EXHIBIT 4.1

AMENDED

AND

RESTATED

DECLARATION OF TRUST

ARTICLE 1: INTERPRETATION AND DEFINITIONS.........................................................................1

   SECTION 1.1       INTERPRETATION AND DEFINITIONS...............................................................1

ARTICLE 2: TRUST INDENTURE ACT...................................................................................12

   SECTION 2.1       TRUST INDENTURE ACT; APPLICATION............................................................12
   SECTION 2.2       LISTS OF HOLDERS OF THE SECURITIES..........................................................13
   SECTION 2.3       REPORTS BY THE PROPERTY TRUSTEE.............................................................13
   SECTION 2.4       PERIODIC REPORTS TO THE PROPERTY TRUSTEE....................................................13
   SECTION 2.5       EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT............................................13
   SECTION 2.6       TRUST ENFORCEMENT EVENTS; WAIVER............................................................14
   SECTION 2.7       TRUST ENFORCEMENT EVENT; NOTICE.............................................................15

ARTICLE 3: ORGANIZATION..........................................................................................15

   SECTION 3.1       NAME AND ORGANIZATION.......................................................................15
   SECTION 3.2       OFFICE......................................................................................16
   SECTION 3.3       PURPOSE.....................................................................................16
   SECTION 3.4       AUTHORITY...................................................................................16
   SECTION 3.5       TITLE TO PROPERTY OF THE TRUST..............................................................16
   SECTION 3.6       POWERS AND DUTIES OF THE REGULAR TRUSTEES...................................................17
   SECTION 3.7       PROHIBITION OF ACTIONS BY THE TRUST AND THE TRUSTEES........................................19
   SECTION 3.8       POWERS AND DUTIES OF THE PROPERTY TRUSTEE...................................................20
   SECTION 3.9       CERTAIN DUTIES AND RESPONSIBILITIES OF THE PROPERTY TRUSTEE.................................22
   SECTION 3.10      CERTAIN RIGHTS OF PROPERTY TRUSTEE..........................................................24
   SECTION 3.11      DELAWARE TRUSTEE............................................................................26
   SECTION 3.12      EXECUTION OF DOCUMENTS......................................................................26
   SECTION 3.13      NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES......................................26
   SECTION 3.14      DURATION OF TRUST...........................................................................26
   SECTION 3.15      MERGERS.....................................................................................26
   SECTION 3.16      COMPENSATION AND REIMBURSEMENT..............................................................28
   SECTION 3.17      PROPERTY TRUSTEE MAY FILE PROOFS OF CLAIM...................................................28
   SECTION 3.18      REGISTRATION STATEMENT AND RELATED MATTERS..................................................29
   SECTION 3.19      BOOKS AND RECORDS...........................................................................30

ARTICLE 4: THE SPONSOR...........................................................................................30

   SECTION 4.1       RESPONSIBILITIES OF THE SPONSOR.............................................................30
   SECTION 4.2       INDEMNIFICATION AND EXPENSES OF THE TRUSTEES................................................31

ARTICLE 5: THE HOLDERS OF THE COMMON SECURITIES..................................................................31
   SECTION 5.1       SENIOR DEFERRABLE NOTES ISSUER'S PURCHASE OF THE COMMON SECURITIES..........................31
   SECTION 5.2       COVENANTS OF THE SENIOR DEFERRABLE NOTES ISSUER.............................................31
   SECTION 5.3       HOLDER OF THE COMMON SECURITIES.............................................................32
   SECTION 5.4       EXCHANGES...................................................................................32

ARTICLE 6: THE TRUSTEES..........................................................................................33

   SECTION 6.1       NUMBER OF TRUSTEES..........................................................................33
   SECTION 6.2       DELAWARE TRUSTEE; ELIGIBILITY...............................................................33

   SECTION 6.3       PROPERTY TRUSTEE; ELIGIBILITY...............................................................33
   SECTION 6.4       QUALIFICATIONS OF THE REGULAR TRUSTEES GENERALLY............................................34
   SECTION 6.5       INITIAL REGULAR TRUSTEES....................................................................34
   SECTION 6.6       APPOINTMENT, REMOVAL AND RESIGNATION OF THE TRUSTEES........................................34
   SECTION 6.7       VACANCIES AMONG TRUSTEES....................................................................36
   SECTION 6.8       EFFECT OF VACANCIES.........................................................................36
   SECTION 6.9       MEETINGS....................................................................................36
   SECTION 6.10      DELEGATION OF POWER BY THE REGULAR TRUSTEES.................................................37
   SECTION 6.11      MERGER, CONSOLIDATION, CONVERSION OR SUCCESSION TO BUSINESS.................................37

ARTICLE 7: TERMS OF THE SECURITIES...............................................................................37

   SECTION 7.1       GENERAL PROVISIONS REGARDING THE SECURITIES.................................................37
   SECTION 7.2       DISTRIBUTIONS...............................................................................40
   SECTION 7.3       REDEMPTION OF SECURITIES....................................................................42
   SECTION 7.4       REDEMPTION PROCEDURES.......................................................................42
   SECTION 7.5       VOTING RIGHTS OF THE PREFERRED SECURITIES...................................................44
   SECTION 7.6       VOTING RIGHTS OF THE COMMON SECURITIES......................................................46
   SECTION 7.7       PAYING AGENT................................................................................47
   SECTION 7.8       LISTING.....................................................................................47
   SECTION 7.9       TRANSFER OF THE SECURITIES..................................................................48
   SECTION 7.10      MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES...........................................49
   SECTION 7.11      DEEMED HOLDERS..............................................................................49
   SECTION 7.12      GLOBAL SECURITIES...........................................................................49
   SECTION 7.13      REMARKETING.................................................................................51

ARTICLE 8:  DISSOLUTION AND TERMINATION OF THE TRUST.............................................................54

   SECTION 8.1       DISSOLUTION AND TERMINATION OF THE TRUST....................................................54
   SECTION 8.2       LIQUIDATION DISTRIBUTION UPON DISSOLUTION OF THE TRUST......................................55

ARTICLE 9:  LIMITATION OF LIABILITY OF HOLDERS OF THE SECURITIES, THE DELAWARE TRUSTEE AND OTHERS................56

   SECTION 9.1       LIABILITY...................................................................................56
   SECTION 9.2       EXCULPATION.................................................................................57
   SECTION 9.3       FIDUCIARY DUTY..............................................................................57
   SECTION 9.4       INDEMNIFICATION.............................................................................58
   SECTION 9.5       OUTSIDE BUSINESSES..........................................................................59

ARTICLE 10:  ACCOUNTING..........................................................................................59

   SECTION 10.1      FISCAL YEAR.................................................................................59
   SECTION 10.2      CERTAIN ACCOUNTING MATTERS..................................................................59
   SECTION 10.3      BANKING.....................................................................................60
   SECTION 10.4      WITHHOLDING.................................................................................60

ARTICLE 11:  AMENDMENTS AND MEETINGS.............................................................................61

   SECTION 11.1      AMENDMENTS..................................................................................61
   SECTION 11.2      MEETINGS OF THE HOLDERS OF THE SECURITIES; ACTION BY WRITTEN CONSENT........................63

ARTICLE 12:  REPRESENTATIONS OF THE PROPERTY TRUSTEE AND THE DELAWARE TRUSTEE....................................64

   SECTION 12.1      REPRESENTATIONS AND WARRANTIES OF THE PROPERTY TRUSTEE......................................64
   SECTION 12.2      REPRESENTATIONS AND WARRANTIES OF THE DELAWARE TRUSTEE......................................65

ARTICLE 13: MISCELLANEOUS........................................................................................65

   SECTION 13.1      NOTICES.....................................................................................65
   SECTION 13.2      GOVERNING LAW...............................................................................67
   SECTION 13.3      INTENTION OF THE PARTIES....................................................................67
   SECTION 13.4      HEADINGS....................................................................................67
   SECTION 13.5      SUCCESSORS AND ASSIGNS......................................................................67
   SECTION 13.6      PARTIAL ENFORCEABILITY......................................................................67
   SECTION 13.7      COUNTERPARTS................................................................................67

AMENDED AND RESTATED DECLARATION OF TRUST

This Amended and Restated Declaration of Trust of VEC Trust I ("Declaration"), dated as of June 28, 2000, by and among Valero Energy Corporation, a Delaware corporation, as Sponsor, Jay D. Browning, John D. Gibbons, and Donna M. Titzman, as the initial Regular Trustees, The Bank of New York, as the initial Property Trustee, and The Bank of New York (Delaware), as the initial Delaware Trustee, not in their individual capacities but solely as Trustees, and the Holders, from time to time, of the Securities representing undivided beneficial ownership interests in the assets of the Trust to be issued pursuant to this Declaration.

WHEREAS, certain of the Trustees and the Sponsor established VEC Trust I (the "Trust"), a business trust under the Business Trust Act, pursuant to a Declaration of Trust dated as of March 22, 2000, (the "Original Declaration") and a Certificate of Trust (the "Certificate of Trust") filed with the Secretary of State of the State of Delaware on March 22, 2000; and

WHEREAS, the sole purpose of the Trust shall be to sell and issue certain securities representing undivided beneficial interests in the assets of the Trust, to invest the proceeds from such sales in the Senior Deferrable Notes issued by the Senior Deferrable Notes Issuer and to engage in only those activities necessary or incidental thereto; and

WHEREAS, the parties hereto, by this Declaration, amend and restate each and every term and provision of the Original Declaration.

NOW, THEREFORE, it being the intention of the parties hereto to continue the Trust as a business trust under the Business Trust Act and that this Declaration constitute the governing instrument of such business trust, the trustees hereby declare that all assets contributed to the Trust be held in trust for the benefit of the Holders, from time to time, of the Securities representing undivided beneficial interests in the assets of the Trust issued hereunder, subject to the provisions of this Declaration.

ARTICLE 1: INTERPRETATION AND DEFINITIONS

SECTION 1.1 Interpretation and Definitions. Unless the context otherwise requires:

(a) capitalized terms used in this Declaration but not defined in the preamble above shall have the meanings assigned to them in this Section 1.1;

(b) a term defined anywhere in this Declaration shall have the same meaning throughout;

(c) all references to "the Declaration" or "this Declaration" shall be to this Declaration as modified, supplemented or amended from time to time;

(d) all references in this Declaration to Articles, Sections, Recitals and Exhibits shall be to Articles and Sections of, or Recitals and Exhibits to, this Declaration unless otherwise specified;

(e) unless otherwise defined in this Declaration, a term defined in the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), shall have the same meaning when used in this Declaration; and

(f) a reference to the singular shall include the plural and vice versa, and a reference to any masculine form of a term shall include the feminine or neuter form of a term, as applicable.

(g) the following terms shall have the following meanings:

"Affiliate" of any specified Person shall mean any other Person directly or indirectly controlling or controlled by, or under direct or indirect common control with, such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person shall mean the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" shall have meanings correlative to the foregoing.

"Applicable Margin" shall mean the spread determined as set forth below, based on the prevailing rating of the senior notes of the Senior Deferrable Notes Issuer in effect at the close of business on the Business Day immediately preceding the date of a Failed Remarketing:

Prevailing Rating                         Spread
-----------------                         ------
AA/"Aa"..................................3.00%
A/"a"....................................4.00%
BBB/"Baa"................................5.00%
Below BBB/"Baa"..........................7.00%

For purposes of this definition, the "prevailing rating" of the senior notes of the Senior Deferrable Notes Issuer shall be:

(i) AA/"Aa" if the senior notes of the Senior Deferrable Notes Issuer have a credit rating of AA or better by S&P and "Aa3" or better by Moody's or the equivalent of such ratings by such agencies or a comparable rating agency or comparable rating agencies selected by the Remarketing Agent (after consultation with the Company);

(ii) if not under clause (i) above, then A/"a" if the senior notes of the Senior Deferrable Notes Issuer have a credit rating of A- or better by S&P and "A3" or better by Moody's or the equivalent of such ratings by such agencies or a comparable rating agency or comparable rating agencies selected by the Remarketing Agent (after consultation with the Company);

(iii) if not under clauses (i) or (ii) above, then BBB/"Baa" if the senior notes of the Senior Deferrable Notes Issuer have a credit rating of BBB- or better by S&P and "Baa" or better by Moody's or the equivalent of such ratings by such agencies or a comparable rating agency or comparable rating agencies selected by the Remarketing Agent (after consultation with the Company); or

(iv) if not under clauses (i) through (iii) above, then Below BBB/"Baa."

Notwithstanding the foregoing, (A) if (i) the credit rating of the senior notes of the Company by S&P shall be on the "Credit Watch" of S&P with a designation of "negative implications" or "developing," or (ii) the credit rating of the senior notes of the Company by Moody's shall be on the "Corporate Credit Watch List" of Moody's with a designation of "downgrade" or "uncertain," or, in each case, on any successor list of S&P or Moody's with a comparable designation, the prevailing ratings of the senior notes of the Company shall be deemed to be within a range one full level lower in the above table than those actually assigned to the senior notes of the Company by Moody's and S&P and (B) if the senior notes of the Company are rated by only one rating agency on or before the Remarketing Date, the prevailing rating shall at all times be determined without reference to the rating of any other rating agency; provided that if no such rating agency shall have in effect a rating for the senior notes of the Company, and the Remarketing Agent is unable to identify a comparable rating agency or rating agencies, as required above, the prevailing rating shall be Below BBB/ "baa."

"Applicable Ownership Interest" shall mean, with respect to a PEPS Units and the U.S. treasury securities in the Treasury Portfolio, (A) a 1/40, or 2.5%, undivided beneficial ownership interest in a $1,000 face amount of a principal or interest strip in a U.S. treasury security included in such Treasury Portfolio that matures on or prior to August 15, 2003 and (B) for each scheduled interest payment date on the Senior Deferrable Notes after the Tax Event Redemption Date, a 1/40, or 2.5%, undivided beneficial ownership interest in a $1,000 face amount of a principal or interest strip in a U.S. treasury security that matures on or prior to such date.

"Applicable Principal Amount" shall mean either (A) if the Tax Event Redemption Date occurs prior to the Purchase Contract Settlement Date, the aggregate principal amount of the Senior Deferrable Notes corresponding to the aggregate stated liquidation amount of the Preferred Securities that are components of the PEPS Units on the Tax Event Redemption Date or (B) if the Tax Event Redemption Date occurs on or after the Purchase Contract Settlement Date, the aggregate principal amount of the Senior Deferrable Notes corresponding to the aggregate stated liquidation amount of the Preferred Securities outstanding on such Tax Event Redemption Date.

"Authorized Officer" of a Person shall mean any Person that is authorized to bind such Person.

"Beneficial Owner" shall mean, with respect to a Global Security, a Person who is the beneficial owner of a book-entry interest in such Global Security as reflected on the books of the Depositary or on the books of a Person maintaining an account with such Depositary (directly as a Depositary Participant or as an indirect participant, in each case in accordance with the rules of such Depositary).

"Business Day" shall mean any day other than a Saturday or Sunday or a day on which banking institutions in the City of New York, New York or San Antonio, Texas are authorized or required by law or executive order to remain closed.

"Business Trust Act" shall mean Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code Section 3801 et seq., as it may be amended from time to time, or any successor legislation.

"Cash Settlement" shall have the meaning specified in the Purchase Contract Agreement.

"Certificate" shall mean a Common Security Certificate or a Preferred Security Certificate.

"Clearing Agency" shall mean an organization registered as a "Clearing Agency" pursuant to Section 17A of the Exchange Act that is acting as depositary for the Preferred Securities and in whose name or in the name of a nominee of that organization shall be registered a Global Certificate and which shall undertake to effect book-entry transfers and pledges of the Preferred Securities.

"Closing Date" shall mean the date on which the Preferred Securities are initially issued and sold.

"Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, or any successor legislation. A reference to a specific section of the Code refers not only to such specific section but also to any corresponding provision of any federal tax statute enacted after the date of this Declaration, as such specific section or corresponding provision is in effect on the date of application of the provisions of this Declaration containing such reference.

"Collateral Agent" shall mean Bank One Trust Company, N.A.

"Commission" shall mean the Securities and Exchange Commission.

"Common Security" shall have the meaning specified in Section 7.1(a).

"Common Security Certificate" shall mean a definitive certificate in fully registered form representing a Common Security, substantially in the form of Exhibit B hereto.

"Company" shall mean Valero Energy Corporation, a Delaware corporation, the Sponsor, Senior Deferrable Notes Issuer, and the parent of the Trust.

"Compounded Distributions" shall have the meaning specified in
Section 7.2(b).

"Corporate Trust Office" shall mean the principal office of the Property Trustee at which, at any particular time, its corporate trust business shall be administered, which office at the date hereof is located at 101 Barclay Street, 21 West, New York, New York 10286, Attn: Corporate Trust Services Division.

"Covered Person" shall mean (A) any officer, director, shareholder, partner, member, representative, employee or agent of (i) the Sponsor, (ii) any Affiliate of the Sponsor, (iii) the Trust or (iv) any Affiliate of the Trust and (B) any Holder.

"Depositary" shall mean, with respect to Securities issuable in whole or in part in the form of one or more Global Securities, a clearing agency registered under the Exchange Act that is designated to act as depositary for such Securities, and initially shall be The Depository Trust Company.

"Depositary Agreement" shall mean the agreement among the Trust, the Property Trustee and the Depositary dated as of the Closing Date, as the same may be amended or supplemented from time to time.

"Depositary Participant" shall mean a member of, or participant in, the Depositary.

"Direct Action" shall have the meaning specified in Section 3.8(e).

"Distribution" shall mean a distribution payable to the Holders in accordance with Section 7.2.

"Exchange Act" shall mean the Securities Exchange Act of 1934 and any statute successor thereto, in each case as amended from time to time, and the rules and regulations promulgated thereunder.

"Failed Remarketing" shall have the meaning specified in
Section 7.13(h).

"Fiscal Year" shall have the meaning specified in Section 10.1.

"Foreign Person" shall mean any Person that is not a United States Person.

"Global Certificate" shall have the meaning specified in
Section 7.1(h).

"Global Security" shall mean a global Preferred Security Certificate registered in the name of the Depositary or its nominee.

"Guarantee" shall mean the Guarantee Agreement, dated as of June 28, 2000, of the Sponsor, as may be amended from time to time, in respect of the Preferred Securities.

"Holder" shall mean any holder of Securities, as registered on the books and records of the Trust, such holder being a beneficial owner within the meaning of the Business Trust Act, provided that in determining whether the Holders of the requisite liquidation amount of Preferred Securities have voted on any matter provided for in this Declaration, then for the purpose of such determination only (and not for any other purpose hereunder), if the Preferred Securities remain in the form of one or more Global Securities and if the Depositary has sent an omnibus proxy to the Depositary Participants to whose accounts the Preferred Securities are credited on the record date, the term "Holders" shall mean such Depositary Participants acting at the direction of the Beneficial Owners.

"Indemnified Person" shall mean any Trustee, any Affiliate of any Trustee, any Paying Agent, any officers, directors, shareholders, members, partners, employees,

representatives or agents of any Trustee, Affiliate of a Trustee or Paying Agent, or any officer, employee or agent of the Trust or any of its Affiliates.

"Indenture" shall mean the indenture dated as of December 12, 1997, as supplemented by the First Supplemental Indenture relating to the Senior Deferrable Notes, dated as of June 28, 2000, between the Senior Deferrable Notes Issuer and the Indenture Trustee (including the provisions of the Trust Indenture Act that are deemed incorporated therein), pursuant to which the Senior Deferrable Notes are to be issued.

"Indenture Event of Default" shall have the meaning given to the term "Event of Default" in the Indenture.

"Indenture Trustee" shall mean The Bank of New York, in its capacity as trustee under the Indenture, until a successor is appointed thereunder, and thereafter shall mean such successor trustee.

"Investment Company" shall mean an investment company as defined in the Investment Company Act and the regulations promulgated thereunder.

"Investment Company Act" shall mean the Investment Company Act of 1940, as amended from time to time, or any successor legislation.

"Legal Action" shall have the meaning specified in Section 3.6(f).

"List of Holders" shall have the meaning specified in Section 2.2(a).

"Majority in Liquidation Amount" shall mean, except as provided by the Trust Indenture Act, Holders of outstanding Securities, voting together as a single class, or, as the context may require, Holders of outstanding Preferred Securities or Holders of the outstanding Common Securities, voting separately as a class, who are the record owners of more than 50% of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accumulated and unpaid Distributions to the date upon which the voting percentages are determined) of all outstanding Securities, Preferred Securities or Common Securities, as the case may be.

"Moody's" shall mean Moody's Investors Service, Inc.

"New York Stock Exchange" shall mean the New York Stock Exchange, Inc or any successor thereto.

"Officers' Certificate" shall mean, when delivered by the Trust, a certificate signed by a majority of the Regular Trustees of the Trust and, when delivered by the Sponsor, a certificate signed by (A) the Chairman of the Board, President or a Vice President of the Sponsor and (B) the Treasurer, Assistant Treasurer or Secretary of the Sponsor. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Declaration shall include, where applicable:

(i) a statement that each officer signing the Officers' Certificate has read the covenant or condition and the definitions relating thereto;

(ii) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Officers' Certificate;

(iii) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and

(iv) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with.

"Over-allotment Option" shall mean any over-allotment option contained in an underwriting agreement pursuant to which the PEPS Units are sold.

"Paying Agent" shall have the meaning specified in Section 3.8(h).

"Payment Amount" shall have the meaning specified in Section 7.2(c).

"PEPS Units" shall mean a security consisting of a unit comprised of (A) a purchase contract under which the holder of the unit will purchase from the Company, for $25 in cash, a certain number of shares of common stock, par value $.01 per share, of the Company and (B) beneficial ownership of a Preferred Security or Senior Deferrable Note, or in certain circumstances following the occurrence of a Tax Event, the appropriate Applicable Ownership Interest of the Treasury Portfolio.

"Person" shall mean a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association or government or any agency or political subdivision thereof, or any other entity of whatever nature.

"Pledge Agreement" shall mean the Pledge Agreement dated as of June 28, 2000 among the Company, the Collateral Agent, Bank One Trust Company, N.A., as Securities Intermediary, and the Purchase Contract Agent.

"Preferred Security" shall have the meaning specified in
Section 7.1(a).

"Preferred Security Certificate" shall mean a definitive certificate in fully registered form representing a Preferred Security, substantially in the form of Exhibit A.

"Primary Treasury Dealer" shall mean a primary U.S. government securities dealer in New York City.

"Property Account" shall have the meaning specified in Section 3.8(c)

"Property Trustee" shall mean the Trustee meeting the eligibility requirements set forth in Section 6.3.

"Pro Rata" shall mean pro rata to each Holder according to the aggregate liquidation amount of the Securities held by such Holder in relation to the aggregate liquidation amount of all Securities outstanding.

"Purchase Contract Agent" shall mean The Bank of New York.

"Purchase Contract Agreement" shall mean the Purchase Contract Agreement dated as of June 28, 2000 between the Company and The Bank of New York, as Purchase Contract Agent.

"Purchase Contract Settlement Date" shall mean August 18, 2003.

"Quorum" shall mean a majority of the Regular Trustees or, if there are only two Regular Trustees, both of them.

"Quotation Agent" shall mean (A) Morgan Stanley & Co. Incorporated and any respective successor, provided that if Morgan Stanley & Co. Incorporated or any respective successor ceases to be a Primary Treasury Dealer, the Sponsor shall substitute another Primary Treasury Dealer therefor or (B) any other Primary Treasury Dealer selected by the Sponsor.

"Redemption Amount" shall mean, for each Senior Deferrable Note, the product of the principal amount of such Senior Deferrable Note and a fraction, the numerator of which shall be the Treasury Portfolio Purchase Price and the denominator of which shall be the Applicable Principal Amount.

"Redemption/Distribution Notice" shall have the meaning specified in Section 7.4(a).

"Redemption Price" shall mean the amount for which the Securities will be redeemed, which amount will equal the lesser of (i) the redemption price paid by the Senior Deferrable Notes Issuer to repay or redeem, in whole or in part, the Senior Deferrable Notes held by the Trust plus an amount equal to accumulated and unpaid Distributions on such Securities through the date of their redemption or (ii) the amount received by the Trust in respect of the Senior Deferrable Notes so repaid or redeemed.

"Regular Trustee" shall mean any trustee of the Trust other than the Property Trustee and the Delaware Trustee.

"Remarketing" shall mean the operation of the procedures for remarketing specified in Section 7.13.

"Remarketed Securities" shall mean (i) so long as the Trust has not been dissolved, the Preferred Securities or (ii) if the Trust has been dissolved, the Senior Deferrable Notes.

"Remarketing Agent" shall mean Morgan Stanley & Co. Incorporated or if the Remarketing Agent is removed or resigns, any successor remarketing agent selected by the Sponsor.

"Remarketing Agreement" shall mean the Remarketing Agreement dated as of June 28, 2000 among the Company, the Trust and the Remarketing Agent.

"Remarketing Date" shall mean the third Business Day preceding August 18, 2003.

