THE PROMPT RETURN OF PROXY CARDS WILL SAVE THE EXPENSE OF FURTHER
REQUESTS FOR PROXIES IN ORDER TO ASSURE A QUORUM.
VALERO ENERGY CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Board of Directors has determined that the 1994 Annual
Meeting of Stockholders (the "Annual Meeting") of Valero Energy
Corporation (referred to herein together with its subsidiaries as
the "Company") will be held on Thursday, April 28, 1994, at 10:00
a.m., Central Time, at its principal executive offices at 530
McCullough Avenue, San Antonio, Texas 78215, for the following
purposes:
(1) To elect three Class II directors as members of the
Board of Directors to serve until the 1997 Annual Meeting or
until their successors are elected and have qualified;
(2) To ratify the appointment of Arthur Andersen & Co.
as independent public accountants to examine the Company's
accounts for the year 1994; and
(3) To transact such other business as may properly
come before the Annual Meeting or any adjournment thereof.
By order of the Board of Directors,
Rand C. Schmidt
Corporate Secretary
San Antonio, Texas
March 22, 1994
<PAGE>
VALERO ENERGY CORPORATION
530 McCullough Avenue
San Antonio, Texas 78215
March 22, 1994
ANNUAL MEETING OF STOCKHOLDERS -- April 28, 1994
PROXY STATEMENT
General Information
This Proxy Statement and the accompanying Notice of Annual
Meeting of Stockholders (the "Notice") and proxy card are being
mailed to stockholders beginning on or about March 22, 1994.
They are furnished in connection with the solicitation of proxies
by Valero Energy Corporation ("Energy" or sometimes collectively
referred to hereinafter with its subsidiaries as the "Company")
to be voted at the 1994 Annual Meeting of Stockholders of Energy
(the "Annual Meeting") to be held at the time and place and for
the purposes set forth in the accompanying Notice. Holders of
Energy's Preferred Stock, $8.50 Cumulative Series A (the "Series
A Preferred Stock"), and Energy's Common Stock, $1.00 par value
per share (the "Common Stock"), are entitled to one vote for each
share held of record at the close of business on March 4, 1994
and are entitled to vote together as a single class with respect
to all matters described in this Proxy Statement.
For a period of at least ten days prior to the Annual Meeting, a
complete list of stockholders entitled to vote at the Annual
Meeting will be open to the examination of any stockholder of
record during ordinary business hours at Energy's principal
executive offices, Stock Transfer Department, Suite 356, 530
McCullough Avenue, San Antonio, Texas.
Action may be taken on any of the proposals at the Annual Meeting
on the date specified herein, or on any date or dates to which,
by original or later adjournment, the meeting may be adjourned.
On March 4, 1994, there were issued and outstanding 43,337,001
shares of Common Stock and 138,000 shares of Series A Preferred
Stock entitled to vote, making an aggregate of 43,475,001 shares
entitled to vote.
Energy's Annual Report to Stockholders (the "Annual Report"),
including audited financial statements of the Company for the
fiscal year ended December 31, 1993, has simultaneously been
mailed to stockholders entitled to vote at the Annual Meeting.
The Annual Report is not to be treated as a part of the proxy
materials.
Energy plans to furnish to its stockholders a report of the
results of the voting on such matters as may properly come before
the 1994 Annual Meeting or any adjournment thereof as soon as
practicable following the Annual Meeting.
Voting and Proxy Procedures
A proxy enables a stockholder to be represented at a meeting at
which he would otherwise be unable to participate. The proxy
card accompanying this Proxy Statement is solicited because each
stockholder is entitled, as an owner of Energy, to vote on
matters scheduled to come before the Annual Meeting. For ease of
reference, these matters have corresponding numbers in the Proxy
Statement and on the enclosed proxy card.
Energy's Restated Certificate of Incorporation (the "Restated
Certificate of Incorporation") entitles stockholders eligible to
vote to cumulate votes for any election of directors. There are
no conditions precedent to the entitlement of stockholders to
cumulate votes. The maximum number of votes which may be cast
shall equal the number of shares of Common Stock and Series A
Preferred Stock to be voted, multiplied by the number of
directors (three) to be elected. Any stockholder eligible to
vote may cast all votes for a single director or may distribute
his votes among the number of director nominees as the
stockholder may see fit. The distribution of votes among
nominees in other than equal proportions may be accomplished by
writing explicit instructions on the proxy card or an attachment
thereto. The proxy solicits discretionary authority to cumulate
votes and, unless otherwise specified, a vote for the nominees
will be cumulated and distributed among the nominees (except
nominees for whom authority to vote is withheld) in equal
proportions unless the persons named as proxies shall, in
accordance with their best judgment, otherwise direct.
Shares eligible to be voted and for which a proxy card in the
accompanying form is properly signed, dated and returned in
sufficient time to permit the necessary examination and
tabulation of the proxy before a vote is taken will be voted in
accordance with any choice specified. The proxy card permits a
specification as to whether shares represented by the proxy are
to be voted for all nominees for director or are not to be voted
for certain of such nominees. The proxy card also permits a
specification of approval, disapproval or abstention as to each
proposal described in this Proxy Statement. Stockholders are
urged to specify their choices by marking an (x) or other mark in
the appropriate boxes on the proxy card, but where no choice is
specified, eligible shares will be voted as indicated on the
proxy card. If any nominee for director is unable to serve or if
any matters not specified in this Proxy Statement come before the
Annual Meeting, eligible shares will be voted in accordance with
the best judgment of the persons named therein as proxies. At
the time this Proxy Statement was printed, the management of
Energy was not aware of any other matters to be voted upon.
A majority of the aggregate number of issued and outstanding
shares of Common Stock and Series A Preferred Stock, present in
person or represented by proxy, will constitute a quorum at the
Annual Meeting.
Directors are elected by a plurality of the votes of the shares
present in person or represented by proxy at the Annual Meeting
and entitled to vote on the election of directors. With respect
to the proposal to ratify the appointment of Independent Public
Accountants, the affirmative vote of the majority of shares
present in person or represented by proxy and entitled to vote is
required to approve the proposal.
Abstentions may be specified on all proposals except the election
of directors. Abstentions are counted as present at the Annual
Meeting for purposes of determining the existence of a quorum
and, with respect to any proposal other than the election of
directors, will have the same effect as a vote against the
proposal.
Under the rules of the New York Stock Exchange, brokers who hold
shares in "street name" on behalf of their customers will have
discretion, in the absence of voting instructions from the
customer, to vote such shares concerning the proposals to elect
directors and ratify the appointment of Independent Public
Accountants, but would not have discretion with respect to
certain other types of proposals. A "broker non-vote" results
when the broker does not receive voting instructions with respect
to a proposal for which the broker does not have such discretion,
or the broker otherwise fails to exercise its discretion.
Under Delaware law, a broker non-vote is treated as "present" for
purposes of determining the existence of a quorum, and, because
the broker has discretionary voting authority with respect to the
proposal to ratify the appointment of Independent Public
Accountants, a broker non-vote will have the same effect as a
vote against such proposal. With respect to the election of
directors, because directors are elected by a plurality of the
vote, broker non-votes and proxy cards or ballots marked
"withheld from" all nominees will have no effect on the outcome
of the vote. In the case of proxy cards or ballots marked
"withheld from" one or more but less than all nominees, the
stockholder's votes will be distributed among the other
nominee(s), as described above.
The proxy may be revoked at any time before it is exercised by
submitting a written revocation or a later dated proxy or proxy
card to Rand C. Schmidt, Corporate Secretary, Valero Energy
Corporation, P.O. Box 500, San Antonio, Texas 78292, or by
attending the Annual Meeting in person and so notifying the
meeting inspectors. Dissenting stockholders do not have rights
of appraisal with respect to any item to be presented at the
Annual Meeting.
Solicitation of proxies from Energy's stockholders will be made
by Energy and will be undertaken principally by use of the United
States Postal Service. However, such solicitation may also be
undertaken, without additional remuneration, by the directors,
officers and employees of the Company, and Energy may also
utilize the services of the firm of Kissel-Blake Inc.
("Kissel-Blake"), New York, New York. Such solicitation could be
undertaken either by telephone, telegraph or personal interview.
The cost of any such solicitation, including the cost of
preparing and mailing proxy materials, returning the proxies and
reimbursing brokerage houses and nominees for forwarding proxy
materials to beneficial owners, will be borne by Energy and its
stockholders. Energy's arrangement with Kissel-Blake provides
for payments to Kissel-Blake for compensation and reimbursement
of expenses, all of which are estimated not to exceed
approximately $15,000.
