ULTRAMAR DIAMOND SHAMROCK CORP
EMPLOYMENT AGREEMENT
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>0002.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT
<TEXT>

                                                                    EXHIBIT 10.1

This EMPLOYMENT AGREEMENT (the "Agreement"), dated as of ________________,  2000
(the "Effective  Date"),  but effective as provided herein,  is made and entered
into  by  and  between  Ultramar  Diamond  Shamrock   Corporation,   a  Delaware
corporation (the "Company"), and ____________________ (the "Executive").

WHEREAS, the Executive is serving as  __________________________of  the Company;
and

WHEREAS,  the Company  considers it in the best interests of its stockholders to
foster the continued employment of certain key management personnel; and

WHEREAS,  the Company  recognizes  that,  as is the case for most  publicly held
companies,  the  possibility of a Change in Control (as defined  herein) exists;
and

WHEREAS,  the  Company  wishes  to  assure  itself of both  present  and  future
continuation of management in the event of a Change in Control; and

WHEREAS,  the  Company  wishes to  continue  to  employ  the  Executive  and the
Executive  is  willing to  continue  to render  services,  both on the terms and
subject to the conditions set forth in this Agreement.

NOW,  THEREFORE,  in  consideration  of the promises and of the mutual covenants
herein contained, it is agreed as follows:

1.  Employment.
    ----------

         1.1 The Company  hereby  agrees to continue to employ the Executive and
the Executive  hereby agrees to undertake  employment  with the Company upon the
terms and conditions herein set forth.

         1.2 Employment will be for a term commencing on the Effective Date and,
subject to earlier expiration upon the Executive's  termination under Section 5,
expiring three years from the Effective Date (the "Term").  Notwithstanding  the
previous  sentence,  this  Agreement and the employment of the Executive will be
automatically  renewed  and  the  Term  extended,  subject  to  Section  5,  for
successive  one-year  periods upon the terms and  conditions  set forth  herein,
commencing  on  the  third  anniversary  of the  Effective  Date,  and  on  each
anniversary  date  thereafter,  unless either party to this Agreement  gives the
other party,  written notice (in  accordance  with Section 12.5) of such party's
intention to terminate  this Agreement at least three months prior to the end of
such initial or extended term. For purposes of this Agreement,  any reference to
the "Term" of this  Agreement  will include the original  term and any extension
thereof.

2.  Position and Duties.
    -------------------

         2.1 Position and Duties.  During the Term,  the Executive will serve as
__________________________ of the Company, and will have such duties, functions,
responsibilities  and  authority  as are (i)  consistent  with  the  Executive's
position as  ______________________________of  the Company;  or (ii) assigned to
his office in the Company's bylaws;  or (iii) reasonably  assigned to him by the
Company's Board of Directors (the "Board").

         2.2 Commitment.  During  the Term,  the Executive will be the Company's
full-time  employee  and,  except as may  otherwise  be  approved  in advance in
writing by the Board, and except during vacation periods and reasonable  periods
of absence due to sickness,  personal injury or other disability,  the Executive
will  devote  substantially  all of  his  business  time  and  attention  to the
performance of his duties to the Company.

3.  Place of  Performance.  In connection  with his employment  during the Term,
unless  otherwise  agreed by the Executive,  the Executive will be based at such
location as may be determined by the Board.  The Executive will undertake normal
business travel on behalf of the Company.

4.  Compensation and Related Matters.
    --------------------------------

         4.1 Compensation and Benefits.
             -------------------------

              (i) Annual  Base  Salary.  During the Term of this Agreement,  the
Company  will pay to the  Executive  an  annual  base  salary  of not less  than
$_________________,  which annual base salary may be modified  from time to time
by the Board (or the  Compensation  Committee  thereof) in its sole  discretion,
payable at the times and in the manner  consistent  with the  Company's  general
policies regarding compensation of executive employees.  The Board may from time
to time authorize such additional  compensation to the Executive,  in cash or in
property, as the Board may determine in its sole discretion to be appropriate.

             (ii) Annual Incentive Compensation.  If the Board (or the Compensa-
tion Committee thereof)  authorizes any cash incentive  compensation or approves
any other  management  incentive  program or arrangement,  the Executive will be
eligible to participate in such plan,  program or arrangement  under the general
terms and conditions applicable to executive and management employees. Except as
set forth in the  proviso to the  preceding  sentence,  nothing in this  Section
4.1(ii)  will  guarantee  to the  Executive  any  specific  amount of  incentive
compensation,  or prevent the Board (or the Compensation Committee thereof) from
establishing  performance goals and compensation  targets applicable only to the
Executive.

         4.2 Executive  Benefits.  In addition to the compensation  described in
Section 4.1, the Company will make  available to the  Executive and his eligible
dependents,  subject  to the  terms  and  conditions  of the  applicable  plans,
including without limitation the eligibility rules, including designation by the
Compensation Committee,  participation in all Company-sponsored employee benefit
plans including all employee  retirement  income and welfare  benefit  policies,
plans,  programs  or  arrangements  in which  senior  executives  of the Company
participate,  including any stock option,  stock purchase,  stock  appreciation,
savings,  pension,  supplemental executive retirement or other retirement income
or  welfare  benefit,  short or  long-term  disability,  and any other  deferred
compensation,  incentive  compensation,  group and/or  executive  life,  health,
medical/hospital  or other  insurance  (whether  funded by actual  insurance  or
self-insured by the Company),  expense  reimbursement  or other employee benefit
policies,  plans, programs or arrangements or any equivalent successor policies,
plans,  programs or arrangements  that may now exist or be adopted  hereafter by
the Company.

         4.3 Expenses. The Company will promptly reimburse the Executive for all
travel and other business  expenses the Executive incurs in order to perform his
duties to the Company  under this  Agreement in a manner  commensurate  with the
Executive's  position  and  level of  responsibility  with the  Company,  and in
accordance with the Company's policy regarding substantiation of expenses.

