EXHIBIT 10.6
EXECUTIVE SEVERANCE AGREEMENT
AGREEMENT between Valero Energy Corporation, a Delaware corporation (the
"Corporation"), and Xxxxxxx X. Xxxxxxx, (the "Executive"), WITNESSETH.
WHEREAS, the Compensation Committee (the "Committee") of the Board of
Directors (the "Board") of the Corporation has recommended, and the Board has
approved, the Corporation entering into severance agreements with key executives
of the Corporation and its subsidiaries; and
WHEREAS, the Executive is a key executive of the Corporation or one of its
subsidiaries and has been selected by the Board as a key executive to be offered
a severance agreement with the Corporation; and
WHEREAS, should the Corporation receive any proposal from a third person
concerning a possible business combination with, or acquisition of equity
securities, of, the Corporation, the Board believes it imperative that the
Corporation and the Board be able to rely upon the Executive to continue in his
position, and that the Corporation be able to receive and rely upon his advice,
if it requests it, as to the best interests of the Corporation and its
shareholders without concern that he might be distracted by the personal
uncertainties and risks created by such a proposal; and
WHEREAS, should the Corporation receive any such proposals, in addition to
the Executive's regular duties, he may be called upon to assist in the
assessment of such proposals, advise management and the Board as to whether such
proposals would be in the best interests of the Corporation and its
shareholders, and to take such other actions as the Board might determine to be
appropriate;
NOW, THEREFORE, to assure the Corporation that it will have the continued
dedication of the Executive and the availability of his advice and counsel
notwithstanding the possibility, threat, or occurrence of a bid to take over
control of the Corporation, and to induce the Executive to remain in the employ
of the Corporation, and for other good and valuable consideration, the
Corporation and the Executive agree as follows:
1. SERVICES DURING CERTAIN EVENTS. In the event a third person begins a
tender or exchange offer, circulates a proxy to shareholders, or takes over
steps to effect a Change of Control (as hereafter defined), the Executive agrees
that he will not voluntarily leave the employ of the Corporation, and will
render the services contemplated in the recitals to this Agreement, until the
third person has abandoned or terminated his efforts to effect a Change of
Control or until a Change of Control has occurred.
2. TERMINATION AFTER CHANGE OF CONTROL. In the event the Executive's
employment with the Corporation (including its subsidiaries) terminates for any
reason (either voluntary or involuntary, other than as a consequence of his
death or disability, or of his retirement at or after
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normal retirement date under the Corporation's retirement plans) within two
years after a Change of Control of the Corporation.
A. LUMP SUM CASH PAYMENT. On or before the Executive's last day of
employment with the Corporation, the Corporation will pay to the Executive
as compensation for services rendered to the Corporation a lump sum cash
amount (subject to any applicable payroll or other taxes required to be
withheld) calculated by adding the amounts specified in paragraph (i)
below:
(i) SALARY PLUS INCENTIVE COMPENSATION. Three times the highest
compensation (including only base salary, bonuses, and other incentive
compensation, if any paid or payable to the Executive by the
Corporation with respect to any 12 consecutive month period during the
three years ending with the date of the Executive's termination. In
the event there are fewer than 36 whole or partial months remaining
from the date of the Executive's termination to his normal retirement
date, the amount calculated in this paragraph will be reduced by
multiplying it by a fraction the numerator of which is the number of
whole or partial months so remaining to his normal retirement date and
the denominator of which is 36;
B. SPECIAL RETIREMENT BENEFITS. The Executive shall receive "Special
Retirement Benefits" as provided herein, so that the total retirement
benefits he receives will equal the retirement benefits he would have
received had he continued in the employ of the Corporation for three years
following his termination (or until his normal retirement date, whichever
is earlier). There benefits will include all ancillary benefits, such as
early retirement and survivor rights and benefits available at retirement,
as well as benefits (if any) under the Supplemental Executive Retirement
Plan ("SERP") for any successor or substitute plan or plans of the
Corporation. If the Executive's credited service with the Corporation plus
three years would result in vested benefits, and/or eligibility for
ancillary benefits under the Corporation's pension plans, the amount
payable to the Executive or his beneficiaries hereunder shall equal the
excess of the amount specified in paragraph (i) over that in (ii) below:
(i) The total retirement benefits that would be paid to the
Executive or his beneficiaries, if the three years (or the period to
his normal retirement date, if less) following his termination are
added to his credited service under the Corporation's pension plans
(including the SERP or any successor or substitute plan or plans of
the Corporation), and his final average compensation is the same as
his actual average compensation (including the amount specified in
Paragraph A. (i) as compensation for services rendered to the
Corporation in the year of his termination);
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(ii) The total retirement benefits payable to the Executive or
his beneficiaries under the Corporation's pension plans (including the
SERP or any successor plans of the Corporation).
All these Special Retirement Benefits are provided on an unfunded basis and
are not intended to meet the qualification requirements of Section 401 of
the Internal Revenue Code. All Special Retirement Benefits shall be
payable solely from the general assets of the Corporation or its
appropriate affiliate.
C. OTHER PROVISIONS.
(i) INSURANCE OR OTHER SPECIAL BENEFITS. The Executive's
participation in the life, accident and health insurance plans of the
Corporation, and in fringe benefits provided the Executive prior to
the Change of Control or his termination, shall be continued, or
equivalent benefits provided, by the Corporation, at no direct cost to
him, for a period of three years from the date of his employment
terminates (or until his normal retirement date, whichever is sooner).
