THE CORPORATE LIBRARY

Related Party Transactions and Outside Related Director Information

Valero Energy Corporation (VLO)

3/23/2006 Proxy Information

Transactions with Management and Others

Mr. Greehey retired as Chief Executive Officer of the Company on December 30, 2005. Valero previously entered into an employment agreement with Mr. Greehey, dated March 25, 1999. The agreement provided for Mr. Greehey to serve as Chief Executive Officer of Valero and receive an initial base salary of $900,000 per annum, subject to possible increase adjustments by the Board of Directors. His annual base salary during 2005, his last year of employment, was $1.4 million. During his employment as Chief Executive Officer, Mr. Greehey was also eligible to receive an annual bonus in an amount determined by the Board upon the recommendation of the Compensation Committee, and a prorated bonus for the year of his retirement. Since he served as Chief Executive Officer for all of 2005, he was eligible to and did receive a full bonus for 2005. The agreement provides for reimbursement of certain club membership dues and fees, tax planning services and a permanent life insurance benefit. The agreement also provides that if Mr. Greehey receives a cash payment, and the payment is determined to be subject to the excise tax required for certain “excess parachute payments,” then he shall receive a cash bonus to cover the amount of the excise tax payable, plus any taxes on such bonus amount. Following his retirement as Chief Executive Officer, Mr. Greehey is continuing to serve as Chairman of the Board at the request and upon the discretion of the Board. The employment agreement provides for Mr. Greehey to serve as Chairman, at the discretion of the Board, for a period of two years after his retirement as Chief Executive Officer at a rate of compensation equal to one-half of his base salary as Chief Executive Officer in effect at the time of his retirement. Accordingly, Mr. Greehey is receiving for his service as Chairman an amount per annum equal to $700,000. If Mr. Greehey is removed from his position as Chairman by a majority of the remaining Board members, the agreement provides that he would be entitled to receive the balance of the two years of compensation for serving as Chairman.

Upon his retirement, in addition to retiree medical and other benefits payable to retirees generally, the agreement provided for Mr. Greehey to receive credit for eight additional years of service for purposes of calculating his pension benefits, vesting of certain outstanding equity and equity-based awards and the right to exercise vested stock options for the remainder of their original term, office and secretarial facilities, tax planning services, and $300,000 of permanent life insurance.

In connection with Mr. Greehey’s retirement as Chief Executive Officer of the Company, the Company, upon the approval of the Compensation Committee and the Board, amended his performance share award agreements to correct a timing issue regarding the vesting of performance shares based upon 2005 Company performance. Since Mr. Greehey was employed as Chief Executive Officer for all of 2005, it was determined that his performance shares that were subject to vesting in January 2006 based on 2005 Company performance (1/3 of his 2003, 2004 and 2005 grants) should be subject to vesting at the same time and the same level as those for other employees. However, Mr. Greehey’s performance share award agreements provided that upon retirement (December 30, 2005), unvested performance shares would vest automatically at the “target level,” or the 100% level. Accordingly, Mr. Greehey’s 2003, 2004 and 2005 performance share award agreements were amended to permit the “normal” vesting of shares scheduled to vest, based upon 2005 Company performance, at the January 2006 meeting of the Compensation Committee. This change also conformed Mr. Greehey’s agreements to those of other employees. Performance shares subject to vesting based upon 2005 Company performance vested in accordance with their terms in January 2006 at 150% of target upon certification by the Compensation Committee of 2005 Company performance. Performance shares subject to vesting in 2006 and 2007 vested at 100% of target upon Mr. Greehey’s retirement in accordance with the terms of the award agreements.

The Company entered into a separation agreement with Mr. Booke in connection with his retirement as Executive Vice President and Chief Administrative Officer of the Company at year-end 2005. The agreement provided for a payment to Mr. Booke equal to one year’s base salary; payment of his 2005 annual bonus as determined by the Compensation Committee in January 2006; vesting of previously granted stock options, restricted stock and performance shares that were unvested; crediting of eight additional years of service for purposes of calculating his pension benefits; payment of $8,000 (plus an amount for applicable taxes) for tax planning and preparation services; if requested, payment of up to $25,000 for outplacement services; one year of residential security monitoring service; and transfer of a club membership. Mr. Booke’s performance shares subject to vesting based upon 2005 Company performance vested in accordance with the terms of the performance share award agreements in January 2006 at 150% of target upon certification by the Compensation Committee of 2005 Company performance. Under the terms of the separation agreement, performance shares subject to vesting in 2006 and 2007 vested at 100% of target upon Mr. Booke’s retirement.

Valero has entered into change of control agreements with each of the named executive officers. These agreements are intended to assure the continued availability of these executives in the event of certain transactions culminating in a “change of control” of Valero. The change of control employment agreements have three-year terms, which terms are automatically extended for one year upon each anniversary unless a notice not to extend is given by the Company. If a “change of control” (as defined in the agreements) occurs during the term of an agreement, then the agreement becomes operative for a fixed three-year period. The agreements provide generally that the executive’s terms and conditions of employment (including position, location, compensation and benefits) will not be adversely changed during the three-year period after a change of control of the Company. The agreements also provide that upon a change of control (1) all stock options held by the executive will vest and remain exercisable for the shorter of five years from the date of termination or the remainder of the original option term; (2) the restrictions and deferral limitations applicable to any restricted stock awards held by the executive will lapse, and such restricted stock awards shall become fully vested; and (3) all performance share awards held by the executive will fully vest and be earned and payable based on the deemed achievement of performance at 200% of target level.

