WAIVER AND AGREEMENT

     This WAIVER AND AGREEMENT ("Waiver"), dated effective as of the 21st day
of November, 1996, by and between Valero Energy Corporation, a Delaware
corporation (the "Corporation"), Valero Refining and Marketing Company, a
Delaware corporation ("VRMC") and William E. Greehey ("Executive"), Witnesseth
That:

     WHEREAS, the Corporation and Executive are parties to that certain
Executive Severance Agreement, dated December 15, 1982 (the "Agreement"); and

     WHEREAS, the Corporation anticipates that it may solicit or receive
proposals involving a transaction (the "Spin-off/Merger") in which (i) all or
substantially all of the petroleum refining and marketing business of the
Corporation currently conducted through VRMC is distributed to the
stockholders of the Company through a stock dividend, spin-off, split-off or
similar distribution, so that, after giving effect to such distribution, such
business is conducted through VRMC (or another subsidiary of the Corporation
then conducting such business), as a separate, publicly owned entity, and (ii)
the Corporation, and/or all or substantially all of the natural gas and
natural gas liquids businesses of the Corporation currently conducted through
Valero Natural Gas Company ("VNGC"), is merged with or into another entity so
that, after giving effect to such merger, the Corporation may no longer be a
separate, publicly owned entity and the persons who were directors of the
Corporation immediately prior to the Spin-off/Merger may cease to constitute a
majority of the Board of Directors of the Corporation; and

     WHEREAS, the Corporation has requested that Executive enter into this
Waiver to clarify the treatment of a Spin-off/Merger under the Agreement;

     NOW THEREFORE, in consideration of $10.00 in hand paid to Executive, and
other good and valuable consideration, the receipt and sufficiency of which
are hereby mutually acknowledged, the Corporation and Executive agree as
follows:

     1.   No Change of Control.  If, during the period when the Agreement is
otherwise in effect, the Corporation enters into a merger or other agreement
providing for the Company to undertake a transaction substantially similar to
the Spin-off/Merger, VRMC (or such other publicly owned entity as may then
conduct the Corporation's refining and marketing business) shall be deemed the
successor to the Corporation (in such capacity, the "Successor Corporation")
for all purposes of the Agreement, and the Corporation shall cause the
Successor Corporation to expressly assume the obligations of the Corporation
thereunder.  Accordingly, neither the execution and delivery by the
Corporation of such merger agreement, the approval by the Corporation's
stockholders of such agreement, nor the performance by the Corporation of such
agreement substantially in accordance with its terms, shall (i) constitute a
"Change of Control" within the intent of the parties under the Agreement, or
(ii) result in Executive becoming entitled to the lump-sum cash payment,
special retirement benefits, acceleration of options and restricted stock and
other benefits more fully described in the Agreement.

     2.   Waiver and Release.  Executive hereby forever releases, waives and
relinquishes, and agrees not to assert, any claim, demand or cause of action
that, but for this Waiver, Executive now or hereafter has, or may have, under
the Agreement against the Corporation, the Successor Corporation, or any of
their respective subsidiaries or affiliates, arising out of, or in any way
related to or connected with, such Spin-off/Merger.

     3.   Agreements Unaffected.  This Waiver is not intended and shall not be
construed to amend or modify the Agreement except as otherwise expressly set
forth herein, or to amend or modify any existing employment agreement or any
existing stock option, restricted stock, performance share or other similar
agreement between Executive and the Corporation, all of which shall remain in
full force and effect in accordance with their respective existing terms. 
Upon the consummation of a Spin-off/Merger, the term "Corporation," as used in
the Agreement, and all references to the Corporation therein, shall refer
solely to the Successor Corporation, as successor to the Corporation, and the
Agreement shall thereupon constitute an agreement between Executive and the
Successor Corporation, in accordance with its terms.  Nothing contained is
this Waiver shall be construed to create a contract of employment or establish
any right to be employed by or to serve as an officer of the Corporation or
the Successor Corporation or any of their respective subsidiaries or
affiliates.

     4.   Successors and Assigns.  This Waiver shall be binding upon and inure
to the benefit of the Executive and his estate, and the Corporation and any
successor to the Corporation (including the Successor Corporation), but
neither this Waiver nor any rights arising hereunder may be assigned or
pledged by the Executive.

     5.   Controlling Law.  This Waiver shall in all respects be governed by,
and construed in accordance with, the laws of the State of Texas. 

     IN WITNESS WHEREOF, the parties have executed this Waiver and Consent
effective as of the date first above set forth.

                           VALERO ENERGY CORPORATION

                           By: /s/ E. C. Benninger, Jr. 
                               President

                           VALERO REFINING AND MARKETING COMPANY

                           By: /s/ E. C. Benninger, Jr.
                               President


                               /s/ William E. Greehey
                               William E. Greehey
                               "Executive"