VALERO ENERGY CORP/TX
EXHIBIT 10.05 FOR THE 10Q 093004
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<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit 10.05 </FONT></P>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>RESTRICTED UNIT
AGREEMENT</FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This Restricted Unit Agreement (the
&#147;Agreement&#148;) dated <B>October 21, 2004</B> is by and between <B>Valero Energy
Corporation</B>, a Delaware corporation (&#147;Valero&#148;), and <B>William E.
Greehey</B>, Chief Executive Officer of Valero (&#147;Greehey&#148;). </FONT></P>

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          <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>1</B>. </FONT></TD>
          <TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          <B><U>Grant of Restricted Units</U></B><U></U>. Valero hereby grants to Greehey
          <B>138,350</B> &#147;Restricted Units&#148; representing the right to receive
          certain cash payments from Valero on the Vesting Dates set forth below. The
          amount of cash payable to Greehey on each Vesting Date will be equal to the
          product of: (a)&nbsp;the number of Restricted Units vesting on that date,
          multiplied by (b)&nbsp;the fair market value on that date of one share of Valero
          common stock, $.01&nbsp;par value (&#147;Common Stock&#148;). For purposes of
          this Agreement, &#147;fair market value&#148; means the average of the
          &#147;high&#148; and &#147;low&#148; reported sales price per share of Common
          Stock as reported on the New York Stock Exchange as of the relevant measuring
          date, or if there are no sales on the NYSE on that measuring date, then as of
          the next following day on which there were sales. </FONT></P></TD>
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          <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>2</B>. </FONT></TD>
          <TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          <B><U>Dividend Rights</U></B><U></U>. In addition to the right to receive cash
          on each Vesting Date as described in Section&nbsp;1 above, Greehey will be
          entitled to receive periodic cash payments in relation to dividends that are
          paid on Valero&#146;s common stock (the &#147;Dividend Rights&#148;). For
          purposes of the settlement of Greehey&#146;s Dividend Rights under this
          Agreement, Greehey will be deemed to be a holder of one share of Valero Common
          Stock for each unvested Restricted Unit held by Greehey. As and when dividends
          are declared on Valero&#146;s Common Stock, in settlement of the Dividend Rights
          granted hereunder Greehey will be entitled to receive a cash payment equal to
          the product of: (a)&nbsp;the declared dividend per share on Valero&#146;s Common
          Stock, multiplied by (b)&nbsp;the number of unvested Restricted Units held by
          Greehey on the dividend record date. </FONT></P></TD>
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          <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>3</B>. </FONT></TD>
          <TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          <B><U>Vesting</U></B><U></U>. The Restricted Units will vest in the following
          increments on the following dates: <B>46,117</B> on <B>October&nbsp;21,
          2005</B>; <B>46,117</B> on <B>October&nbsp;21, 2006</B>; and <B>46,116</B> on
          <B>October&nbsp;21, 2007</B> (each a &#147;Vesting Date&#148;). </FONT></P></TD>
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          <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>4.</B> </FONT></TD>
          <TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          <B><U>Termination of Employment</U></B><U></U>. If Greehey&#146;s employment
          with Valero is terminated by Greehey (whether through retirement, death,
          disability or otherwise), or is terminated by Valero <I>without
          &#147;cause&#148;</I> (as defined per the Employment Agreement then in effect
          between Valero and Greehey, or if none, then the Employment Agreement presently
          in effect on the date hereof, as amended) (hereafter, as applicable, the
          &#147;Employment Agreement&#148;), then any Restricted Units that have not
          vested as of the date of termination of Greehey&#146;s employment shall not be
          forfeited and shall continue to vest in accordance with the vesting schedule set
          forth in Section&nbsp;3 above. If, however, Greehey&#146;s employment is
          terminated by Valero <I>for &#147;cause&#148;</I> (as defined per the Employment
          Agreement), then those Restricted Units that have not yet vested on the date of
          termination of Greehey&#146;s employment shall be forfeited as of that date and
          Greehey shall not be entitled to Dividend Rights or any other payments with
          respect thereto. </FONT></P></TD>
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          <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>5.</B> </FONT></TD>
          <TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          <B><U>Withholding</U></B><U></U>. Valero is hereby authorized to withhold from
          any settlement of the Restricted Units or Dividend Rights the amount of any
          applicable withholding taxes with respect to such settlement, and to take any
          other action necessary to satisfy all obligations for the payment of the taxes. </FONT></P></TD>
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          <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>6.</B> </FONT></TD>
          <TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          <B><U>Reorganization Event</U></B><U></U>. In the event of any stock dividend,