If, during the three-year term, the Company terminates the executive’s employment (other than for “cause,” death or “disability,” as defined in the agreement) or the executive terminates his employment for “good reason,” as defined in the agreement, and upon certain terminations prior to a change of control or in connection with or in anticipation of a change of control, the executive is generally entitled to receive the following payments and benefits: (1) accrued but unpaid compensation through the date of termination, including a pro-rata annual bonus; (2) a payment equal to two times their annual base salary, plus the executive’s highest annual bonus earned for any of the three full fiscal years ending prior to the date of the change of control; (3) the amount having an actuarial present value equal to the additional pension benefits the executive would have received had he continued to be employed (for purposes of both age and service credit) by the Company for an additional two years; (4) a payment equal to two years of additional employer contributions under the Company’s tax-qualified and supplemental defined contribution plans; (5) continued welfare benefits for two years; and (6) up to $25,000 of outplacement services. Each agreement provides that the executive is entitled to receive a payment in an amount sufficient to make the executive whole for any excise tax on excess parachute payments imposed under Section 4999 of the Internal Revenue Code of 1986, as amended.

Indebtedness of Management

No executive officer, director or nominee for director of Valero has been indebted to the Company, or has acquired a material interest in any transaction to which the Company is a party, during the last fiscal year.

3/25/2005 Proxy Information

Transactions with Management and Others

Valero has entered into an employment agreement with Mr. Greehey. The agreement became effective March 25, 1999 and the initial period of the agreement expired on July 31, 2001. In accordance with the agreement, prior to the expiration date, Mr. Greehey delivered written notice to Valero of his intention to extend the employment agreement, and the Company and Mr. Greehey executed an extension of employment agreement that extended the term of Mr. Greehey’s employment beyond the end of the initial period on a month-to-month basis. Mr. Greehey may terminate the employment agreement within the extension period by giving Valero 90 days written notice of termination. The agreement provided for Mr. Greehey to serve as Chief Executive Officer of Valero and receive an initial base salary of $900,000 per annum, subject to possible increase adjustments by the Board of Directors; the current annual base salary is $1.4 million. Mr. Greehey is also eligible to receive an annual bonus in an amount determined by the Board upon the recommendation of the Compensation Committee. During his employment, Mr. Greehey will also receive reimbursement for certain club membership dues and fees, tax planning services and a permanent life insurance benefit. In the event Mr. Greehey dies during employment, his base salary shall be paid to his beneficiaries or estate for the remainder of the agreement period.

The agreement provides that Mr. Greehey may retire at any time upon 90 days prior notice. Upon his retirement from employment, Mr. Greehey has agreed to continue to serve at the discretion of the Board as Chairman of the Board for two additional years at a rate of compensation equal to one-half of his base salary in effect at the time of his retirement. Upon his retirement, in addition to retiree medical and other benefits payable to retirees generally, Mr. Greehey would also receive credit for eight additional years of service for purposes of calculating his pension benefits, vesting of certain outstanding equity and equity-based awards and the right to exercise vested stock options for the remainder of their original term, office and secretarial facilities, tax planning services, and $300,000 of permanent life insurance.

The Company may terminate Mr. Greehey’s employment as Chief Executive Officer without cause at any time upon 90 days notice. Unless his termination is for cause, Mr. Greehey would be entitled to receive a pro rata, lump sum cash settlement equal to the sum of (i) Mr. Greehey’s base salary for the remaining term of the agreement, plus (ii) an amount equal to the highest annual bonus paid to Mr. Greehey during the preceding five years. In addition, Mr. Greehey would be entitled to the vesting and continued exercisability of certain outstanding equity and equity-based awards and additional years of service credit for purposes of his pension benefits, consistent with his rights upon retirement, as described above. If Mr. Greehey’s employment is terminated by the Company, he would not be entitled to serve as Chairman or to receive the compensation specified for such service. However, if Mr. Greehey retires and commences service as Chairman of the Board, and is then removed from such position by a majority of the remaining Board members, he would be entitled to receive the balance of the two years compensation for serving as Chairman of the Board. The employment agreement provides that if Mr. Greehey receives a cash payment, and the payment is determined to be subject to the excise tax required for certain “excess parachute payments,” then he shall receive a cash bonus to cover the amount of the excise tax payable, plus any taxes on such bonus amount.