"Remarketing Settlement Date" shall mean the date, if any, on which the settlement of the Remarketed Securities has occurred through the normal settlement procedures in effect at such time of the Depositary or any successor Depositary.

"Reset Rate" shall mean the distribution rate per annum, as determined by the Remarketing Agent, that results from the Remarketing pursuant to Section 7.13.

"Responsible Officer" shall mean, with respect to the Property Trustee, any officer with direct responsibility for the administration of this Declaration and also shall mean, with respect to a particular corporate trust matter, any other officer to whom such matter is referred due to that officer's knowledge of and familiarity with the particular subject.

"Rule 3a-5" shall mean Rule 3a-5 under the Investment Company Act or any successor rule thereunder.

"S&P" shall mean Standard & Poor's Corporation.

"Scheduled Remarketing Settlement Date" shall mean the date, if any, on which the settlement of the Remarketed Securities is scheduled to occur.

"Securities" shall mean the Common Securities and the Preferred Securities.

"Securities Act" shall mean the Securities Act of 1933, as amended from time to time, or any successor legislation.

"Security Registrar" shall have the meaning specified in
Section 7.9(a)(iv).

"Senior Deferrable Notes" shall mean the series of senior deferrable notes to be issued by the Senior Deferrable Notes Issuer under the Indenture and to be purchased by the Trust and held by the Property Trustee.

"Senior Deferrable Notes Issuer" shall mean Valero Energy Corporation, a Delaware corporation, or any successor entity in a merger, consolidation, conversion, amalgamation or replacement by or conveyance, transfer or lease of its properties substantially as an entirety, in its capacity as issuer of the Senior Deferrable Notes under the Indenture.

"66 2/3% in Liquidation Amount" shall mean Holders of outstanding Securities, voting together as a single class, or, as the context may require, Holders of outstanding Preferred Securities voting separately as a class, who are the record owners of 66 2/3% or more of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accumulated and unpaid Distributions to the date upon which the

voting percentages are determined) of all outstanding Securities or Preferred Securities, as the case may be.

"Sponsor" shall mean Valero Energy Corporation, a Delaware corporation, or any successor entity in a merger, consolidation, conversion, amalgamation or replacement by or conveyance, transfer or lease of its properties substantially as an entirety, in its capacity as sponsor of the Trust.

"Successor Delaware Trustee" shall have the meaning specified in Section 6.6(b).

"Successor Entity" shall have the meaning specified in Section 3.15(b)(i).

"Successor Property Trustee" shall have the meaning specified in Section 6.6(b).

"Successor Security" shall have the meaning specified in
Section 3.15(b)(i)(B).

"Supermajority" shall have the meaning specified in Section 2.6(a)(ii).
"Tax Event" shall mean the receipt by the Sponsor and the Trust of an opinion of a law firm having a nationally recognized tax practice, to the effect that, as a result of any amendment to, change in or announced proposed change in the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative decision, pronouncement, judicial decision or action interpreting or applying such laws or regulations, which amendment or change is effective or which proposed change, pronouncement, action or decision is announced on or after the Closing Date, there is more than an insubstantial increase in the risk that (i) the Trust is, or within 90 days of the date of such opinion will be, subject to United States federal income tax with respect to income received or accrued on the Senior Deferrable Notes, (ii) interest payable by the Senior Deferrable Notes Issuer on the Senior Deferrable Notes is not, or within 90 days of the date of such opinion will not be, deductible by the Senior Deferrable Notes Issuer, in whole or in part, for United States federal income tax purposes, or (iii) the Trust is, or within 90 days of the date of such opinion will be, subject to more than a de minimis amount of other taxes, duties or other governmental charges.

"Tax Event Redemption" shall mean that a Tax Event has occurred and is continuing and the Senior Deferrable Notes have been called for redemption pursuant to the Indenture.

"Tax Event Redemption Date" shall mean the date of the Tax Event Redemption, if any, specified by the Senior Deferrable Notes Issuer.

"10% in Liquidation Amount" shall mean, except as provided by the Trust Indenture Act, Holder(s) of outstanding Securities, voting together as a single class, or, as the context may require, Holders of outstanding Preferred Securities or Holders of outstanding Common Securities, voting separately as a class, who are the record owners of 10% or more of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accumulated and unpaid Distributions to the date upon which the voting percentages are determined) of all outstanding Securities of the relevant class.

"Termination Event" shall have the meaning set forth in
Section 1.1 of the Purchase Contract Agreement.

"Treasury PEPS Units" shall mean a PEPS Units with respect to which Treasury Securities have been substituted for the Preferred Securities or Applicable Ownership Interest of the Treasury Portfolio component, as applicable.

"Treasury Portfolio" shall mean, with respect to the Applicable Principal Amount of Senior Deferrable Notes, a portfolio of zero-coupon U.S. treasury securities consisting of (i) principal or interest strips of U.S. treasury securities that mature on or prior to the Purchase Contract Settlement Date in an aggregate amount at maturity equal to the Applicable Principal Amount and (ii) with respect to each scheduled interest payment date on the Senior Deferrable Notes that occurs after the Tax Event Redemption Date, principal or interest strips of U.S. treasury securities that mature on or prior to such date in an aggregate amount at maturity equal to the aggregate interest payment that would have been due on the Applicable Principal Amount of the Senior Deferrable Notes on such date.

"Treasury Portfolio Purchase Price" shall mean the lowest aggregate price quoted by a Primary Treasury Dealer, to the Quotation Agent on the third Business Day preceding the Tax Event Redemption Date for the purchase of the Treasury Portfolio for settlement the Tax Event Redemption Date.

"Treasury Regulations" shall mean the income tax regulations, including temporary and proposed regulations, promulgated under the Code by the United States Department of the Treasury, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).

"Treasury Securities" shall mean zero-coupon U.S. Treasury Securities (CUSIP Number 912820BG1) with a principal amount at maturity equal to $1,000 and maturing on August 15, 2003, the business day preceding the Purchase Contract Settlement Date.

"Trust" shall have the meaning specified in the Recitals hereto.

"Trust Enforcement Event" in respect of the Securities shall mean that an Indenture Event of Default has occurred and is continuing in respect of the Senior Deferrable Notes.

"Trust Indenture Act" shall mean the Trust Indenture Act of 1939, as amended from time to time, or any successor legislation.

"Trustee" or "Trustees" shall mean each Person that has signed this Declaration as a trustee, so long as such Person continues in office in accordance with the terms hereof, and all other Persons that from time to time may be duly appointed, qualified and serving as Trustees in accordance with the provisions hereof, and references herein to a Trustee or the Trustees shall refer to such Person or Persons solely in their capacity as trustees hereunder.

"Two-Year Benchmark Treasury Rate" shall mean the bid side rate displayed at 10:00 A.M., New York City time, on the third Business Day immediately preceding the Purchase

Contract Settlement Date for direct obligations of the United States (which may be obligations traded on a when-issued basis only) having a maturity comparable to the remaining term to maturity of the Senior Deferrable Notes, as agreed upon by the Company and the Remarketing Agent in the Telerate system (or if the Telerate system is (a) no longer available on the third Business Day immediately preceding the Purchase Contract Settlement Date or (b) in the opinion of the Remarketing Agent (after consultation with the Company) no longer an appropriate system from which to obtain such rate, such other nationally recognized quotation system as, in the opinion of the Remarketing Agent (after consultation with the Company) is appropriate. If such rate is not so displayed, the rate for the Two-Year Benchmark Treasury Rate shall be, as calculated by the Remarketing Agent, the yield to maturity for the Preferred Securities, expressed as a bond equivalent on the basis of a year of 365 or 366 days, as applicable, and applied on a daily basis, and computed by taking the arithmetic mean of the secondary market bid rates, as of 10:30 A.M., New York City time, on the third Business Day immediately preceding the Purchase Contract Settlement Date of three leading United States government securities dealers selected by the Remarketing Agent (after consultation with the Company) (which may include the Remarketing Agent or an affiliate thereof).

"United States Person" shall mean a United States person for United States federal income tax purposes.

"Underwriting Agreement" shall mean the Underwriting Agreement dated as of June 22, 2000 among the Trust, the Sponsor and Morgan Stanley & Co. Incorporated, Credit Suisse First Boston Corporation, J. P. Morgan Securities Inc. and BMO Nesbitt Burns Corp., as representatives of the several underwriters named therein.

ARTICLE 2: TRUST INDENTURE ACT

SECTION 2.1 Trust Indenture Act; Application.

(a) This Declaration is subject to the provisions of the Trust Indenture Act that are required to be part of this Declaration and, to the extent applicable, shall be governed by such provisions.

(b) The Property Trustee shall be the only Trustee that is a trustee for the purposes of the Trust Indenture Act.

(c) If and to the extent that any provision of this Declaration conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties of the Trust Indenture Act shall control.

(d) The application of the Trust Indenture Act to this Declaration shall not affect the Trust's classification as a grantor trust for United States federal income tax purposes and shall not affect the nature of the Securities as equity securities representing undivided beneficial interests in the assets of the Trust.

SECTION 2.2 Lists of Holders of the Securities.

(a) Each of the Sponsor and the Regular Trustees on behalf of the Trust shall provide the Property Trustee a list of the names and addresses of the Holders of the Securities in such form as the Property Trustee may reasonably require ("List of Holders") (i) as of the record date relating to the payment of any Distribution, at least one Business Day prior to the date for payment of such Distribution, except while the Preferred Securities are represented by one or more Global Securities, and (ii) at any other time, within 30 days of receipt by the Trust of a written request from the Property Trustee for a List of Holders as of a date no more than 15 days before such List of Holders is provided to the Property Trustee. If at any time the List of Holders does not differ from the most recent List of Holders provided to the Property Trustee by the Sponsor and the Regular Trustees on behalf of the Trust, then neither the Sponsor nor the Regular Trustees shall be obligated to deliver such List of Holders. The Property Trustee shall preserve, in as current a form as is reasonably practicable, all information contained in Lists of Holders provided to it or that it receives in its capacity as Paying Agent (if acting in such capacity); provided that the Property Trustee may destroy any List of Holders previously provided to it on receipt of a new List of Holders.

(b) The Property Trustee shall comply with its obligations under, and shall be entitled to the benefits of, Sections 311(a), 311(b) and 312(b) of the Trust Indenture Act.

SECTION 2.3 Reports by the Property Trustee.

Within 60 days after June 15 of each year (commencing with the year of the first anniversary of the issuance of the Preferred Securities), the Property Trustee shall provide to the Holders of the Preferred Securities such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Property Trustee also shall comply with the requirements of Section 313(d) of the Trust Indenture Act. The Sponsor shall promptly notify the Property Trustee when any Preferred Securities are listed for trading on any stock exchange and any delisting thereof.

SECTION 2.4 Periodic Reports to the Property Trustee.

Each of the Sponsor and the Regular Trustees on behalf of the Trust shall provide to the Property Trustee such documents, reports and information as required by Section 314 of the Trust Indenture Act (if any) and the compliance certificate required by Section 314 of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. Compliance certificates required by Section 314(a)(4) of the Trust Indenture Act shall be delivered to the Property Trustee annually on or before 120 days after the end of each fiscal year of the Sponsor.

SECTION 2.5 Evidence of Compliance with Conditions Precedent.

Each of the Sponsor and the Regular Trustees on behalf of the Trust shall provide to the Property Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Declaration that relate to any of the matters set forth in Section 314(c) of the

Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) may be given in the form of an Officers' Certificate.

SECTION 2.6 Trust Enforcement Events; Waiver.

(a) The Holders of a Majority in Liquidation Amount of the Preferred Securities may waive, by vote or written consent, on behalf of the Holders of all of the Preferred Securities, any past Trust Enforcement Event in respect of the Preferred Securities and its consequences, provided that if the underlying Indenture Event of Default:

(i) is not waivable under the Indenture, then the Trust Enforcement Event under this Declaration also shall not be waivable; and

(ii) requires the vote or consent of the holders of greater than a majority in principal amount of the Senior Deferrable Notes (a "Supermajority") to be waived under the Indenture, the related Trust Enforcement Event under this Declaration only may be waived by the vote or written consent of the Holders of at least the same Supermajority in aggregate stated liquidation amount of the Preferred Securities outstanding.

The foregoing provisions of this Section 2.6 shall be in lieu of Section 316(a)(1)(B) of the Trust Indenture Act, and Section 316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from this Declaration and the Securities, as permitted by the Trust Indenture Act. Upon such waiver, any such Trust Enforcement Event in respect of the Preferred Securities shall be deemed to have been cured for every purpose of this Declaration and the Preferred Securities, but no such waiver shall extend to any subsequent or other Trust Enforcement Event with respect to the Preferred Securities or impair any right consequent thereon. Any waiver by the Holders of the Preferred Securities of a Trust Enforcement Event with respect to the Preferred Securities also shall be deemed to constitute a waiver by the Holders of the Common Securities of any such Trust Enforcement Event with respect to the Common Securities for all purposes of this Declaration without any further act, vote or consent of the Holders of the Common Securities.

(b) The Holders of the Common Securities may waive, by vote or written consent, any past Trust Enforcement Event in respect of the Common Securities and its consequences, provided that if the underlying Indenture Event of Default is not waivable under the Indenture, then, except where the Holders of the Common Securities have been deemed to have waived such Trust Enforcement as provided below in this Section 2.6(b), the related Trust Enforcement Event under this Declaration also shall not be waivable. The Holders of the Common Securities shall be deemed to have waived any and all Trust Enforcement Events in respect of the Common Securities and the consequences thereof until all Trust Enforcement Events in respect of the Preferred Securities have been cured, waived or otherwise eliminated. Until all Trust Enforcement Events in respect of the Preferred Securities have been so cured, waived or otherwise eliminated, the Property Trustee shall be deemed to be acting solely on behalf of the Holders of the Preferred Securities, and only the Holders of the Preferred Securities shall have the right to direct the Property Trustee. The foregoing provisions of this
Section 2.6(b) shall be in lieu of Sections 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act, and Sections 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act are hereby expressly excluded from this Declaration and the Securities, as permitted by the Trust Indenture Act. Subject to the

foregoing provisions of this Section 2.6(b), upon such cure, waiver or other elimination, any Trust Enforcement Event in respect of the Common Securities shall be deemed to have been cured for every purpose of this Declaration and the Common Securities, but no such waiver shall extend to any subsequent or other Trust Enforcement Event with respect to the Common Securities or impair any right consequent thereon.

(c) A waiver of an Indenture Event of Default under the Indenture by the Property Trustee at the direction of the Holders of the Preferred Securities shall constitute a waiver of the corresponding Trust Enforcement Event under this Declaration. Any such waiver by the Holders of the Preferred Securities also shall be deemed to constitute a waiver by the Holders of the Common Securities of any such Trust Enforcement Event with respect to the Common Securities for all purposes of this Declaration without any further act, vote or consent of the Holders of the Common Securities. The foregoing provisions of this Section 2.6(c) shall be in lieu of Section 316(a)(1)(B) of the Trust Indenture Act, and Section 316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from this Declaration and the Securities, as permitted by the Trust Indenture Act.

SECTION 2.7 Trust Enforcement Event; Notice.

(a) Within 90 days after the occurrence of a Trust Enforcement Event actually known to a Responsible Officer of the Property Trustee, the Property Trustee shall transmit by mail, first class postage prepaid, to the Holders of the Securities, notice of such Trust Enforcement Event, unless such Trust Enforcement Event has been cured before the giving of such notice; provided that, except for a default in the payment of principal of (or premium, if any) or interest on any of the Senior Deferrable Notes, the Property Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Property Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Securities.

(b) The Property Trustee shall not be deemed to have knowledge of any Trust Enforcement Event except for:

(i) a default under Section 501(1) and (2) of the Indenture; or

(ii) any default as to which the Property Trustee shall have received written notice or of which a Responsible Officer of the Property Trustee charged with the administration of this Declaration shall have actual knowledge.

ARTICLE 3: ORGANIZATION

SECTION 3.1 Name and Organization.

The Trust hereby continued is named "VEC Trust I," as such name may be modified from time to time by the Regular Trustees following written notice to the Holders of the Securities. The Trust's activities may be conducted under the name of the Trust or any other name deemed advisable by the Regular Trustees.

SECTION 3.2 Office.

The address of the principal office of the Trust is One Valero Place, San Antonio, Texas 78212. On ten Business Days' written notice to the Holders of the Securities, the Regular Trustees may designate another principal office.

SECTION 3.3 Purpose.

The exclusive purposes and functions of the Trust are (a) to issue and sell the Securities, (b) to use the gross proceeds from such sale to acquire the Senior Deferrable Notes and (c) except as otherwise limited herein, to engage in only those other activities necessary or incidental thereto. The Trust shall not borrow money, issue debt, reinvest proceeds derived from investments, pledge any of its assets or otherwise undertake (or permit to be undertaken) any activity that would cause the Trust not to be classified as a grantor trust for United States federal income tax purposes.

By the acceptance of this Trust, none of the Trustees, the Sponsor, the Holders of the Preferred Securities or the Common Securities or the Beneficial Owners of the Preferred Securities will take any position that is contrary to the classification of the Trust as a grantor trust for United State federal income tax purposes.

SECTION 3.4 Authority.

(a) Subject to the limitations provided in this Declaration and to the specific duties of the Property Trustee, the Regular Trustees shall have exclusive authority to carry out the purposes of the Trust. Any action taken by the Regular Trustees in accordance with their powers shall constitute the act of and shall serve to bind the Trust, and any action taken by the Property Trustee in accordance with its powers shall constitute the act of and shall serve to bind the Trust. In dealing with the Trustees acting on behalf of the Trust, no Person shall be required to inquire into the authority of the Trustees to bind the Trust. Persons dealing with the Trust are entitled to rely conclusively on the power and authority of the Trustees as set forth in this Declaration.

(b) Except as expressly set forth in this Declaration and except if a meeting of the Regular Trustees is called with respect to any matter over which the Regular Trustees have power to act, any power of the Regular Trustees may be exercised by or with the consent of any one such Regular Trustee.

(c) Unless otherwise determined by the Regular Trustees, and except as otherwise required by the Business Trust Act or applicable law, any Regular Trustee may delegate to any other natural person over the age of 21, by power of attorney consistent with applicable law, his or her power for the purposes of signing any documents that the Regular Trustees have power and authority to cause the Trust to execute pursuant to Section 3.6.

SECTION 3.5 Title to Property of the Trust.

Except as provided in Section 3.8 with respect to the Senior Deferrable Notes and the Property Account or as otherwise provided in this Declaration, legal title to all assets of the

Trust shall be vested in the Trust. The Holders of the Securities shall not have legal title to any part of the assets of the Trust but shall have undivided beneficial ownership interests in the assets of the Trust.

SECTION 3.6 Powers and Duties of the Regular Trustees.

The Regular Trustees shall have the exclusive power, duty and authority to cause the Trust to engage in the following activities:

(a) to issue and sell the Securities in accordance with this Declaration; provided that the Trust may issue no more than one series of Preferred Securities and no more than one series of Common Securities; and provided further that there shall be no interests in the Trust other than the Securities, and the issuance of the Securities shall be limited to a one-time, simultaneous issuance of both Preferred Securities and Common Securities on the Closing Date, subject to the issuance of additional Securities pursuant to the exercise of any Over-allotment Option;

(b) to acquire the Senior Deferrable Notes with the proceeds of the sale of the Securities; provided that the Regular Trustees shall cause legal title to the Senior Deferrable Notes to be held of record in the name of the Property Trustee for the benefit of the Holders of the Securities;

(c) to give the Sponsor and the Property Trustee prompt written notice of the occurrence of a Tax Event; provided that the Regular Trustees shall consult with the Sponsor and the Property Trustee before taking or refraining from taking any action in relation to any such Tax Event;

(d) to establish a record date with respect to all actions to be taken hereunder that require a record date to be established, including and with respect to, for the purposes of Section 316(c) of the Trust Indenture Act, Distributions, voting rights, redemptions and exchanges, and to issue relevant notices to the Holders of the Securities as to such actions and applicable record dates;

(e) to take all actions and perform such duties as may be required of the Regular Trustees pursuant to the terms of this Declaration;

(f) to bring or defend, pay, collect, compromise, arbitrate, resort to legal action or otherwise adjust claims or demands of or against the Trust ("Legal Action"), unless pursuant to Section 3.8(e), the Property Trustee has the exclusive power to bring such Legal Action;

(g) to employ or otherwise engage employees and agents (who may be designated as officers with titles) and managers, contractors, advisors and consultants to conduct only those services that the Regular Trustees have authority to conduct directly, and to pay reasonable compensation for such services, provided that any Person so employed or engaged is a United States Person;

(h) to cause the Trust to comply with the Trust's obligations under the Trust Indenture Act;

(i) to give to the Property Trustee the certificate required by Section 314(a)(4) of the Trust Indenture Act, which certificate may be executed by any Regular Trustee;

(j) to incur expenses that are necessary or incidental to carry out any of the purposes of the Trust;

(k) to act as, or appoint another Person to act as, registrar and transfer agent for the Securities;

(l) to take all action that may be necessary or appropriate for the preservation and continuation of the Trust's valid existence, rights, franchise and privileges as a statutory business trust under the laws of the State of Delaware and of each other jurisdiction in which such existence is necessary to protect the limited liability of the Holders of the Securities or to enable the Trust to effect the purposes for which it was created;

(m) to take any action not inconsistent with applicable law that the Regular Trustees determine in their discretion to be necessary or desirable in carrying out the purposes and functions of the Trust as set forth in Section 3 or the activities of the Trust as set forth in this Section 3.6, including:

(i) causing the Trust not to be deemed to be an Investment Company required to be registered under the Investment Company Act;

(ii) causing the Trust to be classified as a grantor trust for United States federal income tax purposes; and

(iii) cooperating with the Senior Deferrable Notes Issuer to ensure that the Senior Deferrable Notes will be treated as indebtedness of the Senior Deferrable Notes Issuer for United States federal income tax purposes;

(n) to take all action necessary to cause all applicable tax returns and tax information reports that are required to be filed with respect to the Trust to be duly prepared and filed;

(o) to prepare, execute and file a certificate of cancellation of the Certificate of Trust of the Trust pursuant to Section 8.1(b);

(p) in connection with the issuance of the Preferred Securities, to execute, deliver and perform the Depositary Agreement on behalf of the Trust;

(q) if and to the extent that the Sponsor on behalf of the Trust has not already done so, to cause the Trust to enter into the Underwriting Agreement and/or such other agreements and arrangements as may be necessary or desirable in connection with the sale of the Preferred Securities to the initial purchasers thereof and the consummation thereof, and to take all action, and exercise all discretion, as may be necessary or desirable in connection with the consummation thereof; and

(r) to execute all documents or instruments, perform all duties and powers, and do all things for and on behalf of the Trust in all matters necessary or incidental to the foregoing.

The Regular Trustees shall exercise the powers set forth in this
Section 3.6 in a manner that is consistent with the purposes and functions of the Trust set out in Section 3.3, and the

Regular Trustees shall have no power to, and shall not, take any action that is inconsistent with the purposes and functions of the Trust set forth in Section 3.3.

Subject to this Section 3.6, the Regular Trustees shall have none of the powers or the authority of the Property Trustee set forth in Section 3.8.

Any expenses incurred by the Regular Trustees pursuant to this Section 3.6 shall be reimbursed by the Senior Deferrable Notes Issuer.

SECTION 3.7 Prohibition of Actions by the Trust and the Trustees.

(a) The Trust shall not, and the Trustees (including the Property Trustee) shall cause the Trust not to, engage in any activity other than as required or authorized by this Declaration. In particular, the Trust shall not and the Trustees (including the Property Trustee) shall cause the Trust not to:

(i) invest any proceeds received by the Trust in connection with its ownership of the Senior Deferrable Notes, but the Property Trustee shall distribute all such proceeds to the Holders of the Securities pursuant to the terms of this Declaration and of the Securities;

(ii) acquire any assets other than as expressly provided herein;

(iii) possess property for any purpose other than a Trust purpose;

(iv) make any loans or incur any indebtedness;

(v) possess any power or otherwise act in such a way as to vary the Trust's assets;

(vi) possess any power or otherwise act in such a way as to vary the terms of the Securities in any way whatsoever (except to the extent expressly authorized in this Declaration or by the terms of the Securities);

(vii) issue any securities or other evidences of beneficial ownership of, or beneficial interest in, the Trust other than the Securities;

(viii) other than as provided in this Declaration, (A) direct the time, method and place of exercising any trust or power conferred upon the Indenture Trustee with respect to the Senior Deferrable Notes,
(B) waive any past default that is waivable under the Indenture, (C) exercise a right to rescind or annul any declaration that the principal of all the Senior Deferrable Notes shall be due and payable or (D) consent to any amendment, modification or termination of the Indenture or the Senior Deferrable Notes where such consent is required, unless the Trust has received an opinion of counsel to the effect that such modification will not cause more than an insubstantial increase in the risk that the Trust will not be classified as a grantor trust for United States federal income tax purposes;

(ix) take any action inconsistent with the status of the Trust as grantor trust for United States federal income tax purposes;

(x) revoke any action previously authorized or approved by vote of the Holders of the Preferred Securities; or

(xi) after the date hereof, enter into any contract or agreement (other than any depositary agreement or any agreement with any securities exchange or automated quotation system) that does not expressly provide that the Holders of Preferred Securities, in their capacities as such, have limited liability (in accordance with the provisions of the Business Trust Act) for the liabilities and obligations of the Trust, which express provision shall be in substantially the following form:

The Holders of the Preferred Securities, in their capacities as such, shall not be personally liable for any liabilities or obligations of the Trust arising out of this Agreement, and the parties hereto hereby agree that the Holders of the Preferred Securities, in their capacities as such, shall be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware.