5.  Termination.  Notwithstanding  the  Term  specified  in  Section  1.2,   the
termination  of the  Executive's  employment  hereunder  will be governed by the
following provisions:

         5.1 Death. In the event of the  Executive's  death during the Term, the
Company will pay to the  Executive's  beneficiaries  or estate,  as appropriate,
promptly after the Executive's death, (i) the unpaid annual base salary to which
the  Executive  is entitled,  pursuant to Section  4.1,  through the date of the
Executive's  death,  and (ii) for any earned but unused  vacation  days,  to the
extent and in the amounts,  if any,  provided under the Company's usual policies
and  arrangements.  This  Section  5.1 will not  limit  the  entitlement  of the
Executive's  estate  or  beneficiaries  to any  death  or  other  benefits  then
available to the Executive  under any life  insurance,  stock  ownership,  stock
options,  or other  benefit plan or policy that is maintained by the Company for
the Executive's benefit.

         5.2 Disability.
             ----------

                   (i) If the Company  determines in good  faith that the Execu-
tive has incurred a Disability  (as defined  below) during the Term, the Company
may  give the  Executive  written  notice  of its  intention  to  terminate  its
obligations  under this  Agreement,  which notice may,  but need not,  include a
statement of the Company's  intent to terminate the Executive's  employment.  In
such event, the Company's obligations under this Agreement,  and the Executive's
employment  (if  applicable),  will  terminate  effective  on the 30th day after
receipt of such notice by the Executive  (the  "Disability  Termination  Date"),
provided that within the 30 days after such receipt, the Executive will not have
returned to full-time  performance of his duties. The Executive will continue to
receive  his annual base  salary  until the  Disability  Termination  Date.  The
Executive will continue to receive  benefits  until the  Disability  Termination
Date,  provided that if the Company has not elected to terminate the Executive's
employment  under this provision  (but rather to terminate only its  obligations
under this  Agreement),  the Executive's  right to continue to receive  benefits
following the Disability  Termination  Date will be governed by the policies and
procedures of the Company generally  applicable to disabled  employees.  In that
event,  the Executive  will be  considered  an "employee at will"  following the
Disability  Termination  Date,  and  either the  Executive  or the  Company  may
thereafter terminate the Executive's employment for any reason or for no reason,
and the  rights and  obligations  of the  Executive  and the  Company  upon such
termination  will be  governed by the  policies  and  procedures  of the Company
applicable to employees at will, and by applicable law.

In the event of the Executive's disability,  the Company will pay the Executive,
promptly  after the  Disability  Termination  Date,  (a) the unpaid  annual base
salary to which he is entitled,  pursuant to Section 4.1, through the Disability
Termination Date, (b) for any earned but unused vacation days, to the extent and
in the  amounts,  if any,  provided  under  the  Company's  usual  policies  and
arrangements, and (c) a lump sum in cash in an amount equal to 50% of his annual
base salary at the Disability  Termination Date. This Section 5.2 will not limit
the entitlement of the Executive,  the Executive's  estate or beneficiaries,  to
any  disability  or other  benefits then  available to the  Executive  under any
disability  insurance or other  benefit plan or policy that is maintained by the
Company for the Executive's benefit;  provided that (i) any amounts paid as base
salary shall  offset,  on a  dollar-for-dollar  basis (but not below zero),  the
Company's obligation to pay the Executive  short-term  disability benefits under
any  short-term  disability  plan,  program or  arrangement  of the Company,  in
respect  of the same  period for which  such base  salary is paid,  and (ii) any
benefits paid pursuant to the Company's long-term  disability plan shall reduce,
on a dollar-for-dollar  basis (but not below zero), the Company's  obligation to
pay the  Executive  base  salary in  respect  of the same  period for which such
benefits are paid;  provided,  however,  that any such offset or reduction shall
not affect,  or be affected  by, the payment  provided to be made in  accordance
with clauses (a), (b), or (c) of this Section 5.2(i);  provided,  however,  that
any such offset or  reduction  shall not affect,  or be affected by, the payment
provided to be made in accordance  with clauses (a), (b), or (c) of this Section
5.2(i).

                  (ii) For purposes of this  Agreement,  "Disability"  will mean
the  Executive's  incapacity due to physical or mental illness to  substantially
perform his duties on a full-time basis for six consecutive months and within 30
days  after a notice of  termination  is  thereafter  given by the  Company  the
Executive will not have returned to the full-time performance of the Executive's
duties;  provided,  however,  if the Executive disagrees with a determination to
terminate him because of Disability,  the question of the Executive's disability
will be subject to the  certification of a qualified medical doctor agreed to by
the Company and the Executive or, in the event of the Executive's  incapacity to
designate a doctor,  the  Executive's  legal  representative.  In the absence of
agreement  between  the Company and the  Executive,  each party will  nominate a
qualified  medical  doctor and the two doctors will select a third  doctor,  who
will  make the  determination  as to  Disability.  In order to  facilitate  such
determination,  the Executive will, as reasonably  requested by the Company, (a)
make himself  available for medical  examinations by a doctor in accordance with
this Section  5.2(ii),  and (b) grant the Company and any such doctor  access to
all relevant  medical  information  concerning him, arrange to furnish copies of
medical  records to such doctor and use his best efforts to cause his own doctor
to be available to discuss his health with such doctor.

         5.3 Cause.
             -----

                   (i) The Company  may  terminate  the  Executive's  employment
hereunder  for  Cause  (as  defined  below).  In the  event  of the  Executive's
termination  for Cause,  the Company will  promptly pay to the Executive (or his
representative) the unpaid annual base salary to which he is entitled,  pursuant
to Section 4.1,  through the date the Executive is terminated  and the Executive
will be entitled to no other compensation, except for earned but unused vacation
and other compensation as otherwise due to him under applicable law.

