8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 29, 2005
VALERO ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware	1-13175		74-1828067
(State or other jurisdiction	(Commission File Number)		(IRS Employer
of incorporation)			Identification No.)
One Valero Way
San Antonio, Texas		78249
(Address of principal executive offices)		(Zip Code)
Registrant’s telephone number, including area code: (210) 345-2000

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement.

Valero Energy Corporation (“Valero”), upon approval of the Compensation Committee of the Board of Directors on December 15, 2005, has amended the 2003, 2004 and 2005 Performance Award Agreements of William E. Greehey, Valero’s Chief Executive Officer.

As previously reported (see Report on Form 8-K filed November 2, 2005), Mr. Greehey is retiring as Chief Executive Officer of the Company, effective Friday, December 30, 2005. He will continue to serve as a director and as Chairman of the Board of Directors.

The amendments to Mr. Greehey’s Performance Award Agreements were made in connection with his retirement as Chief Executive Officer. The amendments are filed as exhibits to this report.

Purposes of Amendments

1. Correct timing issue regarding vesting.

In January 2006, the Compensation Committee of the Board of Directors is scheduled to meet to, among other matters, certify Valero’s total shareholder return versus its peer group for the three-year period ending December 31, 2005. Once that certification is made, 1/3 of the performance shares awarded to employees in 2003, 2004 and 2005 will vest based upon the performance certified by the committee. Since he was employed as Chief Executive Officer for all of 2005 but is retiring prior to the scheduled January 2006 vesting date for performance shares, the Compensation Committee at its meeting on December 15, 2005 determined that Mr. Greehey’s performance shares that are subject to vesting in January 2006 based on 2005 performance (1/3 of his 2003, 2004 and 2005 grants) should be subject to vesting at the same time and the same level as those for other employees. Accordingly, the amendments revise Mr. Greehey’s 2003, 2004 and 2005 Performance Award Agreements to permit the “normal” vesting of performance shares scheduled to vest in January 2006 upon certification by the Compensation Committee of 2005 performance.

2. Address Section 409A of Internal Revenue Code.

Mr. Greehey’s 2003 and 2004 Performance Award Agreements were amended to comply with Section 409A of the Internal Revenue Code, which addresses deferred compensation and provides that certain post retirement benefits for key employees not be delivered until six months following separation from employment. Mr. Greehey’s 2005 Performance Award Agreement already addresses IRC Section 409A. With the amendments, performance shares under Mr. Greehey’s 2003, 2004 and 2005 Performance Award Agreements that are subject to vesting after December 31, 2004 will not be delivered to Mr. Greehey until six months after his retirement as Chief Executive Officer.

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Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers.

As previously reported (see Report on Form 8-K filed November 2, 2005), William E. Greehey is retiring as Valero’s Chief Executive Officer effective Friday, December 30, 2005. He will continue to serve as a director and as Chairman of the Board of Directors. In the same Form 8-K the Company reported that the Board of Directors elected William R. Klesse, currently Executive Vice President and Chief Operating Officer of Valero, to the office of Chief Executive Officer of Valero, effective December 31, 2005, and also elected Mr. Klesse as a director and as Vice Chairman of the Board of Directors.

Mr. Greehey’s letter of resignation as Chief Executive Officer of the Company, effective Friday, December 30, 2005, is filed herewith.

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Item 9.01		Financial Statements and Exhibits.
(c)		Exhibits.
*	10.01	Amendment to 2003 Performance Award Agreement.
*	10.02	Amendment to 2004 Performance Award Agreement.
*	10.03	Amendment to 2005 Performance Award Agreement.
*	99.01	Resignation Letter of William E. Greehey as Chief Executive Officer, effective Friday, December 30, 2005.

_________

* filed herewith

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

VALERO ENERGY CORPORATION

Date: December 29, 2005
	By:	/s/ Jay D. Browning
		Jay D. Browning
		Vice President and Secretary

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EXHIBIT INDEX

Number	Exhibit
10.01	Amendment to 2003 Performance Award Agreement.
10.02	Amendment to 2004 Performance Award Agreement.
10.03	Amendment to 2005 Performance Award Agreement.
99.01	Resignation Letter of William E. Greehey as Chief Executive Officer, effective Friday, December 30, 2005.