          rights distribution, split-up, recapitalization, share exchange, merger,
          consolidation, stock acquisition, spin-off, separation, reorganization,
          liquidation or other similar event (any one of which being hereafter referred to
          as a &#147;Reorganization Event&#148;), as a result of which (i)&nbsp;shares or
          other securities of any class or rights shall be issued in respect of
          outstanding shares of Common Stock, or (ii)&nbsp;shares of Common Stock shall be
          changed into the same or a different number of shares of the same or another
          class or classes or other securities, then the Restricted Units granted under
          this Agreement shall be affected as follows. Upon the closing of the
          Reorganization Event, each unvested Restricted Unit shall be treated as one
          share of Common Stock for purposes of determining the number of unvested
          Restricted Units owned by Greehey immediately following the Reorganization
          Event. </FONT></P></TD>
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          <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>7.</B> </FONT></TD>
          <TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          <B><U>Change of Control</U></B><U></U>. <I>Defined</I>. A &#147;Change of
          Control&#148; shall be deemed to occur when: </FONT></P></TD>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the
stockholders of Valero approve any agreement or transaction pursuant to
               which: (i)&nbsp;Valero will merge or consolidate with any other entity
(other                than a wholly owned subsidiary of Valero) and will not be the
surviving entity                (or in which Valero survives only as the subsidiary of
another entity);                (ii)&nbsp;Valero will sell all or substantially all of
its assets to any other                person or entity (other than a wholly owned
subsidiary of Valero); or                (iii)&nbsp;Valero will be liquidated or
dissolved;  </FONT></TD>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>any
&#147;person&#148; or &#147;group&#148; (as these terms are used in Section
               13(d) and 14(d) of the Securities Exchange Act of 1934) other than Valero,
any                subsidiary of Valero, any employee benefit plan of Valero or its
subsidiaries,                or any entity holding shares of Common Stock for or pursuant
to the terms of                such employee benefit plans, is or becomes an &#147;Acquiring
Person&#148; as                defined in the Rights Agreement dated June&nbsp;18, 1997
between Valero and                Computershare Investor Services, L.L.C., as successor
Rights Agent to Harris                Trust and Savings Bank, as amended (or any
successor Rights Agreement), or, if                no Rights Agreement is then in effect,
such person or group acquires or holds                such number of shares as, under the
terms and conditions of the most recent such                Rights Agreement to be in
force and effect, would have caused such person or                group to be an &#147;Acquiring
Person&#148; thereunder;  </FONT></TD>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(c)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>any
&#147;person&#148; or &#147;group&#148; shall commence a tender offer or
               exchange offer for 15% or more of the shares of Common Stock then
outstanding,                or for any number or amount of shares of Common Stock which,
if the tender or                exchange offer were to be fully subscribed and all shares
of Common Stock for                which the tender or exchange offer is made were to be
purchased or exchanged                pursuant to the offer, would result in the
acquiring person or group directly or                indirectly beneficially owning 50%
or more of the shares of Common Stock then                outstanding;  </FONT></TD>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(d)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>individuals
who, as of any date, constitute Valero&#146;s Board of Directors                (the
&#147;Incumbent Board&#148;) thereafter cease for any reason to constitute
               at least a majority of the Board of Directors; provided, however, that any
               individual becoming a director whose election, or nomination for election
by                Valero&#146;s stockholders, was approved by a vote of at least a
majority of the                directors then comprising the Incumbent Board shall be
considered as though such                individual were a member of the Incumbent Board,
but excluding, for this                purpose, any such individual whose initial
assumption of office occurs as a                result of an actual or threatened
election contest with respect to the election                or removal of directors or
other actual or threatened solicitation of proxies or                consents by or on
behalf of a person or group other than the Board of Directors;  </FONT></TD>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(e)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the
occurrence of the Distribution Date (as defined in the Rights Agreement
               dated June&nbsp;18, 1997 between Valero and Computershare Investor
Services,                L.L.C., as successor Rights Agent to Harris Trust and Savings
Bank, as amended);                or  </FONT></TD>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(f)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>any
other event determined by Valero&#146;s Board of Directors or the
               Compensation Committee thereof to constitute a &#147;Change of Control&#148;               hereunder.  </FONT></TD>
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          <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>8.</B> </FONT></TD>