                  (ii) For  purposes of this  Agreement,  the Company  will have
"Cause" to terminate the Executive's  employment hereunder upon a finding by the
Board that (a) the Executive committed an illegal act or acts that were intended
to and did defraud the Company, (b) the Executive engaged in gross negligence or
gross misconduct against the Company or another employee, or in carrying out his
duties and responsibilities, or (c) the Executive materially breached any of the
express  covenants  set forth in Section  9.1,  9.2 or 9.3. The Company will not
have Cause  unless and until the Company  provides  the  Executive  with written
notice that the Company  intends to terminate  his  employment  for Cause.  Such
written  notice will specify the particular act or acts, or failure to act, that
is or are the basis for the decision to so terminate the Executive's  employment
for Cause. The Employee will be given the opportunity within 30 calendar days of
the receipt of such notice to meet with the Board to defend such act or acts, or
failure to act. The Executive's  employment by the Company automatically will be
terminated  under this  Section  5.3 for Cause as of the  receipt of the written
notice from the Company  or, if later,  the date  specified  in such  notice.  A
notice  given  under this  Section 5.3 must set forth in  reasonable  detail the
facts and  circumstances  claimed  to  provide a basis  for  termination  of the
Executive's  employment for Cause, and if the termination date is other than the
date of  receipt  of such  notice,  specify  the date on which  the  Executive's
employment is to be terminated  (which date will not be earlier than the date on
which such notice is given in accordance with Section 12.5). Such notice must be
given no later than 180 business days after a director of the Company (excluding
the  Executive,  if  applicable)  first  has  actual  knowledge  of  the  events
justifying the purported termination.

         5.4 Termination.
             -----------

                   (i)  Involuntary  Termination.   The  Executive's  employment
hereunder may be  terminated by the Company for any reason by written  notice as
provided in Section  12.5.  The  Executive  will be treated for purposes of this
Agreement as having been involuntarily  terminated by the Company other than for
Cause if the Executive terminates his employment with the Company for any of the
following  reasons  (each,  a "Good  Reason")  without the  Executive's  written
consent:  (a) the Company has breached any material  provision of this Agreement
and within 30 days after notice thereof from the Executive, the Company fails to
cure such breach;  (b) a successor  or assign  (whether  direct or indirect,  by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business  and/or  assets  of the  Company  fails to assume  liability  under the
Agreement; (c) at any time after the Company has notified the Executive pursuant
to Section 1.2 that the Company does not intend to renew the  Agreement  and the
Executive's  employment at the end of the Term (including any previous renewals)
(rather  than to allow the  Agreement  automatically  to renew);  (d) a material
reduction in the aggregate  benefits  described by Section 4.2 (other than stock
based compensation) provided to the Executive,  unless such decrease is required
by law or is applicable to all employees of the Company  eligible to participate
in  any  employee  benefit  arrangement  affected  by  such  reduction;   (e)  a
significant reduction in the Executive's duties or the addition of duties, which
in  either  case  are  materially  inconsistent  with the  Executive's  title or
position; or (f) a reduction in the Executive's annual base salary.

                  (ii)  Voluntary  Termination.  The Executive  may  voluntarily
terminate  the  Agreement  at any time by notice to the  Company as  provided in
Section  12.5.  The  Executive's  death or  Disability  (as  defined  in Section
5.2(ii))   during  the  term  of  the  Agreement  will  constitute  a  voluntary
termination of employment for purposes of eligibility for  termination  payments
and benefits as provided in Section 5.5, but for no other purpose.

         5.5 Termination Payments and Benefits.
             ---------------------------------

                   (i)  Form and Amount.  Upon  Executive's involuntary termina-
tion, other than for Cause, the Company shall:

                        (a) subject  to  Section 5.5(iii), pay or provide Execu-
                            tive

                            (1) his annual salary and benefits until the date of
    termination,

                            (2) within  five  business days after any revocation
    period in the release described in Section 5.5(iii)  has expired, a lump sum
    cash payment equal to three multiplied by the sum of (x)  and (y), where (x)
    is Executive's highest annual base salary in effect during  the three  years
    prior to his date of  termination,  and (y) is the  highest annual incentive
    compensation  earned  by  Executive  during  the  three  years  prior to his
    termination;  provided,  however,  that  all  amounts received by  Executive
    pursuant to the Ultramar Diamond Shamrock Corporation Intermediate Incentive
    and Performance-Based Restricted Stock Plan shall not be considered  "annual
    incentive  compensation" for purposes of this Section 5.5(i)(a)(2),

                            (3) three additional years of age and service credit
    under all Company-sponsored employee benefit plans, including all retirement
    income plans and welfare benefit plans, policies or programs or arrangements
    in   which   Executive   participates,   including   any  savings,  pension,
    supplemental  executive  retirement  or  other  retirement income or welfare
    benefit, short or long-term disability, and any other deferred compensation,
    group  and/or  executive life, health, retiree health, medical/hospital,  or
    other insurance  (whether funded by actual  insurance or self-insured by the
    Company), expense reimbursement  or other employee benefit plans,  policies,
    programs or arrangements or  any  equivalent   successor  plans,   policies,
    programs or arrangements that may not now exist or may be adopted  hereafter
    by the Company (but only to  the extent that  eligibility,  vesting,  or the
    timing  or  amount  of  the  benefit are dependent upon age and/or service);
    provided, however, that in the case of a qualified  defined  benefit pension
    plan,  the  present  value  of  the additional  benefit Executive would have
    accrued if he had been credited for all  purposes with the three  additional
    years of  age  and  service  under  such plan as of his date of  termination
    with  the  Company  will  be paid in a lump sum in cash within five business
    after any  revocation  period in the release  described in Section  5.5(iii)
    has  expired,   with  (i)  in  the  event  that  Executive's  aforementioned
    involuntary  termination  occurs  on  or  after a "Change in Control" of the
    Company,  as  defined  in  Section 6.2 (or prior to, but in anticipation of,
    such a "Change in  Control"),  such  present  value being  determined  using
    the  interest  rate  and mortality table set forth in Section  4.1(m)(i) and
    4.1(n)(i), respectively,  of the Ultramar Corporation Supplemental Executive
    Retirement Plan (or any equivalent  successor  plan,   policy,   program  or
    arrangement) (collectively, the "Ultramar SERP") and (ii) in the event  that
    Executive's  aforementioned   involuntary   termination   occurs   prior  to
    such a  "Change in Control" of the Company (other than such a termination in
    anticipation  of  such  a  "Change  in  Control"),  such present value being
    determined  using  the  interest  rate  and  mortality  table  set  forth in
    Section 4.1(m)(ii) and 4.1(n)(ii), respectively,  f the Ultramar  SERP,  and
    further,  provided,  in  crediting  the  three  additional  years of age and
    service  for  purposes  of  calculating   current  and unused  vacation such
    additional  years  shall  be  applied  in  determining  the amount of annual
    vacation  to  which  Executive  is  entitled,  but  shall  not  be deemed to
    cause  Executive  to  have  earned  three  additional  years worth of unused
    vacation,