SECTION 3.8 Powers and Duties of the Property Trustee.

(a) The legal title to the Senior Deferrable Notes shall be owned by and held of record in the name of the Property Trustee in trust for the benefit of the Trust and the Holders of the Securities. The right, title and interest of the Property Trustee to the Senior Deferrable Notes shall vest automatically in each Person that hereafter may be appointed as Property Trustee in accordance with Section 6.6. To the fullest extent permitted by law, such vesting and cessation of title shall be effective whether or not conveyancing documents with regard to the Senior Deferrable Notes have been executed and delivered.

(b) The Property Trustee shall not transfer its right, title and interest in the Senior Deferrable Notes to the Regular Trustees nor to the Delaware Trustee (if the Property Trustee does not also act as Delaware Trustee).

(c) The Property Trustee shall:

(i) establish and maintain a segregated non-interest bearing trust account (the "Property Account") in the name of and under the exclusive control of the Property Trustee on behalf of the Holders of the Securities and, upon the receipt of payments of funds made in respect of the Senior Deferrable Notes, deposit such funds into the Property Account and make payments to the Holders of the Securities from the Property Account in accordance with Section 7.2. Funds in the Property Account shall be held uninvested until disbursed in accordance with this Declaration. The Property Account shall be an account that is maintained with a banking institution, the rating on whose long-term unsecured indebtedness is at least equal to the rating assigned to the

Company's senior notes by a "nationally recognized statistical rating organization" within the meaning of Rule 436(g)(2) under the Securities Act;

(ii) engage in such ministerial activities as shall be necessary or appropriate to effect the redemption of the Securities to the extent the Senior Deferrable Notes are redeemed or mature;

(iii) upon written direction by the Sponsor to dissolve the Trust, to engage in such ministerial activities as shall be necessary or appropriate to effect the distribution of the Senior Deferrable Notes to the Holders of the Securities in exchange for the Securities; and

(iv) be a United States Person.

(d) The Property Trustee shall take all actions and perform such duties as may be specifically required of the Property Trustee pursuant to the terms of this Declaration and the Securities.

(e) The Property Trustee shall take any Legal Action that arises out of or in connection with (i) a Trust Enforcement Event of which a Responsible Officer of the Property Trustee has actual knowledge or (ii) the Property Trustee's duties and obligations under this Declaration or the Trust Indenture Act; provided that if a Trust Enforcement Event has occurred and is continuing and such event is attributable to the failure of the Senior Deferrable Notes Issuer to pay interest or principal on the Senior Deferrable Notes on the date such interest or principal is otherwise payable (or in the case of redemption, on the redemption date), then a Holder of Preferred Securities may institute a proceeding directly against the Senior Deferrable Notes Issuer to enforce payment to such Holder of the principal or interest on Senior Deferrable Notes having an aggregate principal amount equal to the aggregate liquidation amount of the Preferred Securities of such Holder (a "Direct Action"). In connection with such Direct Action, the Senior Deferrable Notes Issuer will be subrogated to the rights of such Holder of Preferred Securities to the extent of any payment made by the Senior Deferrable Notes Issuer to such Holders of Preferred Securities in such Direct Action.

(f) The Property Trustee shall continue to serve as a Trustee until either:

(i) the Trust has been completely liquidated and the proceeds of the liquidation have been distributed to the Holders of the Securities pursuant to the terms of the Securities; or

(ii) a Successor Property Trustee has been appointed and has accepted that appointment in accordance with Section 6.6.

(g) The Property Trustee shall have the legal power to exercise all of the rights, powers and privileges of a holder of Senior Deferrable Notes under the Indenture and, if a Trust Enforcement Event actually known to a Responsible Officer of the Property Trustee occurs and is continuing, the Property Trustee shall enforce, for the benefit of Holders of the Securities, its rights as holder of the Senior Deferrable Notes subject to the rights of the Holders of the Securities pursuant to the terms of such Securities.

(h) The Property Trustee may authorize one or more Persons (each, a "Paying Agent") to pay Distributions, redemption payments or liquidation payments on behalf of the Trust with respect to all Securities, and any such Paying Agent shall comply with Section 317(b) of the Trust Indenture Act. Any Paying Agent may be removed by the Property Trustee at any time, and a successor Paying Agent or additional Paying Agents may be appointed at any time by the Property Trustee.

(i) Subject to this Section 3.8, the Property Trustee shall have none of the duties, liabilities, powers or the authority of the Regular Trustees set forth in Section 3.6.

The Property Trustee shall exercise the powers set forth in this
Section 3.8 in a manner that is consistent with the purposes and functions of the Trust set out in Section 3.3, and the Property Trustee shall have no power to, and shall not, take any action that is inconsistent with the purposes and functions of the Trust set out in Section 3.3.

SECTION 3.9 Certain Duties and Responsibilities of the Property Trustee.

(a) The Property Trustee, before the occurrence of any Trust Enforcement Event and after the cure or waiver of all Trust Enforcement Events that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Declaration, and no implied covenants shall be read into this Declaration against the Property Trustee. If a Trust Enforcement Event has occurred (that has not been cured or waived pursuant to Section 2.6) of which a Responsible Officer of the Property Trustee has actual knowledge, the Property Trustee shall exercise such of the rights and powers vested in it by this Declaration and shall use the same degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs.

(b) No provision of this Declaration shall be construed to relieve the Property Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that:

(i) prior to the occurrence of a Trust Enforcement Event and after the cure or waiver of all such Trust Enforcement Events that may have occurred:

(A) the duties and obligations of the Property Trustee shall be determined solely by the express provisions of this Declaration, and the Property Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Declaration, and no implied covenants or obligations shall be read into this Declaration against the Property Trustee; and

(B) in the absence of bad faith on the part of the Property Trustee, the Property Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Property Trustee and conforming to the requirements of this Declaration; but in the case of any such certificates or opinions that by any provision

hereof are specifically required to be furnished to the Property Trustee, the Property Trustee shall be under a duty to examine such certificates or opinions to determine whether or not they conform to the requirements of this Declaration (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein);

(ii) the Property Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Property Trustee, unless it has been proven that the Property Trustee was negligent in ascertaining the pertinent facts;

(iii) the Property Trustee shall not be liable with respect to any action taken or omitted to be taken by it without negligence, in good faith in accordance with the direction of the Holders of not less than a Majority in Liquidation Amount of the Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee under this Declaration;

(iv) no provision of this Declaration shall require the Property Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if it has reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Declaration or indemnity reasonably satisfactory to the Property Trustee against such risk or liability is not reasonably assured to it;

(v) the Property Trustee's sole duty with respect to the custody, safe-keeping and physical preservation of the Senior Deferrable Notes and the Property Account shall be to deal with such property in a similar manner as the Property Trustee deals with similar property for its own account, subject to the protections and limitations on liability afforded to the Property Trustee under this Declaration and the Trust Indenture Act;

(vi) the Property Trustee shall have no duty or liability for or with respect to the value, genuineness, existence or sufficiency of the Senior Deferrable Notes or the payment of any taxes or assessments levied thereon or in connection therewith;

(vii) the Property Trustee shall not be liable for any interest on any money received by it except as it otherwise may agree with the Sponsor. Money held by the Property Trustee need not be segregated from other funds held by it except in relation to the Property Account maintained by the Property Trustee pursuant to Section 3.8(c)(i) and except to the extent otherwise required by law; and

(viii) the Property Trustee shall not be responsible for monitoring the compliance by the Regular Trustees or the Sponsor with their respective duties under this Declaration, nor shall the Property Trustee be liable for any default or misconduct of the Regular Trustees or the Sponsor.

SECTION 3.10 Certain Rights of Property Trustee.

(a) Subject to the provisions of Section 3.9:

(i) The Property Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties.

(ii) Any direction or act of the Sponsor contemplated by this Declaration shall be sufficiently evidenced by an Officers' Certificate.

(iii) Whenever in the administration of this Declaration, the Property Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Property Trustee (unless other evidence is herein specifically prescribed) may request, in the absence of bad faith on its part, and conclusively rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Sponsor.

(iv) The Property Trustee shall have no duty to see to any recording, filing or registration of any instrument (including any financing or continuation statement or any filing under tax or securities laws) or any rerecording, refiling or registration thereof.

(v) The Property Trustee may consult with counsel of its choice or other experts, and the advice or opinion of such counsel and experts with respect to legal matters or advice within the scope of such experts' area of expertise shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion. Such counsel may be counsel to the Sponsor or any of its Affiliates and may include any of its employees. The Property Trustee shall have the right at any time to seek instructions concerning the administration of this Declaration from any court of competent jurisdiction.

(vi) The Property Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Declaration at the request or direction of any Holder of Securities, unless such Holder of Securities has provided to the Property Trustee security and indemnity, reasonably satisfactory to the Property Trustee, against the costs, expenses (including attorneys' fees and expenses and the expenses of the Property Trustee's agents, nominees or custodians) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Property Trustee; provided that nothing contained in this Section 3.10(a) shall be taken to relieve the Property Trustee, upon the occurrence of an Indenture Event of Default, of its obligation to exercise the rights and powers vested in it by this Declaration.

(vii) The Property Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion,

report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Property Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it sees fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Sponsor, personally or by agent or attorney at the sole cost of the Sponsor and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation.

(viii) The Property Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, custodians, nominees or attorneys, provided that any such action (other than ministerial action) executed or performed by such agent or attorney is executed or performed by an agent or an attorney that is a United States Person, and the Property Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder.

(ix) Any action taken by the Property Trustee or its agents hereunder shall bind the Trust and the Holders of the Securities, and the signature of the Property Trustee or its agents alone shall be sufficient and effective to perform any such action, and no third party shall be required to inquire as to the authority of the Property Trustee to so act or as to its compliance with any of the terms and provisions of this Declaration, both of which shall be evidenced conclusively by the Property Trustee's or its agent's taking such action.

(x) Whenever in the administration of this Declaration the Property Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Property Trustee (A) may request instructions from the Holders of the Securities, which instructions only may be given by the Holders of the same proportion in liquidation amount of the Securities as would be entitled to direct the Property Trustee under this Declaration in respect of such remedy, right or action, (B) may refrain from enforcing such remedy or right or taking such other action until such instructions are received and (C) shall be protected in conclusively relying on or acting in accordance with such instructions.

(xi) Except as otherwise expressly provided by this Declaration, the Property Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Declaration.

(xii) The Property Trustee shall not be liable for any action taken, suffered or omitted to be taken by it without negligence, in good faith and reasonably believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Declaration.

(b) No provision of this Declaration shall be deemed to impose any duty or obligation on the Property Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which the Property Trustee shall be unqualified or incompetent in accordance with applicable law, to

perform any such act or acts, or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Property Trustee shall be construed to be a duty.

SECTION 3.11 Delaware Trustee.

Notwithstanding any other provision of this Declaration other than Section 6.2, the Delaware Trustee shall not be entitled to exercise any powers of, nor shall the Delaware Trustee have any of the duties and responsibilities of, the trustees described in this Declaration. Except as set forth in Section 6.2, the Delaware Trustee shall be a Trustee for the sole and limited purpose of fulfilling the requirements of Section 3807(a) of the Business Trust Act and shall be a United States Person. If the Property Trustee, meeting the requirements of Section 6.2, also acts as Delaware Trustee, this
Section 3.11 shall not apply.

SECTION 3.12 Execution of Documents.

Except as otherwise required by the Business Trust Act or applicable law, any Regular Trustee is authorized to execute on behalf of the Trust any documents that the Regular Trustees have the power and authority to execute pursuant to Section 3.6.

SECTION 3.13 Not Responsible for Recitals or Issuance of Securities.

The recitals contained in this Declaration and the Securities shall be taken as the statements of the Sponsor, and the Trustees do not assume any responsibility for their correctness. The Trustees make no representations as to the value or condition of the property of the Trust or any part thereof. The Trustees make no representations as to the validity or sufficiency of this Declaration, the Securities, the Senior Deferrable Notes or the Indenture.

SECTION 3.14 Duration of Trust.

The Trust shall exist until dissolved pursuant to the provisions of Article 8 hereof.

SECTION 3.15 Mergers.

(a) The Trust may not consolidate with, convert into, amalgamate or merge with or into, be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other body, except as described in Section 3.15(b) and (c) or Section 8.2.

(b) At the request of the Sponsor and with the consent of the Regular Trustees or, if there are more than two, a majority of the Regular Trustees and without the consent of the Holders of the Preferred Securities, the Delaware Trustee or the Property Trustee, the Trust may consolidate with, convert into, amalgamate or merge with or into, be replaced by or convey, transfer or lease its properties substantially as an entirety to a trust organized as such under the laws of any state; provided that:

(i) if the Trust is not the successor entity, such successor entity (the "Successor Entity") either:

(A) expressly assumes all of the obligations of the Trust with respect to the Securities; or

(B) substitutes for the Securities other securities having substantially the same terms as the Securities (the "Successor Securities"), so long as such Successor Securities rank the same as the Securities with respect to Distributions and payments upon liquidation, redemption and otherwise;

(ii) the Senior Deferrable Notes Issuer expressly appoints a trustee of such Successor Entity that possesses the same powers and duties as the Property Trustee as the holder of the Senior Deferrable Notes;

(iii) the Preferred Securities or any Successor Securities are or, upon notification of issuance will be, listed on any national securities exchange or with any other organization on which the Preferred Securities are then listed or quoted;

(iv) such consolidation, conversion, amalgamation, merger, replacement, conveyance, transfer or lease does not cause the Preferred Securities (including any Successor Securities) to be downgraded by any nationally recognized statistical rating organization;

(v) such consolidation, conversion, amalgamation, merger, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the Holders of the Preferred Securities (including any Successor Securities) in any material respect;

(vi) such Successor Entity has a purpose substantially identical to that of the Trust;

(vii) prior to such consolidation, conversion, amalgamation, merger, replacement, conveyance, transfer or lease, the Sponsor has received an opinion of independent counsel to the Trust experienced in such matters to the effect that:

(A) such consolidation, conversion, amalgamation, merger, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the Holders of the Securities (including any Successor Securities) in any material respect;

(B) following such consolidation, conversion, amalgamation, merger, replacement, conveyance, transfer or lease, neither the Trust nor such Successor Entity will be required to register as an Investment Company under the Investment Company Act; and

(C) following such consolidation, conversion, amalgamation or merger, replacement, conveyance, transfer or lease, the Trust (or

such Successor Entity) will continue to be classified as a grantor trust for United States federal income tax purposes;

(viii) the Sponsor or any permitted successor or assignee owns all of the common securities of such Successor Entity and guarantees the obligations of such Successor Entity under the Successor Securities, at least to the extent provided by the Guarantee; and

(ix) such Successor Entity expressly assumes all of the obligations of the Trust.

(c) Notwithstanding Section 3.15(b), the Trust shall not, except with the consent of Holders of 100% in aggregate liquidation amount of the Securities, consolidate with, convert into, amalgamate or merge with or into, be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to, any other entity or permit any other entity to consolidate with, amalgamate, merge with or into, or replace it, if such consolidation, conversion, amalgamation, merger, replacement, conveyance, transfer or lease would cause the Trust or any successor Entity to be classified as other than a grantor trust for United States federal income tax purposes or would cause each Holder of Securities not to be treated as owning an undivided beneficial ownership interest in the Senior Deferrable Notes.

SECTION 3.16 Compensation and Reimbursement.

The Sponsor agrees to pay each of the Trustees from time to time such compensation for all services rendered by such Trustee hereunder as the Sponsor and such Trustee may agree upon from time to time (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust). To the fullest extent permitted by law the parties intend that Section 3561 of Title 12 of the Delaware Code shall not apply to the Trust and that compensation paid pursuant to this Section 3.16 not be subject to review by any court under Section 3560 of Title 12 of the Delaware Code.

SECTION 3.17 Property Trustee May File Proofs of Claim.

In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other similar judicial proceeding relative to the Trust or any other obligor upon the Securities or the property of the Trust or of such other obligor or their creditors, the Property Trustee (irrespective of whether any Distributions on the Securities are then due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Property Trustee has made any demand on the Trust for the payment of any past due Distributions) shall be entitled and empowered, to the fullest extent permitted by law, by intervention in such proceeding or otherwise:

(a) to file and prove a claim for the whole amount of any Distributions owing and unpaid in respect of the Securities (or, if the Securities are original issue discount securities, such portion of the liquidation amount as may be specified in the terms of such securities) and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Property Trustee (including any claim for the reasonable compensation, expenses,

disbursements and advances of the Property Trustee, its agents and counsel) and of the Holders of the Securities allowed in such judicial proceeding; and

(b) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder of Securities to make such payments to the Property Trustee and, in the event the Property Trustee consents to the making of such payments directly to the Holders, to pay to the Property Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Property Trustee, its agents and counsel, and any other amounts due the Property Trustee.

Nothing herein contained shall be deemed to authorize the Property Trustee to authorize or consent to or accept or adopt, on behalf of any Holder of Securities, any plan of reorganization, arrangement, adjustment or compensation affecting the Securities or the rights of any Holder thereof or to authorize the Property Trustee to vote in respect of the claim of any Holder of Securities in any such proceeding.

SECTION 3.18 Registration Statement and Related Matters.

In accordance with the Original Declaration, the Sponsor was authorized (a) to prepare and file with the Commission and execute, in each case on behalf of the Trust, (i) a Registration Statement on Form S-3 (Registration Nos. 333-33846, 333-33846-01 and 333-33846-02) (the "1933 Act Registration Statement"), including any pre-effective or post-effective amendments thereto, relating to the registration under the Securities Act of the Preferred Securities and certain other securities of the Sponsor and (ii) if the Sponsor deemed it desirable, a Registration Statement on Form 8-A (the "1934 Act Registration Statement"), including all pre-effective and post-effective amendments thereto, relating to the registration of the Preferred Securities under Section 12 of the Exchange Act; (b) if the Sponsor deemed it desirable, to prepare and file with New York Stock Exchange, Inc. or any other automated quotation system, exchange or over-the-counter market (collectively, the "Exchanges") and execute on behalf of the Trust a listing application or applications and all other applications, statements, certificates, agreements and other instruments as shall be necessary or desirable to cause the Preferred Securities to be listed on any Exchange; (c) to prepare and file and execute on behalf of the Trust such applications, reports, surety bonds, irrevocable consents, appointments of attorney for service of process and other papers and documents as the Sponsor, on behalf of the Trust, deemed necessary or desirable to register the Preferred Securities under the securities or "Blue Sky" laws of such jurisdictions as the Sponsor, on behalf of the Trust, deemed necessary or desirable; (d) to negotiate the terms of and execute on behalf of the Trust the Underwriting Agreement; and (e) to execute and deliver on behalf of the Trust letters or documents to, or instruments for filing with, the Clearing Agency relating to the Preferred Securities. In the event that any filing referred to in clauses (a)-(c) above is required by the rules and regulations of the Commission, any Exchange, the National Association of Securities Dealers, Inc. or state securities or blue sky laws, to be executed on behalf of the Trust by the Regular Trustees, the Regular Trustees, in their capacities as Trustee of the Trust, are hereby authorized to join in any such filing and to execute on behalf of the Trust any and all of the foregoing. In connection with

all of the foregoing, each Regular Trustee, solely in its capacity as Trustee of the Trust, has constituted and appointed, and hereby confirms the appointment of, Jay D. Browning, John D. Gibbons and Donna M. Titzman, and each of them, as his, her or its, as the case may be, true and lawful attorneys-in-fact, and agents, with full power of substitution and resubstitution, for such Trustee or in such Trustee's name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to the 1933 Act Registration Statement and the 1934 Act Registration Statement and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as such Trustee might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Notwithstanding anything in this Section 3.18 to the contrary, no Foreign Person (acting in its capacity as attorney-in-fact or agent of any Foreign Person) shall be authorized to take or perform any action on behalf of the Trust pursuant to this Section 3.18 at any time on or after the Closing Date.

SECTION 3.19 Books and Records.

The books and records of the Trust will be maintained at the principal office of the Trust and will be open for inspection by each Holder of Preferred Securities or any authorized representative of such Holder for any purpose reasonably related to the Holder's interest in the Trust during normal business hours.

ARTICLE 4: THE SPONSOR

SECTION 4.1 Responsibilities of the Sponsor.

In connection with the sale and issuance of the Preferred Securities, the Sponsor shall have the exclusive right and responsibility to engage in the following activities:

(a) to prepare, execute and file with the Commission, on behalf of the Trust, a registration statement on Form S-3 in relation to the Preferred Securities, including any amendments or supplements thereto, and to take any other action relating to the registration and sale of the Preferred Securities under federal and state securities laws;

(b) if necessary, to determine the states in which to take appropriate action to qualify or register for sale all or part of the PEPS Units and to do any and all such acts, other than actions that must be taken by the Trust, and advise the Trust of actions it must take; to prepare, execute and file, on behalf of the Trust, any documents it deems necessary or advisable in order to comply with the applicable laws of any such states; and to prepare, execute and file, on behalf of the Trust, any such documents or take any acts determined by it to be necessary in order to qualify or register all or part of the PEPS Units in any state in which it has determined to qualify or register such PEPS Units for sale;

(c) if necessary, to prepare, execute and file on behalf of the Trust, an application to the New York Stock Exchange or any other national stock exchange or the NASDAQ National Market for listing upon notice of issuance of any Preferred Securities;

(d) if necessary, to prepare, execute and file with the Commission, on behalf of the Trust, a registration statement on Form 8-A relating to the registration of the Preferred Securities under Section 12 of the Exchange Act, including any amendments thereto; and

(e) to negotiate the terms of, and execute and enter into, an Underwriting Agreement providing for the sale of the PEPS Units and a Remarketing Agreement providing for the Remarketing.

SECTION 4.2 Indemnification and Expenses of the Trustees.

To the fullest extent permitted by law, the Sponsor, in its capacity as Senior Deferrable Notes Issuer, agrees to indemnify the Regular Trustees, the Property Trustee and the Delaware Trustee for, and to hold each of them harmless against, any loss, liability or expense incurred without negligence or bad faith on the part of the Regular Trustees, the Property Trustee or the Delaware Trustee, as the case may be, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses of defending any of them against any claim (whether asserted by the Sponsor, a Holder or any other Person) or liability in connection with the exercise or performance of any of their respective powers or duties hereunder. The provisions of this Section 4.2 shall survive the resignation or removal of the Regular Trustees, the Delaware Trustee or the Property Trustee and the termination of this Declaration.

ARTICLE 5: THE HOLDERS OF THE COMMON SECURITIES

SECTION 5.1 Senior Deferrable Notes Issuer's Purchase of the Common Securities.

On the Closing Date, the Senior Deferrable Notes Issuer shall purchase all of the Common Securities issued by the Trust, in an aggregate liquidation amount equal to at least three percent of the total capital of the Trust, at such time as the Preferred Securities are sold and issued. If any additional Preferred Securities are issued pursuant to the exercise of any Over-allotment Option, then the Senior Deferrable Notes Issuer shall purchase, on the date of such issuance, an amount of additional Common Securities such that the aggregate number of Common Securities held by the Senior Deferrable Notes Issuer, upon such purchase, will equal at least three percent of the total capital of the Trust.

The aggregate stated liquidation amount of the Common Securities outstanding at any time shall not be less than three percent of the total capital of the Trust.

SECTION 5.2 Covenants of the Senior Deferrable Notes Issuer.

For so long as the Preferred Securities remain outstanding, the Senior Deferrable Notes Issuer shall covenant (i) to maintain, directly or indirectly, 100% ownership of the Common Securities, (ii) to cause the Trust to remain a statutory business trust and not to

voluntarily dissolve, wind up, liquidate or be terminated, except as permitted by this Declaration, (iii) to use its commercially reasonable efforts to ensure that the Trust will not be an Investment Company required to be registered under the Investment Company Act and (iv) not to take any action that would be reasonably likely to cause the Trust to be classified as an association or a publicly traded partnership taxable as a corporation for United States federal income tax purposes.

SECTION 5.3 Holder of the Common Securities.

Each Holder of the Common Securities shall at all times hold the Common Securities in its individual capacity on its own behalf and shall not, in its capacity as a Holder of the Common Securities, be under (or subject to) the control or direction of any Foreign Person (pursuant to a contractual arrangement or otherwise) other than by virtue of such Foreign Person's direct or indirect stock ownership, if any, of the Holder of Common Securities. Notwithstanding anything in this Declaration to the contrary, each Holder of the Common Securities shall at all times be a United States Person and shall be authorized to give any direction hereunder with respect to the Trust as shall be necessary for the Trust not to be considered a foreign trust for United States Federal income tax purposes.