Board of Directors
The business of Energy is managed by or under the direction of
the Board of Directors (the "Board"). The Board establishes
corporate policies, approves major business decisions and
monitors the performance of Energy's management. The day-to-day
management functions and operating activities of Energy are
performed by the Company's executive officers and employees. The
Board is routinely informed about the Company's business
activities through monthly financial and operating reports,
regular Board and Committee meetings and other reports and
documents furnished or presented by the Chairman of the Board and
Chief Executive Officer ("CEO") and other officers and employees
of the Company.
The Restated Certificate of Incorporation requires that Energy's
Board be divided into three classes as nearly equal in number as
possible, consisting of Class I, Class II and Class III
directors, with each class serving a staggered three-year term.
The Restated Certificate of Incorporation provides that the Board
shall consist of not less than seven members, and the By-Laws of
Energy (the "By-Laws"), which may be amended by the Board,
provide that the Board shall have not more than thirteen members.
The size of the Board is currently set at eight members.
The Board conducts its business through meetings of the Board and
through its committees. One annual, one special and six regular
meetings of the Board were held in 1993. No current board member
attended less than 85.7% of the meetings of the Board and
committees of which he was a member.
Audit Committee
The Audit Committee reviews and reports to the Board on the
quality and performance of Energy's internal and external
accountants and auditors, the adequacy of its financial controls,
and the reliability of financial information reported to the
public.
Current members of the Audit Committee, none of whom are
employees of the Company, are James L. Johnson (Chairman), Robert
G. Dettmer and Philip K. Verleger, Jr.
Mr. Johnson, subject to his election as director at the Annual
Meeting, Messrs. Dettmer and Verleger have been appointed as
members of the Audit Committee to be effective April 28, 1994.
Mr. Johnson, subject to his election as director, has been
designated to serve as Chairman.
Two meetings of the Audit Committee were held in 1993.
Compensation Committee
The Compensation Committee reviews and reports to the Board on
Energy's compensation strategies, policies and programs; certain
personnel policies and policy controls; management development;
management succession; and benefit programs. The Committee also
approves and administers the Company's stock option, restricted
stock bonus and incentive bonus plans. See "Report of the
Compensation Committee of the Board of Directors on Executive
Compensation."
Current members of the Compensation Committee are Lowell H.
Lebermann (Chairman), Robert G. Dettmer, A. Ray Dudley and James
L. Johnson.
None of the members of the Compensation Committee is an employee
of the Company or was formerly an officer of Energy or its
subsidiaries. There are no compensation committee interlocks.
For the previous three fiscal years, except for director
compensation arrangements disclosed in this Proxy Statement, the
Company has not participated in any contracts, loans, fees,
awards or financial interests, direct or indirect, with any
Compensation Committee member, nor is the Company aware of any
means, directly or indirectly, by which a committee member could
benefit from the actions of the Company.
Messrs. Dudley and Johnson, subject to their election as
directors at the Annual Meeting, and Messrs. Lebermann and
Dettmer have been appointed to serve as members of the
Compensation Committee to be effective April 28, 1994. Mr.
Lebermann has been designated to serve as Chairman.
Three meetings of the Compensation Committee were held in 1993.
Executive Committee
The Executive Committee exercises the power and authority of the
Board during intervals between meetings of the Board and reports
to the Board at its next regular meeting regarding any actions
taken. The Executive Committee has the power to act on major
matters where it deems action appropriate, providing flexibility
and the ability to respond to time-sensitive business and legal
matters without calling a special Board meeting. Actions taken
by the Executive Committee do not require ratification by the
Board to be legally effective. If a Nominating Committee is not
appointed, the Executive Committee may also review possible
director candidates and recommend individuals for election as a
director.
Current members of the Executive Committee are A. Ray Dudley
(Chairman), William E. Greehey and Lowell H. Lebermann. Mr.
Dudley, subject to his election as director at the Annual
Meeting, and Messrs. Greehey and Lebermann have been appointed to
serve as members of the Executive Committee to be effective April
28, 1994. Mr. Dudley, subject to his election as director at the
Annual Meeting, has been designated to serve as Chairman.
Five meetings of the Executive Committee were held in 1993.
Nominating Committee
The Nominating Committee, if appointed by the Board, evaluates
policy on the size and composition of the Board and criteria and
procedures for director nomination. The Nominating Committee
reviews possible director candidates, including director
recommendations properly presented by stockholders, and
recommends to the full Board individuals suited for election as
directors and the slate of Board nominees for election by the
stockholders. The Nominating Committee also reviews and
recommends to the full Board director assignments for the various
committees of the Board. The Nominating Committee, if appointed
by the Board, typically meets during the fourth quarter of each
year, but may meet more often as required to fill vacancies on
the Board.
The Nominating Committee is comprised of directors who will not
be standing for election at the Annual Meeting of Stockholders.
Lowell H. Lebermann (Chairman), Robert G. Dettmer and William E.
Greehey were appointed by the full Board to serve as the
Nominating Committee with regard to nominations for the 1994
Annual Meeting of Stockholders. The recommendations of the
Nominating Committee were approved by the full Board and are
reflected in this Proxy Statement.
One meeting of the Nominating Committee was held in 1993.
PROPOSAL No. 1 -- Election of Directors
Three Class II directors will be elected at the Annual Meeting to
serve until the third succeeding Annual Meeting of Stockholders
or until their respective successors are elected and have
qualified. Messrs. Edward C. Benninger, A. Ray Dudley and James
L. Johnson have been nominated for election as Class II
directors. It is intended that shares represented by proxies
will be voted, except where authority to vote is withheld for any
nominee, FOR the election of the three director nominees in equal
proportions unless the persons named therein as proxies shall, in
accordance with their best judgment, otherwise direct. If, as
the result of some unexpected occurrence, any nominee should be
unavailable as a candidate at the time of the Annual Meeting,
either the number of directors constituting the full Board will
be appropriately reduced to eliminate the vacancy, or the proxies
will be voted by the persons named as proxies, in accordance with
their best judgment, for any available nominee. The Board has no
reason to believe that any current nominee will be unable to
serve. The three nominees for Class II director receiving the
greatest number of votes, whether or not such votes represent a
majority of the shares present and voting at the Annual Meeting,
will be elected as Class II directors. Information with respect
to the right to cumulate votes for the election of directors is
set forth on the second page of this Proxy Statement.
The following table sets forth information as of December 31,
1993, concerning each nominee for election as a director. Such
information, and the information regarding directors of Energy
contained elsewhere herein, is based partly on data furnished to
the Company by such director and partly on the Company's records.
<TABLE>
___________________________________________________________________________________________________________________________________
<CAPTION>
Year First
Elected or Age
Appointed as as of
Energy Executive December Present Proposed
Position(s) and Officer 31, Director Director
Name Office(s) Held or Director 1993 Class Class
___________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Edward C. Benninger Director, Executive 1979 51 II II
Vice President
A. Ray Dudley Director 1988 69 II II
James L. Johnson Director 1991 66 II II
___________________________________________________________________________________________________________________________________
</TABLE>
Mr. Benninger has served as a director of Energy since 1990. He
was elected Executive Vice President in 1989 and served as Chief
Financial Officer from 1986 to 1992. In 1992, he was elected
Executive Vice President and Chief Operating Officer of Valero
Natural Gas Company, general partner of Valero Natural Gas
Partners, L.P. (the "Partnership").
Mr. Dudley has served as a director of Energy since 1988. Mr.
Dudley served in various capacities with Tenneco Oil Company
("Tenneco") from 1959 until his retirement in 1987. Tenneco is
not affiliated with the Company or the Partnership.
Mr. Johnson has served as a director of Energy since 1991. Mr.
Johnson has served as a director of GTE Corporation ("GTE") since
1985. Since May 1, 1992, he has served as Chairman Emeritus of
GTE. He previously served in various capacities with GTE and was
Chairman and Chief Executive Officer of GTE from 1988 to 1992.
Mr. Johnson also serves as a director of Contel Cellular, Inc.
("Contel"), GFC Financial Corp. ("GFC"), Harte-Hanks
Communications, Inc. ("Harte-Hanks"), and The Mutual Life
Insurance Company of New York ("MONY"). Neither GTE, Contel,
GFC, Harte-Hanks nor MONY is affiliated with the Company or the
Partnership.
For detailed information regarding the nominees' holdings of
Common Stock, Common Units of Limited Partner Interests ("L.P.
Units") of the Partnership, compensation and other arrangements,
see "Beneficial Ownership of Voting Securities," "Information
Concerning Executive Compensation," "Arrangements with Certain
Officers and Directors," "Transactions with Management and
Others" and "Compensation of Directors."
Approval of the Proposal
As provided in the By-Laws, the election of directors will be
determined by a plurality of the shares present in person or by
proxy and entitled to vote at the Annual Meeting, provided that
the total shares present at the Annual Meeting constitute a
quorum.