                            (4) within five business  days after any  revocation
    period in the releasedescribed in Section  5.5(iii) has expired,  a lump sum
    cash payment equal to three times the maximum  amount the Company could have
    contributed  on  behalf  of  Executive  to  all  of  the   Company-sponsored
    qualified  and  nonqualified  defined contribution retirement plans in which
    Executive participated for any of the three years ending  on the date of the
    Executive's  termination of employment  assuming that the executive made the
    maximum voluntary contributions thereto,

                            (5) for  a  period  of three years after the date of
    Executive's  termination  of  employment,   the continuation of the employee
    welfare  benefits  set  forth in Section 4.2 (other than short-term or long-
    term  disability  benefits),  except  as offset  by  benefits  paid by other
    sources as set forth in Section  8.2,  or as  provided  in  Section  5.5(ii)
    (provided,  however,  that in the event that any such continued  coverage is
    not permitted under the terms of any applicable  welfare plan or policy, the
    Company  shall provide Executive with the after-tax  economic  equivalent of
    any  coverage foregone, such economic  equivalent to be deemed to be no less
    than the total cost to Executive of obtaining such coverage on an individual
    basis and to be paid quarterly in advance without discount); and

                      (b) provide the Executive with outplacement services for a
period of one year  commencing  on the date his
employment is terminated in accordance with the Company's executive outplacement
policy in effect at the time his employment is terminated or  immediately  prior
to a Change in Control (if prior to his termination of employment), whichever is
more generous.

                  (ii)  Maintenance of Benefits.  During the period set forth in
Section 5.5(i)(a)(5),  the Company will use its best efforts to maintain in full
force and  effect for the  continued  benefit of the  Executive  all  referenced
benefits  or  will  arrange  to  make   available  to  the  Executive   benefits
substantially  similar to those that the  Executive  would  otherwise  have been
entitled to receive if his  employment  had not been  terminated.  Such benefits
will be provided to the  Executive on the same terms and  conditions  (including
employee  contributions  toward the premium  payments) under which the Executive
was   entitled   to   participate   immediately   prior   to  his   termination.
Notwithstanding the above, if Executive's continued  participation in any of the
benefits referenced in Section  5.5(i)(a)(5) would violate any applicable law or
cause any benefit plan,  policy or arrangement of the Company to fail to qualify
for  tax-favored  status,  the Company  shall not be  required  to provide  such
benefit to Executive through the Company's plans, policies or arrangements,  but
instead  shall  either  (A)  arrange  to make a  substantially  similar  benefit
available  to  Executive  at no cost to the  Executive  or (B) pay  Executive  a
sufficient amount of cash to allow Executive to purchase, on an after-tax basis,
a  substantially  similar  benefit on the open market at no incremental  cost to
Executive.

                  (iii) Release. No benefit will be paid or made available under
Section  5.5(i)(a)  unless the  Executive  first  executes a release in the form
attached as an exhibit to this  Agreement,  and (b) to the extent any portion of
such release is subject to the seven-day revocation period prescribed by the Age
Discrimination  in  Employment  Act of  1967,  as  amended,  or to  any  similar
revocation   period  in  effect  on  the  date  of  termination  of  Executive's
employment, such revocation period has expired.

                  (iv) Other Severance  Benefits.  Notwithstanding any provision
of this  Agreement to the contrary,  Executive  shall be entitled to receive the
greater of (a) the termination  payments and benefits provided under Section 5.5
of this Agreement,  or (b) the termination payments and benefits provided by any
other Company-sponsored plan, program or policy which has as its primary purpose
the provision of severance benefits, but in no event shall Executive be eligible
to receive termination  payments and benefits provided under both this Agreement
and any such plan, program or policy.

6.  Change in Control Provisions.
    ----------------------------

         6.1 Impact of Change in Control.  In the event of a "Change in Control"
of the  Company,  as defined in Section 6.2, (i) the company will cause all cash
benefits due under this Agreement to be secured by an irrevocable  trust for the
benefit of the  Executive,  the assets of which will be subject to the claims of
the Company's creditors, and will transfer to such trust cash and other property
adequate  to satisfy  all of the  expenses  of the trust for at least five years
after the Change in Control and any of the Company's  actual and potential  cash
obligations  under  this  Agreement,  (ii)  if  the  Executive's  employment  is
involuntarily  terminated  without  Cause after the Change in  Control,  (A) the
covenants of Sections 9.1 and 10 will be inapplicable to the Executive,  and (B)
the covenant of Section 9.2 will expire on the third  anniversary of the date of
termination  of the  Executive's  employment,  and (iii) the  definition of Good
Reason,  as set forth in Section  5.4(i) above,  will be expanded to include the
following:

                  (a) A good faith  determination  by the  Executive  that, as a
result  of the  Change  in  Control  and a change  in  circumstances  thereafter
significantly  affecting  his  positions,  including  a change  in the  scope of
business or other activities for which he was responsible,  he has been rendered
substantially  unable  to carry  out,  has been  substantially  hindered  in the
performance  of,  or  has  suffered  a  substantial  reduction  in,  any  of the
authorities,  powers,  functions,  responsibilities or duties attached to any of
the Executive's  positions;  the Executive's  determination  will be presumed to
have been made in good faith unless  otherwise shown by the Company by clear and
convincing evidence;

                  (b)  The  relocation  of  the  Company's  principal  executive
offices  (but  only  if,  immediately  prior  to  the  Change  in  Control,  the
Executive's  principal  place  of  employment  was  at the  Company's  principal
executive  offices),  or  requirement  that the Executive  have as his principal
location of work any  location  that is, in excess of 50 miles from the location
thereof  immediately  preceding the Change in Control or to travel away from his
home or office  significantly more often than that required immediately prior to
the Change in Control; or

                  (c) For any  reason,  or  without  reason,  during  the 30-day
period immediately  following the first anniversary of the first occurrence of a
Change in Control.