SECTION 5.4 Exchanges.

(a) If at any time the Senior Deferrable Notes Issuer or any of its Affiliates (in either case, a "Issuer Affiliated Holder") is the Holder of any Preferred Securities, such Issuer Affiliated Holder shall have the right to deliver to the Property Trustee all or such portion of its Preferred Securities as it elects and receive, in exchange therefor, Senior Deferrable Notes in an aggregate principal amount equal to the aggregate stated liquidation amount of, with an interest rate identical to the distribution rate of, and accrued and unpaid interest equal to accumulated and unpaid Distributions on, such Preferred Securities. Such election (i) shall be exercisable effective on any Distribution payment date by such Issuer Affiliated Holder delivering to the Property Trustee a written notice of such election specifying the aggregate liquidation amount of the Preferred Securities with respect to which such election is being made and the Distribution payment date on which such exchange shall occur, which Distribution payment date shall be not less than ten Business Days after the date of receipt by the Property Trustee of such election notice and (ii) shall be conditioned upon such Issuer Affiliated Holder having delivered or caused to be delivered to the Property Trustee or its designee the Preferred Securities which are the subject of such election by 10:00 A.M. New York time, on the Distribution payment date on which such exchange is to occur. After the exchange, such Preferred Securities will be canceled and will no longer be deemed to be outstanding and all rights of the Senior Deferrable Notes Issuer or its Affiliate(s) with respect to such Preferred Securities will cease.

(b) In the case of an exchange described in Section 5.4(a), the Trust will, on the date of such exchange, exchange Senior Deferrable Notes having a principal amount equal to a proportional amount of the aggregate liquidation amount of the outstanding Common Securities based on the ratio of the aggregate liquidation amount of the Preferred Securities exchanged pursuant to Section 5.4(a) divided by the aggregate liquidation amount of the Preferred Securities outstanding immediately prior to such exchange, for such proportional amount of Common Securities held by the Senior Deferrable Notes Issuer (which contemporaneously shall be

canceled and no longer be deemed to be outstanding); provided, that the Senior Deferrable Notes Issuer delivers or causes to be delivered to the Property Trustee or its designee the required amount of Common Securities to be exchanged by 10:00 A.M., New York City time, on the Distribution payment date on which such exchange is to occur.

ARTICLE 6: THE TRUSTEES

SECTION 6.1 Number of Trustees.

The number of Trustees initially shall be five, and:

(a) at any time before the issuance of any Securities, the Sponsor may increase or decrease the number of Trustees by written instrument; and

(b) after the issuance of any Securities, the number of Trustees may be increased or decreased by vote of the Holders of the Common Securities at a meeting of the Holders of the Common Securities or by written consent without prior notice in lieu of such meeting;

provided that the number of Trustees shall be at least three; and provided further that: (i) the Delaware Trustee, in the case of a natural person, shall be a person who is a resident of the State of Delaware or that, if not a natural person, is an entity that has its principal place of business in the State of Delaware and otherwise meets the requirements of applicable law; (ii) at least a majority of the Trustees shall be employees or officers of, or are affiliates of, the Sponsor; (iii) one Trustee shall be the Property Trustee for so long as this Declaration is required to qualify as an indenture under the Trust Indenture Act, and such Property Trustee also may serve as Delaware Trustee if it meets the applicable requirements; (iv) each Trustee shall be a United States Person; and (v) each Trustee, or any delegee of, any Trustee, shall at all times act as Trustee in its individual capacity on its own behalf and will not, at any time, in its capacity as Trustee, be under (or subject to) the control or direction of any Foreign Person (pursuant to a contractual arrangement or otherwise).

SECTION 6.2 Delaware Trustee; Eligibility.

If required by the Business Trust Act, one Trustee (which may be the Property Trustee) (the "Delaware Trustee") shall be:

(a) a natural person who is a resident of the State of Delaware; or

(b) if not a natural person, an entity that has its principal place of business in the State of Delaware and otherwise meets the requirements of applicable law, provided that if the Property Trustee has its principal place of business in the State of Delaware and otherwise meets the requirements of applicable law, then the Property Trustee also shall be the Delaware Trustee and
Section 3.11 shall have no application.

SECTION 6.3 Property Trustee; Eligibility.

(a) There shall be at all times one Trustee (which may be the Delaware Trustee) that shall act as Property Trustee that shall:

(i) not be an Affiliate of the Sponsor; and

(ii) be a corporation that is a United States Person organized and doing business under the law of the United States of America or any state or territory thereof or of the District of Columbia, or a corporation or other Person that is a United States Person permitted by the Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least fifty million U.S. dollars ($50,000,000) and subject to supervision or examination by federal, state, territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then for the purpose of this Section 6.3(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.

(b) If at any time the Property Trustee shall cease to be eligible to so act under Section 6.3(a), the Property Trustee immediately shall resign in the manner and with the effect set forth in Section 6.6(c).

(c) If the Property Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Property Trustee and the Holders of the Common Securities (as if it were the obligor referred to in Section 310(b) of the Trust Indenture Act) shall comply in all respects with the provisions of Section 310(b) of the Trust Indenture Act.

(d) The Guarantee shall be deemed to be specifically described in this Declaration for purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act.

SECTION 6.4 Qualifications of the Regular Trustees Generally.

Each Regular Trustee shall be either a natural person who is at least 21 years of age or a legal entity that shall act through one or more Authorized Officers.

SECTION 6.5 Initial Regular Trustees.

The initial Regular Trustees shall be Jay D. Browning, John D. Gibbons, and Donna M. Titzman, the business address of all of whom is in care of Valero Energy Corporation, One Valero Place, San Antonio, Texas 78212.

SECTION 6.6 Appointment, Removal and Resignation of the Trustees.

(a) Subject to Sections 6.6(b) and 7.5(k), the Trustees may be appointed or removed without cause at any time:

(i) until the issuance of any Securities, by written instrument executed by the Sponsor; and

(ii) after the issuance of any Securities, by a vote of the Holders of a Majority in Liquidation Amount of the Common Securities at a meeting of the Holders of the Common Securities or by written consent without prior notice in lieu of such meeting.

(b) The Property Trustee shall not be removed in accordance with
Section 6.6(a) or Section 7.5(k) until a successor Trustee possessing the qualifications to act as Property Trustee under Section 6.3(a) (a "Successor Property Trustee") has been appointed and has accepted such appointment by written instrument executed by such Successor Property Trustee and delivered to the Regular Trustees and the Sponsor. The Delaware Trustee shall not be removed in accordance with Section 6.6(a) or Section 7.5(k) until a successor Trustee possessing the qualifications to act as Delaware Trustee under Sections 6.2 and
6.4 (a "Successor Delaware Trustee") has been appointed and has accepted such appointment by written instrument executed by such Successor Delaware Trustee and delivered to the Regular Trustees and the Sponsor.

(c) A Trustee appointed to office shall hold office until a successor has been appointed, until death or dissolution or until removal or resignation. Any Trustee may resign from office (without need for prior or subsequent accounting) by written instrument executed by such Trustee and delivered to the Sponsor and the other Trustees, which resignation shall take effect upon such delivery or upon such later date as is specified therein; provided that:

(i) no such resignation of the Property Trustee shall be effective:

(A) until a Successor Property Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Property Trustee and delivered to the Regular Trustees, the Sponsor and the resigning Property Trustee; or

(B) until the assets of the Trust have been completely liquidated and the proceeds thereof distributed to the Holders of the Securities; and

(ii) no such resignation of the Delaware Trustee shall be effective until a Successor Delaware Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Delaware Trustee and delivered to the Regular Trustees, the Sponsor and the resigning Delaware Trustee.

(d) The Holders of the Common Securities shall use their best efforts to promptly appoint a Successor Property Trustee or Successor Delaware Trustee, as the case may be, if the Property Trustee or the Delaware Trustee delivers an instrument of resignation in accordance with this Section 6.6.

(e) If no Successor Property Trustee or Successor Delaware Trustee, as the case may be, has been appointed and accepted appointment as provided in this
Section 6.6 within 60 days after delivery of an instrument of resignation or removal, the resigning or removed Property Trustee or Delaware Trustee, as applicable, may petition any court of competent jurisdiction for appointment of a Successor Property Trustee or Successor Delaware Trustee, as applicable. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Property Trustee or Successor Delaware Trustee, as the case may be.

(f) No Property Trustee or Delaware Trustee shall be liable for the acts or omissions to act of any Successor Property Trustee or Successor Delaware Trustee, as the case may be.

(g) In case of the appointment hereunder of a Successor Property Trustee or a Successor Delaware Trustee, such Successor Property Trustee or Successor Delaware Trustee so appointed shall execute, acknowledge and deliver to the Trust and to the retiring Property Trustee or Delaware Trustee, as the case may be, an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Property Trustee or Delaware Trustee shall become effective and such Successor Property Trustee or Successor Delaware Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Property Trustee or Delaware Trustee; but, on the request of the Sponsor or the Successor Property Trustee or Successor Delaware Trustee, such retiring Property Trustee or Delaware Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such Successor Property Trustee or Successor Delaware Trustee all the rights, powers and trusts of the retiring Property Trustee or Delaware Trustee, as the case may be, and if the Property Trustee is the resigning Trustee, it shall duly assign, transfer and deliver to the Successor Property Trustee all property and money held by such retiring Property Trustee hereunder.

SECTION 6.7 Vacancies among Trustees.

If a Trustee ceases to hold office for any reason and the number of Trustees is not reduced pursuant to Section 6.1, or if the number of Trustees is increased pursuant to Section 6.1, a vacancy shall occur. A resolution certifying the existence of such vacancy by the Regular Trustees or, if there are more than two, a majority of the Regular Trustees shall be conclusive evidence of the existence of such vacancy. The vacancy shall be filled with a Trustee appointed in accordance with Section 6.6.

SECTION 6.8 Effect of Vacancies.

The death, resignation, retirement, removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to perform the duties of a Trustee shall not operate to annul, dissolve or terminate the Trust nor to terminate this Declaration. Whenever a vacancy in the number of Regular Trustees shall occur until such vacancy is filled by the appointment of a Regular Trustee in accordance with Section 6.6, the Regular Trustees in office, regardless of the number, shall have all the powers granted to the Regular Trustees and shall discharge all the duties imposed upon the Regular Trustees by this Declaration.

SECTION 6.9 Meetings.

If there is more than one Regular Trustee, meetings of the Regular Trustees shall be held from time to time upon the call of any Regular Trustee. Regular meetings of the Regular Trustees may be held at a time and place fixed by resolution of the Regular Trustees. Notice of any in-person meetings of the Regular Trustees shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 48 hours before such meeting. Notice of any telephonic meetings of the Regular Trustees shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by

overnight courier) not less than 24 hours before a meeting. Notices shall contain a brief statement of the time, place and anticipated purposes of the meeting. The presence (whether in person or by telephone) of a Regular Trustee at a meeting shall constitute a waiver of notice of such meeting except where a Regular Trustee attends a meeting for the express purpose of objecting to the transaction of any activity on the ground that the meeting has not been lawfully called or convened. Unless provided otherwise in this Declaration, any action of the Regular Trustees may be taken at a meeting by vote of a majority of the Regular Trustees present (whether in person or by telephone) and eligible to vote with respect to such matter, provided a Quorum is present, or without a meeting and without prior notice by the unanimous written consent of the Regular Trustees. In the event there is only one Regular Trustee, any and all action of such Regular Trustee shall be evidenced by a written consent of such Regular Trustee.

SECTION 6.10 Delegation of Power by the Regular Trustees.

(a) Any Regular Trustee may delegate to any natural person over the age of 21 that is a United States Person, by power of attorney consistent with applicable law, his, her or its power for the purpose of executing any documents contemplated in Section 3.6.

(b) The Regular Trustees shall have the power to delegate from time to time to such of their number or to officers of the Trust or any other Person the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Regular Trustees or otherwise as the Regular Trustees may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of the Trust, as set forth herein.

SECTION 6.11 Merger, Consolidation, Conversion or Succession to Business.

Any entity into which the Property Trustee, the Delaware Trustee or any Regular Trustee that is not a natural person may be merged or converted or with such Trustee may be consolidated, or any entity resulting from any merger, conversion or consolidation to which such Trustee is a party, or any entity succeeding to all or substantially all the corporate trust business of such Trustee, shall be the successor of such Trustee hereunder, without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such entity otherwise is qualified and eligible under this Article.

ARTICLE 7: TERMS OF THE SECURITIES

SECTION 7.1 General Provisions Regarding the Securities.

(a) The Regular Trustees shall issue, on behalf of the Trust, one class of preferred securities representing undivided beneficial interests in the assets of the Trust (the "Preferred Securities") and one class of common securities representing undivided beneficial interests in the assets of the Trust (the "Common Securities").

(i) Preferred Securities. The Preferred Securities of the Trust shall have an aggregate stated liquidation amount with respect to the assets of the Trust of one hundred fifty million and 00/100 dollars ($150,000,000) (subject to increase to not more than one

hundred seventy-two million five hundred thousand and 00/100 dollars ($172,500,000) in the event of the exercise of any Over-allotment Option) and a stated liquidation amount with respect to the assets of the Trust of $25 per Preferred Security. The Preferred Securities are hereby designated for identification purposes only as the Preferred Securities. The Preferred Security Certificates shall be substantially in the form of Exhibit A hereto, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice.

(ii) Common Securities. The Common Securities of the Trust shall have an aggregate liquidation amount with respect to the assets of the Trust of four million six hundred thirty-nine thousand two hundred and 00/100 dollars ($4,639,200) (subject to increase to not more five million three hundred thirty-five thousand seventy-five and 00/100 dollars ($5,335,075) in the event of the exercise of any Over-allotment Option) and a liquidation amount with respect to the assets of the Trust of $25 per Common Security. The Common Securities are hereby designated for identification purposes only as the Common Securities. The Common Security Certificates shall be substantially in the form of Exhibit B hereto, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice.

(b) Payment of Distributions on, and any payment of the Redemption Price upon a redemption of, the Preferred Securities and the Common Securities, as applicable, shall be made Pro Rata based on the liquidation amount of such Preferred Securities and Common Securities; provided that if on any date on which amounts payable on distribution or redemption, an Indenture Event of Default has occurred and is continuing, then such amounts payable shall not be made on any of the Common Securities, and no other payment on account of the redemption, liquidation or other acquisition of such Common Securities shall be made, until all accumulated and unpaid Distributions, or payments of the Redemption Price, as the case may be, on all of the outstanding Preferred Securities for which Distributions are to be paid or that have been called for redemption, as the case may be, are fully paid. All funds available to the Property Trustee shall first be applied to the payment in full in cash of all Distributions on, or the Redemption Price of, the Preferred Securities then due and payable.

(c) The consideration received by the Trust for the issuance of the Securities shall constitute a contribution to the capital of the Trust and shall not constitute a loan to the Trust.

(d) Upon issuance of the Securities as provided in this Declaration, the Securities so issued shall be validly issued, fully paid and non-assessable beneficial ownership interests in the assets of the Trust.

(e) Every Person, by virtue of having become a Holder of Securities or a Beneficial Owner of Preferred Securities in accordance with the terms of this Declaration, shall be deemed to have expressly assented and agreed to the terms of, and shall be bound by, this Declaration, the Guarantee, the Indenture, the Purchase Contract Agreement, the Pledge Agreement and the Senior Deferrable Notes.

(f) The Holders of the Securities shall not have any preemptive or similar rights.

(g) The Certificates shall be signed on behalf of the Trust by a Regular Trustee. Such signature shall be the manual or facsimile signature of any Regular Trustee. If a Regular Trustee of the Trust who has signed any of the Certificates ceases to be a Regular Trustee before such signed Certificates have been delivered by the Trust, such Certificates nevertheless may be delivered as though the Person who signed such Certificates had not ceased to be a Regular Trustee. Any Certificate may be signed on behalf of the Trust by such Persons who, at the actual date of execution of such Certificate, shall be the Regular Trustees of the Trust, although at the date of the execution and delivery of this Declaration any such Person was not such a Regular Trustee. Certificates shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Regular Trustees, as evidenced by their execution thereof, and may have such letters, numbers or other marks of identification or designation and such legends or endorsements as the Regular Trustees may deem appropriate, or as may be required to comply with any law or with any rule or regulation of any stock exchange on which the Securities may be listed, or to conform to usage.

A Preferred Security Certificate shall not be valid until authenticated by the manual signature of an authorized signatory of the Property Trustee. Such signature shall be conclusive evidence that such Preferred Security Certificate has been authenticated under this Declaration.

Upon a written order of the Trust signed by one Regular Trustee, the Property Trustee shall authenticate the Preferred Security Certificates for original issue. The aggregate number of Preferred Securities outstanding at any time (including the Over-allotment Option) shall not exceed the liquidation amount set forth in Section 7.1(a)(i).

The Property Trustee may appoint an authenticating agent acceptable to the Trust, as determined by the Regular Trustees on behalf of the Trust, to authenticate Certificates. An authenticating agent may authenticate Certificates whenever the Property Trustee may do so. Each reference in this Declaration to authentication by the Property Trustee shall include authentication by such agent. An authenticating agent shall have the same rights as the Property Trustee to deal with the Sponsor or an Affiliate of the Sponsor.

(h) The Preferred Securities Certificates, upon original issuance (including Preferred Securities, if any, issued pursuant to the exercise of any Over-allotment Option), shall be issued as Global Securities in the form of one or more fully registered global Preferred Security Certificates (each a "Global Certificate"), to be delivered to The Depository Trust Company, the initial Depositary, by or on behalf of the Trust. Such Global Certificates initially shall be registered on the books and records of the Trust in the name of "Cede & Co.," the nominee of the initial Depositary. No Beneficial Owner of Preferred Securities shall receive a definitive Preferred Security Certificate representing such Beneficial Owner's interests in such Global Certificates, except as provided in Section 7.12. Unless and until definitive, fully registered Preferred Security Certificates have been issued to the Beneficial Owners of Preferred Securities pursuant to Section 7.12,

(i) the provisions of this Section 7.1 shall be in full force and effect;

(ii) the Trust and the Trustees shall be entitled to deal with the Depositary for all purposes of this Declaration (including the payment of Distributions on the Global Certificates and receiving approvals, votes or consents thereunder) as the Holder of the Preferred Securities and the sole Holder of the Global Certificates and, except as set forth herein or in Rule 3a-7 (if the Trust is excluded from the definition of an Investment Company solely by reason of Rule 3a-7) with respect to the Property Trustee, shall have no obligation to the Beneficial Owners of the Preferred Securities;

(iii) to the extent that the provisions of this Section 7.1 conflict with any other provisions of this Declaration, the provisions of this Section 7.1 shall control; and

(iv) the rights of the Beneficial Owners of the Preferred Securities shall be exercised only through the Depositary and shall be limited to those established by law and agreements between such Beneficial Owners and the Depositary and/or the Depositary Participants. The Depositary shall make book-entry transfers among Depositary Participants and receive and transmit Distributions on the Global Certificates to such Depositary Participants; provided that solely for the purposes of determining whether the Holders of the requisite amount of Preferred Securities have voted on any matter provided for in this Declaration, so long as definitive Preferred Security Certificates have not been issued, the Trustees may rely conclusively on, and shall be fully protected in relying on, any written instrument (including a proxy) delivered to the Trustees by the Depositary setting forth the votes of the Beneficial Owners of the Preferred Securities or assigning the right to vote on any matter to any other Persons either in whole or in part.

Whenever a notice or other communication to the Holder of the Preferred Securities is required to be given under this Declaration, unless and until definitive Preferred Security Certificates have been issued pursuant to
Section 7.1(g), the Trustees shall deliver all such notices and communications specified herein to be given to the Holders of the Preferred Securities to the Depositary, and, with respect to any Preferred Security Certificate registered in the name of a Depositary or the nominee of a Depositary, the Trustees may conclusively rely on, and shall be fully protected in relying on, any written instrument (including a proxy) delivered to the Trustees by the Depositary setting forth the votes of the Beneficial Owners of the Preferred Securities or assigning the right to vote on any matter or any other Persons either in whole or in part.

SECTION 7.2 Distributions.

(a) Holders of the Securities shall be entitled to receive Distributions that shall accumulate and be payable at the rate per annum of 7 3/4% of the stated liquidation amount of $25 per Security until August 18, 2003, and at the Reset Rate thereafter. The amount of Distributions payable for any period shall be computed (i) for any full quarterly distribution period, on the basis of a 360-day year of twelve 30-day months and (ii) for any period shorter than a full quarterly distribution period, on the basis of a 30-day month and, for any period of less than one month, on the basis of the actual number of days elapsed per 30-day month. Subject to Section 7.1(b), Distributions shall be made on the Securities on a Pro Rata basis. Distributions on the Securities shall accumulate from June 28, 2000, shall be cumulative and shall be payable

quarterly, in arrears, on February 18, May 18, August 18 and November 18 of each year, commencing August 18, 2000, when, as and if available for payment, by the Property Trustee, except as otherwise described below. Distributions shall be payable only to the extent that payments are made to the Trust in respect of the Senior Deferrable Notes held by the Property Trustee and to the extent that the Trust has funds available for the payment of such Distributions in the Property Account.

(b) Distributions not paid on the scheduled payment date shall accumulate and compound quarterly at the rate of 7 3/4% per annum through and including August 18, 2003 and at the Reset Rate thereafter ("Compounded Distributions"). "Distributions" shall mean ordinary cumulative distributions together with any Compounded Distributions.

(c) If and to the extent that the Senior Deferrable Notes Issuer makes a payment of principal of and any premium or interest on the Senior Deferrable Notes held by the Property Trustee (the amount of any such payment being a "Payment Amount"), the Property Trustee shall and is directed, to the extent funds are available for that purpose, to make a Pro Rata distribution of the Payment Amount to Holders, subject to Section 7.1(b).

(d) Distributions on the Securities shall be payable to the Holders thereof as they appear on the register of the Trust as of the close of business on the relevant record dates. If the Preferred Securities are represented by one or more Global Securities, the relevant record dates shall be the close of business on the Business Day preceding such Distribution payment date, unless a different regular record date is established or provided for the corresponding interest payment date on the Senior Deferrable Notes. The relevant record dates for the Common Securities shall be the same as for the Preferred Securities. If the Preferred Securities are not represented by one or more Global Securities, the relevant record dates for the Preferred Securities shall be selected by the Regular Trustees and shall be the fifteenth Business Day prior to the relevant Distribution payment dates. At all times, the Distribution payment dates shall correspond to the interest payment dates on the Senior Deferrable Notes. Distributions payable on any Securities that are not punctually paid on any Distribution payment date, as a result of the Senior Deferrable Notes Issuer having failed to make a payment under the Senior Deferrable Notes, shall cease to be payable to the Person in whose name such Securities are registered on the relevant record date, and such defaulted Distribution instead shall be payable to the Person in whose name such Securities are registered on the special record date or other specified date determined in accordance with this Declaration. If any date on which Distributions are payable on the Securities is not a Business Day, then payment of the Distribution payable on such date shall be made on the next day that is a Business Day (and without any interest or other payment in respect of any such delay), except that if such Business Day is in the next calendar year, such payment shall be made on the preceding Business Day, with the same force and effect as if made on such payment date.

(e) In the event that there is any money or other property held by or for the Trust that is not accounted for hereunder, such property shall be distributed Pro Rata among the Holders of the Securities, subject to Section 7.1(b).

SECTION 7.3 Redemption of Securities.

(a) Upon the repayment or redemption, in whole or in part, of the Senior Deferrable Notes held by the Trust, whether at the stated maturity of the Senior Deferrable Notes or upon earlier redemption as provided in the Indenture, the proceeds from such repayment or redemption shall be simultaneously applied Pro Rata (subject to Section 7.1(b)) to redeem Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Senior Deferrable Notes so repaid or redeemed at the Redemption Price. Holders of the Securities shall be given not less than 30 nor more than 60 days notice of such redemption in accordance with Section 7.4.

(b) If the Senior Deferrable Notes Issuer redeems the Senior Deferrable Notes upon the occurrence and continuance of a Tax Event, the proceeds from such redemption shall be applied by the Property Trustee to redeem the Securities in whole (but not in part) at a redemption price per Security equal to the Redemption Amount plus any accumulated and unpaid Distributions thereon to the Tax Event Redemption Date. If, following the occurrence of a Tax Event, the Senior Deferrable Notes Issuer exercises its option to redeem the Senior Deferrable Notes, the Senior Deferrable Notes Issuer shall appoint the Quotation Agent; if a Tax Event Redemption occurs prior to the Purchase Contract Settlement Date, the redemption price payable in liquidation of the Securities will be distributed to Bank One Trust Company, N.A., acting as the securities intermediary under the Pledge Agreement, which in turn will apply that amount to purchase the Treasury Portfolio and remit the remaining portion, if any, of such price to The Bank of New York, acting as the purchase contract agent under the Purchase Contract Agreement, for payment to the Holders of the Securities. If a Tax Event Redemption occurs after the Purchase Contract Settlement Date, the Treasury Portfolio shall not be purchased and the Property Trustee shall distribute to the Holders of the Securities on the Tax Event Redemption Date the Redemption Price payable in liquidation of such Holders' interests in the assets of the Trust.