PROPOSAL No. 2 -- Proposal to Ratify the Appointment of
Independent Public Accountants
The Board desires to obtain stockholders' ratification of the
following resolution approved at the Board meeting held on March
1, 1994, appointing Arthur Andersen & Co., 70 N.E. Loop 410, San
Antonio, Texas 78216, as independent public accountants for the
Company for the year 1994. Arthur Andersen & Co. has served
continuously in such capacity for the Company since 1979.
RESOLVED, that the appointment of the firm of Arthur
Andersen & Co., Certified Public Accountants, as the independent
auditors for the Company for the purpose of conducting an
examination and audit of the financial statements of the Company
and its subsidiaries for the fiscal year ending December 31,
1994, is hereby approved and ratified.
If the appointment is not approved, the adverse vote will be
considered as an indication to the Board that it should select
other independent public accountants for the following year.
Because of the difficulty and expense of making any substitution
of accountants so long after the beginning of the current year,
it is contemplated that the appointment for the year 1994 will be
permitted to stand unless the Board finds other good reason for
making a change.
A representative of Arthur Andersen & Co. is expected to be
present at the Annual Meeting to respond to appropriate questions
raised at the Annual Meeting or submitted to such firm in writing
prior to the Annual Meeting, and to make a statement if he
desires to do so.
Approval of the Proposal
The proposal shall be approved if approved by the vote of a
majority of the shares present in person or by proxy and entitled
to vote at the Annual Meeting, provided that the total shares
present at the Annual Meeting constitute a quorum.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
PROPOSAL TO RATIFY THE APPOINTMENT OF INDEPENDENT PUBLIC
ACCOUNTANTS.
Information Concerning Directors (Classes I and III)
The following table sets forth certain information as of December
31, 1993, respecting those directors whose present terms will
continue after the Annual Meeting.
There is no family relationship among any of the executive
officers, directors or nominees for director of Energy. The term
of each Class I director expires in 1996. The term of each Class
III director expires in 1995.
<TABLE>
____________________________________________________________________________________________________________________________________
<CAPTION
Year First
Elected or Age
Appointed as as of
Energy Executive December Present
Position(s) and Officer 31, Director
Name Office(s) Held or Director 1993 Class
____________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
William E. Greehey Director, Chairman 1979 57 I
of the Board and
Chief Executive
Officer
Robert G. Dettmer Director 1991 62 III
Lowell H. Lebermann Director 1986 54 III
Philip K. Verleger, Jr. Director 1991 49 I
____________________________________________________________________________________________________________________________________
</TABLE>
Mr. Greehey has served as Chief Executive Officer and as a
director of Energy since 1979 and as Chairman of the Board since
1983. Mr. Greehey is also a director of Weatherford
International Incorporated and Santa Fe Energy Resources, Inc.,
neither of which is affiliated with the Company or the
Partnership.
Mr. Dettmer was elected as a director of Energy in 1991. Mr.
Dettmer has served as an Executive Vice President and as the
Chief Financial Officer of PepsiCo, Inc. ("PepsiCo") since 1986.
PepsiCo is not affiliated with the Company or the Partnership.
Mr. Lebermann was elected as a director of Energy in 1986, and
previously had served on Energy's Board from 1979 to 1983. Mr.
Lebermann has served as President of Centex Beverage, Inc.
("Centex"), a beverage distributor, in Austin, Texas, since 1981.
Centex is not affiliated with the Company or the Partnership.
Mr. Verleger has served as a director of Energy since 1991. He
is an independent economic consultant and has been a Visiting
Fellow at the Institute for International Economics since 1984.
Sally A. Shelton, who had served as a director of Energy since
1993, resigned effective March 7, 1994, in order to accept a
position in the Clinton Administration. Because of the short
period between the date of Ms. Shelton's resignation and the
mailing of the Proxy Statement, there was insufficient time to
select a nominee for her position. As a result, it is expected
that the Board will take action prior to the 1994 Annual Meeting
to reduce the size of the Board to seven members, as permitted
under the By-Laws, until a new director can be named.
Beneficial Ownership of Voting Securities
The following table sets forth information as of December 31,
1993, with respect to each person, including any group as that
term is used in Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended ("Exchange Act"), known to Energy to be the
beneficial owner of more than five percent of any class of its
voting securities:
<TABLE>
______________________________________________________________________________________
<CAPTION>
Amount and
Nature of
Name and Address Beneficial Percent
Title of Class of Beneficial Owner Ownership of Class
______________________________________________________________________________________
<S> <C> <C> <C>
Common Stock Vanguard/Windsor Funds, Inc.<fn1> 4,255,500 9.8%
P.O. Box 2600
Valley Forge, PA 19482
Common Stock Frost National Bank of 4,208,674 9.7%
San Antonio, N.A.<fn2>
P.O. Box 1600
San Antonio, TX 78296
Common Stock Franklin Resources, Inc.<fn3> 4,116,100 9.5%
777 Mariners Island Blvd.
San Mateo, CA 94404
Series A Preferred American General Corporation 138,000 100%
Stock<fn4> P.O. Box 3855
Houston, TX 77253
______________________________________________________________________________________
<FN>
<fn1> Vanguard/Windsor Funds, Inc. ("Vanguard") and Wellington Management Company ("Wellington") have filed with the SEC separate
Schedule 13Gs, reporting, as of December 31, 1993, their beneficial ownership of 4,255,500 shares of Common Stock. As disclosed in
the Schedule 13Gs, Vanguard has sole voting power and shared dispositive power, while Wellington has shared dispositive power, with
respect to the reported shares.
<fn2> Frost National Bank of San Antonio, N.A. ("Frost") has filed with the SEC a Schedule 13G reporting, as of December 31, 1993,
its beneficial ownership of 4,208,674 shares of Common Stock in its capacity as Trustee for the Valero Energy Corporation Thrift
Plan, Valero Energy Corporation Employees' Stock Ownership Plan, the Valero Employees' Stock Ownership Plan and the Valero Energy
Corporation Benefits Trust. As disclosed in the Schedule 13G, Frost has shared voting and dispositive power with respect to the
reported shares.
<fn3> Franklin Resources, Inc. ("Franklin") has filed with the SEC a Schedule 13G reporting, as of December 31, 1993, its
beneficial ownership of 4,116,100 shares of Common Stock. As disclosed in the Schedule 13G, Franklin has sole voting power with
respect to 3,765,800 shares, shared voting power with respect to 350,300 shares and shared dispositive power with respect to all
the reported shares.
<fn4> The Series A Preferred Stock is not registered pursuant to Section 12 of the Exchange Act and, accordingly, no filing of
Schedules 13G or 13D is required with respect thereto. A subsidiary of Energy holds 552,000 shares of Series A Preferred Stock,
which shares are not deemed to be "outstanding" for purposes of the Annual Meeting.
</TABLE>
Except as otherwise indicated, the following table sets forth
information as of February 1, 1994, regarding Common Stock and
L.P. Units beneficially owned (or deemed to be owned) by each
nominee for director, each current director, each executive
officer named in the Summary Compensation Table, and all current
directors and executive officers of Energy as a group. Such
information has been furnished to Energy by such persons and
cannot be independently verified by Energy.
<TABLE>
____________________________________________________________________________________________________________________________________
<CAPTION>
Shares of L.P.
Name of Common Stock Units Percent Percent
Beneficial Owner Beneficially Beneficially of Class of Class
<fn1> Owned<fn2><fn3><fn4> Owned<fn2><fn3><fn4> (Shares) (Units)
____________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Edward C. Benninger<fn5> 127,689 15,774
Robert G. Dettmer 3,252 - 0 -
A. Ray Dudley 10,286 - 0 -
William E. Greehey<fn5> 403,552 33,595
James L. Johnson 1,727 - 0 -
Lowell H. Lebermann 5,774 - 0 -
E. Baines Manning<fn5> 58,422 - 0 - <fn6> <fn7>
Stan L. McLelland<fn5> 116,834 20,260
Philip K. Verleger, Jr. 2,127 - 0 -
Martin P. Zanotti<fn5> 66,483 1,348
All current executive officers
and directors as a group,
including the persons named
above<fn5><fn8> 864,797 71,529
____________________________________________________________________________________________________________________________________
(footnotes on following page)
<FN>
<fn1> The business address for all beneficial owners listed above is 530 McCullough Avenue, San Antonio, Texas 78215.
<fn2> No executive officer, director or nominee for director of Energy owns any class of equity securities of Energy or the
Partnership other than Common Stock and L.P. Units.
<fn3> Excludes Common Stock and L.P. Units owned by adult children. Beneficial ownership is disclaimed as to all such excluded
shares and units.