          <TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          <B><U>Actions of Compensation Committee</U></B><U></U>. The Compensation
          Committee, as constituted before a Change of Control, is hereby authorized, and
          has sole discretion to take any one or more of the following actions, whether in
          connection with a Change of Control or otherwise: </FONT></P></TD>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>provide
for the acceleration of any vesting periods relating to the Restricted
               Units to a date or dates determined by the Compensation Committee;  </FONT></TD>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>adjust
any unvested Restricted Units as the Compensation Committee deems
               appropriate to reflect a Change of Control; or  </FONT></TD>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(c)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>cause
any unvested Restricted Units to be assumed, or new rights substituted
               therefor, by the acquiring or surviving corporation after a Change of
Control.                The Compensation Committee may in its discretion include other
provisions and                limitations in any amended Restricted Unit Agreement as it
may deem equitable                and in the best interests of Valero.  </FONT></TD>
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          <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>9.</B> </FONT></TD>
          <TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          <B><U>Rights as Stockholder</U></B><U></U>. Except for the Dividend Rights
          described above, neither Greehey nor any person claiming by, through or under
          Greehey with respect to the Restricted Units shall have any rights as a
          stockholder of Valero (including, without limitation, voting rights). </FONT></P></TD>
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          <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>10.</B> </FONT></TD>
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          <B><U>Assignment</U></B><U></U>. </FONT></P></TD>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This Agreement and
Greehey&#146;s interest in the Restricted Units and Dividend Rights granted by this Agreement are of a personal nature, and, except as
               expressly provided below, Greehey&#146;s rights with respect thereto may
not be                sold, mortgaged, pledged, assigned, transferred, conveyed or
disposed of in any                manner by Greehey. Any such attempted sale, mortgage,
pledge, assignment,                transfer, conveyance or disposition shall be void, and
Valero shall not be bound                thereby.</FONT></TD>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cash
payments upon settlement of the Restricted Units and Dividend Rights may be
               made only to Greehey, during his lifetime, or to his beneficiary(ies)
after his                death. After Greehey&#146;s death, any cash settlements with
respect to                Restricted Units or Dividend Rights will be made to Greehey&#146;s
               beneficiary(ies) as designated under Greehey&#146;s <I>Valero Energy
Corporation                Beneficiary Designation Form</I>, or if there is no such
designation, to the                beneficiary(ies) designated in Greehey&#146;s last
will and testament.  </FONT></TD>
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          <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>11.</B> </FONT></TD>
          <TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          <B><U>Successors</U></B><U></U>. This Agreement shall be binding upon any
          successors of Valero and upon the beneficiaries, legatees, heirs,
          administrators, executors and legal representatives of Greehey. </FONT></P></TD>
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          <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>12.</B> </FONT></TD>
          <TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          <B><U>No Trust Fund</U></B><U></U>. This Agreement shall not create or be
          construed to create a trust or separate fund of any kind or any fiduciary
          relationship between Valero and Greehey or any other person with respect to the
          Restricted Units and Dividend Rights. To the extent that any person acquires a
          right to receive payments from Valero under this Agreement, such right shall be
          no greater than the right of any unsecured general creditor of Valero. </FONT></P></TD>
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          <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>13.</B> </FONT></TD>
          <TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          <B><U>Governing Law</U></B><U></U>. The validity, construction, and effect of
          this Agreement shall be determined in accordance with the laws of the State of
          Texas. </FONT></P></TD>
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     <TD WIDTH=54% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=46% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>VALERO ENERGY CORPORATION</B><BR>&nbsp;<BR>&nbsp;<BR>&nbsp;</FONT></TD></TR>

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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>By:<U>/s/ Keith D. Booke&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Keith D. Booke</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Executive Vice President and</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Chief Administrative Officer</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/ William E. Greehey&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>WILLIAM E. GREEHEY</B></FONT></TD></TR>
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