SECTION 7.4 Redemption Procedures.

(a) Notice of any redemption of, or notice of distribution of Senior Deferrable Notes in exchange for, the Securities (a "Redemption/Distribution Notice"), which notice shall be irrevocable, shall be given by the Trust by mail to each Holder of Securities to be redeemed or exchanged at least 30 but no more than 60 days before the date fixed for redemption or exchange thereof which, in the case of a redemption, shall be the date fixed for redemption of the Senior Deferrable Notes. For purposes of the calculation of the date of redemption or exchange and the dates on which notices are given pursuant to this Section 7.4(a), a Redemption/Distribution Notice shall be deemed to be given on the day such notice is first mailed by first-class mail, postage prepaid, to the Holders of the Securities. Each Redemption/Distribution Notice shall be addressed to the Holders of the Securities at the address of each such Holder appearing in the register of the Trust. All notices of redemption shall state:

(i) the date fixed for redemption;

(ii) the Redemption Price;

(iii) the applicable CUSIP number;

(iv) if less than all of the outstanding Securities are to be redeemed, the identification and amount of the particular Trust securities to be redeemed;

(v) that on the date fixed for redemption the Redemption Price will become due and payable upon each Security to be redeemed and that Distributions thereon will cease to accrue on and after said date; and

(vi) the place or places where such Securities are to be surrendered for payment of the Redemption Price.

No defect in the Redemption/Distribution Notice or in the mailing of either thereof with respect to any Holder shall affect the validity of the redemption or exchange proceedings with respect to any other Holder.

(b) Subject to the Trust's fulfillment of the notice requirements set forth in Section 7.4(a), if Securities are to be redeemed, then (provided that the Senior Deferrable Notes Issuer has paid the Property Trustee a sufficient amount of cash in connection with the related redemption or maturity of the Senior Deferrable Notes) (i) with respect to the Preferred Securities represented by one or more Global Securities, by 12:00 noon, New York City time, on the redemption date, the Property Trustee will deposit irrevocably with the Depositary or its nominee funds sufficient to pay the applicable Redemption Price, and the Property Trustee shall give the Depositary irrevocable instructions and authority to pay the Redemption Price to the Beneficial Owners of the Preferred Securities, and (ii) with respect to Securities not represented by one or more Global Securities, the Property Trustee shall pay the applicable Redemption Price to the Holders of such Securities by check mailed to the address of each Holder appearing on the register of the Trust on the redemption date. If any date fixed for redemption of Securities is not a Business Day, then payment of the Redemption Price payable on such date shall be made on the next Business Day (without any interest thereon), except that if such Business Day falls in the next calendar year, such payment shall be made on the preceding Business Day, in each case with the same force and effect as if made on such date fixed for redemption. Notwithstanding the foregoing, so long as the Holder of any Preferred Securities is the Collateral Agent or the Purchase Contract Agent, the payment of the Redemption Price in respect of the Preferred Securities held by the Collateral Agent or the Purchase Contract Agent shall be made no later than 12:00 noon, New York City time, on the redemption date by check or wire transfer in immediately available funds at such place and to such account as may be designated by the Collateral Agent or the Purchase Contract Agent. If payment of the Redemption Price in respect of any Securities is improperly withheld or refused and not paid either by the Trust or by the Sponsor as guarantor pursuant to the Guarantee, then Distributions on such Securities shall continue to accumulate at the then applicable rate, from the original redemption date to the actual date of payment, in which case the actual payment date shall be the date fixed for redemption for purposes of calculating the Redemption Price. For these purposes, the applicable Redemption Price shall not include Distributions that are being paid to Holders of Securities who were not Holders of Securities on a relevant record date. If a Redemption/Distribution Notice has been given and funds have been deposited or paid as required, then immediately prior to the close of business on the date of such deposit or payment, Distributions will cease to accumulate on the Securities called for redemption, and all rights of Holders of such Securities so called for redemption shall cease, except the right of the Holders of such Securities to receive the

Redemption Price, but without interest on such Redemption Price, and from and after the date fixed for redemption, such Securities will cease to be outstanding.

Neither the Regular Trustees nor the Trust shall be required to register or cause to be registered the transfer of any Securities that have been called for redemption, except for the unredeemed portion of any Securities being redeemed in part.

(c) Subject to the foregoing and applicable law (including, without limitation, United States federal securities laws), the Senior Deferrable Notes Issuer or its Affiliates may purchase, at any time and from time to time, outstanding Preferred Securities by tender, in the open market, by private agreement or otherwise.

SECTION 7.5 Voting Rights of the Preferred Securities.

(a) Except as provided under this Section 7.5 and Section 11.1 and as otherwise required by the Business Trust Act, the Trust Indenture Act and other applicable law, the Holders of the Preferred Securities shall have no voting rights.

(b) Subject to the requirement of the Property Trustee obtaining a tax opinion in certain circumstances set forth in Section 7.5(d), the Holders of a Majority in Liquidation Amount of the Preferred Securities, voting separately as a class, shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or to direct the exercise of any trust or power conferred upon the Property Trustee under this Declaration, including the right to direct the Property Trustee, as Holder of the Senior Deferrable Notes, to (i) exercise the remedies available to it under the Indenture, (ii) consent to any amendment or modification of the Indenture or the Senior Deferrable Notes where such consent is required or (iii) waive any past default and its consequences that are waivable under the Indenture; provided that if an Indenture Event of Default has occurred and is continuing, then the Holders of 25% of the aggregate stated liquidation amount of the Preferred Securities may direct the Property Trustee to declare the principal of and interest on the Senior Deferrable Notes due and payable; provided further that where a consent or action under the Indenture would require the consent or act of the Holders of more than a majority of the aggregate principal amount of Senior Deferrable Notes affected thereby, the Property Trustee only may give such consent or take such action at the direction of the Holders of at least the same proportion in aggregate stated liquidation amount of the Preferred Securities; and provided further, however, that (subject to the provisions of Section 3.09) the Property Trustee shall have the right to decline to follow any such direction if the Property Trustee, being advised by counsel, determines that the action or proceeding so directed may not lawfully be taken or if the Property Trustee, in good faith, by its board of directors or trustees, executive committee, or a trust committee of directors or trustees, and/or Responsible Officers, shall determine that the action or proceeding so directed would involve the Property Trustee in personal liability.

(c) If the Property Trustee fails to enforce its rights under the Senior Deferrable Notes after a Holder of Preferred Securities has made a written request, such Holder of Preferred Securities may institute, to the fullest extent permitted by law, a legal proceeding directly against the Senior Deferrable Notes Issuer to enforce the Property Trustee's rights under the Indenture without first instituting any legal proceeding against the Property Trustee or any other Person. In

addition, if a Trust Enforcement Event has occurred and is continuing and such event is attributable to the failure of the Senior Deferrable Notes Issuer to make any interest, principal or other required payments when due under the Indenture, then a Holder of Preferred Securities may institute a Direct Action against the Senior Deferrable Notes Issuer on or after the respective due date specified in the Senior Deferrable Notes. In connection with such Direct Action, the Senior Deferrable Notes Issuer will be subrogated to the rights of such Holder of Preferred Securities to the extent of any payment made by the Senior Deferrable Notes Issuer to such Holders of Preferred Securities in such Direct Action.

(d) The Property Trustee shall notify all Holders of the Preferred Securities of any notice of any Indenture Event of Default received from the Senior Deferrable Notes Issuer with respect to the Senior Deferrable Notes. Such notice shall state that such Indenture Event of Default also constitutes a Trust Enforcement Event. Except with respect to directing the time, method, and place of conducting a proceeding for a remedy, the Property Trustee shall be under no obligation to take any of the actions described in clauses (i) and (ii) of
Section 7.5(b) above, unless the Property Trustee has obtained an opinion of independent tax counsel to the effect that the Trust will not fail to be classified as a grantor trust for United States federal income tax purposes as a result of such action, and that each Holder of Preferred Securities shall be treated as owning an undivided beneficial ownership interest in the Senior Deferrable Notes.

(e) If the consent of the Property Trustee, as the Holder of the Senior Deferrable Notes, is required under the Indenture with respect to any amendment or modification of the Indenture, the Property Trustee shall request the direction of the Holders of the Securities with respect to such amendment or modification and shall vote with respect to such amendment or modification as directed by a Majority in Liquidation Amount of the Securities voting together as a single class; provided that where a consent under the Indenture would require the consent of the Holders of more than a majority of the aggregate principal amount of the Senior Deferrable Notes, the Property Trustee only may give such consent at the direction of the Holders of at least the same proportion in aggregate stated liquidation amount of the Securities. The Property Trustee shall not take any such action in accordance with the directions of the Holders of the Securities unless the Property Trustee has obtained an opinion of independent tax counsel to the effect that the Trust will not be classified as other than a grantor trust for United States federal income tax purposes as a result of such action, and that each Holder will be treated as owning an undivided beneficial ownership interest in the Senior Deferrable Notes.

(f) A waiver of an Indenture Event of Default with respect to the Senior Deferrable Notes shall constitute a waiver of the corresponding Trust Enforcement Event.

(g) Any required approval or direction of the Holders of the Preferred Securities may be given at a separate meeting of the Holders of the Preferred Securities convened for such purpose, at a meeting of all of the Holders of the Securities or pursuant to written consent without prior notice. The Regular Trustees shall cause a notice of any meeting at which Holders of the Preferred Securities are entitled to vote to be mailed to each Holder of record of Preferred Securities. Each such notice shall include a statement setting forth:
(i) the date of such meeting; (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote; and (iii) instructions for the delivery of proxies.

(h) No vote or consent of the Holders of the Preferred Securities shall be required for the Trust to redeem and cancel the Preferred Securities or distribute the Senior Deferrable Notes in accordance with this Declaration and the terms of the Securities.

(i) Notwithstanding that the Holders of the Preferred Securities are entitled to vote or consent under any of the circumstances described above, any of the Preferred Securities that are owned at such time by the Senior Deferrable Notes Issuer the Trustees or any entity directly or indirectly controlled by, or under direct or indirect common control with, the Senior Deferrable Notes Issuer or any Trustee shall not be entitled to vote or consent and shall be treated, for purposes of such vote or consent, as if such Preferred Securities were not outstanding.

(j) Except as provided under Section 7.5(k), the Holders of the Preferred Securities shall have no rights to appoint or remove the Trustees, who, subject to Section 6.6, may be appointed, removed or replaced by the Holders of the Common Securities.

(k) If an Indenture Event of Default has occurred and is continuing, the Property Trustee and the Delaware Trustee may be removed and replaced, subject to Section 6.6(b), at such time by a Majority in Liquidation Amount of the Preferred Securities.

SECTION 7.6 Voting Rights of the Common Securities.

(a) Except as provided under Section 6.1(b), this Section 7.6 and
Section 11.1 and as otherwise required by the Business Trust Act, the Trust Indenture Act or other applicable law or provided by this Declaration, the Holders of the Common Securities shall have no voting rights.

(b) Subject to Section 7.5(k), the Holders of the Common Securities shall be entitled to vote to appoint, remove or replace any Trustee or to increase or decrease the number of Trustees in accordance with Article 6.

(c) Subject to Section 2.6 and only after all Trust Enforcement Events with respect to the Preferred Securities have been cured, waived, or otherwise eliminated and subject to the requirement of the Property Trustee obtaining a tax opinion in certain circumstances set forth in this paragraph (c), the Holders of the Common Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or to direct the exercise of any trust or power conferred upon the Property Trustee under this Declaration, including the right to direct the Property Trustee, as Holder of the Senior Deferrable Notes, to (i) exercise the remedies available to it under the Indenture, (ii) consent to any amendment or modification of the Indenture or the Senior Deferrable Notes where such consent is required or (iii) waive any past default and its consequences that are waivable under the Indenture; provided that where a consent or action under the Indenture would require the consent or act of the Holders of more than a majority of the aggregate principal amount of Senior Deferrable Notes affected thereby, only the Holders of at least the same proportion of the aggregate stated liquidation amount of the Common Securities may direct the Property Trustee to give such consent or take such action. Except with respect to directing the time, method, and place of conducting a proceeding for a remedy, the Property Trustee shall be under no obligation to take any of the actions described in clause 7.6(c)(i) and (ii) above unless the Property Trustee has obtained an opinion of independent tax counsel to the effect that, as a result of such action,

for United States federal income tax purposes the Trust will not fail to be classified as a grantor trust and each Holder will be treated as owning an undivided beneficial ownership interest in the Senior Deferrable Notes.

(d) If the Property Trustee fails to enforce its rights under the Senior Deferrable Notes after the Holders of the Common Securities have made a written request, the Holders of the Common Securities may institute, to the fullest extent permitted by law, a legal proceeding directly against the Senior Deferrable Notes Issuer to enforce the Property Trustee's rights under the Senior Deferrable Notes without first instituting any legal proceeding against the Property Trustee or any other Person.

(e) A waiver of an Indenture Event of Default with respect to the Senior Deferrable Notes shall constitute a waiver of the corresponding Trust Enforcement Event.

(f) Any required approval or direction of the Holders of the Common Securities may be given at a separate meeting of the Holders of the Common Securities convened for such purpose, at a meeting of all of the Holders of the Securities or pursuant to written consent without prior notice. The Regular Trustees shall cause a notice of any meeting at which the Holders of the Common Securities are entitled to vote to be mailed to the Holders of the Common Securities. Such notice shall include a statement setting forth: (i) the date of such meeting; (ii) a description of any resolution proposed for adoption at such meeting on which the Holders of the Common Securities are entitled to vote; and
(iii) instructions for the delivery of proxies.

(g) No vote or consent of the Holders of the Common Securities shall be required for the Trust to redeem and cancel the Common Securities or to distribute Senior Deferrable Notes in accordance with this Declaration and the terms of the Securities.

SECTION 7.7 Paying Agent.

If any Preferred Securities are not represented by one or more Global Securities, the Trust shall maintain in the Borough of Manhattan, New York City, State of New York, an office or agency where the Preferred Securities may be presented for payment ("Paying Agent"). The Regular Trustees shall appoint the paying agent (which shall be a bank or trust company acceptable to the Senior Deferrable Notes Issuer) and may appoint one or more additional paying agents in such other locations as they shall determine. The term "Paying Agent" includes any additional paying agent. The Regular Trustees may change any Paying Agent without prior notice to the Holders of the Securities. The Regular Trustees shall notify the Property Trustee of the name and address of any Paying Agent not a party to this Declaration. If the Regular Trustees, on behalf of the Trust, fail to appoint or maintain another entity as Paying Agent, the Property Trustee shall act as such. The Paying Agent shall be permitted to resign as Paying Agent upon 30 days' written notice to the Property Trustee and the Senior Deferrable Notes Issuer.

SECTION 7.8 Listing.

The Sponsor shall use its best efforts to cause the PEPS Units to be listed and maintained as listed for quotation on the New York Stock Exchange.

SECTION 7.9 Transfer of the Securities.

(a) (i) The Preferred Securities initially shall be pledged, pursuant to the terms of the Pledge Agreement, as collateral to secure the obligations of the Holders of PEPS Units to purchase common shares of the Company in accordance with the terms of the Purchase Contract Agreement.

(ii) The Preferred Securities may be transferred, in whole or in part, only in accordance with the terms and conditions set forth in this Declaration and pursuant to the Pledge Agreement. To the fullest extent permitted by law, any transfer or purported transfer of any Preferred Security not made in accordance with this Declaration shall be null and void.

(iii) Subject to this Section 7.9 and Section 7.12, the Preferred Securities shall be freely transferable.

(iv) The Trust shall cause to be kept at the Corporate Trust Office a register in which, subject to such reasonable regulations as it may prescribe, the Trust shall provide for the registration of Preferred Securities and of transfers of Preferred Securities. The Property Trustee is hereby appointed "Security Registrar" for the purpose of registering Preferred Securities and transfers of Preferred Securities as herein provided.

(v) Upon surrender for registration of transfer of any Preferred Securities at an office or agency of the Trust designated for such purpose, a Regular Trustee shall execute, and the Property Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Preferred Securities of any authorized denominations and of a like aggregate principal amount.

(vi) At the option of the Holder, Securities may be exchanged for other Preferred Securities of any authorized denominations and of a like aggregate principal amount, upon surrender of the Preferred Securities to be exchanged at such office or agency. Whenever any Preferred Securities are so surrendered for exchange, a Regular Trustee shall execute, and the Property Trustee shall authenticate and deliver, the Preferred Securities that the Holder making the exchange is entitled to receive.

(vii) If so required by the Trust or the Property Trustee, every Preferred Security presented or surrendered for registration of transfer or for exchange shall be duly endorsed, or accompanied by a duly executed written instrument of transfer in form satisfactory to the Trust and the Security Registrar, by the Holder thereof or his attorney duly authorized in writing.

(viii) No service charge shall be made for any registration of transfer or exchange of Preferred Securities, but the Trust may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Preferred Securities.

(b) The Senior Deferrable Notes Issuer may not transfer the Common Securities except in connection with the transactions permitted under Section 801 of the Indenture; provided, that

each Holder of the Common Securities shall at all times be a United States Person. To the fullest extent permitted by law, any attempted transfer of the Common Securities other than as set forth in this Section 7.9(b) shall be null and void.

SECTION 7.10 Mutilated, Destroyed, Lost or Stolen Certificates.

If:

(a) any mutilated Certificates are surrendered to the Regular Trustees, or if the Regular Trustees receive evidence to their satisfaction of the destruction, loss or theft of any Certificate; and

(b) there shall be delivered to the Regular Trustees such security or indemnity as may be required by them to keep each of them and the Property Trustee harmless, then, in the absence of notice that such Certificate has been acquired by a bona fide purchaser, any Regular Trustee shall execute and the Property Trustee shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like denomination. In connection with the issuance of any new Certificate under this Section 7.10, the Regular Trustees may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Any duplicate Certificate issued pursuant to this Section 7.10 shall constitute conclusive evidence of an ownership interest in the relevant Securities, as if originally issued, whether or not the lost, stolen or destroyed Certificate is found at any time.

SECTION 7.11 Deemed Holders.

The Trustees may treat the Person in whose name any Certificate is registered on the register of the Trust as the sole holder of such Certificate and of the Securities represented thereby for purposes of receiving Distributions and for all other purposes whatsoever. Accordingly, the Trustees shall not be bound to recognize any equitable or other claim to or interest in such Certificate or in the Securities represented by such Certificate on the part of any Person, whether or not the Trust has actual or other notice thereof.

SECTION 7.12 Global Securities.

The Preferred Securities initially shall be issued in the form of one or more Global Securities. A Regular Trustee on behalf of the Trust shall execute, and the Property Trustee shall authenticate and deliver, one or more Global Securities that (i) shall represent and be denominated in an amount equal to the aggregate stated liquidation amount of all of the Preferred Securities to be issued in the form of Global Securities and not yet canceled, (ii) shall be registered in the name of the Depositary for the Preferred Securities or the nominee of such Depositary and (iii) shall be delivered by the Property Trustee to such Depositary or pursuant to such Depositary's instructions. Global Securities shall bear a legend substantially to the following effect:

"This Preferred Security is a Global Security within the meaning of the Declaration and is registered in the name of The Depository

Trust Company, a New York corporation (the "Depositary"), or a nominee of the Depositary. This Preferred Security is exchangeable for Preferred Securities registered in the name of a person other than the Depositary or its nominee only in the limited circumstances described in the Declaration, and no transfer of this Preferred Security (other than a transfer of this Preferred Security as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary) may be reregistered except in limited circumstances.

Unless this certificate is presented by an authorized representative of the Depositary to VEC Trust I or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of the Depositary (and any payment hereon is made to Cede & Co. or to such other entity as is requested by an authorized representative of the Depositary), and except as otherwise provided in the Amended and Restated Declaration of VEC Trust I dated as of June 28, 2000, as amended from time to time, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON (OTHER THAN PURSUANT TO THE PLEDGE AGREEMENT) IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein."

Preferred Securities not represented by a Global Security issued in exchange for all or a part of a Global Security pursuant to this Section 7.12 shall be registered in such names and in such authorized denominations as the Depositary, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Property Trustee. Upon execution and authentication, the Property Trustee shall deliver any Preferred Securities not represented by a Global Security to the Persons in whose names such definitive Preferred Securities are so registered.

At such time as all interests in Global Securities have been redeemed, repurchased or canceled, such Global Securities shall be canceled, upon receipt thereof, by the Property Trustee in accordance with standing procedures of the Depositary. At any time prior to such cancellation, if any interest in a Global Security is exchanged for Preferred Securities not represented by a Global Security, redeemed, canceled or transferred to a transferee who receives Preferred Securities not represented by a Global Security, or if any Preferred Security not represented by a Global Security is exchanged or transferred for part of a Global Security, then, in accordance with the standing procedures of the Depositary, the liquidation amount of such Global Security shall be reduced or increased, as the case may be, and an endorsement shall be made on such Global Security by the Property Trustee to reflect such reduction or increase.

The Trust and the Property Trustee, as the authorized representative of the Holders of the Preferred Securities, may deal with the Depositary for all purposes of this Declaration, including

the making of payments due on the Preferred Securities and exercising the rights of Holders of the Preferred Securities hereunder. The rights of any Beneficial Owner shall be limited to those established by law and agreements between such owners and Depository Participants; provided that no such agreement shall give to any Person any rights against the Trust or the Property Trustee without the written consent of the parties so affected. Multiple requests and directions from and votes of the Depositary as the Holder of the Preferred Securities represented by Global Securities with respect to any particular matter shall not be deemed inconsistent to the extent they do not represent an amount of Preferred Securities in excess of those held in the name of the Depositary or its nominee.

If at any time the Depositary notifies the Trust that it is unwilling or unable to continue as Depositary for the Preferred Securities or if at any time the Depositary no longer is eligible under this Section 7.12, the Regular Trustees shall appoint a successor Depositary with respect to the Preferred Securities. If a successor Depositary is not appointed by the Trust within 90 days after the Trust receives such notice or becomes aware of such ineligibility, the Trust's election that the Preferred Securities be represented by one or more Global Securities shall no longer be effective, and a Regular Trustee shall execute, and the Property Trustee will authenticate and deliver, Preferred Securities in definitive registered form, in any authorized denominations, in an aggregate stated liquidation amount equal to the aggregate stated liquidation amount of the Global Securities representing the Preferred Securities in exchange for such Global Securities.

A Regular Trustee on behalf of the Trust at any time and in its sole discretion may determine that the Preferred Securities issued in the form of one or more Global Securities shall no longer be represented by Global Securities. In such event a Regular Trustee on behalf of the Trust shall execute, and the Property Trustee shall authenticate and deliver, Preferred Securities in definitive registered form, in any authorized denominations, in an aggregate stated liquidation amount equal to the aggregate stated liquidation amount of the Global Securities representing the Preferred Securities, in exchange for such Global Securities.

Notwithstanding any other provisions of this Declaration (other than the provisions set forth in Section 7.9), Global Securities may not be transferred as a whole except by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary.

Interests of Beneficial Owners may be transferred or exchanged for Preferred Securities not represented by a Global Security, and Preferred Securities not represented by a Global Security may be transferred or exchanged for a Global Security or Securities, in accordance with rules of the Depositary and the provisions of Section 7.9.

SECTION 7.13 Remarketing.

(a) So long as the Preferred Securities, the PEPS Units and the Treasury Securities are evidenced by one or more global certificates held by the Depositary, the Senior Deferrable Notes Issuer shall request, not later than 15 nor more than 30 calendar days prior to the Remarketing Date, that the Depositary notify the Holders of the Preferred Securities and the holders of PEPS

Units and the Treasury PEPS Units of the Remarketing and of the procedures that must be followed if a Holder of Preferred Securities wishes to make a Cash Settlement.

(b) Not later than 5:00 P.M., New York City time, on the seventh Business Day preceding August 18, 2003, each Holder of Preferred Securities may elect to have the Preferred Securities held by such Holder remarketed in the Remarketing. Under Section 5.02 of the Purchase Contract Agreement, holders of PEPS Units that do not give notice of their intention to make a Cash Settlement of the Purchase Contract component of their PEPS Units prior to such time in the manner specified in such Section, or have given such notice but fail to deliver cash prior to 11:00 A.M., New York City time, on or prior to the fifth Business Day preceding August 18, 2003, shall be deemed to have consented to the disposition of the Preferred Securities comprising a component of their PEPS Units in the Remarketing. Holders of the Preferred Securities that are not a component of PEPS Units wishing to elect to have their Preferred Securities remarketed shall give to the Property Trustee notice of their election prior to 11:00 A.M., New York City time on the fifth Business Day prior to August 18, 2003. Any such notice shall be irrevocable and may not be conditioned upon the level at which the Reset Rate is established in the Remarketing. Promptly after 11:00 A.M., New York City time, on such fifth Business Day, the Property Trustee, based on the notices received by it prior to such time (including notices from the Purchase Contract Agent as to Purchase Contracts for which Cash Settlement has been elected and cash received), shall notify the Trust, the Sponsor and the Remarketing Agent of the number of Preferred Securities to be tendered for purchase in the Remarketing.