<fn4> Amounts include shares of Common Stock allocated pursuant to various employee stock plans established by Energy and
available to its employees generally (collectively, the "Employee Stock Plans"), as well as shares granted under Energy's Restricted
Stock Bonus and Incentive Stock Plan (the "Restricted Stock Plan") and Energy's 1990 Restricted Stock Plan for Non-Employee
Directors (the "Director Plan"). Except as otherwise noted, each person named in the table, and each other executive officer, has
sole power to vote or direct the vote of all such shares and units beneficially owned by him. Each person named in the table, and
each other executive officer, has sole power to dispose or direct the disposition of shares and units beneficially owned by him,
except that shares held under certain Employee Stock Plans are subject to transfer restrictions. Common Stock granted under the
Restricted Stock Plan ("Restricted Stock") and the Director Plan may not be disposed of until vested.
<fn5> Amounts include 75,496, 21,769, 17,841, 18,234, 14,750 and 163,982 shares which may be acquired by Messrs. Greehey,
Benninger, McLelland, Zanotti, Manning and all current executive officers and directors of Energy as a group, respectively, under
options which are exercisable within 60 days. Such shares may not be voted unless the options are exercised. Shares which may
become exercisable within 60 days only in the event of a change of control of Energy are excluded. None of the current executive
officers, directors or nominees for director of Energy holds any rights to acquire Common Stock except through exercise of stock
options.
<fn6> As of February 1, 1994, each current executive officer, director and nominee for director of Energy owned less than 1% of
the outstanding Common Stock. All of the current executive officers and directors of Energy as a group beneficially owned
approximately 2.0% of the outstanding Common Stock as of the same date. Fractional shares have been rounded to the nearest whole
share.
<fn7> As of February 1, 1994, each current executive officer, director and nominee for director of Energy and all of the current
executive officers and directors of Energy as a group owned less than 0.4% of the outstanding L.P. Units.
<fn8> Certain officers of Energy not designated as executive officers by the Board of Directors do not perform the duties of
executive officers and are not classified as "executive officers" for purposes of this Proxy Statement.
</TABLE>
Section 16 Reporting
Section 16(a) of the Exchange Act requires Energy's executive
officers and directors, and persons who own more than ten percent
of a registered class of Energy's equity securities, to file
reports of ownership and changes in ownership with the Securities
and Exchange Commission ("SEC") and the New York Stock Exchange.
Officers, directors and greater than ten-percent stockholders are
required by SEC regulation to furnish Energy with copies of all
forms filed pursuant to Section 16(a).
Based on a review of the copies of such forms received by it and
written representations from certain reporting persons that no
Forms 5 were required for those persons, Energy believes that,
during the year ended December 31, 1993, its executive officers,
directors and greater than ten-percent beneficial owners were in
compliance with applicable requirements of Section 16(a).
Notwithstanding anything to the contrary set forth in any of
Energy's previous filings under the Securities Act of 1933, as
amended, or the Exchange Act that might incorporate future
filings by reference, including this Proxy Statement, in whole or
in part, the following performance graph and Report of the
Compensation Committee of the Board of Directors shall not be
incorporated by reference into any such filings.
Set forth below is a line graph comparing the yearly percentage
change in the cumulative total stockholder return on Energy's
Common Stock against the cumulative total return of the S&P 500
Composite Index and the S&P Oil (Domestic Integrated) Index for
the period of six fiscal years commencing December 31, 1987 and
ended December 31, 1993.
<PAGE>
Comparison of Six Year Cumulative Total Return*
Energy's Common Stock, S&P 500 and S&P Oil
(Domestic Integrated) Indices
<TABLE>
<CAPTION>
12/1987 12/1988 12/1989 12/1990 12/1991 12/1992 12/1993
<S> <C> <C> <C> <C> <C> <C> <C>
Energy
Common Stock 22.50 100.00 172.01 177.82 349.19 262.69 256.69
S&P 500 88.39 100.00 131.09 127.60 166.47 179.15 197.21
S&P Oil
(Domestic Integrated) 82.23 100.00 144.01 136.73 127.82 130.54 137.54
</TABLE>
*Assumes that the value of the investment in Energy Common Stock
and each index was $100 on December 31, 1988, and that all
dividends were reinvested.
<PAGE>
The performance graph contained in Energy's 1993 proxy statement
used an oil refining industry index that is no longer available.
The performance graph herein uses the S&P Oil (Domestic
Integrated) Index in lieu of the discontinued index. Energy
estimates that total return for 1993 for the discontinued index
would have been approximately 13%. For the S&P Oil (Domestic
Integrated) Index and for the Energy Common Stock, 1993 total
return was 5.36% and -5.87%, respectively.
The foregoing performance graph and related textual information
are based on historical data and are not necessarily indicative
of future performance.
Report of the Compensation Committee of the Board of Directors on
Executive Compensation
The Company's executive compensation programs are administered by
the Compensation Committee (the "Committee") of Energy's Board of
Directors. The Committee is composed of four independent outside
directors not eligible to participate in the Company's executive
compensation programs. The Committee's policies are implemented
by the Company's compensation and benefits staff under the
direction of the Vice President Administration. The Company's
executive compensation programs are intended to provide strong
incentives for high performance, enabling the Company to recruit,
retain and motivate the executive talent necessary to be
successful.
Overview. The Company's executive compensation program includes
base salary, an annual incentive bonus opportunity and long-term
stock-based incentives. The CEO and other executive officers
also participate in benefit plans generally available to
employees of the Company. Because of its role as general partner
of the Partnership, the Company competes for executive talent in
both the oil refining industry and in the natural gas industry.
Accordingly, for purposes of determining executive compensation
levels, the Company utilizes a subgroup of companies from a
nationally recognized compensation database compiled by Hewitt
Associates, L.L.C. ("Hewitt"), an independent compensation
consultant retained by the Company. The subgroup consists of
fifteen companies with significant participation in the oil
refining industry or natural gas industry and which are similar
to the Company in size and scope of operations (the "Comparator
Group"). The Comparator Group has been approved by the Committee
and did not change from 1992 to 1993. Base salary, bonuses and
other compensation recommendations are developed by the Company's
compensation and benefits staff, reviewed by Hewitt and submitted
to the Committee for consideration. Other nationally recognized
compensation surveys are utilized to validate the information
provided by Hewitt. In establishing and implementing executive
compensation arrangements, the Committee reviews and discusses
the staff recommendations directly with representatives of
Hewitt.
Annual incentive bonuses are related both to measures of Company
financial performance and to individual performance. Long-term
incentives, consisting of restricted stock and stock option
grants, as well as the noncash portion of annual incentive bonus
awards, are intended to balance executive management focus
between short- and long-term goals and provide capital
accumulation linked directly to the performance of Energy's
Common Stock. Base salary levels are targeted at approximately
the 50th percentile of the Comparator Group, while annual
incentive compensation, restricted stock and stock option grants
are targeted at the 65th percentile. While no specific
percentile target is set for overall compensation, the Committee
intends that each executive's total compensation package favor
longer-term and variable compensation over fixed compensation.
For the five executives named in the Summary Compensation Table,
the base salary component of total annual and long-term
compensation for 1993, as reported in the Summary Compensation
Table, ranged from a low of approximately 32% (for the CEO) to
approximately 55%, while the annual incentive and longer-term
compensation component ranged from a high of approximately 68%
(for the CEO) to approximately 45%. (For purposes of the
preceding sentence, stock options granted in 1993 have been
valued using the "grant date present value" set forth in the
table below titled "Option/SAR Grants in the Last Fiscal Year.")
Base Salaries. Base salaries are set against established grades,
salary ranges and midpoints reflecting the position, duties and
level of responsibility for each executive and the Hewitt
compensation survey data for the Comparator Group. Base salaries
are reviewed annually and may be adjusted within the established
salary ranges for each salary grade to reflect promotions, the
assignment of additional responsibilities, individual performance
or the performance of the Company. Salary grades, compensation
ranges and midpoints are also periodically adjusted to remain
competitive with the Comparator Group. Base salaries for the CEO
and other executive officers were last adjusted by 4% in
mid-1992, and were not increased in 1993.
Annual Incentive Bonus. Executive officers have the opportunity
to earn an annual incentive bonus, which is based on three
factors: (i) the position of the executive officer, which is used
to determine a targeted percentage of annual base salary which
may be awarded as incentive bonus, with the targets ranging from
a low of approximately 40% of base salary to approximately 65% of
base salary (for the CEO); (ii) realization by the Company of
quantative financial performance targets established by the
Committee; and (iii) a qualitative evaluation of the individual's
performance. For each executive, the targeted percentage of base
salary is adjusted, upward or downward, based upon Company
achievement of the financial performance goals. The Committee
retains ultimate discretion to adjust the bonus amount, upwards
or downward, by up to approximately 25%, based upon its
subjective determination of individual performance and such other
factors as it deems to be appropriate.
