsequently determined (together with interest at 120% of the rate provided in Section 1274(b)(2)(B) of the Code).
Capitalized terms not otherwise defined in this Amendment shall have the meanings given to them in the Agreement.  As amended hereby, the Agreement remains in full force and effect.  This Amendment is governed by the laws of the State of Delaware. 
IN WITNESS WHEREOF, the Executive and Company execute this Amendment as of the day and year first above written.
Executive
__________________________________
William R. Klesse

VALERO ENERGY CORPORATION

by:________________________________
R. Michael Crownover
Senior Vice President - Human Resources

32012 EX 10.18

Exhibit 10.18

SCHEDULE OF AMENDMENTS TO CHANGE OF CONTROL SEVERANCE AGREEMENTS

The following have executed Amendments to Change of Control Severance Agreements substantially in the form of the amendment attached as Exhibit 10.XX to Valero’s Annual Report on Form 10-K for the year ended December 31, 2012 (SEC File No. 1-13175).

Kimberly S. Bowers
Michael S. Ciskowski
S. Eugene Edwards
Joseph W. Gorder
William R. Klesse2012 EX 10.21

Exhibit 10.21

Notice of Grant of Performance Stock Option and Option Agreement

Valero Energy Corporation
ID: 74-1828067
P. O. Box 696000
San Antonio, TX  78269-6000

Effective [_____], 2012, you have been granted a «NUF_Option_Type1» to buy [______] shares of the common stock of Valero Energy Corporation (the “Company”) at [_______] per share.  Your ability to exercise the Option is subject to the “Performance Condition Precedent” described in the attached agreement.

The total Option price of the shares granted is «Total_Cost_To_Exercise» 

Your Option will vest on the dates shown below.

Shares        Grant Date        Vest Type        Full Vest        Expiration

By your signature and the Company’s signature below, you and the Company agree that the Option referenced above is granted under and governed by the terms and conditions of the Company’s 2011 Omnibus Stock Incentive Plan (as may be amended) and the Agreement attached hereto.

VALERO ENERGY CORPORATION
                               
By:____________________________            _____________________
R Michael Crownover                    Date
Senior Vice President - Human Resources
    

_______________________________            _____________________
Employee                            Date

PERFORMANCE STOCK OPTION AGREEMENT
Valero Energy Corporation 2011 Omnibus Stock Incentive Plan

This Performance Stock Option Agreement (this “Agreement”) is entered into between Valero Energy Corporation, a Delaware corporation (“Valero”), and Employee pursuant to the terms of the Valero Energy Corporation 2011 Omnibus Stock Incentive Plan (as may be amended, the “Plan”).  As used herein, Employee means [__________].  Capitalized terms used in this Agreement and the attached Form A but not otherwise defined in this Agreement have the meanings set forth in the Plan.

1.    Grant of Option.  Valero grants to Employee the option (the “Option”) to purchase up to [_________] shares of common stock of Valero, $.01 par value per share (“Shares”), in accordance with the terms of this Agreement and the Plan.  The Shares, when issued to Employee upon the exercise of the Option, will be fully paid and non-assessable.

2.    Purchase Price.  The purchase price of the Shares will be «Grant_Price» per Share.

3.    Term of Option and Time Vesting.  The period during which the Option is in effect (the “Option Period”) will commence on [grant date].  The Option Period will terminate on [expiration date].  No portion of the Option may be exercised prior to [first vest date].  Subject to (i) the terms of this Agreement, and (ii) the provisions of the Plan relating to suspension or termination from the Plan, the Option will be available for exercise in the following increments: [_____] shares on [date 1]; [______] shares on [date 2]; and [____] shares on [date 3]. 

4.    Performance Condition Precedent.  Notwithstanding the time vesting of the Option as described in Section 3 above, no Option may be exercised under this Agreement until, during the Option Period, the NYSE-reported closing price per share of Valero’s common stock reaches $36.54 or higher (the “Performance Milestone”).  Once the Performance Milestone has been achieved, the Option granted hereunder may be exercised by the Employee in accordance with the time vesting schedule described in Section 3 above and the other terms and conditions of this Agreement and the Plan.

5.    Procedures.  The Option must be exercised in accordance with procedures established by Valero and pursuant to one of the methods for exercise set forth in the Exercise Notice substantially in the form of Form A attached hereto.  Payment for the Shares will be made at Valero’s San Antonio offices.  