         6.2 Definition of Change in Control. For purposes of this Agreement,  a
"Change in  Control"  will be deemed to occur if at any time  during the term of
the Agreement any of the following events will occur:

                  (i) The Company is merged, consolidated or reorganized into or
with another  corporation or other legal person, and as a result of such merger,
consolidation or  reorganization,  less than 50% of the combined voting power of
the then-outstanding  securities of such corporation or person immediately after
such  transaction  are held in the  aggregate by the holders of Voting Stock (as
that  term is  hereafter  defined)  of the  Company  immediately  prior  to such
transaction;

                  (ii)  The  Company   sells  or  otherwise   transfers  all  or
substantially  all of its assets to any other corporation or other legal person,
and as a result of such sale or transfer,  less than 50% of the combined  voting
power of the then  outstanding  voting  securities of such corporation or person
are  held in the  aggregate  by the  holders  of  Voting  Stock  of the  Company
immediately prior to such sale;

                  (iii)  There is a report  filed on  Schedule  13D or  Schedule
14D-1 (or any successor schedule,  form or report), each as promulgated pursuant
to the Securities Exchange Act of 1934 (the "Exchange Act"), disclosing that any
person (as the term "person" is used in Section  13(d)(3) or Section 14(d)(2) of
the  Exchange  Act) has become  the  beneficial  owner (as the term  "beneficial
owner"  is  defined  under  Rule  13d-3  or any  successor  rule  or  regulation
promulgated  under the Exchange Act) of securities  representing  20% or more of
the combined  voting  power of the  then-outstanding  securities  of the Company
entitled to vote generally in the election of Directors of the Company  ("Voting
Stock");

                  (iv) The Company  files a report or proxy  statement  with the
Securities  and Exchange  Commission  pursuant to the Exchange Act disclosing in
response to Form 8-K or Schedule 14A (or any successor schedule,  form or report
or item  therein)  that a  change  in  control  of the  Company  has or may have
occurred  or will or may  occur  in the  future  pursuant  to any  then-existing
contract or transaction; or

                  (v) If during the period of two consecutive  years individuals
who at the beginning of any such period  constitute the Directors of the Company
cease for any  reason to  constitute  at least a  majority  thereof  unless  the
election, or the nomination for election by the Company's shareholders,  of each
Director of the Company first elected  during such period was approved by a vote
of at least  two-thirds of the Directors of the Company then still in office who
were Directors of the Company at the beginning of any such period (excluding for
this purpose the election of any new  Director in  connection  with an actual or
threatened election or proxy contest).

Notwithstanding  the foregoing  provisions  of Section  6.2(iii) or (iv) hereof,
unless otherwise determined in a specific case by majority vote of the Board (or
the Compensation Committee thereof), a "Change in Control" will not be deemed to
have  occurred for purposes of this  Agreement  solely  because the Company,  an
entity in which the  Company  directly or  beneficially  owns 50% or more of the
voting securities of such entity, any Company-sponsored employee stock ownership
plan or any other  employee  benefit plan of the Company either files or becomes
obligated to file a report or a proxy statement under or in response to Schedule
13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor  schedule,  form
or report  or item  therein)  under  the  Exchange  Act,  disclosing  beneficial
ownership by it of shares of voting securities of the Company, whether in excess
of 20% or otherwise,  or because the Company reports that a change in control of
the  Company  has or may have  occurred  or will or may  occur in the  future by
reason of such beneficial ownership.

7.  Certain Additional Payments by the Company:
    ------------------------------------------

         (i) Anything in this Agreement to the contrary  notwithstanding,  if it
is determined (as hereafter  provided) that any payment or  distribution  by the
Company  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 pursuant to or by reason of any other agreement, policy, plan, program
or  arrangement,   including   without   limitation  any  stock  option,   stock
appreciation  right  or  similar  right,  or the  lapse  or  termination  of any
restriction  on or the  vesting or  exercisability  of any of the  foregoing  (a
"Payment"),  would be subject to the excise tax  imposed by Section  4999 of the
Code (or any successor  provision  thereto) by reason of being  "contingent on a
change in ownership  or control" of the  Company,  within the meaning of Section
280G of the Code (or any  successor  provision  thereto)  or to any  similar tax
imposed by state or local law, or any interest or penalties with respect to such
excise tax (such tax or taxes,  together with any such  interest and  penalties,
are hereafter  collectively referred to as the "Excise Tax"), then the Executive
will be entitled  to receive an  additional  payment or  payments  (a  "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  any 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.  No Gross-Up  Payment will be made with respect to the Excise Tax,
if any,  attributable to (a) any incentive  stock option,  as defined by Section
422 of the Code ("ISO") granted prior to the execution of this Agreement (unless
a comparable  Gross-Up  Payment has theretofore been made available with respect
to such option), or (b) any stock appreciation or similar right,  whether or not
limited, granted in tandem with any ISO described in clause (a).

         (ii)  Subject  to  the   provisions  of  Section   7(vi)  hereof,   all
determinations  required to be made under this Section 7,  including  whether an
Excise  Tax is payable by the  Executive  and the amount of such  Excise Tax and
whether a Gross-Up Payment is required and the amount of such Gross-Up  Payment,
will be made by a nationally  recognized  firm of certified  public  accountants
(the "Accounting  Firm") selected by the Executive in his sole  discretion.  The
Executive  will  direct  the  Accounting  Firm to submit its  determination  and
detailed supporting calculations to both the Company and the Executive within 15
calendar days after the Termination Date, if applicable, and any other such time
or times as may be requested by the Company or the Executive.  If the Accounting
Firm  determines  that any Excise Tax is payable by the  Executive,  the Company
will pay the required  Gross-Up  Payment to the  Executive  within five business
days after receipt of such  determination  and  calculations.  If the Accounting
Firm determines that no Excise Tax is payable by the Executive,  it will, at the
same time as it makes such determination,  furnish the Executive with an opinion
that he has  substantial  authority not to report any Excise Tax on his federal,
state,  local income or other tax return.  Any  determination  by the Accounting
Firm as to the amount of the  Gross-Up  Payment will be binding upon the Company
and the Executive.  As a result of the uncertainty in the application of Section
4999 of the Code (or any successor  provision  thereto) and the  possibility  of
similar uncertainty  regarding  applicable state or local tax law at the time of
any determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments  which will not have been made by the Company should have been made (an
"Underpayment"), consistent with the calculations required to be made hereunder.
In the event that the Company exhausts or fails to pursue its remedies  pursuant
to Section  7(vi)  hereof and the  Executive  thereafter  is  required to make a
payment of any Excise Tax,  the  Executive  will direct the  Accounting  Firm to
determine  the amount of the  Underpayment  that has  occurred and to submit its
determination and detailed  supporting  calculations to both the Company and the
Executive as promptly as possible.  Any such  Underpayment will be promptly paid
by the Company to, or for the benefit  of, the  Executive  within five  business
days after receipt of such determination and calculations.