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EX-10.01

Exhibit 10.01

AMENDMENT TO PERFORMANCE AWARD AGREEMENT

This Amendment to 2003 Performance Award Agreement, dated December 29, 2005, amends that certain Performance Award Agreement (the “Agreement”) dated January 23, 2003 between Valero Energy Corporation, a Delaware corporation (“Valero”) and William E. Greehey (“Participant”).

WHEREAS, the parties desire to amend the Agreement in certain respects.

NOW THEREFORE, the parties agree as follows.

Section 3. of the Agreement is hereby amended and restated in its entirety as follows:

“3. Vesting and Delivery of Shares. (a) Vesting. The Performance Shares shall be eligible to vest in the following increments: one-third on January 23, 2004; one-third on January 23, 2005; and one-third on January23, 2006 (each a “Normal Vesting Date”), subject to verification of attainment of the Performance Objectives described in Paragraph 4 by the Compensation Committee of the Valero Board of Directors, which determination is usually made each year at a meeting of the Compensation Committee of the Board held in January.

(b) Delivery of Shares. The shares of Common Stock that Participant becomes eligible to receive as determined (a) on any Normal Vesting Date, or (b) per the terms of Paragraph 5 below, shall not be issued or delivered to Participant (or his estate) until the Participant dies, becomes “disabled” (as contemplated in Section 409A of the Internal Revenue Code, hereafter “IRC Section 409A”) or “separates from service” (as contemplated in IRC Section 409A) with Valero, in accordance with the following:

(i) If Participant’s dies or becomes disabled, then the shares of Common Stock shall be distributed to Participant (or his estate or heirs) as soon as practicable following the date on which the Participant died or became disabled, and in any event on or before the later of: (a) the last day of the calendar year in which the Participant died or became disabled; or (b) the fifteenth day of the third month following the date of the Participant’s death or disability; or

(ii) if Participant separates from service from Valero, then the shares of Common Stock attributable to a Normal Vesting Date occurring after December 31, 2004 (or otherwise not covered by the following sentence) shall be distributed to Participant upon the latter of: (a) the date that is six months following the Participant’s separation from service, or (b) January 1 of the year following the year in which Participant separates from service. All shares of Common Stock distributable upon Participant’s separation from service from Valero (pursuant to Participant’s retirement under Valero’s Pension Plan) for which a Normal Vesting Date occurred on or before December 31, 2004, shall be distributed January 1 of the year following the year in which Participant separates from service, in accordance with the original terms of the Agreement.

(c) Rights. Until shares of Common Stock are actually issued to Participant (or his estate) in settlement of the Performance Shares, neither Participant nor any person claiming by, through or under Participant shall have any rights as a stockholder of Valero (including, without limitation, voting rights or any right to receive dividends or other distributions) with respect to such shares, and Participant’s status with respect to the issuance of such shares shall be that of a general creditor of Valero.”

Section 5 of the Agreement is hereby amended and restated to read in its entirety as follows:

“5. Termination of Employment. Except for a Change of Control (described below), if Participant separates from service (as contemplated under IRC Section 409A) with Valero for reasons other than termination for “cause” (as defined pursuant to the Employment Agreement then in effect between Valero and Participant), or if Participant dies or becomes disabled (as contemplated under IRC Section 409A), then those Performance Shares that have not vested or been forfeited and for which a Normal Vesting Date has not yet occurred shall be deemed to have been earned and vested at the target level (2nd Quartile), and shall be distributed in accordance with the provisions of Paragraph 3 above. Notwithstanding the foregoing, those Performance Shares that have not theretofore vested or been forfeited, and for which a Normal Vesting Date occurs on or before the 90th day following the date of such separation from service, shall be subject to vesting on such Normal Vesting Date in accordance with Paragraph 4 hereof. If Participant’s separation from service is due to his termination by Valero for “cause” (as defined pursuant to the Employment Agreement then in effect between Valero and Participant), then those Performance Shares for which the Normal Vesting Date has not yet occurred shall be forfeited as of the effective date of Participant’s separation from service.”