For 1993, the Committee established four quantitative measures of
Company financial performance, consisting of (i) return on equity
("ROE") compared with the average ROE for six similarly-sized
companies in the oil refining business for which financial
information is publicly available on a timely basis (the
"Refinery Group"), (ii) return on investment ("ROI") compared
with the Refinery Group, (iii) earnings per share of Common Stock
in calendar year 1993 compared with 1992, and (iv) the average
closing price of a share of Common Stock during a recent period,
compared with the average closing price during the corresponding
prior year period. For the ROE and ROI financial performance
measures, the targeted salary percentage is adjusted, upward or
downward, depending upon the extent to which the Company's ROE
and ROI exceed, or fall short of, the average ROE and ROI for the
Refinery Group. For the targets based on earnings per share and
stock price, the Committee established a targeted performance
range, with adjustments to the targeted salary percentage being
made if the Company's performance falls outside the
preestablished ranges. ROE and ROI are measured against the
Refinery Group, rather than the Comparator Group, because the
Company's investment in the Partnership is accounted for on the
equity method and does not have a significant effect on the
Company's consolidated financial results. The four performance
factors were given approximately equal weight in determining
potential adjustments to the targeted salary percentages.
The 1993 bonus amounts were determined by the Committee at a
meeting held in November 1993, based upon the Company's actual
financial performance for the first nine months of 1993, its
projected financial results for the final quarter of 1993, as
reflected in the latest internal financial projections then
available, and its average stock price during October 1993 versus
October 1992. The financial information considered by the
Committee indicated that the Company had exceeded the ROE and ROI
averages for the Refinery Group, was within the targeted range
for the stock price objective and was below the targeted range
for the earnings per share objective. Based upon these results,
the Committee reduced by approximately 12.8% the initial bonus
target amounts determined by application of each executive's
targeted salary percentage. The resulting preliminary bonus
amount for each executive was then adjusted to reflect the
Committee's subjective evaluation of the individual's
performance. With respect to executives other than the CEO, such
adjustment was based upon recommendations made by the CEO
following a subjective evaluation of the executive's performance
in relation to individual goals established by the CEO. For the
four executive officers (other than the CEO) named in the Summary
Compensation Table, the preliminary bonus amounts determined
through application of the quantitative factors discussed above
were further reduced by a weighted average of approximately 4.1%.
Because of the timing of the bonus awards, the Committee did not
take into account, and the awards did not reflect, the adverse
impact of the significant decline in oil and refined product
prices which occurred late in the fourth quarter of 1993,
resulting in a decline in Energy's fourth quarter 1993 earnings.
Forty percent of each executive's 1993 annual incentive award was
paid in shares of Common Stock and the remainder in cash. After
giving effect to payment of federal income taxes out of the cash
award, approximately one-third of the after-tax amount of each
award is represented by a cash payment, while approximately
two-thirds is represented by Common Stock, which executives are
encouraged to retain. The Committee believes that this
allocation is consistent with the Company's goal of emphasizing
stock ownership in both short-term and long-term compensation and
providing a vested interest and incentive for long-term financial
and operating performance.
Long-Term Incentive Awards. To provide stock-based longer-term
compensation for executives, the Company maintains the Restricted
Stock Plan, which was approved by Energy's stockholders on April
19, 1990. The Restricted Stock Plan authorizes grants of
restricted shares of Common Stock which vest (become
nonforfeitable) over a period determined by the Committee. For
each executive, a targeted number of shares is set with a market
value at the date of grant equivalent to approximately the 65th
percentile of the Comparator Group. Such targeted award is then
adjusted, upwards or downwards, by up to 25% based upon an
individual subjective performance evaluation, which (for
executives other than the CEO) is based upon the recommendation
of the CEO. The Committee generally makes restricted stock
awards every year. The awards made in 1993 vest in equal
installments over a period of three years commencing in 1994, but
will be subject to forfeiture if an executive terminates
employment prior to vesting. Award recipients participate in any
appreciation or depreciation in the market price of the Common
Stock during the vesting period and thereafter as long as such
stock is retained. Awards have no additional performance
criteria and, because they are intended to provide an incentive
for future performance, are not based upon past Company
performance. In determining individual awards, the Committee
does not consider Restricted Stock previously awarded or
currently held, both because such considerations are not
reflected in the compensation survey information upon which
awards are based, and because the Company does not wish to
encourage executives to sell stock in order to qualify for
additional grants. The total number of shares awarded is a
function of the Common Stock price at the time of grant and the
number of shares required to achieve the percentile compensation
target.
Stock Options. Under the Company's Stock Option Plan No. 3 and
Stock Option Plan No. 4, previously approved by Energy's
stockholders, the Committee may grant stock options to
executives. Procedures for determining option grants are in all
material respects the same as for restricted stock awards.
Option awards generally vest over a period of three years in
equal installments and, in the case of the awards made in 1993,
are exercisable for approximately ten years. Consistent with the
Company's philosophy of emphasizing long-term variable
compensation, options were granted in 1993 at an exercise price
equal to the price of the Common Stock at the date of grant. The
award and vesting of stock options are not contingent on
achievement of any performance targets, but the options will
provide a benefit to the executive only to the extent that there
is appreciation in the market price of the Common Stock during
the option period. Options are also subject to forfeiture upon
termination of employment.
Determination of the CEO's Compensation. The CEO's compensation
is recommended by the Committee and established by the Board of
Directors. The 1993 compensation of Mr. William E. Greehey, as
CEO, consisted of base salary, an incentive bonus and restricted
stock and stock option awards. As noted above, base salary
comprised approximately 32% of the CEO's 1993 total annual and
long-term compensation reported in the Summary Compensation
Table, versus approximately 68% for annual incentive and
long-term compensation. The CEO's base salary and bonus are
determined using the procedures described above. In determining
the CEO's 1993 annual bonus, the Committee considered the four
financial performance measures discussed above and reduced the
initial bonus target amount determined by application of the
CEO's targeted salary percentage by approximately 12.8%. The
Committee then evaluated Mr. Greehey's individual performance in
achieving Company strategic goals, including successful
completion of the capital expansion program at the Company's
Corpus Christi, Texas, refinery, and progress made toward the
reacquisition of VNGP, L.P. and business development efforts in
Mexico, as well as goals related to development of management
systems and talent and efforts to reengineer various Company
operations. Based upon this subjective evaluation, the Committee
increased the preliminary bonus amount by approximately 6.4% and
awarded a 1993 incentive bonus of $375,000, representing an
overall increase of 2.7% from 1992. As a result, approximately
94% of the CEO's 1993 bonus amount reported in the Summary
Compensation Table was based upon quantitative factors, while
approximately 6% was based upon qualitative factors.
In January 1993, Mr. Greehey was awarded options to purchase
50,000 shares of Common Stock at the then-current market price of
$23.1875 per share in accordance with the guidelines discussed
above. In November 1993, Mr. Greehey was awarded 20,000 shares
of Restricted Stock under the Restricted Stock Plan, also
reflecting the guidelines mentioned above. Such options and
Restricted Stock will vest over a period of three years.
Omnibus Budget Reconciliation Act of 1993. The Omnibus Budget
Reconciliation Act of 1993 added Section 162(m) to the Internal
Revenue Code ("Section 162(m)"). With certain exceptions,
beginning with the taxable year commencing January 1, 1994,
Section 162(m) will prevent publicly held corporations, including
the Company, from taking a tax deduction for compensation in
excess of $1 million paid to the CEO and the four other persons
named in the Summary Compensation Table in the proxy statement.
Section 162(m) will not apply to limit the deductibility of
performance-based compensation exceeding $1 million if paid (i)
solely upon attainment of one or more performance goals, (ii)
pursuant to a performance-based compensation plan adopted by the
Committee, and (iii) the terms of the plan are approved by the
stockholders before payment of the compensation. The Company
believes that its stock option plans will qualify for the tax
deduction.
The Committee is evaluating alternatives but has not adopted any
policy to qualify for deductibility under Section 162(m) of
fiscal year 1994 compensation exceeding $1 million, if any, paid
to any executive. The Committee does not anticipate that Section
162(m) will limit the deductibility of any compensation paid in
fiscal year 1994. No executive officers of Energy, other than
the CEO, would have been affected by such provision in 1993.
Members of the Compensation Committee:
Lowell H. Lebermann, Chairman
Robert G. Dettmer
A. Ray Dudley
James L. Johnson
<PAGE>
The foregoing Performance Graph and Report of the Compensation
Committee shall not be deemed to be "soliciting material" or to
be "filed" with the SEC or subject to regulations 14A or 14C
under the Exchange Act, or to the liabilities of Section 18 of
the Exchange Act.
Information Concerning Executive Compensation
The following table sets forth information as to items of
compensation paid to Energy's CEO and its four other most highly
compensated executive officers for services rendered in all
capacities to the Company in 1991, 1992 and 1993. Benefits made
available under comprehensive health care, long-term and
short-term disability, relocation, term life insurance, vacation
and other plans which are available on the same basis to all
full-time salaried employees are not included herein.