(ii) RELOCATION ASSISTANCE. Should the Executive move his
residence in order to pursue other business opportunities within two
years of his termination, he will be reimbursed for any expenses
incurred in that relocation (including taxes payable on the
reimbursement) which are not reimbursed by another employer. Benefits
under this provision will include the assistance in selling the
Executive's home which was customarily provided by the Corporation to
transferred executives prior to the Change of Control.
(iii) THRIFT AND OTHER PLANS. The Executive's participation in
the Corporation's Thrift, Employee Stock Ownership, Pension or other
applicable plans of the Corporation or any of its subsidiaries shall
continue only through the last day of this employment. Any
terminating distributions and/or vested rights under such Plans shall
be governed by the terms of the respective Plans.
D. DEFINITION OF CHANGE OF CONTROL. For the purposes of this
Agreement, a "Change of Control" shall be deemed to have taken place if:
(i) a third person, including a "group" as defined in Section 13(d)(3) of
the Securities Exchange Act of 1934, becomes the beneficial owner of shares
of the Corporation having 20% or more of the total number of votes that may
be cast for the election of directors of the Corporation; or (ii) as the
result of, or in connection with, any cash tender or exchange offer, merger
or other business combination, sale of assets or contested election, or any
combination of the foregoing transactions (a "Transaction"), the persons
who were directors of the Corporation before the Transaction shall cease to
constitute a majority of the Board of Directors of the Corporation or any
successor to the Corporation.
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3. ACCELERATION OF OPTIONS AND RIGHTS IN CERTAIN EVENTS. Stock options
("options") and stock appreciation or similar rights ("rights") granted to the
Executive by the Corporation under the Corporation's Stock Option Plan No. 1 or
Non-qualified Stock Option Plan No. 2, or any other stock option or stock
appreciation plan adopted by the Corporation will be exercisable in full for a
period of 30 days (i) following the date of Change of Control of the Corporation
or (ii) commencing on the date of approval by the Corporation's shareholder of
an agreement providing for a merger in which the Corporation will not remain an
independent publicly owned corporation or a consolidation or a sale or other
disposition of all or substantially all the assets of the Corporation, provided
that no option or right shall be exercisable by directors or officers of the
Corporation within six months after the date of grant, or after the termination
date, of such option or right.
4. REMOVAL OF RESTRICTIONS ON STOCK GRANTS. Stock previously granted to
the Executive by the Corporation under the Corporation's Restricted Stock bonus
Plan will have all restrictions removed immediately following the date of Change
of Control of the Corporation or commencing on the date of approval by the
Corporation's shareholders of an agreement providing for a merger in which the
Corporation will not remain an independent publicly owned corporation or a
consolidation or a sale or other disposition of all or substantially all the
assets of the Corporation.
5. GENERAL.
A. INDEMNIFICATION. If litigation shall be brought to enforce or
interpret any provision contained herein, the Corporation, to the extent
permitted by applicable law and the Corporation's Restated Certificate of
Incorporation, hereby indemnifies the Executive for his reasonable
attorneys' fees and disbursements incurred in such litigation and hereby
agrees to pay pre-judgement interest on any money judgement obtained by the
Executive, calculated at the "prime rate" of interest announced by
Continental Illinois National Bank and Trust Company of Chicago as being in
effect from time to time, from the date that payment(s) to him should have
been made in accordance with the provisions of this Agreement.
B. PAYMENT OBLIGATIONS ABSOLUTE. The Corporation's obligation to pay
the Executive the compensation and other amounts specified herein and to
make the arrangements provided herein shall be absolute and unconditional
and shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right
which the Corporation may have against him or anyone else. All amounts
payable by the Corporation hereunder shall be paid without notice or
demand. Each and every payment made hereunder by the Corporation shall be
final and the Corporation will not seek to recover all or any part of such
payment from the Executive or from whoever may be entitled thereto, for any
reason whatsoever.
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C. CONTINUING OBLIGATIONS. The Executive shall retain in confidence
any confidential information known to him concerning the Corporation and
its subsidiaries an their respective businesses so long as such information
is not publicly disclosed.
D. SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of the Executive and his estate, and the Corporation and any
successor of the Corporation, but neither this Agreement nor any rights
arising hereunder may be assigned or pledged by the Executive.
E. SEVERABILITY. Any provision in this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective only to the extent of such prohibition or unenforceability
without invalidating or affecting the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
F. CONTROLLING LAW. This Agreement shall in all respects be governed
by, and construed in accordance with, the laws of the State of Texas.
G. TERMINATION. This Agreement shall terminate if the Board
determines that the Executive is no longer a key executive and so notifies
the Executive; except that such determination shall not be made, and if
made shall have no effect, (i) within two years after the Change of Control
in question or (ii) during any period of time when the Corporation has
knowledge that any third person has taken steps reasonably calculated to
effect a Change of Control until, in the opinion of the Board, the third
person has abandoned or terminated his efforts to effect a Change of
Control. Any decision by the Board that the third person has abandoned or
terminated his efforts to effect a Change of Control shall be conclusive
and binding on the Executive.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
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of , 19 .
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Executive
VALERO ENERGY CORPORATION
By:__________________________________________
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