VALERO ENERGY CORPORATION

By:	/s/ Jay D. Browning	x:	/s/ William E. Greehey
	Jay D. Browning		William E. Greehey
	Vice President

EX-10.02

Exhibit 10.02

AMENDMENT TO PERFORMANCE AWARD AGREEMENT

This Amendment to 2004 Performance Award Agreement, dated December 29, 2005, amends that certain Performance Award Agreement (the “Agreement”) dated January 15, 2004 between Valero Energy Corporation, a Delaware corporation (“Valero”) and William E. Greehey (“Participant”).

WHEREAS, the parties desire to amend the Agreement in certain respects.

NOW THEREFORE, the parties agree as follows.

Section 3. of the Agreement is hereby amended and restated in its entirety as follows:

“3. Vesting and Delivery of Shares. (a) Vesting. The Performance Shares granted hereunder shall vest over a period of three years in equal, one-third increments with the first increment vesting on the date of the regularly scheduled meeting of the Board’s Compensation Committee (“Meeting Date”) in January 2005, and the second and third increments vesting on the Committee’s Meeting Dates in January 2006 and January 2007, respectively (each of these three vesting dates is referred to as a “Normal Vesting Date”), such vesting being subject to verification of attainment of the Performance Objectives described in Paragraph 4 by the Compensation Committee. If the Committee is unable to meet in January of a given year, then the Normal Vesting Date for that year will be the date not later than March 31 of that year as selected by the Compensation Committee.

(b) Delivery of Shares. The shares of Common Stock that Participant becomes eligible to receive as determined (a) on any Normal Vesting Date, or (b) per the terms of Paragraph 5 below, shall not be issued or delivered to Participant (or his estate) until the Participant dies, becomes “disabled” (as contemplated in Section 409A of the Internal Revenue Code, hereafter “IRC Section 409A”) or “separates from service” (as contemplated in IRC Section 409A) with Valero, in accordance with the following:

(i) If Participant’s dies or becomes disabled, then the shares of Common Stock shall be distributed to Participant (or his estate or heirs) as soon as practicable following the date on which the Participant died or became disabled, and in any event on or before the later of: (a) the last day of the calendar year in which the Participant died or became disabled; or (b) the fifteenth day of the third month following the date of the Participant’s death or disability; or

(ii) if Participant separates from service from Valero, then the shares of Common Stock attributable to a Normal Vesting Date occurring after December 31, 2004 (or otherwise not covered by the following sentence) shall be distributed to Participant upon the latter of: (a) the date that is six months following the Participant’s separation from service, or (b) January 1 of the year following the year in which Participant separates from service. All shares of Common Stock distributable upon Participant’s separation from service from Valero (pursuant to Participant’s retirement under Valero’s Pension Plan) for which a Normal Vesting Date occurred on or before December 31, 2004, shall be distributed January 1 of the year following the year in which Participant separates from service, in accordance with the original terms of the Agreement.

(c) Rights. Until shares of Common Stock are actually issued to Participant (or his estate) in settlement of the Performance Shares, neither Participant nor any person claiming by, through or under Participant shall have any rights as a stockholder of Valero (including, without limitation,

voting rights or any right to receive dividends or other distributions) with respect to such shares, and Participant’s status with respect to the issuance of such shares shall be that of a general creditor of Valero.”

Section 5 of the Agreement is hereby amended and restated to read in its entirety as follows:

“5. Termination of Employment. Except for a Change of Control (described below), if Participant separates from service (as contemplated under IRC Section 409A) with Valero for reasons other than termination for “cause” (as defined pursuant to the Employment Agreement then in effect between Valero and Participant), or if Participant dies or becomes disabled (as contemplated under IRC Section 409A), then upon the occurrence of such an event those Performance Shares that have not vested or been forfeited and for which a Normal Vesting Date has not yet occurred shall be deemed to have been earned and vested at the target level (2nd Quartile), and shall be distributed in accordance with the provisions of Paragraph 3 above. Notwithstanding the foregoing, those Performance Shares that have not theretofore vested or been forfeited, and for which a Normal Vesting Date occurs on or before the 90th day following the date of such separation from service, shall be subject to vesting on such Normal Vesting Date in accordance with Paragraph 4 hereof. If Participant’s separation from service is due to his termination by Valero for “cause” (as defined pursuant to the Employment Agreement then in effect between Valero and Participant), then those Performance Shares for which the Normal Vesting Date has not yet occurred shall be forfeited as of the effective date of Participant’s separation from service.”