<PAGE>
Summary Compensation Table
<TABLE>
____________________________________________________________________________________________________________________________________
<CAPTION>
Long-Term Compensation
_______________________
Securities
Restricted Underlying
Annual Compensation Stock Options/ All Other
Name and Bonus Awards SARs Compensation
Principal Position Year Salary($) ($)<fn1> ($)<fn2> (#) ($)<fn3>
____________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
William E. Greehey
Director, Chairman of 1993 $622,020 $ 375,000 $457,500 50,000 $ 77,861
the Board and Chief 1992 $610,050 $ 365,000 $367,413 32,884 $ 78,327
Executive Officer 1991 $586,560 $ 472,804 $397,211 0 --
of Energy
Edward C. Benninger
Director and Executive 1993 $335,040 $ 170,000 $228,750 18,000 $ 32,923
Vice President of 1992 $303,778 $ 155,000 $165,538 18,805 $ 33,507
Energy 1991 $285,630 $ 200,942 $161,088 0 --
Stan L. McLelland
Executive Vice 1993 $262,380 $ 87,000 $102,938 12,000 $ 28,777
President and 1992 $257,310 $ 91,000 $ 88,825 12,524 $ 31,885
General Counsel of 1991 $247,380 $ 118,201 $ 93,650 0 --
Energy
Martin P. Zanotti<fn4>
Executive Vice 1993 $227,160 $ 75,000 $ 22,875 10,000 $ 24,977
President of Valero 1992 $222,780 $ 80,000 $ 72,675 11,700 $ 25,214
Refining and Marketing
Company
E. Baines Manning<fn4>
Senior Vice President 1993 $216,420 $ 60,000 $ 68,625 9,000 $ 17,682
of Valero Refining and 1992 $212,250 $ 64,000 $ 40,375 9,750 $ 14,417
Marketing Company
___________________________________________________
<fn1> In 1991, executives received bonuses comprised of 60% Common Stock and 40% cash. In 1992 and 1993, executives received
bonuses in 60% cash and 40% Common Stock.
<fn2> Represents the dollar value obtained by multiplying the number of shares of Restricted Stock granted to each named executive
officer by the closing market price of Energy's unrestricted Common Stock on the date of grant. Amounts for 1991 also include
grants of L.P. Units ("Restricted Units") under Energy's Preference Unit Award Plan (the "Unit Plan"), valued at the closing market
price of unrestricted L.P. Units at the date of grant. No grants were made to any named executive out of the Unit Plan after 1991,
and no grants under the Unit Plan remain unvested. For each named executive officer, the number of shares of Restricted Stock held
at December 31, 1993, and the value thereof, based on the closing market price of the Common Stock at December 31, 1993, was as
follows: Mr. Greehey: 35,133 shares -- $742,185; Mr. Benninger: 16,532 shares -- $349,239; Mr. McLelland: 8,066 shares -- $170,394;
Mr. Zanotti: 3,400 shares -- $71,825; and Mr. Manning: 4,333 shares -- $91,535. Dividends are paid on the Restricted Stock at the
same rate as on Energy's unrestricted Common Stock. Except as noted below, all grants of Restricted Stock and Restricted Units vest
in annual increments of 33 1/3% beginning on the first anniversary of the grant date. In November 1993, the Compensation Committee
of the Board accelerated from February 1994 to November 1993 the vesting date of certain grants under the Restricted Stock Plan and
Unit Plan, as permitted under the provisions of the plans.
<fn3> Amounts for 1992 and 1993 include Company contributions pursuant to the Employee Stock Plans, and that portion of interest
accrued under the Executive Deferred Compensation Plan which is deemed to be at "above-market" rates under applicable SEC rules.
Messrs. Greehey, Benninger, McLelland, Zanotti and Manning were allocated $50,280, $28,092, $21,215, $18,736 and $17,682,
respectively, as a result of Energy contributions to Employee Stock Plans for 1993, and $14,581, $4,831, $7,562, $6,241 and $0,
respectively, as a result of Energy "above-market" allocations to the Executive Deferred Compensation Plan for 1993. Mr. Manning
does not participate in the Executive Deferred Compensation Plan. Amounts for 1992 and 1993 also include executive insurance policy
premiums with respect to standard cash value life insurance (and not split-dollar life insurance) for Mr. Greehey in the amount of
$13,000 per year. Reporting of "other compensation" is not required for years prior to 1992.
<fn4> Messrs. Zanotti and Manning did not serve as executive officers of Energy during 1991. The Board of Directors of Energy has
determined to include Messrs. Zanotti and Manning in the Summary Compensation Table in accordance with Rule 3b-7 under the Exchange
Act.
</TABLE>
Shown below is further information regarding the grants of stock
options to the named executive officers reflected in the Summary
Compensation Table.
Option/SAR Grants in the Last Fiscal Year
<TABLE>
____________________________________________________________________________________________________________________________________
<CAPTION>
Number of Percent of
Securities Total
Underlying Options/
Options/ SARs Granted Market
SARs to Employees Exercise or Price at
Granted in Fiscal Base Price Grant Date Expiration Grant Date
Name (#)<fn1> Year (/$/Sh) ($/Sh) Date Present Value $<fn2>
____________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
William E. Greehey 50,000 8.3745% $23.1875 $23.1875 1/20/03 $440,865
Edward C. Benninger 18,000 3.0148% $23.1875 $23.1875 1/20/03 $158,711
Stan L. McLelland 12,000 2.0099% $23.1875 $23.1875 1/20/03 $105,807
Martin P. Zanotti 10,000 1.6749% $23.1875 $23.1875 1/20/03 $ 88,173
E. Baines Manning 9,000 1.5074% $23.1875 $23.1875 1/20/03 $ 79,356
____________________________________________________________________________________________________________________
<fn1> Options granted in 1993 are exercisable in cumulative 33 1/3% annual installments commencing one year from date of grant.
In the event of a change of control of Energy, such options would also become immediately exercisable pursuant to provisions of the
respective stock option plans or of executive severance agreements between Energy and certain of such executive officers. Under the
terms of the plans, the exercise price and tax withholding obligations related to exercise may be paid by delivery of already owned
shares or by offset of the underlying shares, subject to certain conditions.
<fn2> A variation of the Black-Scholes option pricing model was used to determine grant date present value. This model is
designed to value publicly traded options. Options issued under the Company's option plans are not freely traded, and the exercise
of such options is subject to substantial restrictions. The Black- Scholes model does not give effect to either risk or forfeiture
or lack of transferability. The estimated values under the Black-Scholes model are based on assumptions as to variables such as
interest rates, stock price volatility and future dividend yield. The grant date present values presented in this table were
calculated using an expected average option term of six years, a risk-free rate of return of 6.4%, a three-year average historical
volatility rate of 35.3%, and a dividend yield of 1.9%, which is the annualized quarterly dividend rate in effect at the date of
grant, expressed as a percentage of the market value of the Common Stock at the date of grant. The actual value of stock options
depends upon the actual future performance of the Common Stock, the continued employment of the option holder throughout the vesting
period and the timing of the exercise of the option. Accordingly, the values set forth in this table may not be achieved.
</TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
<TABLE>
<CAPTION>
____________________________________________________________________________________________________________________________________
Value of Unexercised
Shares Number of Securities In-the-Money
Acquired Value Underlying Unexercised Options/SARs at
on Exercise Realized Options/SARs at FY-End(#) FY-End ($)<fn2>
Name (#) ($)<fn1> Exercisable Unexercisable Exercisable Unexercisable
____________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
William E. Greehey - 0 - - 0 - 82,962 71,922 $480,276 - 0 -
Edward C. Benninger - 0 - - 0 - 15,269 30,536 $60,035 - 0 -
Stan L. McLelland 2,500 $46,563 16,174 20,349 $80,039 - 0 -
Martin P. Zanotti 2,000 $31,750 18,300 17,800 $96,055 - 0 -
E. Baines Manning - 0 - - 0 - 14,050 15,500 $72,041 - 0 -
____________________________________________________________________________________________________________________________________
<fn1> Represents the dollar value obtained by multiplying the difference between the exercise price and the average market price
of Energy's Common Stock on the exercise date by the number of options/SARs exercised. The amounts reported do not reflect any
costs incurred by the named executive officer, including payments for related taxes.
<fn2> Represents the dollar value obtained by multiplying the number of unexercised options/SARs by the difference between the
Strike price and the average market price of Energy's Common Stock on December 31, 1993.
</TABLE>
Retirement Benefits
The following table shows, for purposes of illustration, the
estimated annual gross benefits payable under Energy's Pension
Plan ("Pension Plan") and Supplemental Executive Retirement Plan
("SERP") upon retirement at age 65 on the assumed compensation
levels and years of service indicated, assuming an election to
have payments continue for the benefit of the life of the
participant only.