(c) If any Holder of PEPS Units does not give a notice of its intention to make a Cash Settlement or gives such notice but fails to deliver cash as described in Section 7.13(b), or gives a notice of election to have Preferred Securities that are not a component of PEPS Units remarketed, then the Preferred Securities of such Holder shall be deemed tendered for purchase in the Remarketing, notwithstanding any failure by such Holder to deliver or properly deliver such Preferred Securities to the Remarketing Agent for purchase.

(d) The right of each Holder to have Preferred Securities tendered for purchase shall be limited to the extent that (i) the Remarketing Agent conducts a Remarketing pursuant to the terms of the Remarketing Agreement, (ii) the Remarketing Agent is able to find a purchaser or purchasers for the tendered Preferred Securities and (iii) such purchaser or purchasers deliver the purchase price therefor to the Remarketing Agent.

(e) On the Remarketing Date, the Remarketing Agent shall use commercially reasonable efforts to remarket, at a price equal to 100.25% of the aggregate stated liquidation amount thereof, the Preferred Securities tendered or deemed tendered for purchase.

(f) If, as a result of the efforts described in 7.13(e), the Remarketing Agent has determined that it will not be able to remarket all of the Preferred Securities tendered or deemed tendered for purchase at a price of 100.25% of the aggregate stated liquidation amount of such Preferred Securities, the Remarketing Agent shall determine the Reset Rate, which shall be the rate per annum (rounded to the nearest one-thousandth (0.001) of one percent per annum), adjusted up or down, sufficient to cause the then current aggregate market value of the Preferred Securities to be equal to 100.25% of the aggregate stated liquidation amount of such Preferred

Securities, that the Remarketing Agent determines, in its sole reasonable judgment, to be the lowest rate per annum that will enable it to remarket all of the Preferred Securities tendered or deemed tendered for Remarketing.

(g) If none of the Holders of the Preferred Securities or the holders of the PEPS Units elect to have Preferred Securities remarketed in the Remarketing, the Reset Rate shall be the rate determined by the Remarketing Agent, in its sole reasonable discretion, as the rate that would have been established had a Remarketing been held on the Remarketing Date.

(h) If, by 4:00 P.M., New York City time, on the Remarketing Date, the Remarketing Agent is unable to remarket all of the Preferred Securities tendered or deemed tendered for purchase, a failed Remarketing ("Failed Remarketing") shall be deemed to have occurred and the Remarketing Agent shall so advise by telephone the Depositary, the Property Trustee, the Trust and the Sponsor. In the event of a Failed Remarketing, the Reset Rate shall equal the Two-Year Benchmark Treasury Rate plus the Applicable Margin.

(i) By approximately 4:30 P.M., New York City time, on the Remarketing Date provided that there has not been a Failed Remarketing, the Remarketing Agent shall advise, by telephone (i) the Depositary, the Property Trustee, the Trust and the Sponsor of the Reset Rate determined in the Remarketing and the number of Preferred Securities sold in the Remarketing, (ii) each purchaser (or the Depositary Participant thereof) purchasing Preferred Securities sold in the Remarketing of the Reset Rate and the number of Preferred Securities such purchaser is to purchase and (iii) each purchaser to give instructions to its Depositary Participant to pay the purchase price on the Purchase Contract Settlement Date in same day funds against delivery of the Preferred Securities purchased through the facilities of the Depositary.

(j) In accordance with the Depositary's normal procedures, on the Remarketing Settlement Date, the transactions described above with respect to each Preferred Security tendered for purchase and sold in the Remarketing shall be executed through the Depositary, and the accounts of the respective Depositary Participants shall be debited and credited and such Preferred Securities delivered by book-entry as necessary to effect purchases and sales of such Preferred Securities. The Depositary shall make payment in accordance with its normal procedures.

(k) If any Holder of the Preferred Securities selling Preferred Securities in the Remarketing fails to deliver such Preferred Securities, the Depositary Participant of such selling Holder and of any other Person that was to have purchased Preferred Securities in the Remarketing may deliver to any such other Person a number of Preferred Securities that is less than the number of Preferred Securities that otherwise was to be purchased by such Person. In such event, the number of Preferred Securities to be so delivered shall be determined by such Depositary Participant, and delivery of such lesser number of Preferred Securities shall constitute good delivery.

(l) The Remarketing Agent is not obligated to purchase any Preferred Securities that otherwise would remain unsold in the Remarketing. None of the Trust, any Trustee, the Sponsor or the Remarketing Agent shall be obligated in any case to provide funds to make payment upon tender of the Preferred Securities for Remarketing.

(m) Under the Remarketing Agreement, the Sponsor, in its capacity as Senior Deferrable Notes Issuer, shall be liable for, and shall pay, any and all costs and expenses incurred in connection with the Remarketing, and the Trust shall not have any liabilities for such costs and expenses; provided, however, that for the performance of its services, the Remarketing Agent will retain from the proceeds of the Remarketing an amount equal to 0.25% of the aggregate stated liquidation amount of all remarketed Preferred Securities.

(n) The tender and settlement procedures set in this Section 7.13, including provisions for payment by purchasers of the Preferred Securities in the Remarketing, shall be subject to modification to the extent required by the Depositary or if the book-entry system is no longer available for the Preferred Securities at the time of the Remarketing, to facilitate the tendering and remarketing of the Preferred Securities in certificated form. In addition, the Remarketing Agent may modify the settlement procedures set forth herein in order to facilitate the settlement process.

ARTICLE 8: DISSOLUTION AND TERMINATION OF THE TRUST

SECTION 8.1 Dissolution and Termination of the Trust.

(a) The Trust shall dissolve upon the earliest of:

(i) the bankruptcy of the Senior Deferrable Notes Issuer;

(ii) the filing of a certificate of dissolution or its equivalent with respect to the Sponsor or the revocation of the Sponsor's charter and the expiration of 90 days after the date of revocation without a reinstatement thereof;

(iii) the entry of a decree of judicial dissolution of the Sponsor or the Trust;

(iv) the time when all of the Securities shall have been called for redemption and the amounts then due shall have been paid to the Holders of the Securities;

(v) the direction by the Property Trustee, following the occurrence and continuation of a Tax Event pursuant to which the Trust is to be dissolved and all of the Senior Deferrable Notes distributed to the Holders of the Securities in exchange for all of the Securities;

(vi) at the Sponsor's sole discretion, by notice and direction to the Property Trustee to distribute the Senior Deferrable Notes to the Holders of the Securities in exchange for all of the Securities; provided that the Sponsor will be required to obtain an opinion of counsel that the distribution of the Senior Deferrable Notes will not be taxable to the holders of the Preferred Securities for United States federal income tax purposes; or

(vii) the time when all of the Regular Trustees and the Sponsor have consented to dissolution of the Trust, provided such action is taken before the issuance of any Securities.

(b) As soon as is practicable after the occurrence of an event referred to in Section 8.1(a) and upon completion of the winding up and liquidation of the Trust, the Regular Trustees shall terminate the Trust by executing and filing a certificate of cancellation with the Secretary of State of the State of Delaware.

(c) The provisions of Section 4.2 and Article 9 shall survive the termination of the Trust.

SECTION 8.2 Liquidation Distribution Upon Dissolution of the Trust.

(a) In the event of any voluntary or involuntary liquidation, dissolution, or winding-up of the Trust (each a "Liquidation") based on the occurrence of an event specified in Section 8.1(a) (other than clauses (iv) or
(v)), the Holders of the Securities on the date of the Liquidation shall be entitled to receive on a Pro Rata basis, after satisfaction of the Trust's liabilities to creditors, Senior Deferrable Notes in an aggregate principal amount equal to the aggregate stated liquidation amount of, with an interest rate identical to the distribution rate of, and accrued and unpaid interest equal to accumulated and unpaid Distributions on, such Securities in exchange for such Securities; provided if the Liquidation occurs prior to the Purchase Contract Settlement Date, the Senior Deferrable Notes receivable by the Holders shall be transferred to the Collateral Agent.

(b) Notice of Liquidation shall be given by the Property Trustee by first-class mail, postage prepaid, mailed not later than 30 nor more than 60 days prior to the date of the Liquidation to each Holder of Securities at such Holder's address appearing in the Securities register. All notices of Liquidation shall:

(i) state the date of the Liquidation;

(ii) state that from and after the date of the Liquidation, the Securities will no longer be deemed to be outstanding and any Certificates not surrendered for exchange will be deemed to represent the Senior Deferrable Notes in a principal amount equal to the stated liquidation amount of the Securities, bearing accrued and unpaid interest in an amount equal to the accumulated and unpaid Distribution on the Securities; and

(iii) provide such information with respect to the mechanics by which Holders may exchange Certificates for Senior Deferrable Notes, or if Section 8.2(d) applies receive a distribution, as the Property Trustee shall deem appropriate.

(c) Except where Section 8.1(a)(iv) or (v) or Section 8.2(d) applies, in order to affect the liquidation of the Trust and distribution of the Notes to Holders, the Property Trustee shall establish a record date for such distribution (which shall be not more than 45 days prior to the date of the Liquidation) and, either itself acting as exchange agent or through the appointment of a separate exchange agent, shall establish such procedures as it shall deem appropriate to effect the distribution of Senior Deferrable Notes in exchange for the outstanding Certificates.

(d) In the event that, notwithstanding the other provisions of this
Section 8.2, whether because of an order for dissolution entered by a court of competent jurisdiction or otherwise, distribution of the Senior Deferrable Notes in the manner provided herein is determined by the Property Trustee not to be practical, the property of the Trust shall be liquidated, and the Trust

shall be wound-up and terminated, by the Property Trustee in such manner as the Property Trustee reasonably determines. In such event, on the date of the winding-up and termination of the Trust, the Holders of the Securities on the date of the Liquidation shall be entitled to receive, out of the assets of the Trust available for distribution to the Holders of the Securities after satisfaction of the Trust's liabilities to creditors, if any, cash or other immediately available funds in an amount equal to the aggregate of the stated liquidation amount of $25 per Security plus accumulated and unpaid Distributions thereon to the date of payment (such amount being the "Liquidation Distribution"); provided if the Liquidation occurs prior to the Purchase Contract Settlement Date, the Redemption Price payable to the Collateral Agent, in liquidation of the Holders' interests in the Preferred Securities, will be distributed to the Collateral Agent, which in turn will apply an amount equal to the Redemption Amount of such Redemption Price to purchase the Treasury Portfolio on behalf of the Holders of the Securities and remit the remaining portion, if any, of such Redemption Price to the Purchase Contract Agent for payment to the Holders. If, upon any such Liquidation, the Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay the aggregate Liquidation Distribution in full, then the amounts payable directly by the Trust on the Securities shall be paid on a Pro Rata basis. The Holders of the Common Securities shall be entitled to receive the Liquidation Distribution Pro Rata with the Holders of the Preferred Securities, except that if an Indenture Event of Default has occurred and is continuing, then the Preferred Securities shall have a preference over the Common Securities with regard to the Liquidation Distribution.

(e) After the date fixed for any distribution of Senior Deferrable Notes upon dissolution of the Trust, (i) the Securities no longer shall be deemed to be outstanding and (ii) the Certificates shall be deemed to represent the Senior Deferrable Notes in a principal amount equal to the stated liquidation amount of the Securities, bearing accrued and unpaid interest in an amount equal to the accumulated and unpaid Distributions on the Securities, until such Certificates are presented to the Regular Trustees or agent for transfer or reissuance.

ARTICLE 9: LIMITATION OF LIABILITY OF
HOLDERS OF THE SECURITIES, THE DELAWARE TRUSTEE AND OTHERS

SECTION 9.1 Liability.

(a) Except as expressly set forth in this Declaration and the Guarantee, the Sponsor and the Trustees:

(i) shall not be personally liable for the return of any portion of the capital contributions (or any return thereon) of the Holders of the Securities that will be made solely from assets of the Trust; and

(ii) shall not be required to pay to the Trust or to any Holder of the Securities any deficit, upon dissolution of the Trust or otherwise.

(b) Pursuant to Section 3803(a) of the Business Trust Act, the Holder of the Common Securities shall be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware; provided that the Holders of the Common Securities shall be liable for all of the debts

and obligations of the Trust (other than with respect to the Securities) to the extent such debts and obligations are not satisfied out of the Trust's assets.

(c) Pursuant to Section 3803(a) of the Business Trust Act, the Holder of the Preferred Securities shall be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware.

SECTION 9.2 Exculpation.

(a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Trust or to any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner that such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Declaration or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's gross negligence (or, in the case of the Property Trustee, negligence) or willful misconduct with respect to such acts or omissions.

(b) Each Indemnified Person shall be fully protected in relying in good faith upon the records of the Trust and upon such information, opinions, reports or statements presented to the Trust by any Person as to matters such Indemnified Person reasonably believes to be within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Trust, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses or any other facts pertinent to the existence and amount of assets from which distributions to Holders of the Securities might properly be paid.

SECTION 9.3 Fiduciary Duty.

(a) To the extent that, at law or in equity, an Indemnified Person has duties (including fiduciary duties) and liabilities relating thereto to the Trust or to any other Covered Person, an Indemnified Person acting under this Declaration shall not be liable to the Trust or to any other Covered Person for its good faith reliance on the provisions of this Declaration. The provisions of this Declaration, to the extent that they restrict the duties and liabilities of an Indemnified Person otherwise existing at law or in equity (other than the duties imposed on the Property Trustee under the Trust Indenture Act), are agreed by the parties hereto to replace such other duties and liabilities of such Indemnified Person.

(b) Unless otherwise expressly provided herein:

(i) whenever a conflict of interest exists or arises between a Covered Person and an Indemnified Person; or

(ii) whenever this Declaration or any other agreement contemplated herein or therein provides that an Indemnified Person shall act in a manner that is, or provides terms that are, fair and reasonable to the Trust or any Holder of Securities,

the Indemnified Person shall resolve such conflict of interest, take such action or provide such terms, considering in each case the relative interest of each party (including its own interest) to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interests, any customary or accepted industry practices and any applicable generally accepted accounting practices or principles. In the absence of bad faith by the Indemnified Person, the resolution, action or term so made, taken or provided by the Indemnified Person shall not constitute a breach of this Declaration or any other agreement contemplated herein or of any duty or obligation of the Indemnified Person at law or in equity or otherwise.

(c) Whenever in this Declaration an Indemnified Person is permitted or required to make a decision:

(i) in its "discretion" or under a grant of similar authority, the Indemnified Person shall be entitled to consider such interests and factors as it desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Trust or any other Person; or

(ii) in its "good faith" or under another express standard, the Indemnified Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Declaration or by applicable law.

SECTION 9.4 Indemnification.

(a) To the fullest extent permitted by applicable law, the Sponsor, in its capacity as Senior Deferrable Notes Issuer, shall indemnify and hold harmless each Indemnified Person from and against any loss, damage or claim incurred by such Indemnified Person by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of authority conferred on such Indemnified Person by this Declaration, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Indemnified Person by reason of gross negligence (or, in the case of the Property Trustee, negligence) or willful misconduct with respect to such acts or omissions.

(b) The provisions of this Section 9.4 shall survive the termination of this Declaration or the resignation or removal of any Trustee.

(c) The Sponsor or the Trust may purchase and maintain insurance on behalf of any Person who is or was an Indemnified Person against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Sponsor would have the power to indemnify him or her against such liability under the provisions of this Section 9.4.

(d) For purposes of this Section 9.4, references to "the Trust" shall include, in addition to the resulting or surviving entity, any constituent entity (including any constituent of a constituent) absorbed in a consolidation or merger, so that any Person who is or was a director, trustee, officer or employee of such constituent entity, or is or was serving at the request of such constituent entity as a director, trustee, officer, employee or agent of another entity, shall stand in

the same position under the provisions of this Section 9.4 with respect to the resulting or surviving entity as he or she would have had with respect to such constituent entity if its separate existence had continued.

(e) The indemnification and advancement of expenses provided by, or granted pursuant to, this Section 9.4 shall continue, unless otherwise provided when authorized or ratified, as to a Person who has ceased to be an Indemnified Person and shall inure to the benefit of the heirs, executors and administrators of such a Person.

SECTION 9.5 Outside Businesses.

Any Covered Person, the Sponsor, the Delaware Trustee and the Property Trustee (subject to Section 6.3(c)) may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the activities of the Trust, and the Trust and the Holders of the Securities shall have no rights by virtue of this Declaration in and to such independent ventures or the income or profits derived therefrom, and the pursuit of any such venture, even if competitive with the activities of the Trust, shall not be deemed wrongful or improper. Each Covered Person, the Sponsor, the Delaware Trustee and the Property Trustee shall not be obligated to present any particular investment or other opportunity to the Trust even if such opportunity is of a character that, if presented to the Trust, could be taken by the Trust, and any Covered Person, the Sponsor, the Delaware Trustee and the Property Trustee shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment or other opportunity. Any Covered Person, the Delaware Trustee and the Property Trustee may engage or be interested in any financial or other transaction with the Sponsor or any Affiliate of the Sponsor, or may act as depositary for, trustee or agent for, or act on any committee or body of holders of, securities or other obligations of the Sponsor or its Affiliates.

ARTICLE 10: ACCOUNTING

SECTION 10.1 Fiscal Year.

The fiscal year ("Fiscal Year") of the Trust shall be the calendar year, or such other year as is required by the Code.

SECTION 10.2 Certain Accounting Matters.

(a) At all times during the existence of the Trust, the Regular Trustees shall keep, or shall cause to be kept, full books of account, records and supporting documents, which shall reflect in reasonable detail each transaction of the Trust. The books of account shall be maintained on the accrual method of accounting, in accordance with generally accepted accounting principles, consistently applied. The Trust shall use the accrual method of accounting for United States federal income tax purposes. The books of account and the records of the Trust shall be examined by and reported upon as of the end of each Fiscal Year of the Trust by a firm of independent certified public accountants selected by the Regular Trustees.

(b) The Regular Trustees shall cause to be prepared and delivered to each Holder of Securities, within 90 days after the end of each Fiscal Year of the Trust, annual financial statements of the Trust, including a balance sheet of the Trust as of the end of such Fiscal Year, and the related statements of income or loss.

(c) The Regular Trustees shall cause to be duly prepared and delivered to each Holder of Securities an annual United States federal income tax information statement, required by the Code, containing such information with regard to the Securities held by each Holder as is required by the Code and the Treasury Regulations. Notwithstanding any right under the Code to deliver any such statement at a later date, the Regular Trustees shall endeavor to deliver all such statements within 30 days after the end of each Fiscal Year of the Trust.

(d) The Regular Trustees shall cause to be duly prepared and filed with the appropriate taxing authority an annual United States federal income tax return, on Form 1041 or such other form required by United States federal income tax law, and any other annual income tax returns required to be filed on behalf of the Trust with any state or local taxing authority.

SECTION 10.3 Banking.

The Trust shall maintain one or more bank accounts in the name and for the sole benefit of the Trust; provided that all payments of funds in respect of the Senior Deferrable Notes held by the Property Trustee shall be made directly to the Property Account and no other funds of the Trust shall be deposited in the Property Account. The sole signatories for such accounts shall be designated by the Regular Trustees; provided that the Property Trustee shall designate the signatories for the Property Account.

SECTION 10.4 Withholding.

The Trust and the Regular Trustees shall comply with all withholding requirements under United States federal, state and local law. The Regular Trustees shall request, and the Holders of the Securities shall provide to the Trust, such forms or certificates as are necessary to establish an exemption from withholding with respect to each Holder of Securities and any representations and forms as shall reasonably be requested by the Regular Trustees to assist them in determining the extent of, and in fulfilling, the Trust's withholding obligations. The Regular Trustees shall file required form with applicable jurisdictions and, unless an exemption from withholding is properly established by a Holder of Securities, shall remit amounts withheld with respect to such Holder to applicable jurisdictions. To the extent that the Trust is required to withhold and pay over any amounts to any authority with respect to distributions or allocations to any Holder of Securities, the amount withheld shall be deemed to be a distribution in the amount of the withholding to such Holder. In the event of any claimed over withholding, a Holder shall be limited to an action against the applicable jurisdiction. If the amount required to be withheld was not withheld from actual Distributions made, the Trust may reduce subsequent Distributions by the amount of such withholding.

ARTICLE 11: AMENDMENTS AND MEETINGS

SECTION 11.1 Amendments.

(a) Except as otherwise provided in this Declaration or by any applicable terms of the Securities, this Declaration may be amended only by a written instrument approved and executed by the Sponsor and (i) the Regular Trustees (or, if there are more than two Regular Trustees, a majority of the Regular Trustees) and (ii) the Property Trustee (if the amendment affects the rights, powers, duties, obligations or immunities of the Property Trustee) and
(iii) by the Delaware Trustee (if the amendment affects the rights, powers, duties, obligations or immunities of the Delaware Trustee).

(b) No amendment shall be made, and any such purported amendment shall be void and ineffective:

(i) unless, in the case of any proposed amendment, the Property Trustee first has received an Officers' Certificate from each of the Trust and the Sponsor that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities);

(ii) unless, in the case of any proposed amendment that affects the rights, powers, duties, obligations or immunities of the Property Trustee, the Property Trustee first has received:

(A) an Officers' Certificate from each of the Trust and the Sponsor that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); and

(B) an opinion of counsel (which may be counsel to the Sponsor or the Trust) that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); and

(iii) to the extent the result of such amendment would be to

(A) cause the Trust to be classified other than as a grantor trust for United States federal income tax purposes;

(B) reduce or otherwise adversely affect the powers of the Property Trustee in contravention of the Trust Indenture Act; or

(C) cause the Trust to be deemed to be an Investment Company required to be registered under the Investment Company Act.

(c) At such time after the Trust has issued any Securities that remain outstanding, (i) any amendment that would (A) adversely affect the powers, preferences or special rights of the Securities, whether by way of amendment to this Declaration or otherwise or (B) result in the dissolution, winding-up or termination of the Trust other than pursuant to the terms of this

Declaration shall not be effective except with the approval of the Holders of at least a 66 2/3% in Liquidation Amount of the Securities; provided that if any amendment or proposal referred to in clause (A) above would adversely affect only the Preferred Securities or the Common Securities, then only the affected class will be entitled to vote on such amendment or proposal, and such amendment or proposal shall not be effective except with the approval of a 66 2/3% in Liquidation Amount of the class of Securities affected thereby; and (ii) any amendment that would (X) change the amount or timing of any distribution of the Securities or otherwise adversely affect the amount of any distribution require to be made in respect of the Securities as of a specified date or (Y) restrict the right of a Holder of Securities to institute suit for the enforcement of such payment on or after such date shall not be effective except with the approval of each Holder of Securities affected thereby.

(d) This Section 11.1 shall not be amended without the consent of all of the Holders of the Securities.

(e) Article 4 shall not be amended without the consent of the Holders of the Common Securities.

(f) The rights of the Holders of the Common Securities under Articles to increase or decrease the number of, and appoint and remove, Trustees shall not be amended without the consent of the Holders of the Common Securities.

(g) Notwithstanding Section 11.1(c), this Declaration may be amended without the consent of the Holders of the Securities, provided that such amendment does not have a material adverse effect on the rights, preferences or privileges of the Holders of the Securities:

(i) to cure any ambiguity;

(ii) to correct or supplement any provision in this Declaration that may be defective or inconsistent with any other provision of this Declaration;

(iii) to add to the covenants, restrictions or obligations of the Sponsor;

(iv) to conform to any change in Rule 3a-5 or written change in interpretation or application of Rule 3a-5 by any legislative body, court, government agency or regulatory authority;

(v) to modify, eliminate and add to any provision of this Declaration to ensure that the Trust will be classified as a grantor trust for United States federal income tax purposes at all times that any Securities are outstanding or to ensure that the Trust will not be required to register as an Investment Company under the Investment Company Act; provided that such modification, elimination or addition would not adversely affect in any material respect the rights, privileges or preferences of any Holder of Securities; or

(vi) to facilitate the tendering, remarketing and settlement of the Preferred Securities as contemplated by Section 7.13(n).

SECTION 11.2 Meetings of the Holders of the Securities; Action by Written Consent.

(a) Meetings of the Holders of any class of Securities may be called at any time by the Regular Trustees (or as provided in the terms of the Securities) to consider and act on any matter on which Holders of such class of Securities are entitled to act under the terms of this Declaration or the rules of any stock exchange on which the Preferred Securities are listed or admitted for trading. The Regular Trustees shall call a meeting of the Holders of such class if directed to do so by the Holders of at least 10% in Liquidation Amount of such class of Securities. Such direction shall be given by delivering to the Regular Trustees a writing stating that the signing Holders of the Securities wish to call a meeting and indicating the general or-specific purpose for which the meeting is to be called. The Holder or Holders of the Securities calling a meeting shall specify in writing the Certificates held by such Holder or Holders, and only those Securities specified shall be counted for purposes of determining whether the required percentage set forth in the second sentence of this paragraph has been met.