         (iii) The Company and the  Executive  will each provide the  Accounting
Firm access to and copies of any books,  records and documents in the possession
of the Company or the Executive, as the case may be, reasonably requested by the
Accounting Firm, and otherwise  cooperate with the Accounting Firm in connection
with the preparation and issuance of the  determination  contemplated by Section
7(ii) hereof.

         (iv) The federal,  state and local income or other tax returns filed by
the  Executive  will be  prepared  and  filed  on a  consistent  basis  with the
determination  of the Accounting  Firm with respect to the Excise Tax payable by
the  Executive.  The  Executive  will make  proper  payment of the amount of any
Excise Tax, and at the request of the  Company,  provide to the Company true and
correct  copies (with any  amendments) of his federal income tax return as filed
with the Internal Revenue Service and corresponding state and local tax returns,
if  relevant,  as filed with the  applicable  taxing  authority,  and such other
documents reasonably requested by the Company, evidencing such payment. If prior
to the filing of the  Executive's  federal income tax return,  or  corresponding
state or local tax return, if relevant,  the Accounting Firm determines that the
amount of the Gross-Up Payment should be reduced, the Executive will within five
business days pay to the Company the amount of such reduction.

         (v) The fees and  expenses of the  Accounting  Firm for its services in
connection with the  determinations  and  calculations  contemplated by Sections
7(ii) and (iv) hereof will be borne by the  Company.  If such fees and  expenses
are  initially  advanced  by the  Executive,  the  Company  will  reimburse  the
Executive  the full amount of such fees and expenses  within five  business days
after receipt from the Executive of a statement therefor and reasonable evidence
of his payment thereof.

         (vi) The  Executive  will notify the Company in writing of any claim by
the Internal  Revenue Service that, if successful,  would require the payment by
the Company of a Gross-Up  Payment.  Such notification will be given as promptly
as practicable  but no later than 10 business days after the Executive  actually
receives notice of such claim and the Executive will further apprise the Company
of the nature of such claim and the date on which such claim is  requested to be
paid (in each case, to the extent known by the  Executive).  The Executive  will
not  pay  such  claim  prior  to  the  earlier  of  (a)  the  expiration  of the
30-calendar-day  period  following the date on which he gives such notice to the
Company and (b) the date that any  payment of amount with  respect to such claim
is due. If the Company notifies the Executive in writing prior to the expiration
of such period that it desires to contest such claim, the Executive will:

              (1) provide the Company  with any written  records or documents in
his possession relating to such claim reasonably requested by the Company;

              (2) take such action in connection  with  contesting such claim as
the Company  will  reasonably  request in writing  from time to time,  including
without limitation  accepting legal representation with respect to such claim by
an attorney  competent in respect of the subject matter and 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  will bear and pay  directly all costs and
expenses  (including  interest and penalties)  incurred in connection  with such
contest and will  indemnify  and hold  harmless the  Executive,  on an after-tax
basis,  for and  against any Excise Tax or income tax,  including  interest  and
penalties with respect thereto,  imposed as a result of such  representation and
payment of costs and expenses. Without limiting the foregoing provisions of this
Section 7(vi), the Company will control all proceedings taken in connection with
the contest of any claim  contemplated  by this  Section  7(vi) and, at its sole
option,  may pursue or forego any and all administrative  appeals,  proceedings,
hearings  and  conferences  with the taxing  authority  in respect of such claim
(provided,  however,  that the Executive may participate therein at his own cost
and expense) and may, at its option,  either direct the Executive to pay the tax
claimed and 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 will determine;  provided, however, that if the
Company  directs the Executive to pay the tax claimed and sue for a refund,  the
Company  will  advance  the  amount  of  such  payment  to the  Executive  on an
interest-free  basis and will indemnify and hold the Executive  harmless,  on an
after-tax  basis,  from any  Excise Tax or income  tax,  including  interest  or
penalties  with  respect  thereto,  imposed with  respect to such  advance;  and
provided  further,  however,  that any  extension of the statute of  limitations
relating to payment of taxes for the taxable year of the Executive  with respect
to which the  contested  amount is claimed  to be due is limited  solely to such
contested amount. Furthermore, the Company's control of any such contested claim
will be limited to issues  with  respect  to which a Gross-Up  Payment  would be
payable  hereunder and the Executive  will 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.

         (vii) If, after the receipt by the  Executive of an amount  advanced by
the Company pursuant to Section 7(vi) hereof,  the Executive receives any refund
with  respect to such  claim,  the  Executive  will  (subject  to the  Company's
complying  with the  requirements  of Section 7(vi) hereof)  promptly pay to the
Company the amount of such refund  (with any interest  paid or credited  thereon
after any taxes applicable  thereto).  If, after the receipt by the Executive of
an  amount  advanced  by  the  Company  pursuant  to  Section  7(vi)  hereof,  a
determination is made that the Executive will 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 or refund  prior to the  expiration  of 30
calendar days after such  determination,  then such advance will be forgiven and
will not be required to be repaid and the amount of such advance will offset, to
the extent thereof,  the amount of Gross-Up Payment required to be paid pursuant
to this Section 7.