IN WITNESS WHEREOF, the Parties have executed this Amendment to 2004 Performance Award Agreement this the 29^th day of December, 2005.

VALERO ENERGY CORPORATION

By:	/s/ Jay D. Browning	x:	William E. Greehey
	Jay D. Browning		William E. Greehey
	Vice President

EX-10.03

Exhibit 10.03

AMENDMENT TO PERFORMANCE AWARD AGREEMENT

This Amendment to 2005 Performance Award Agreement, dated December 29, 2005, amends that certain Performance Award Agreement (the “Agreement”) dated February 3, 2005 between Valero Energy Corporation, a Delaware corporation (“Valero”) and William E. Greehey (“Participant”).

WHEREAS, the parties desire to amend the Agreement in certain respects.

NOW THEREFORE, the parties agree as follows.

Sections 3 B.(i) and 3 B.(ii) of the Agreement are hereby amended and restated in their entirety as follows:

“ (i) If Participant’s dies or becomes disabled, then the shares of Common Stock shall be distributed to Participant (or his estate or heirs) as soon as practicable following the date on which the Participant died or became disabled, and in any event on or before the later of: (a) the last day of the calendar year in which the Participant died or became disabled; or (b) the fifteenth day of the third month following the date of the Participant’s death or disability or

(ii) if Participant separates from service from Valero, then the shares of Common Stock shall be distributed to Participant upon the latter of: (a) the date that is six months following the Participant’s separation from service from Valero (pursuant to Participant’s retirement under Valero’s Pension Plan), or (b) January 1 of the year following the year in which Participant separates from service.”

Section 5 of the Agreement is hereby amended and restated to read in its entirety as follows:

“5. Termination of Employment. Except for a Change of Control (described below), if Participant separates from service (as contemplated under IRC Section 409A) with Valero for reasons other than his termination for “cause” (as defined pursuant to the Employment Agreement then in effect between Valero and Participant), or if Participant dies or becomes disabled (as contemplated in IRC Section 409A), then upon the occurrence of such an event, those Performance Shares that have not vested or have not been forfeited and for which a Normal Vesting Date has not yet occurred shall be deemed to have been earned and vested at the target level (2nd Quartile), and shall be distributed in accordance with the provisions of Paragraph 3 above. Notwithstanding the foregoing, those Performance Shares that have not theretofore vested or been forfeited, and for which a Normal Vesting Date occurs on or before the 90th day following the date of such separation from service, shall be subject to vesting on such Normal Vesting Date in accordance with Paragraph 4 hereof. If Participant’s separation from service is due to his termination by Valero for “cause” (as defined pursuant to the Employment Agreement then in effect between Valero and Participant), then those Performance Shares for which the Normal Vesting Date has not yet occurred shall be forfeited as of the effective date of termination of Participant’s separation from service.”

IN WITNESS WHEREOF, the Parties have executed this Amendment to 2005 Performance Award Agreement this the 29^th day of December, 2005.

VALERO ENERGY CORPORATION

By:	/s/ Jay D. Browning	/s/ William E. Greehey
	Jay D. Browning	William E. Greehey
	Vice President

EX-99

Exhibit 99.01

December 29, 2005

To the Board of Directors of

Valero Energy Corporation

One Valero Way

San Antonio, Texas 78249-1616

Please accept this letter as notice of my resignation as Chief Executive Officer of Valero Energy Corporation effective Friday, December 30, 2005.

Very truly yours,

/s/ William E. Greehey

William E. Greehey