(b) Except to the extent otherwise provided in the terms of the Securities, the following provisions shall apply to meetings of the Holders of the Securities:

(i) Notice of any such meeting shall be given to all the Holders of the Securities having a right to vote thereat at least seven days and not more than 60 days before the date of such meeting. Whenever a vote, consent or approval of the Holders of the Securities is permitted or required under this Declaration or the rules of any stock exchange on which the Preferred Securities are listed or admitted for trading, such vote, consent or approval may be given at a meeting of the Holders of the Securities. Any action that may be taken at a meeting of the Holders of the Securities may be taken without a meeting and without prior notice if a consent in writing setting forth the action so taken is signed by the Holders of the Securities owning not less than the minimum amount of Securities in liquidation amount that would be necessary to authorize or take such action at a meeting at which all Holders of the Securities having a right to vote thereon were present and voting. Prompt notice of the taking of action without a meeting shall be given to the Holders of the Securities entitled to vote who have not consented in writing. The Regular Trustees may specify that any written ballot submitted to the Holders of the Securities for the purpose of taking any action without a meeting shall be returned to the Trust within the time specified by the Regular Trustees.

(ii) Each Holder of the Securities may authorize any Person to act for it by proxy on any or all matters in which such Holder is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Holder of Securities executing such proxy. Except as otherwise provided herein, all matters relating to the giving, voting or validity of proxies shall be governed by the General Corporation Law of the State of Delaware relating to proxies, and judicial interpretations thereunder, as if the Trust were a Delaware corporation and the Holders of the Securities were stockholders of a Delaware corporation.

(iii) Each meeting of the Holders of the Securities shall be conducted by the Regular Trustees or by such other Person that the Regular Trustees may designate.

(iv) Unless the Business Trust Act, this Declaration, the Trust Indenture Act or the listing rules of any stock exchange on which the Preferred Securities are then listed for trading otherwise provides, the Regular Trustees, in their sole discretion, shall establish all other provisions relating to meetings of Holders of the Securities, including notice of the time, place or purpose of any meeting at which any matter is to be voted on by any Holders of the Securities, waiver of any such notice, action by consent without a meeting without prior notice, the establishment of a record date, quorum requirements, voting in person or by proxy or any other matter with respect to the exercise of any such right to vote.

ARTICLE 12: REPRESENTATIONS OF THE PROPERTY TRUSTEE
AND THE DELAWARE TRUSTEE

SECTION 12.1 Representations and Warranties of the Property Trustee.

The initial Property Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Property Trustee represents and warrants to the Trust and the Sponsor at the time of such Successor Property Trustee's acceptance of its appointment as Property Trustee, that:

(a) the Property Trustee is a corporation or national banking association duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with trust power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, this Declaration;

(b) the Property Trustee satisfies the requirements set forth in
Section 6.3(a);

(c) the execution, delivery and performance by the Property Trustee of this Declaration have been duly authorized by all necessary corporate action on the part of the Property Trustee; this Declaration has been duly executed and delivered by the Property Trustee, and it constitutes a legal, valid and binding obligation of the Property Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law);

(d) the execution, delivery and performance of this Declaration by the Property Trustee do not conflict with, nor constitute a breach of, the articles of association or incorporation, as the case may be, or the by-laws (or other similar organizational documents) of the Property Trustee; and

(e) no consent, approval or authorization of, or registration with or notice to, any state or federal banking authority is required for the execution delivery or performance by the Property Trustee of this Declaration.

SECTION 12.2 Representations and Warranties of the Delaware Trustee.

The initial Delaware Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Delaware Trustee represents and warrants to the Trust and the Sponsor at the time of such Successor Delaware Trustee's acceptance of its appointment as Delaware Trustee, that:

(a) the Delaware Trustee satisfies the requirements set forth in
Section 6.2 and has the power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, this Declaration and, if it is not a natural person, is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization;

(b) the Delaware Trustee has been authorized to perform its obligations under the Certificate of Trust and this Declaration; and this Declaration constitutes a legal, valid and binding obligation of the Delaware Trustee under Delaware law, enforceable against it in accordance with its terms subject to applicable bankruptcy, reorganization, moratorium, insolvency and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law) and

(c) no consent, approval or authorization of, or registration with or notice to, any state or federal banking authority is required for the execution, delivery or performance by the Delaware Trustee of this Declaration.

ARTICLE 13: MISCELLANEOUS

SECTION 13.1 Notices.

All notices provided for in this Declaration shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by registered or certified mail, as follows:

(a) if given to the Trust, in care of the Regular Trustees at the Trust's mailing address set forth below (or such other address as the Trust may give notice of to the Property Trustee, the Delaware Trustee and the Holders of the Securities):

VEC Trust I
One Valero Place
P.O. Box 500
San Antonio, Texas 78212 Attention: Jay D. Browning, Corporate Secretary Telephone No: (210) 370-2031 Fax No: (210) 370-2988

with a copy to:

Attention: Donna M. Titzman Telephone No: (210) 370-2180 Fax No: (210) 370-2497

(b) if given to the Delaware Trustee, at the mailing address set forth below (or such other address as the Delaware Trustee may give notice of to the Regular Trustees, the Property Trustee and the Holders of the Securities):

The Bank of New York (Delaware) c/o The Bank of New York 101 Barclay Street
21 West
New York, New York 10286 Attention: Corporate Trust Trustee Administration Telephone No: (212) 815-3703 Fax No: (212) 815-5915

(c) if given to the Property Trustee, at its Corporate Trust Office to the attention of Corporate Trust Trustee Administration (telephone no. (212) 815-3703 and fax no. (212) 815-5915) (or such other address as the Property Trustee may give notice of to the Regular Trustees, the Delaware Trustee and the Holders of the Securities);

(d) if given to the Holders of the Common Securities, at the mailing address of the Sponsor set forth below (or such other address as the Holders of the Common Securities may give notice of to the Property Trustee, the Delaware Trustee and the Trust):

Valero Energy Corporation One Valero Place
San Antonio, Texas 78212 Attention: Jay D. Browning, Corporate Secretary Telephone No: (210) 370-2031 Fax No: (210) 370-2988

with a copy to:

Attention: Donna M. Titzman Telephone No: (210) 370-2180 Fax No: (210) 370-2497

(e) if given to any Holder of Preferred Securities, at such Holder's address as set forth in the register of the Trust.

All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed or mailed by first class mail, postage prepaid, except that if a notice or other

document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver.

SECTION 13.2 Governing Law.

This Declaration and the rights of the parties hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware, without regard to principles of conflicts of laws.

SECTION 13.3 Intention of the Parties.

It is the intention of the parties hereto that the Trust be classified for United States federal income tax purposes as a grantor trust. The provisions of this Declaration shall be interpreted in a manner consistent with such classification.

SECTION 13.4 Headings.

The headings contained in this Declaration are inserted for convenience of reference only and do not affect the interpretation of this Declaration or any provision hereof.

SECTION 13.5 Successors and Assigns.

Whenever in this Declaration any of the parties hereto is named or referred to, the successors and assigns of such party shall be deemed to be included, and all covenants and agreements in this Declaration by the Sponsor and the Trustee shall bind and inure to the benefit of their respective successors and assigns, whether so expressed.

SECTION 13.6 Partial Enforceability.

If any provision of this Declaration or the application of such provision to any Person or circumstance is held invalid, the remainder of this Declaration, or the application of such provision to persons or circumstances other than those to which it is held invalid, shall not be affected thereby.

SECTION 13.7 Counterparts.

This Declaration may contain more than one counterpart of the signature page, and this Declaration may be executed by the affixing of the signature of each of the Trustees to one of such counterpart signature pages. All such counterpart signature pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page.

IN WITNESS WHEREOF, the undersigned have caused these presents to be executed as of the day and year first above written.

VALERO ENERGY CORPORATION,
as Sponsor, Senior Deferrable Notes Issuer and
Common Securities Holder

THE BANK OF NEW YORK,
as Property Trustee

THE BANK OF NEW YORK (DELAWARE),
as Delaware Trustee

EXHIBIT A

This Preferred Security is a Global Security within the meaning of the Amended and Restated Declaration of VEC TRUST I hereinafter referred to and is registered in the name of The Depository Trust Company, a New York corporation (the "Depositary"), or a nominee of the Depositary. This Preferred Security is exchangeable for Preferred Securities registered in the name of a person other than the Depositary or its nominee only in the limited circumstances described in the Declaration, and no transfer of this Preferred Security (other than a transfer of this Preferred Security as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary) may be registered, except in limited circumstances.

Unless this Preferred Security Certificate is presented by an authorized representative of the Depositary to the issuer or its agent for registration of transfer, exchange or payment, and any Preferred Security Certificate issued is registered in the name of Cede & Co. or such other name as registered by an authorized representative of the Depositary (and any payment hereon is made to Cede & Co. or to such other entity as is requested by an authorized representative of the Depositary), and except as otherwise provided in the Amended and Restated Declaration of VEC Trust I dated June 28, 2000, ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL, since the registered owner hereof, Cede & Co., has an interest

herein.]

Certificate No._____                      Number of Preferred Securities: ______
CUSIP No.  91913Y308                      Aggregate Liquidation Amount:  $______

                   Certificate Evidencing Preferred Securities
                                       of

VEC Trust I

Preferred Securities
(liquidation amount $25 per Preferred Security)

VEC Trust I, a statutory business trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that Cede & Co. (the "Holder") is the registered owner of preferred securities of the Trust representing undivided beneficial interests in the assets of the Trust designated the Preferred Securities (liquidation amount $25.00 per Preferred Security) (the "Preferred Securities"). The Preferred Securities are transferable on the register of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer as provided in the Declaration (as defined below). The designation rights, privileges, restrictions, preferences and other terms and provisions of the Preferred Securities represented hereby are issued and shall in all respect be subject to the provisions of the Amended and Restated Declaration of Trust of the Trust, dated as of June 28, 2000 (as the same may be amended from time to time (the "Declaration"), among Valero Energy Corporation, as Sponsor, Jay D. Browning, John D. Gibbons and Donna M. Titzman, as Regular Trustees, The Bank of New York, as Property Trustee, The Bank of New York (Delaware), as Delaware Trustee, and the holders from time to time, of undivided beneficial interests in the assets of the

Trust. Capitalized terms used herein but not defined shall have the meaning given them in the Declaration. The Holder is entitled to the benefits of the Guarantee Agreement, dated as of June 28, 2000, as the same may be amended from time to time, of Valero Energy Corporation, in respect of the Preferred Securities. The Sponsor will provide a copy of the Declaration, the Guarantee and the Indenture to a Holder without charge upon written request to the Sponsor at its principal place of business.

Upon receipt of this certificate, the Holder is bound by the terms of the Declaration and is entitled to the benefits thereunder.

By acceptance, the Holder agrees to treat, for United States federal income tax purposes, the Senior Deferrable Notes as indebtedness of the Sponsor and the Preferred Securities as evidence of undivided indirect beneficial ownership interests in the Senior Deferrable Notes.

IN WITNESS WHEREOF, the Trust has executed this certificate this ____ day of _________________, 2000.

VEC TRUST I

This is one of the Securities referred to in the within-mentioned Declaration.

THE BANK OF NEW YORK, as
Property Trustee

Certificate No.______                      Number of Common Securities: ________
                                           Aggregate Liquidation Amount: $______

                    Certificate Evidencing Common Securities
                                       of

VEC Trust I

Common Securities
(liquidation amount $25 per Common Security)

VEC Trust I, a statutory business trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that Valero Energy Corporation (the "Holder") is the registered owner of _________________ common securities of the Trust representing an undivided beneficial interest in the assets of the Trust designated the Common Securities (liquidation amount $25.00 per Common Security) (the "Common Securities"). Except as provided in the Declaration (as defined below), the Common Securities are not transferable, and any attempted transfer thereof shall be void. The designation, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities represented hereby are issued and shall in all respects be subject to the provisions of the Amended and Restated Declaration of Trust of the Trust, dated as of June 28, 2000 (as the same may be amended from time to time, the "Declaration"), among Valero Energy Corporation, as Sponsor, Jay D. Browning, John D. Gibbons and Donna M. Titzman, as Regular Trustees, The Bank of New York, as Property Trustee, The Bank of New York (Delaware), as Delaware Trustee, and the holders, from time to time, of undivided beneficial ownership interests in the assets of the Trust. The Sponsor will provide a copy of the Declaration and the Indenture to the Holder without charge upon written request to the Sponsor at its principal place of business.

Upon receipt of this certificate, the Holder is bound by the terms of the Declaration and is entitled to the benefits thereunder.

By acceptance, the Holder agrees to treat, for United States federal income tax purposes, the Senior Deferrable Notes as indebtedness of the Sponsor and the Common Securities as evidence of an undivided indirect beneficial ownership interest in the Senior Deferrable Notes.

IN WITNESS WHEREOF, the Trust has executed this certificate this ______ day of June, 2000.

VEC TRUST I

VALERO ENERGY CORPORATION

GUARANTEE AGREEMENT

VEC TRUST I

Dated as of June 28, 2000

                                                                                                                PAGE
                                                                                                                ----

                                                     ARTICLE I
                                                    DEFINITIONS


SECTION 1.01      Definitions.....................................................................................1

                                                     ARTICLE II
                                                TRUST INDENTURE ACT


SECTION 2.01      Trust Indenture Act; Application................................................................5
SECTION 2.02      Lists of Holders of Preferred Securities........................................................5
SECTION 2.03      Reports by the Guarantee Trustee................................................................6
SECTION 2.04      Periodic Reports to the Guarantee Trustee.......................................................6
SECTION 2.05      Evidence of Compliance with Conditions Precedent................................................6
SECTION 2.06      Events of Default; Waiver.......................................................................7
SECTION 2.07      Disclosure of Information.......................................................................7
SECTION 2.08      Conflicting Interest............................................................................7

                                                     ARTICLE III
                                 POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE


SECTION 3.01      Powers and Duties of the Guarantee Trustee......................................................7
SECTION 3.02      Certain Rights and Duties of the Guarantee Trustee..............................................8
SECTION 3.03      Not Responsible for Recitals or Issuance of Guarantee..........................................10
SECTION 3.04      The Guarantee Trustee May Own Preferred Securities.............................................11
SECTION 3.05      Moneys Received by the Guarantee Trustee to Be Held in Trust Without Interest..................11
SECTION 3.06      Compensation and Expenses of Guarantee Trustee.................................................11

                                                     ARTICLE IV
                                                 GUARANTEE TRUSTEE


SECTION 4.01      Qualifications.................................................................................12
SECTION 4.02      Appointment, Removal and Resignation of the Guarantee Trustee..................................12

                                                      ARTICLE V
                                                      GUARANTEE


SECTION 5.01      Guarantee......................................................................................13
SECTION 5.02      Waiver of Notice...............................................................................13
SECTION 5.03      Obligations Not Affected.......................................................................13
SECTION 5.04      Enforcement of Guarantee.......................................................................14
SECTION 5.05      Guarantee of Payment...........................................................................15
SECTION 5.06      Subrogation....................................................................................15
SECTION 5.07      Independent Obligations........................................................................15

                                                     ARTICLE VI
                                     LIMITATION OF TRANSACTIONS; SUBORDINATION


SECTION 6.01      Limitation of Transactions.....................................................................16
SECTION 6.02      Subordination..................................................................................16

                                                     ARTICLE VII
                                                    TERMINATION


SECTION 7.01      Termination....................................................................................17

                                                    ARTICLE VIII
                                      LIMITATION OF LIABILITY; INDEMNIFICATION


SECTION 8.01      Exculpation....................................................................................17
SECTION 8.02      Indemnification................................................................................17
SECTION 8.03      Survive Termination............................................................................18

                                                     ARTICLE IX
                                                   MISCELLANEOUS


SECTION 9.01      Successors and Assigns.........................................................................18
SECTION 9.02      Amendments.....................................................................................18
SECTION 9.03      Notices........................................................................................18
SECTION 9.04      Genders........................................................................................19
SECTION 9.05      Benefit........................................................................................19
SECTION 9.06      Governing Law..................................................................................20
SECTION 9.07      Counterparts...................................................................................20
SECTION 9.08      Exercise of Overallotment Option...............................................................20
SECTION 9.09      Limited Liability..............................................................................20

GUARANTEE AGREEMENT

This GUARANTEE AGREEMENT, dated as of June 28, 2000, is executed and delivered by Valero Energy Corporation, a Delaware corporation (the "Guarantor"), and The Bank of New York, a national banking association, as the initial Guarantee Trustee (as defined herein) for the benefit of the Holders (as defined herein) from time to time of the Preferred Securities (as defined herein) of VEC Trust I, a Delaware statutory business trust (the "Issuer").

WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the "Declaration"), dated as of June 28, 2000 among the trustees of the Issuer named therein, Valero Energy Corporation, as Sponsor, and the Holders from time to time of preferred undivided beneficial interests in the assets of the Issuer, the Issuer may issue up to $172,500,000 aggregate liquidation amount of its 7 3/4% Trust Preferred Securities (the "Preferred Securities") representing preferred undivided beneficial interests in the assets of the Issuer and having the terms set forth in the Declaration, of which $150,000,000 liquidation amount of Preferred Securities is being issued as of the date hereof. Up to the remaining $22,500,000 liquidation amount of Preferred Securities may be issued by the Issuer if and to the extent that the over-allotment option granted by the Guarantor and the Issuer pursuant to the Underwriting Agreement (as defined in the Declaration) is exercised by the Underwriters named in the Underwriting Agreement; and

WHEREAS, as incentive for the Holders to purchase Preferred Securities, the Guarantor desires to irrevocably and unconditionally agree, to the extent set forth herein, to pay to the Holders the Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the purchase by the initial purchasers thereof of Preferred Securities, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee Agreement for the benefit of the Holders from time to time.

ARTICLE I
DEFINITIONS

SECTION 1.01 Definitions.

(a) Capitalized terms used in this Guarantee Agreement but not defined in the preamble or recitals above have the respective meanings assigned to them in this Section 1.01.

(b) A term defined anywhere in this Guarantee Agreement has the same meaning throughout.

(c) All references to "the Guarantee Agreement" or "this Guarantee Agreement" are to this Guarantee Agreement as modified, supplemented or amended from time to time.

(d) All references in this Guarantee Agreement to Articles and Sections are to Articles and Sections of this Guarantee Agreement unless otherwise specified.

(e) A term defined in the Trust Indenture Act has the same meaning when used in this Guarantee Agreement unless otherwise defined in this Guarantee Agreement or unless the context otherwise requires.

(f) A reference to the singular includes the plural and vice versa.

"Additional Amounts" has the meaning set forth in the Indenture.

"Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by, or under direct or indirect common control with, such specified Person. For purposes of this definition, "control" of a Person shall mean the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" shall have meanings correlative to the foregoing.

"Business Day" has the meaning set forth in the Indenture.

"Commission" means the Securities and Exchange Commission.

"Common Securities" means the securities representing common undivided beneficial interests in the assets of the Issuer and having the terms set forth in Article VII of the Declaration.

"Common Stock" means the common stock, $.01 par value per share, of the Guarantor, including associated preferred share purchase rights.

"Declaration" has the meaning set forth in the recitals above.

"Distributions" means the periodic distributions and other payments payable to Holders in accordance with the terms of the Preferred Securities set forth in Article VII of to the Declaration.

"Dollar" has the meaning set forth in the Indenture.

"Event of Default" means a default by the Guarantor on any of its payment or other obligations under this Guarantee Agreement; provided, however, that, except with respect to a default in payment of any Guarantee Payment, any such default shall constitute an Event of Default

only if the Guarantor shall have received notice of such default and shall not have cured such default within 60 days after receipt of such notice.

"Extension Period" has the meaning set forth in Section 2.8 of the Supplemental Indenture.

"Guarantee Payments" means the following payments or distributions, without duplication, with respect to the Preferred Securities, to the extent not paid or made by or on behalf of the Issuer: (i) any accumulated and unpaid Distributions, any Additional Amounts payable with respect to the Preferred Securities in accordance with the terms thereof and the Redemption Price, including all accumulated and unpaid Distributions and Additional Amounts to the date of redemption, with respect to the Preferred Securities called for redemption by the Issuer but only if and to the extent that in each case the Guarantor has made a payment to the Property Trustee of principal of, any premium or interest on or any Additional Amounts with respect to the Notes and
(ii) upon a voluntary or involuntary dissolution, winding-up or termination of the Issuer (other than in connection with the distribution of Notes to Holders in exchange for Preferred Securities or the redemption of the Preferred Securities in full upon the maturity or redemption of the Notes as provided in the Declaration), the lesser of (a) the aggregate of the liquidation amount and all accumulated and unpaid Distributions and Additional Amounts on the Preferred Securities to the date of payment, to the extent the Issuer has funds on hand legally available therefor, and (b) the amount of assets of the Issuer remaining available for distribution to Holders in liquidation of the Issuer as required by applicable law.

"Guarantee Trustee" means The Bank of New York, a New York banking corporation, until a Successor Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Guarantee Agreement, and thereafter means each such Successor Guarantee Trustee.

"Holder" means any holder, as registered on the books and records of the Issuer, of any Preferred Securities; provided, however, that in determining whether the holders of the requisite percentage of Preferred Securities have given any request, notice, consent or waiver hereunder, "Holder" shall not include the Guarantor or any Affiliate of the Guarantor.

"Indemnified Person" means the Guarantee Trustee, any Affiliate of the Guarantee Trustee, and any officers, directors, shareholders, members, partners, employees, representatives or agents of the Guarantee Trustee.

"Indenture" means the Indenture dated as of December 12, 1997 between the Guarantor and The Bank of New York, as trustee, as supplemented by the First Supplemental Indenture thereto dated as of June 28, 2000 (the "Supplemental Indenture"), pursuant to which the Notes are to be issued to the Property Trustee.

"Majority of Outstanding Preferred Securities" means Holder(s) of outstanding Preferred Securities, voting together as a single class, who are the record owners of Preferred Securities representing more than 50% of the outstanding Preferred Securities.

"Notes" means the series of unsecured senior notes issued to the Property Trustee by the Guarantor under the Indenture and entitled the "7 3/4% Senior Deferrable Notes due 2005."

"Officers' Certificate" means, with respect to any Person, a certificate signed by the Chairman of the Board, the President, any Vice Chairman of the Board, any Vice President, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Assistant Secretary of such Person, and delivered to the Guarantee Trustee. One of the officers signing an Officers' Certificate given pursuant to Section 2.04 shall be the principal executive, financial or accounting officer of the Guarantor. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Guarantee Agreement shall include:

(i) a statement that the person making such certificate has read such covenant or condition;

(ii) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate are based;

(iii) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and

(iv) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with.

"Person" means any individual, corporation, partnership, limited liability company, joint venture, incorporated or unincorporated association, joint stock company, trust, unincorporated organization or government or other agency or political subdivision thereof or other entity of any kind.

"Preferred Securities" has the meaning set forth in the recitals above.

"Property Trustee" means the Person acting as Property Trustee under the Declaration.

"Redemption Price" means the amount payable on redemption of the Preferred Securities in accordance with the terms of the Preferred Securities.

"Responsible Officer" means, when used with respect to the Guarantee Trustee, any officer within the corporate trust department of the Guarantee Trustee, including any vice president,

assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Guarantee Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such Person's knowledge of and familiarity with the particular subject and, in either case, who shall have direct responsibility for the administration of this Guarantee Agreement.

"Successor Guarantee Trustee" means a successor Guarantee Trustee possessing the qualifications to act as a Guarantee Trustee under Section 4.01.

"Supplemental Indenture" has the meaning specified in the definition of Indenture.

"Trust Enforcement Event" has the meaning specified in the Declaration.

"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.

ARTICLE II
TRUST INDENTURE ACT

SECTION 2.01 Trust Indenture Act; Application.

(a) This Guarantee Agreement is subject to the provisions of the Trust Indenture Act that are required to be part of this Guarantee Agreement and shall, to the extent applicable, be governed by such provisions.

(b) If and to the extent that any provision of this Guarantee Agreement limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control.

(c) The application of the Trust Indenture Act to this Guarantee Agreement shall not affect the nature of the Preferred Securities as equity securities representing preferred undivided beneficial interests in the assets of the Issuer.

SECTION 2.02 Lists of Holders of Preferred Securities.