8.  Mitigation and Offset.
    ---------------------

         8.1  Executive's  right to  receive  when due the  payments  and  other
benefits  provided for under and in accordance  with the terms of this Agreement
is  absolute,  unconditional  and subject to no set-off,  counterclaim  or legal
equitable  defense.  Any claim  which the Company  may have  against  Executive,
whether  for  breach of this  Agreement  or  otherwise,  shall be  brought  in a
separate  action or proceeding and not part of any action or proceeding  brought
by Executive to enforce the rights against the Company under this Agreement.

         8.2 Executive  shall not have any duty to mitigate the amounts  payable
by the Company  under this  Agreement  upon any  termination  of  employment  by
seeking new employment  following  termination.  All amounts payable pursuant to
this  Agreement  shall be paid  without  reduction  regardless  of any amount of
salary,  compensation or other amounts which may be paid or payable to Executive
as the result of Executive's employment by another employer;  provided, however,
that  Executive's  coverage  under the Company's  welfare  benefit plans will be
reduced  to the extent  that  Executive  becomes  covered  under any  comparable
employee  benefit plan made available by another  employer and covering the same
type of  benefits.  Executive  shall  report to the  Company  any such  benefits
actually received by him.

9.  Competition; Confidentiality; Nonsolicitation.
    --------------------------------------------

         9.1 (i) Subject to Section 6.1(ii),  the Executive hereby covenants and
agrees  that  during the Term and for one year  following  the Term he will not,
without the prior  written  consent of the Company,  engage in  Competition  (as
defined  below)  with  the  Company.  For  purposes  of this  Agreement,  if the
Executive   takes  any  of  the   following   actions  he  will  be  engaged  in
"Competition,"  engaging  in  or  carrying  on,  directly  or  indirectly,   any
enterprise, whether as an advisor, principal, agent, partner, officer, director,
employee,  stockholder,  associate  or  consultant  to any person,  partnership,
corporation or any other  business  entity,  that is principally  engaged in the
business  of  refining  and/or  marketing  oil or related  products in States or
Provinces  in which  the  Company  (or any  division  or  segment  thereof)  has
operations;  provided, however, that "Competition" will not include (a) the mere
ownership of securities  in any  enterprise  and exercise of rights  appurtenant
thereto  or (b)  participation  in  management  of any  enterprise  or  business
operation  thereof other than in connection  with the  competitive  operation of
such enterprise.

                  (ii)  Subject  to  Section   6.1(ii),   the  Executive  hereby
covenants and agrees that during the Term and for three years following the Term
he will not assist a third party in preparing or making an  unsolicited  bid for
the Company,  engaging in a proxy  contest with the Company,  or engaging in any
other similar activity.

         9.2  During the Term,  the  Company  agrees  that it will  disclose  to
Executive  its  confidential  or  proprietary  information  (as  defined in this
Section 9.2) to the extent  necessary for Executive to carry out his obligations
under this Agreement. Subject to Section 6.1(ii), the Executive hereby covenants
and agrees that he will not,  without the prior written  consent of the Company,
during  the Term or  thereafter  disclose  to any  person  not  employed  by the
Company, or use in connection with engaging in Competition with the Company, any
confidential  or proprietary  information  of the Company.  For purposes of this
Agreement,  the term "confidential or proprietary  information" will include all
information  of any nature and in any form that is owned by the Company and that
is not publicly  available or generally  known to persons  engaged in businesses
similar  or  related  to those of the  Company.  Confidential  information  will
include,  without  limitation,  the  Company's  financial  matters,   customers,
employees,  industry contracts,  and all other secrets and all other information
of a confidential or proprietary  nature. The foregoing  obligations  imposed by
this Section 9.2 will cease if such confidential or proprietary information will
have become, through no fault of the Executive, generally known to the public or
the  Executive is required by law to make  disclosure  (after giving the Company
notice and an opportunity to contest such requirement).

         9.3 The Executive  hereby covenants and agrees that during the Term and
for one year thereafter he will not attempt to influence, persuade or induce, or
assist any other  person in so  persuading  or  inducing,  any  employee  of the
Company to give up, or to not commence,  employment  or a business  relationship
with the Company.

         9.4 Executive  acknowledges and agrees that the remedy at law available
to the  Company  for  breach of any of his  post-termination  obligations  under
Sections 9.1, 9.2 and 9.3 would be inadequate and that damages flowing from such
a breach may not readily be  susceptible  to being  measured in monetary  terms.
Accordingly,  Executive  acknowledges,  consents and agrees that, in addition to
any other  rights or  remedies  which the  Company may have at law, in equity or
under this Agreement, upon adequate proof of his violation of any such provision
of this Agreement,  the Company will be entitled to immediate  injunctive relief
and may obtain a temporary  order  restraining any threatened or further breach,
without the necessity of proof of actual damage.

10.  Post-termination  Assistance.  Subject to Section  6.1(ii),  the  Executive
agrees  that  after his  employment  with the  Company  has  terminated  he will
provide,  upon reasonable notice, such information and assistance to the Company
as may  reasonably  be  requested by the Company in  connection  with any audit,
governmental investigation or litigation in which it or any of its affiliates is
or may  become a  party;  provided,  however,  that (i) the  Company  agrees  to
reimburse the Executive for any related out-of-pocket expenses, including travel
expenses, and to pay the Executive reasonable compensation for his time based on
his  rate of  annual  salary  at the  time of  termination  and  (ii)  any  such
assistance may not unreasonably  interfere with the  then-current  employment of
the Executive.

11.  Survival.  The  expiration or  termination  of the Term will not impair the
rights or  obligations of any party hereto that accrue  hereunder  prior to such
expiration or termination,  except to the extent  specifically stated herein. In
addition to the foregoing,  the Executive's covenants contained in Sections 9.1,
9.2, 9.3, and 10 and the  Company's  obligations  under  Sections 5, 7, and 12.1
will survive the expiration or termination of Executive's employment.