Pension Table
<TABLE>
______________________________________________________________________________________
<CAPTION>
Remuneration Years of Service
______________________________________________________________
15 20 25 30 35
______________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
$ 200,000 $ 55,000 $ 74,000 $ 92,000 $111,000 $129,000
250,000 70,000 93,000 117,000 140,000 163,000
300,000 85,000 113,000 141,000 169,000 197,000
400,000 114,000 152,000 190,000 228,000 266,000
500,000 143,000 191,000 238,000 286,000 334,000
600,000 172,000 230,000 287,000 345,000 402,000
700,000 202,000 269,000 336,000 403,000 470,000
800,000 231,000 308,000 385,000 462,000 539,000
900,000 260,000 347,000 433,000 520,000 607,000
1,000,000 289,000 386,000 482,000 579,000 675,000
1,200,000 348,000 464,000 580,000 696,000 812,000
______________________________________________________________________________________
</TABLE>
Energy maintains a noncontributory Pension Plan in which
virtually all Company employees are eligible to participate. The
Pension Plan is a defined benefit plan funded by a method which
determines contribution requirements in the aggregate for all
participants. Accordingly, contributions for individual
participants are not determinable. Accrued contributions to the
Pension Plan in 1993 for the 1993 Pension Plan year were
approximately 7.4% of total covered remuneration. The Pension
Plan provides a monthly pension at normal retirement equal to
1.6% of the participant's average monthly compensation (based
upon the participant's base earnings during the sixty consecutive
months of the participant's credited service affording the
highest such average) times the participant's years of credited
service, plus .35% times the product of the participant's years
of credited service (maximum thirty-five years) multiplied by the
excess of the participant's average monthly compensation over the
lesser of 1.25 times the monthly average (without indexing) of
the social security wage bases for the thirty-five-year period
ending with the year the participant attains social security
retirement age, or the monthly average of the social security
wage base in effect for the year that the participant retires
under the Pension Plan.
Energy also maintains the SERP, a non-qualified plan approved by
the Board in 1982, which provides additional pension benefits to
the executive officers and certain other employees of the
Company. In 1989, Energy funded its obligations through that
date under the SERP through the contribution of Common Stock to a
trust that was established as a vehicle to fund disbursements to
SERP participants. No contributions were made to the SERP during
1993.
Compensation for purposes of the Pension Plan includes only
salary as reported in the Summary Compensation Table and excludes
cash bonuses. For purposes of calculating the amount payable
under the SERP, the participant's most highly compensated
consecutive thirty-six months of service (rather than sixty
months) in the prior ten years are considered, and bonuses are
included in calculating covered compensation. Accordingly, the
amounts reported in the Summary Compensation Table under the
heading "Salary" and "Bonus" constitute covered compensation for
purposes of the SERP. Benefits listed in the Pension Table are
not subject to any deduction for social security or other offset
amounts.
Credited years of service for the period ending December 31, 1993
for the executive officers named in the cash compensation table
are as follows: Mr. Greehey -- 30 years; Mr. Benninger -- 19
years; Mr. McLelland -- 15 years; Mr. Zanotti -- 10 years; and
Mr. Manning -- 7 years. The credited service for Mr. McLelland
includes two years service credited pursuant to the terms of Mr.
McLelland's employment by the Company and for which benefits are
payable only from the SERP.
Arrangements with Certain Officers and Directors
Energy entered into an employment agreement with Mr. Greehey in
1990. The employment agreement expires June 9, 1995, and
provides for a minimum annual salary of $540,000, which is
subject to increase adjustments by the Board. The agreement does
not limit the authority or discretion of the Board or any
appropriate committee thereof to grant bonuses or other
additional or direct or indirect benefits or increased
compensation to Mr. Greehey.
Executive Severance Program
The Board approved an executive severance program in 1982 which
is administered by the Compensation Committee. Pursuant to this
program, Energy has entered into agreements (the "Executive
Severance Agreements") with Messrs. Greehey, Benninger, McLelland
and Manning. These Executive Severance Agreements provide such
executives with payments and other benefits in the event of the
termination of their employment with the Company under certain
circumstances. The Executive Severance Agreements each provide
that if the executive leaves the employ of the Company for any
reason other than death, disability or normal retirement within
two years after a change of control of Energy, such executives
will receive a lump sum cash payment equal to three times,in the
cases of Messrs. Greehey and McLelland and two times in the cases
of Messrs. Benninger and Manning, the highest compensation paid
to such executive during any consecutive twelve month period
prior to such termination. The executive will also be entitled
to accelerated exercise of any stock options or SARs previously
granted under Energy's stock option plans and held by the
executive for more than six months. If the executive has
received a grant of Restricted Stock under the Restricted Stock
Plan or Restricted Units under the Unit Plan, any restrictions
imposed by such plans on the vesting and sale of such Restricted
Stock or Restricted Units will be removed. Each Executive
Severance Agreement also provides for special retirement benefits
if the executive would have qualified for benefits under the
Pension Plan had the executive remained in the employ of the
Company for the three-year period following such termination, for
continuance of life insurance, health coverages and other fringe
benefits previously provided to the executive for such three-year
period and for relocation assistance if the executive chooses to
relocate after termination.
Compensation of Directors
Each director is reimbursed for the usual and ordinary expenses
of meeting attendance. Directors who are employees of the
Company receive no compensation (other than reimbursement of
usual and ordinary expenses of meeting attendance) for serving as
directors.
The compensation of each non-employee director of Energy is a
retainer fee of $18,000 per year, plus $1,000 for each Board and
committee meeting attended ($500 for telephonic meetings).
Upon election or appointment to the Board, non-employee directors
receive grants of Common Stock, and are eligible to participate
in the Retirement Plan for Non-Employee Directors ("Retirement
Plan").
1990 Restricted Stock Plan for Non-Employee Directors
Energy maintains the Director Plan to supplement the compensation
paid to non-employee directors, increase their proprietary
interest in Energy and increase their identification with the
interests of Energy's stockholders by grants of Common Stock
("Director Stock").
The Director Plan, approved by Energy stockholders in 1990,
provides for grants of Director Stock to non-employee directors;
such grants generally vest in equal annual installments over
three years beginning the year after the grant date. No director
who is also an employee of the Company may participate in the
Director Plan. Upon election to the Board, each non-employee
director automatically receives a grant of shares of Director
Stock having a value in 1991 dollars of $45,000 and adjusted
based on annual changes in the consumer price index. Typically,
grants are scheduled to vest on or about the date of the Annual
Meeting. When all of the Director Stock previously granted to a
non-employee director becomes fully vested and the director is
reelected for an additional term or his term of office otherwise
continues beyond the date of the Annual Meeting at which his
Director Stock has become fully vested, another automatic grant
of Director Stock is made. However, if a director would not be
eligible for reelection as a director due to Energy's mandatory
retirement policy for directors or if a director advises Energy
that he does not intend to stand for reelection, the grant would
be reduced pro rata based on the number of years to the end of
that director's term.
Retirement Plan for Non-Employee Directors
Effective January 1, 1992, Energy established the Retirement
Plan. Under the Retirement Plan, a non-employee director becomes
entitled to a retirement benefit upon completion of five years of
service on the Board. The annual benefit at retirement is equal
to the product of 10% of the highest annual cash retainer paid to
the non-employee director during his service on the Board,
multiplied by the number of full and partial years of service on
the Board (not to exceed 10 years). Retirement benefits are paid
for a period equal to the shorter of the non-employee director's
number of whole and partial years of service on the Board, or his
lifetime, but in no event for longer than 10 years. The
Retirement Plan provides no survivor benefits, and is an unfunded
plan, the benefits of which will be paid from the general assets
of Energy.
Transactions with Management and Others
The Company has invested approximately $9.7 million in a program
to drill coal seam gas wells in New Mexico. In order to share
the drilling and other risks inherent in this project, various
officers and employees of the Company were permitted to invest as
general partners in a partnership to which the subsidiary's
interest was assigned. As a result, during 1992 and 1993 Messrs.
Greehey, Benninger, McLelland, Zanotti and Manning invested
approximately $207,000, $52,000, $156,000, $104,000 and $104,000,
respectively, to acquire respective interests of 2.0%, .50%,
1.5%, 1.0% and 1.0% in the project. The Board determined in 1992
that this transaction was fair to the Company. During 1993,
Messrs. Greehey, Benninger, McLelland, Zanotti and Manning
received cash distributions of $5,200, $1,400, $4,200, $2,800 and
$2,800, respectively, with respect to such investments.
Except as disclosed herein, no executive officer, director or
nominee for director of Energy 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.