Valero has entered into change of control agreements with each of the named executive officers. These agreements are intended to assure the continued availability of these executives in the event of certain transactions culminating in a “change of control” of Valero. The change of control employment agreements have three-year terms, which terms are automatically extended for one year upon each anniversary unless a notice not to extend is given by the Company. If a “change of control” (as defined in the agreements) occurs during the term of an agreement, then the agreement becomes operative for a fixed three-year period. The agreements provide generally that the executive’s terms and conditions of employment (including position, location, compensation and benefits) will not be adversely changed during the three-year period after a change of control of the Company. The agreements also provide that upon a change of control (1) all stock options held by the executive will vest and remain exercisable for the remainder of (a) the original option term for Mr. Greehey and (b) the shorter of five years from the date of termination and the remainder of the original option term for the other named executive officers; (2) the restrictions and deferral limitations applicable to any restricted stock awards held by the executive will lapse, and such restricted stock awards shall become fully vested; and (3) all performance share awards held by the executive will fully vest and be earned and payable based on the deemed achievement of performance at 200% of target level.

If, during the three-year term, the Company terminates the executive’s employment (other than for “cause,” death or “disability,” as defined in the agreement) or the executive terminates his employment for “good reason,” as defined in the agreement, and upon certain terminations prior to a change of control or in connection with or in anticipation of a change of control, the executive is generally entitled to receive the following payments and benefits: (1) accrued but unpaid compensation through the date of termination, including a pro-rata annual bonus; (2) a payment equal to (a) in the case of Mr. Greehey, three times his annual base salary, and for the other named executive officers, two times their annual base salary, plus (b) the executive’s highest annual bonus earned for any of the three full fiscal years ending prior to the date of the change of control; (3) the amount having an actuarial present value equal to the additional pension benefits the executive would have received had he continued to be employed (for purposes of both age and service credit) by the Company for an additional three years in the case of Mr. Greehey and two years in the case of the other named executive officers; (4) a payment equal to three years in the case of Mr. Greehey and two years in the case of the other named executive officers of additional employer contributions under the Company’s tax-qualified and supplemental defined contribution plans; (5) continued welfare benefits for three years in the case of Mr. Greehey and two years in the case of the other named executive officers; and (6) up to $25,000 of outplacement services. Mr. Greehey’s agreement also provides that he will be entitled to three additional years of fringe benefits and that, to the extent his existing employment agreement provides for a payment, benefit or right that is more favorable than or in addition to those provided by the change of control employment agreement, he shall be entitled to receive the more favorable payment, benefit or right, provided that in no event will he be entitled to duplicate payments, benefits or rights. Each agreement provides that the executive is entitled to receive a payment in an amount sufficient to make the executive whole for any excise tax on excess parachute payments imposed under Section 4999 of the Internal Revenue Code of 1986, as amended.

Indebtedness of Management

In order to reduce the Company’s tax burden under Section 162(m) of the Internal Revenue Code, Mr. Greehey’s 2001 bonus was deferred until after his retirement. In order to alleviate the cash flow impact to Mr. Greehey resulting from the delivery of his 2001 bonus after his retirement, the Compensation Committee and the Board determined in early 2002 to make a loan to Mr. Greehey of $1.9 million. The loan was evidenced by a promissory note executed by Mr. Greehey and made payable to Valero. The loan was combined with a similar $400,000 loan made to Mr. Greehey in 2001. The note had a five-year term and bore interest at a rate of 4.49% per annum. Interest and principal on the note were payable at maturity on January 17, 2007. Mr. Greehey repaid this loan in full, in cash, on October 29, 2004.

Except as referenced above, no executive officer, director or nominee for director of Valero has been indebted to the Company, or has acquired a material interest in any transaction to which the Company is a party, during the last fiscal year.

3/26/2004 Proxy Information

In order to alleviate the cash flow impact to Mr. Greehey resulting from the delivery of his 2001 bonus after his retirement, the Compensation Committee and the Board determined in early 2002 to make a loan to Mr. Greehey of $1.9 million. The loan is evidenced by a promissory note executed by Mr. Greehey and made payable to Valero. The loan was combined with a similar $400,000 loan made to Mr. Greehey in 2001. The note has a five-year term and bears interest at a rate of 4.49% per annum. Interest and principal on the note are payable at maturity on January 17, 2007. If Mr. Greehey’s employment with Valero ceases prior to the stated maturity of the note, the note must be repaid in full by the end of the third month following such cessation of employment.

Except as referenced above, no executive officer, director or nominee for director of Valero has been indebted to the Company, or has acquired a material interest in any transaction to which the Company is a party, during the last fiscal year.

3/25/2003 Proxy Information

In order to alleviate the cash flow impact to Mr. Greehey resulting from the delivery of his 2001 bonus after his retirement, the Compensation Committee and the Board determined in early 2002 to make a loan to Mr. Greehey of $1.9 million. The loan is evidenced by a promissory note executed by Mr. Greehey and made payable to Valero. The loan was combined with a similar $400,000 loan made to Mr. Greehey in 2001. The note has a five-year term and bears interest at a rate of 4.49% per annum. Interest and principal on the note are payable at maturity on January 17, 2007. If Mr. Greehey’s employment with Valero ceases prior to the stated maturity of the note, the note must be repaid in full by the end of the third month following such cessation of employment.

Except as referenced above, no executive officer, director or nominee for director of Valero has been indebted to the Company, or has acquired a material interest in any transaction to which the Company is a party, during the last fiscal year.