This excerpt taken from the NS 10-K filed Mar 15, 2005.




   Number of
Granted (#)


Percent of
Total Options

to Employees
in Fiscal Year

    Exercise Price

Price at
Grant Date


   Grant Date
Present Value

Curtis V. Anastasio

   9,625    11.19 %   $ 56.5100    $ 56.5100    10/28/2014    50,531

Steven A. Blank

   6,875    7.99 %   $ 56.5100    $ 56.5100    10/28/2014    36,094

James R. Bluntzer

   2,475    2.88 %   $ 56.5100    $ 56.5100    10/28/2014    12,994

Jerry D. McVicker

   2,400    2.79 %   $ 56.5100    $ 56.5100    10/28/2014    12,600

Rodney L. Reese

   2,400    2.79 %   $ 56.5100    $ 56.5100    10/28/2014    12,600


(1) All options reported vest in equal increments over a five-year period from the date of grant, unless otherwise noted. Under the terms of Valero GP, LLC’s 2000 Long Term Incentive Plan, a participant may satisfy the tax withholding obligations related to exercise by tendering cash payment, by authorizing Valero GP, LLC to withhold units otherwise issuable to the participant or by delivering to Valero GP, LLC already owned and unencumbered units, subject to certain conditions.


(2) 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 Valero GP, LLC’s option plan are not freely traded, and the exercise of such options is subject to substantial restrictions. Moreover, the Black-Scholes model does not give effect to either risk of forfeiture or lack of transferability. The estimated values under the Black-Scholes model are based on assumptions as to variables such as interest rates, unit price volatility and future cash distribution yield. The estimated grant date present values presented in this table were calculated using an expected average option life of five years, risk-free rate of return of 3.41%, average volatility rate of 18.58% based on daily volatility rates from the initial public offering by Valero L.P. through December 31, 2004, and cash distribution yield of 5.66%, which is the expected annualized quarterly cash distribution rate in effect at the date of grant expressed as a percentage of the market value of the common units at the date of grant. The actual value of unit options could be zero; realization of any positive value depends upon the actual future performance of the common units, 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.



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