6.    Delivery and Payment.  If any law or regulation requires Valero to take any action with respect to the Shares specified in the Exercise Notice, then the date of delivery of the Shares against payment will be extended for the period necessary to take such action.  In the event of any failure by Employee to pay for the number of Shares specified in the Exercise Notice on the Exercise Date, the exercise of the Option with respect to such number of Shares will be null and void and treated as if it had never been made.

7.    Plan Incorporated by Reference.  The Plan is incorporated herein, and by this reference, is made a part hereof for all purposes.  

8.    Limitation of Rights of Employee.  Employee will have no rights with respect to any Shares not expressly conferred by the Plan or this Agreement.

9.    No Assignment.  This Agreement and the Option granted hereunder are of a personal nature and Employee’s rights with respect hereto and thereto may not be sold, mortgaged, pledged, assigned, transferred, conveyed or disposed of in any manner by Employee and may not be exercised by any person, other than Employee, except as expressly permitted under the Plan.  Any such attempted sale, mortgage, pledge, assignment, transfer, conveyance, disposition or exercise will be void, and Valero will not be bound thereby.

10.    Successors.  This Agreement is binding upon any successors of Valero and the heirs and legal representatives of Employee.

11.    Direct Registration.  In lieu of stock certificates, any Shares issuable in connection with the exercise of the Option hereunder will be issued in uncertificated form pursuant to the Direct Registration System of Valero’s stock transfer agent.  

VALERO ENERGY CORPORATION
FORM A-STOCK OPTION EXERCISE FORM
On the day you exercise your options, this exercise form must be faxed to Valero’s Stock Administration department at (210) 345-2717 the original(s) mailed to P.O. Box 696000, San Antonio, TX  78269-6000, mailstation VHC/E1N. The Stock Administration department must receive your original form(s) within three days after exercise date.

ATTENTION:  Stock Administration (VHC-E1N)
Telephone (210) 345-2153 or (210) 345-2072
Fax (210) 345-2717 
The undersigned elects to exercise an Option to purchase shares as follows:

Name:    __________________________________________________________________________________________________
(Use Complete Legal Name)
Address:    __________________________________________________________________________________________________
__________________________________________________________________________________________________
Employee Number:    ________________    Telephone Number:  ______________  (Where you can be reached at time of exercise) 
Date of Grant to Which Exercise Applies:                                
Option Number to Which Exercise Applies:                                
Option Price to Which Exercise Applies:                                
Number of Shares to Which Exercise Applies:                                
The Settlement Date on which the shares will be tendered may not be less than three nor more than ten business days following this Exercise Date.
Federal income tax will be withheld at 25%; if a higher amount is requested, please specify __________ (max 35%).
On or before the Settlement Date, I will pay the Option price, applicable taxes, and any transaction fees as follows:  [Choose One]

		
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	a) CASH METHOD.  I will furnish a check made payable to Valero Energy Corporation on the date of exercise.  In addition to the Option price, federal income tax, social security tax, Medicare tax and state tax, as applicable, will be payable to Valero on the Exercise Date.  I will be informed not later than the close of business on the day after the Exercise Date of the total settlement funds required.  All option shares will be issued to me via the Computershare Direct Registration System; or

		
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	b) STOCK SWAP METHOD.  I will submit a signed Representation of Ownership statement attesting as to shares of Valero Common Stock that I own.  The number of shares of Valero Common Stock attested to on this signed statement must have a market value equal to or exceeding the sum of the Option price plus the amount of applicable tax withholding for the number of Option shares being exercised. The stock will be valued at the average of the high and low sales price per share of Valero Common Stock quoted on the New York Stock Exchange on the exercise date.  In addition to the Option price, federal income tax, social security tax, Medicare tax and state tax, as applicable, will be deducted from the Option shares exercised, and a net number of shares will be issued to me via the Computershare Direct Registration System.  Fractional shares will be settled in cash within one week of the exercise date; or

CASHLESS SELL METHOD  or  CASHLESS HOLD METHOD.  
To exercise your options, please select one of the following:
1)   Use Merrill Lynch AwardChoice On-line system at www.benefits.ml.com, or 
		
	2)
	Contact Merrill Lynch Representatives at 1-877-401-5856

The Cashless transactions must be completed before 3:00 p.m. CT to be in effect for the current trading day.

The Valero Stock Administration team is available to assist you with any questions you might have.

Executed this _______day of    ___________________________, 20____    

_________________________________________________
Signature

_________________________________________________
Print Name

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