Stockholder Nominations and Proposals for 1995 Annual Meeting
Under Energy's By-Laws, stockholders intending to bring any
business before an Annual Meeting of Stockholders of Energy,
including nominations of persons for election as directors, must
give written notice to the Corporate Secretary of Energy
regarding the business to be presented or persons to be
nominated. The notice must be received at the principal
executive office of Energy within the time periods and must be
accompanied by the information and documents specified in the
By-Laws of Energy. A copy of the By- Laws may be obtained by
writing to the Corporate Secretary of Energy.
The foregoing provisions of the By-Laws do not affect the right
of any stockholder to request inclusion of proposals in Energy's
Proxy Statement pursuant to Rule 14a-8 under the Exchange Act.
However, the stockholder must also comply with all applicable
requirements of the Exchange Act and the rules and regulations of
the SEC thereunder. Any stockholder proposal intended to be
considered for inclusion in the 1995 proxy materials for the 1995
Annual Meeting must, in addition to the foregoing requirements,
be made in writing and received by the Corporate Secretary of
Energy at Energy's principal executive office by November 21,
1994. The SEC's rules require, among other things, that a person
making a stockholder proposal shall, at the time of such
proposal, have been the record or beneficial owner of at least
$1,000 in market value of Common Stock or Series A Preferred
Stock, that such shares have been held by such person for at
least one year prior to such date and that such shares continue
to be owned by such person through the date of the meeting.
Energy will also consider recommendations by stockholders for
directors to be nominated at the 1995 Annual Meeting. Such
recommendations must be made in writing and must include
sufficient biographical and other relevant information such that
an informed judgment as to the proposed nominee's qualifications
can be made. Such recommendation must be accompanied by a
notarized written statement executed by the proposed nominee
consenting to be named in the Proxy Statement, if nominated, and
to serve as a director, if elected. Recommendations received in
proper order by the Corporate Secretary of Energy at Energy's
principal executive office at least six months prior to the 1995
Annual Meeting will be referred to, and considered by, the
Executive Committee or, if appointed, a Nominating Committee.
Stockholders are urged to review all applicable rules and, if
questions arise, to consult their own legal counsel before
submitting a nomination or proposal to Energy. No stockholder
recommendations or proposals were received within the required
period before the 1994 Annual Meeting.
Availability of Form 10-K
Energy's Annual Report on Form 10-K, including the financial
statements and the financial statement schedules, required to be
filed with the SEC pursuant to Rule 13a-1 of the Exchange Act,
for the fiscal year ended December 31, 1993, will be furnished
without charge to any stockholder upon written request. A copy
may be requested by writing to Rand C. Schmidt, Corporate
Secretary, Valero Energy Corporation, P.O. Box 500, San Antonio,
Texas 78292-0500.
Miscellaneous
Correspondence relating to any stock accounts or dividends should
be addressed to:
Valero Energy Corporation
Attention: Stock Transfer Department
P. O. Box 500
San Antonio, TX 78292
All transfers of certificates of the Common Stock or any series
of Preferred Stock should also be presented or mailed for
transfer to such address.
Participants in Employee Stock Plans Please Note:
Participants in Employee Stock Plans will receive a separate
voting instruction card for the shares held in each plan.
By order of the Board of Directors,
Rand C. Schmidt
Corporate Secretary
San Antonio, Texas
March 22, 1994
<PAGE>
(COMMON STOCK PROXY CARD)
THIS PROXY IS SOLICITED BY AND ON BEHALF OF THE BOARD OF
DIRECTORS.
VALERO ENERGY CORPORATION
PROXY - ANNUAL MEETING OF STOCKHOLDERS - APRIL 28, 1994
The undersigned, revoking all previous proxies, hereby appoint(s)
William E. Greehey, Stan L. McLelland and Rand C. Schmidt, or any
one or more of them, Proxies, with full power of substitution, to
represent and to vote all Common Stock of Valero Energy
Corporation owned by the undersigned at the Annual Meeting of
Stockholders to be held in San Antonio, Texas on Thursday, April
28, 1994, including any original or subsequent adjournment
thereof, with respect to the proposals set forth in the Notice of
Annual Meeting and Proxy Statement. No business other than
matters described below is expected to come before the meeting,
but should any other matter requiring a vote of stockholders
arise, the persons named herein will vote thereon in accordance
with their best judgment. All powers may be exercised by a
majority of said Proxies or substitutes voting or acting or, if
only one votes or acts, then by that one. The undersigned
authorize(s) the Proxies to cumulate the undersigned's votes and
distribute them among the nominees for director (excepting any
nominee for which authority to vote is withheld) in equal
proportions or in such other proportions as the Proxies shall
direct. Receipt of the Notice of Annual Meeting and Proxy
Statement is hereby acknowledged. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING:
1. Election of Directors. / / FOR all nominees listed
OR / / Withhold authority to vote (except as specified
here: ___________________) for all nominees listed above.
Nominees:
A. Edward C. Benninger
B. A. Ray Dudley
C. James L. Johnson
(Please mark, date and sign on the reverse and mail in the
enclosed envelope.)
2. Proposal to Ratify the Appointment of Independent Public
Accountants.
/ / FOR / / AGAINST / / ABSTAIN
In their discretion, the Proxies are authorized to vote in
accordance with their best judgment upon such other business as
may properly come before the meeting, including matters which the
Board of Directors did not know were to be presented at the
meeting and matters incidental to the conduct of the meeting, and
to vote for a substitute nominee if a nominee for director named
in Proposal 1 cannot or for good cause will not serve.
The shares represented by this proxy will be voted as directed.
IF NO SPECIFIC DIRECTION IS GIVEN, THE SHARES REPRESENTED BY THIS
PROXY WILL BE VOTED FOR THE NOMINEES NAMED IN PROPOSAL 1 AND FOR
PROPOSAL 2.
Dated: ............, 1994 __________________________________
(Signature)
__________________________________
(Signature)
Where there is more than one owner,
each should sign. When signing as
an attorney, administrator,
executor, guardian or trustee,
please add your full title as
such. If executed by a corporation
or partnership, the proxy should
be signed in the corporate or
partnership name by a duly
authorized officer or other duly
authorized person, indicating
such officer's or other person's
title.
PLEASE SIGN, DATE AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE.
<PAGE>
(VOTING INSTRUCTIONS - THRIFT / ESOP / or VESOP)
THESE VOTING INSTRUCTIONS ARE SOLICITED BY AND ON BEHALF OF THE
BOARD OF DIRECTORS.
VALERO ENERGY CORPORATION
VOTING INSTRUCTIONS FOR THE APRIL 28, 1994 ANNUAL MEETING OF
STOCKHOLDERS
The undersigned hereby instructs the Trustee of the Plan
mentioned above to represent and to vote all Common Stock of
Valero Energy Corporation credited to the Plan accounts of the
undersigned at the Annual Meeting of Stockholders to be held in
San Antonio, Texas on Thursday, April 28, 1994, or any original
or subsequent adjournment thereof, with respect to the following
proposals as set forth in the Notice of Annual Meeting and Proxy
Statement. The undersigned authorizes the Trustee to cumulate
the undersigned's votes and distribute them among the nominees
for Director (excepting any nominee for which authority to vote
is withheld) in equal proportions or in such other proportions as
the Trustee shall direct.
1. Election of Directors. / /FOR all nominees listed OR
Withhold authority to vote (except as specified here:
_______________________________) for all nominees listed
above.
Nominees:
A. Edward C. Benninger
B. A. Ray Dudley
C. James L. Johnson
(Please mark, date and sign on the reverse and mail in the
enclosed envelope.)
2. Proposal to Ratify the Appointment of Independent Public
Accountants.
/ / FOR / / AGAINST / / ABSTAIN
In its discretion, the Trustee is authorized to vote in
accordance with its best judgment upon such other business as may
properly come before the meeting, including matters which the
Board of Directors did not know were to be presented at the
meeting and matters incidental to the conduct of the meeting, and
to vote for a substitute nominee if a nominee for director named
in Proposal 1 cannot or for good cause will not serve.
The shares represented by this voting instruction will be voted
as directed. IF NO SPECIFIC DIRECTION IS GIVEN, THE SHARES
REPRESENTED BY THIS VOTING INSTRUCTION WILL BE VOTED FOR THE
NOMINEES NAMED IN PROPOSAL 1 AND FOR PROPOSAL 2.
Dated: ............., 1994 ______________________________
(Signature)
______________________________
(Signature)
Where there is more than one
owner, each should sign. When
signing as an attorney,
administrator, executor, guardian
or trustee, please add your full
title as such. If executed by a
corporation or partnership, the
voting instruction should be
signed in the corporate or
partnership name by a duly
authorized officer or other
duly authorized person,
indicating such officer's or
other person's title.
PLEASE SIGN, DATE AND RETURN
PROMPTLY IN THE ENCLOSED
ENVELOPE.