12.  Miscellaneous Provisions.
     ------------------------

         12.1 Legal Fees and Expenses.  Without  regard to whether the Executive
prevails, in whole or in part, in connection therewith, the Company will pay and
be financially  responsible  for 100% of any and all attorneys' and related fees
and expenses incurred by the Executive in connection with any dispute associated
with the interpretation,  enforcement or defense of the Executive's rights under
this  Agreement by  litigation or  otherwise;  provided  that, in regard to such
dispute,  the Executive has not acted in bad faith or with no colorable claim of
success.  All such fees and expenses  will be paid by the Company as incurred by
the Executive on a monthly basis upon an  undertaking  by the Executive to repay
such  advanced  amounts if a court  determines,  in a decision  against which no
appeal  may be taken or with  respect  to which the time  period  to appeal  has
expired, that he acted in bad faith or with no colorable claim of success.

         12.2 Binding on  Successors.  This  Agreement  will be binding upon and
inure to the benefit of the Company,  the Executive and each of their respective
successors,   assigns,   personal   and   legal   representatives,    executors,
administrators, heirs, distributees, devisees, and legatees, as applicable.

         12.3 Governing Law.  This Agreement will be governed, construed, inter-
preted and  enforced  in  accordance  with  the substantive laws of the State of
Delaware, without regard to conflicts of law principles.

         12.4  Severability.  Any  provision  of this  Agreement  that is deemed
invalid,  illegal  or  unenforceable  in  any  jurisdiction  will,  as  to  that
jurisdiction,  be  ineffective to the extent of such  invalidity,  illegality or
unenforceability,  without affecting in any way the remaining  provisions hereof
in such jurisdiction or rendering that or any other provisions of this Agreement
invalid,  illegal, or unenforceable in any other  jurisdiction.  If any covenant
should  be  deemed  invalid,  illegal  or  unenforceable  because  its  scope is
considered  excessive,  such  covenant will be modified so that the scope of the
covenant is reduced only to the minimum extent  necessary to render the modified
covenant valid, legal and enforceable.

         12.5 Notices.  For all purposes of this Agreement,  all communications,
including without limitation notices, consents, requests or approvals,  required
or permitted to be given hereunder will be in writing and will be deemed to have
been duly  given when hand  delivered  or  dispatched  by  electronic  facsimile
transmission  (with  receipt  thereof  confirmed),  or five  business days after
having been mailed by United States registered or certified mail, return receipt
requested,  postage prepaid,  or three business days after having been sent by a
nationally recognized overnight courier service such as Federal Express, UPS, or
Purolator,  addressed to the  Company,  and to the  Executive  at his  principal
residence, or to such other address as any party may have furnished to the other
in writing and in accordance herewith, except that notices of changes of address
will be effective only upon receipt.

                  (i)    To The Company.  If  to the  Company,  addressed to the
attention of the Chief Executive  Officer at P.O. Box 696000, San Antonio, Texas
78269-6000,  with  a  copy  sent to the attention of the General Counsel at such
address.

                  (ii)   To the Executive.  If  to the Executive, to him in care
of the Company at the above address.

         12.6   Counterparts.   This   Agreement  may  be  executed  in  several
counterparts,  each of which will be deemed to be an original,  but all of which
together will constitute one and the same Agreement.

         12.7 Entire Agreement.  The terms of this Agreement are intended by the
parties  to be the final  expression  of their  agreement  with  respect  to the
Executive's employment by the Company and may not be contradicted by evidence of
any prior or  contemporaneous  agreement.  The parties  further intend that this
Agreement will constitute the complete and exclusive  statement of its terms and
that  no  extrinsic  evidence  whatsoever  may be  introduced  in any  judicial,
administrative or other legal proceeding to vary the terms of this Agreement.

         12.8 Amendments;  Waivers. This Agreement may not be modified, amended,
or terminated  except by an  instrument in writing,  approved by the Company and
signed by the Executive and the Company.  Failure on the part of either party to
complain of any action or  omission,  breach or default on the part of the other
party,  no matter how long the same may  continue,  will never be deemed to be a
waiver of any rights or remedies  hereunder,  at law or in equity. The Executive
or the Company may waive  compliance  by the other party with any  provision  of
this  Agreement  that such other  party was or is  obligated  to comply  with or
perform only through an executed writing;  provided,  however,  that such waiver
will not  operate  as a waiver of, or  estoppel  with  respect  to, any other or
subsequent failure.

         12.9  No  Inconsistent   Actions.  The  parties  will  not  voluntarily
undertake  or  fail  to  undertake  any  action  or  course  of  action  that is
inconsistent  with  the  provisions  or  essential  intent  of  this  Agreement.
Furthermore,  it is  the  intent  of the  parties  hereto  to act in a fair  and
reasonable  manner with respect to the  interpretation  and  application  of the
provisions of this Agreement.

         12.10  Headings  and  Section  References.  The  headings  used in this
Agreement  are intended for  convenience  or reference  only and will not in any
manner  amplify,  limit,  modify or  otherwise  be used in the  construction  or
interpretation of any provision of this Agreement. All section references are to
sections of this Agreement, unless otherwise noted.

         12.11 Indemnification.  The Company will indemnify, defend and hold the
Executive  harmless,  to the maximum  extent  permitted by law, from any and all
claims,  litigations,  or suits  arising out of the  activities of the Executive
reasonably  taken in the  performance  of his duties  hereunder,  including  all
reasonable  expenses and professional fees that may relate thereto.  The Company
agrees to use its best  efforts to obtain a  directors  and  officers  liability
insurance  policy covering the Executive in a sufficient  amount to provide such
indemnification,  and to maintain  such policy  during the Term (and for so long
thereafter  as is  practicable  in the  circumstances  taking  into  account the
availability of such insurance).

         12.12 Dialogue. Unless Executive otherwise consents by the execution of
an  instrument  in writing  that  specifically  refers to Section  12.12 of this
Agreement,  no claim or dispute  arising out of or related to this  Agreement or
any other agreement,  policy,  plan,  program or arrangement,  including without
limitation,  any qualified or nonqualified retirement plan, stock option plan or
agreement,  or any other equity  incentive plan in which Executive  participated
prior to his  termination,  shall be subject to the Company's  Dialogue  Dispute
Resolution Program.

IN WITNESS WHEREOF,  the parties have duly executed this Agreement as of the day
and the year first above written.


_____________________________________
Executive

ULTRAMAR DIAMOND SHAMROCK CORPORATION

By:__________________________________

Title:_______________________________
</TEXT>
</DOCUMENT>