(a) The Guarantor shall provide the Guarantee Trustee (unless the Guarantee Trustee is the registrar of the Preferred Securities) (i) within 14 days after each record date for payment of Distributions, a list, in such form as the Guarantee Trustee may reasonably require, of the names and addresses of the Holders ("List of Holders") as of such date, and (ii) at any other time, within 30 days of receipt by the Guarantor of a written request for a List of Holders as of a date no more than 15 days before such List of Holders is given to the Guarantee Trustee; provided that in each case the Guarantor shall not be obligated to provide such List of Holders at any time that the List of Holders does not differ from the most recent List of Holders given to the Guarantee Trustee

by the Guarantor. The Guarantee Trustee shall preserve, in as current a form as is reasonably practicable, all information contained in the Lists of Holders given to it; provided that the Guarantee Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders.

(b) The Guarantee Trustee shall comply with its obligations under
Section 312(b) of the Trust Indenture Act.

SECTION 2.03 Reports by the Guarantee Trustee.

Within 60 days after June 15th of each year, commencing June 15, 2001, the Guarantee Trustee shall deliver to the Holders such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form, in the manner and at the times provided by Section 313 of the Trust Indenture Act. The Guarantee Trustee shall also comply with the other requirements of Section 313 of the Trust Indenture Act. A copy of each such report shall, at the time of such transmission to the Holders, be filed by the Guarantee Trustee with the Guarantor, with each stock exchange or quotation system upon which any Preferred Securities are listed or traded (if so listed or traded) and also with the Commission. The Guarantor agrees to notify the Guarantee Trustee when any Preferred Securities become listed on any stock exchange or quotation system and of any delisting thereof.

SECTION 2.04 Periodic Reports to the Guarantee Trustee.

The Guarantor shall provide to the Guarantee Trustee, the Commission and the Holders, as applicable, such documents, reports and information (if any) as required by Section 314(a)(1)-(3) of the Trust Indenture Act and the compliance certificates required by Section 314(a)(4) and (c) of the Trust Indenture Act, any such certificates to be provided in the form, in the manner and at the times required by Section 314(a)(4) and (c) of the Trust Indenture Act (provided that any certificate to be provided pursuant to Section 314(a)(4) of the Trust Indenture Act shall be provided within 120 days of the end of each fiscal year of the Issuer). Delivery of such reports, information and documents to the Guarantee Trustee is for informational purposes only and the Guarantee Trustee's receipt of such shall not constitute constructive notice of any information contained therein, including the Guarantor's compliance with any of its covenants hereunder (as to which the Guarantee Trustee is entitled to rely exclusively on Officers' Certificates or on certificates provided pursuant to this Section 2.04).

SECTION 2.05 Evidence of Compliance with Conditions Precedent.

The Guarantor shall provide to the Guarantee Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Guarantee Agreement which relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c) may be given in the form of an Officers' Certificate.

SECTION 2.06 Events of Default; Waiver.

(a) The Holders of a Majority of Outstanding Preferred Securities may, by vote, on behalf of the Holders, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Guarantee Agreement, but no such waiver shall extend to any subsequent or other default or Event of Default, or impair any right consequent thereon.

(b) The right of any Holder to receive payment of the Guarantee Payments in accordance with this Guarantee Agreement, or to institute suit for the enforcement of any such payment, shall not be impaired without the consent of each such Holder.

SECTION 2.07 Disclosure of Information.

The disclosure of information as to the names and addresses of the Holders in accordance with Section 312 of the Trust Indenture Act, regardless of the source from which such information was derived, shall not be deemed to be a violation of any existing law, or any law hereafter enacted which does not specifically refer to Section 312 of the Trust Indenture Act, nor shall the Guarantee Trustee be held accountable by reason of mailing any material pursuant to a request made under Section 312(b) of the Trust Indenture Act.

SECTION 2.08 Conflicting Interest.

(a) The Declaration shall be deemed to be specifically described in this Guarantee Agreement for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act.

(b) The Guarantee Trustee shall comply with its obligations under Sections 310(b) and 311 of the Trust Indenture Act.

ARTICLE III
POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE

SECTION 3.01 Powers and Duties of the Guarantee Trustee.

(a) This Guarantee Agreement shall be held by the Guarantee Trustee in trust for the benefit of the Holders. The Guarantee Trustee shall not transfer its right, title and interest in this Guarantee Agreement to any Person except a Successor Guarantee Trustee on acceptance by such Successor Guarantee Trustee of its appointment to act as Guarantee Trustee or to a Holder exercising his or her rights pursuant to Section 5.04(iv). The right, title and interest of the Guarantee Trustee to this Guarantee Agreement shall vest automatically in each Person who may hereafter be appointed

as Guarantee Trustee in accordance with Article IV. Such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered.

(b) If an Event of Default has occurred and is continuing, the Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of the Holders.

(c) This Guarantee Agreement and all moneys received by the Guarantee Trustee in respect of the Guarantee Payments will not be subject to any right, charge, security interest, lien or claim of any kind in favor of, or for the benefit of, the Guarantee Trustee or its agents or their creditors.

(d) The Guarantee Trustee shall, within 90 days after the occurrence of an Event of Default actually known to a Responsible Officer of the Guarantee Trustee, transmit by mail, first class postage prepaid, to the Holders, as their names and addresses appear upon the List of Holders, notice of all such Events of Default, unless such defaults shall have been cured before the giving of such notice; provided that the Guarantee Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders. The Guarantee Trustee shall not be deemed to have knowledge of any Event of Default except any Event of Default as to which the Guarantee Trustee shall have received written notice or a Responsible Officer charged with the administration of this Guarantee Agreement shall have obtained written notice of such Event of Default.

(e) The Guarantee Trustee shall continue to serve as a trustee until a Successor Guarantee Trustee has been appointed and accepted that appointment in accordance with Article IV.

SECTION 3.02 Certain Rights and Duties of the Guarantee Trustee.

(a) The Guarantee Trustee, before the occurrence of an Event of Default and after the curing or waiving of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Guarantee Agreement, and no implied covenants shall be read into this Guarantee Agreement against the Guarantee Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.06), the Guarantee Trustee shall exercise such of the rights and powers vested in it by this Guarantee Agreement, and use the same degree of care and skill in its exercise thereof, as a prudent person would exercise or use under the circumstances in the conduct of his own affairs.

(b) No provision of this Guarantee Agreement shall be construed to relieve the Guarantee Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that:

(i) prior to the occurrence of an Event of Default and after the curing or waiving of all such Events of Default that may have occurred:

(A) the duties and obligations of the Guarantee Trustee shall be determined solely by the express provisions of this Guarantee Agreement, and the Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Guarantee Agreement, and no implied covenants or obligations shall be read into this Guarantee Agreement against the Guarantee Trustee; and

(B) in the absence of willful misconduct on the part of the Guarantee Trustee, the Guarantee Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Guarantee Trustee and conforming to the requirements of this Guarantee Agreement; provided, however, that in the case of any such certificates or opinions that by any provision hereof or the Trust Indenture Act are specifically required to be furnished to the Guarantee Trustee, the Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Guarantee Agreement or the Trust Indenture Act, as the case may be (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein);

(ii) the Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Guarantee Trustee, unless it shall be proved that the Guarantee Trustee was negligent in ascertaining the pertinent facts upon which such judgment was made;

(iii) the Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a Majority of Outstanding Preferred Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee, or exercising any trust or power conferred upon the Guarantee Trustee under this Guarantee Agreement; and

(iv) no provision of this Guarantee Agreement shall require the Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Guarantee Agreement or indemnity reasonably satisfactory to it against such risk or liability is not reasonably assured to it.

(c) Subject to the provisions of Section 3.02(a) and (b):

(i) whenever in the administration of this Guarantee Agreement, the Guarantee Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Guarantee Trustee (unless other evidence is

herein specifically prescribed) may, in the absence of willful misconduct on its part, request and rely upon an Officers' Certificate, which, upon receipt of such request, shall be promptly delivered by the Guarantor;

(ii) the Guarantee Trustee (A) may consult with counsel (which may be counsel to the Guarantor or any of its Affiliates and may include any of its employees) selected by it in good faith and with due care and the advice or opinion of such counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon and in accordance with such advice and opinion and (B) shall have the right at any time to seek, at the expense of the Guarantor, instructions concerning the administration of this Guarantee Agreement from any court of competent jurisdiction;

(iii) the Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys, and the Guarantee Trustee shall not be responsible for any willful misconduct or negligence on the part of any agent or attorney appointed by it in good faith and with due care;

(iv) the Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Guarantee Agreement at the request or direction of any Holder, unless such Holder shall have offered to the Guarantee Trustee security and indemnity satisfactory to the Guarantee Trustee against the costs, expenses (including attorneys' fees and expenses) and liabilities that might be incurred by it in complying with such request or direction; provided that nothing contained in this clause (iv) shall relieve the Guarantee Trustee of the obligation, upon the occurrence of an Event of Default (which has not been cured or waived) to exercise such of the rights and powers vested in it by this Guarantee Agreement, and to use the same degree of care and skill in this exercise as a prudent person would exercise or use under the circumstances in the conduct of his own affairs; and

(v) any action taken by the Guarantee Trustee or its agents hereunder shall bind the Holders, and the signature of the Guarantee Trustee or its agents alone shall be sufficient and effective to perform any such action; and no third party shall be required to inquire as to the authority of the Guarantee Trustee to so act, or as to its compliance with any of the terms and provisions of this Guarantee Agreement, both of which shall be conclusively evidenced by the Guarantee Trustee's or its agent's taking such action.

SECTION 3.03 Not Responsible for Recitals or Issuance of Guarantee.

The recitals contained in this Guarantee Agreement shall be taken as the statements of the Guarantor, and the Guarantee Trustee does not assume any responsibility for their correctness. The Guarantee Trustee makes no representations as to the validity or sufficiency of this Guarantee Agreement.

SECTION 3.04 The Guarantee Trustee May Own Preferred Securities.

The Guarantee Trustee, in its individual or any other capacity, may become the owner or pledgee of Preferred Securities and may otherwise deal with the Guarantor with the same rights it would have if it were not the Guarantee Trustee.

SECTION 3.05 Moneys Received by the Guarantee Trustee to Be Held in Trust Without Interest.

All moneys received by the Guarantee Trustee in respect of Guarantee Payments shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by law. The Guarantee Trustee shall be under no liability for interest on any moneys received by it hereunder except such as it may agree in writing to pay thereon.

SECTION 3.06 Compensation and Expenses of Guarantee Trustee.

The Guarantor covenants and agrees to pay to the Guarantee Trustee from time to time, and the Guarantee Trustee shall be entitled to, such compensation as the Guarantor and the Guarantee Trustee shall from time to time agree in writing (which shall not be limited by any provision of law in regard to the compensation of a Guarantee Trustee of an express trust) for all services rendered by it in the exercise and performance of any of the powers and duties hereunder of the Guarantee Trustee, and the Guarantor will pay or reimburse the Guarantee Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Guarantee Trustee in accordance with any of the provisions of this Guarantee Agreement (including the reasonable compensation and the reasonable expenses and disbursements of its counsel and of all persons not regularly in its employ) except any such expense, disbursement or advance as may arise from its negligence or willful misconduct. The Guarantor also covenants to indemnify each of the Guarantee Trustee or any predecessor Guarantee Trustee and their officers, agents, directors and employees for, and to hold them harmless against, any and all loss, liability, damage, claim or expense including taxes (other than taxes based upon, measured by or determined by the income, profit, franchise or doing business of the Guarantee Trustee) incurred without negligence or willful misconduct on the part of the Guarantee Trustee and arising out of or in connection with the acceptance or administration of this trust, including the reasonable costs and expenses of defending itself against any claim (whether asserted by the Guarantor, any Holder or any other Person) of liability in the premises. The provisions of this
Section 3.06 shall survive the termination of this Guarantee Agreement and resignation or removal of the Guarantee Trustee.

ARTICLE IV
GUARANTEE TRUSTEE

SECTION 4.01 Qualifications.

There shall at all times be a Guarantee Trustee that shall:

(i) not be an Affiliate of the Guarantor; and

(ii) be a national banking association or corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000, and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then for the purposes of this clause (ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.

If at any time the Guarantee Trustee shall cease to satisfy the requirements of clauses (i) and (ii) above, the Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 4.02. If the Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Guarantee Trustee and the Guarantor shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act.

SECTION 4.02 Appointment, Removal and Resignation of the Guarantee Trustee.

(a) Subject to Section 4.02(b), the Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor.

(b) The Guarantee Trustee shall not be removed in accordance with
Section 4.02(a) until a Successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 4.01 has been appointed and has accepted such appointment by written instrument executed by such Successor Guarantee Trustee and delivered to the Guarantor and the Guarantee Trustee being removed.

(c) The Guarantee Trustee appointed to office shall hold office until its successor shall have been appointed or until its removal or resignation.

(d) The Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument (a "Resignation Request") in writing signed by the

Guarantee Trustee and delivered to the Guarantor, which resignation shall take effect upon such delivery or upon such later date as is specified therein; provided, however, that no such resignation of the Guarantee Trustee shall be effective until a Successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 4.01 has been appointed and has accepted such appointment by instrument executed by such Successor Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee Trustee.

(e) If no Successor Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 4.02 within 60 days after delivery to the Guarantor of a Resignation Request or receipt of a notice of removal by the Guarantee Trustee, the Guarantee Trustee resigning or to be removed may, at the expense of the Guarantor petition any court of competent jurisdiction for appointment of a Successor Guarantee Trustee. Such court may thereupon after such notice, if any, as it may deem proper, appoint a Successor Guarantee Trustee.

ARTICLE V
GUARANTEE

SECTION 5.01 Guarantee.

The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by the Issuer), as and when due, regardless of any defense, right of set-off or counterclaim which the Issuer may have or assert. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or to the Guarantee Trustee for remittance to the Holders or by causing the Issuer to pay such amounts to the Holders.

SECTION 5.02 Waiver of Notice.

The Guarantor hereby waives notice of acceptance of this Guarantee Agreement and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Issuer or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. Notwithstanding anything to the contrary herein, the Guarantor retains all of its rights under the Indenture to extend the interest payment period on the Notes and the Guarantor shall not be obligated hereunder to make any Guarantee Payment during any Extension Period with respect to the Distributions on the Preferred Securities.

SECTION 5.03 Obligations Not Affected.

The obligations, covenants, agreements and duties of the Guarantor under this Guarantee Agreement shall in no way be affected or impaired by reason of the happening from time to time of any of the following:

(a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer of any express or implied agreement, covenant, term or condition relating to the Preferred Securities to be performed or observed by the Issuer;

(b) the extension of time for the payment by the Issuer of all or any portion of the Distributions (other than an extension of time for payment of Distributions that result from any Extension Period), Redemption Price, Liquidation Distribution (as defined in the Declaration) or any other sums payable under the terms of the Preferred Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Preferred Securities (other than an extension of time for payment of Distributions that result from any Extension Period);

(c) any failure, omission, delay or lack of diligence on the part of the Guarantee Trustee or the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Guarantee Trustee or the Holders pursuant to the terms hereof or of the Preferred Securities, respectively, or any action on the part of the Issuer granting indulgence or extension of any kind;

(d) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer or any of the assets of the Issuer;

(e) any invalidity of, or defect or deficiency in, the Preferred Securities;

(f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or

(g) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 5.03 that the obligations of the Guarantor with respect to the Guarantee Payments shall be absolute and unconditional under any and all circumstances.

There shall be no obligation of the Guarantee Trustee or the Holders to give notice to, or obtain consent of, the Guarantor with respect to the happening of any of the foregoing.

SECTION 5.04 Enforcement of Guarantee.

The Guarantor and the Guarantee Trustee expressly acknowledge and agree that (i) this Guarantee Agreement will be deposited with the Guarantee Trustee to be held for the benefit of the Holders; (ii) the Guarantee Trustee has the right to enforce this Guarantee Agreement on behalf of the Holders; (iii) Holders representing not less than a Majority of Outstanding Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any

remedy available to the Guarantee Trustee in respect of this Guarantee Agreement or exercising any trust or other power conferred upon the Guarantee Trustee under this Guarantee Agreement; and (iv) if the Guarantee Trustee fails to enforce this Guarantee Agreement as provided in clauses (ii) and (iii) above, any Holder may institute a legal proceeding directly against the Guarantor to enforce its rights under this Guarantee Agreement, without first instituting a legal proceeding against the Issuer, the Guarantee Trustee or any other Person. Notwithstanding the foregoing, if the Guarantor has failed to make a Guarantee Payment, a Holder may directly institute a proceeding against the Guarantor for enforcement of this Guarantee Agreement for such payment without first instituting a legal proceeding against the Issuer, the Guarantee Trustee or any other Person.

SECTION 5.05 Guarantee of Payment.

This Guarantee Agreement creates a guarantee of payment and not merely of collection. This Guarantee Agreement will not be discharged except by payment of the Guarantee Payments in full (without duplication of amounts theretofore paid by the Issuer) or upon the distribution of the Notes to the Holders as provided in the Declaration.

SECTION 5.06 Subrogation.

The Guarantor shall be subrogated to all (if any) rights of the Holders against the Issuer in respect of any amounts paid to the Holders by the Guarantor under this Guarantee Agreement; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any rights which it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Guarantee Agreement, if, at the time of any such payment, any amounts are due and unpaid under this Guarantee Agreement. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders or to the Guarantee Trustee for remittance to the Holders.

SECTION 5.07 Independent Obligations.

The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the Preferred Securities and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Guarantee Agreement notwithstanding the occurrence of any event referred to in subsections
(a) through (g), inclusive, of Section 5.03 hereof.

ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION

SECTION 6.01 Limitation of Transactions.

So long as any Preferred Securities remain outstanding, the Guarantor shall not (a) make any payment of principal, interest or premium, if any, on or repay, repurchase or redeem any debt securities that rank junior to the Notes in the right of payment issued by the Guarantor, or (b) make any guarantee payments with respect to any guarantee by the Guarantor of any securities of any of its subsidiaries if such guarantee ranks junior to the Notes in the right of payment or (c) declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of the Guarantor's capital stock, except for or as a result of (i) dividends or distributions in, or options, warrants or rights to subscribe for or purchase, the Guarantor's common stock; (ii) any declaration of a dividend in connection with the implementation of a shareholder's rights plan, or the issuance of shares under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto; (iii) a reclassification of the Guarantor's capital stock solely into shares of one or more classes or series of the Guarantor's capital stock or the exchange or conversion of one class or series of the Guarantor's capital stock for or into another class or series of the Guarantor's capital stock; (iv) the purchase of fractional interests in shares of the Guarantor's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged; and (v) the purchase of the Guarantor's common stock in connection with the Guarantor's normal course issuer bid-purchases for the satisfaction by the Guarantor of its obligations under any benefit plans for the Guarantor and the Guarantor's subsidiaries' directors, officers or employees or under any of the Guarantor's dividend reinvestment plans, if at such time (i) the Guarantor shall be in default with respect to its Guarantee Payments or other payment obligations hereunder, (ii) there shall have occurred and be continuing any event of default under the Declaration or (iii) the Guarantor shall have given notice of its election of an Extension Period and such period, or any extension thereof, is continuing. In addition, so long as any Preferred Securities remain outstanding, the Guarantor (i) will remain the sole direct or indirect owner of all of the outstanding Common Securities and shall not cause or permit the Common Securities to be transferred except to the extent such transfer is permitted under the Declaration; provided that any permitted successor of the Guarantor under the Indenture may succeed to the Guarantor's direct or indirect ownership of the Common Securities, (ii) will cause the holder of the Common Securities to satisfy the requirements of Section 5.3 of the Declaration and (iii) will use reasonable efforts to cause the Issuer to continue to be treated as a grantor trust for United States federal income tax purposes, except in connection with a distribution of Notes as provided in the Declaration.

SECTION 6.02 Subordination.

If a Trust Enforcement Event has occurred and is continuing under the Declaration the rights of the holders of the Common Securities to receive Guarantee Payments will be subordinated to the rights of the Holders of the Preferred Securities to receive Guarantee Payments.

ARTICLE VII
TERMINATION

SECTION 7.01 Termination.

This Guarantee Agreement shall terminate and be of no further force and effect (i) upon full payment of the Redemption Price of all Preferred Securities, (ii) upon the distribution of Notes to Holders and holders of Common Securities in exchange for all of the Preferred Securities and Common Securities or (iii) upon full payment of the amounts payable in accordance with the Declaration upon liquidation of the Issuer. Notwithstanding the foregoing, this Guarantee Agreement will continue to be effective or will be reinstated, as the case may be, if at any time any Holder must restore payment of any sums paid with respect to the Preferred Securities or under this Guarantee Agreement.

ARTICLE VIII
LIMITATION OF LIABILITY; INDEMNIFICATION

SECTION 8.01 Exculpation.

(a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Guarantor or any Holder for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith in accordance with this Guarantee Agreement and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Guarantee Agreement or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's negligence or willful misconduct with respect to such acts or omissions.

(b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Guarantor and upon such information, opinions, reports or statements presented to the Guarantor by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Guarantor, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses or any other facts pertinent to the existence and amount of assets from which Distributions to Holders might properly be paid.

SECTION 8.02 Indemnification.

To the fullest extent permitted by applicable law, the Guarantor shall indemnify and hold harmless each Indemnified Person from and against any loss, damage or claim incurred by such Indemnified Person by reason of any act or omission performed or omitted by such Indemnified Person in good faith in accordance with this Guarantee Agreement and in a manner such Indemnified

Person reasonably believed to be within the scope of authority conferred on such Indemnified Person by this Guarantee Agreement, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Indemnified Person by reason of negligence or willful misconduct with respect to such acts or omissions.

SECTION 8.03 Survive Termination.

The provisions of Sections 8.01 and 8.02 shall survive the termination of this Guarantee Agreement or the resignation or removal of the Guarantee Trustee.

ARTICLE IX
MISCELLANEOUS

SECTION 9.01 Successors and Assigns.

All guarantees and agreements contained in this Guarantee Agreement shall bind the successors, assignees, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Guarantee Trustee and the Holders then outstanding. Except in connection with a consolidation, merger or sale involving the Guarantor that is permitted under Article X of the Indenture, the Guarantor shall not assign its obligations hereunder.

SECTION 9.02 Amendments.

Except with respect to any changes which do not adversely affect the rights of Holders in any material respect (in which case no consent of Holders will be required), this Guarantee Agreement may only be amended with the prior approval of the Guarantor, the Guarantee Trustee and the Holders of not less than a Majority of Outstanding Preferred Securities. The provisions of Section 11.2 of the Declaration concerning meetings of Holders shall apply to the giving of such approval.

SECTION 9.03 Notices.

Any notice, request or other communication required or permitted to be given hereunder shall be in writing, in English, duly signed by the party giving such notice, and delivered, telecopied or mailed by first class mail as follows:

(a) if given to the Guarantor, to the address set forth below or such other address as the Guarantor may give notice of to the Holders:

Valero Energy Corporation
One Valero Place
P.O. Box 500
San Antonio, Texas 78212
Attention: Jay D. Browning, Corporate Secretary Facsimile: (210) 370-2988

with a copy to:

Attention: Donna M. Titzman
Facsimile: (210) 370-2497

(b) if given to the Guarantee Trustee, to the address set forth below or such other address as the Guarantee Trustee may give notice of to the Holders:

The Bank of New York
101 Barclay Street
21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration Facsimile: (212) 815-5915

(c) if given to any Holder, at the address set forth on the books and records of the Issuer.

All notices hereunder shall be deemed to have been given when (i) received in person, (ii) telecopied with receipt confirmed, or (iii) mailed by first class mail, postage prepaid, when received, except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver.

SECTION 9.04 Genders.

The masculine, feminine and neuter genders used herein shall include the masculine, feminine and neuter genders.

SECTION 9.05 Benefit.

This Guarantee Agreement is solely for the benefit of the Guarantee Trustee and the Holders and, subject to Section 3.01(a), is not separately transferable from the Preferred Securities.

SECTION 9.06 Governing Law.

THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS).

SECTION 9.07 Counterparts.

This Guarantee Agreement may be executed in counterparts, each of which shall be an original; but such counterparts shall together constitute one and the same instrument.

SECTION 9.08 Exercise of Overallotment Option.

If and to the extent that Preferred Securities are issued by the Issuer upon exercise of the overallotment option referred to in the first WHEREAS clause, the Guarantor agrees to give prompt notice thereof to the Guarantee Trustee but the failure to give such notice shall not relieve the Guarantor of any of its obligations hereunder.

SECTION 9.09 Limited Liability.

Neither the Guarantee Trustee nor the Holders, in their capacities as such, shall be personally liable for any liabilities or obligations of the Guarantor arising out of this Guarantee Agreement. The parties further hereby agree that the Holders, in their capacities as such, shall be entitled to the same limitation of personal liability extended to the stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware.

THIS GUARANTEE AGREEMENT is executed as of the day and year first above written.

VALERO ENERGY CORPORATION

THE BANK OF NEW YORK
as Guarantee Trustee

Title:

VALERO ENERGY CORPORATION

and

THE BANK OF NEW YORK,

as Purchase Contract Agent

PURCHASE CONTRACT AGREEMENT

Dated as of June 28, 2000

TABLE OF CONTENTS

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                                                                                                               ----
ARTICLE 1
         DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATIONS
         SECTION 1.01.  Definitions...............................................................................1
         SECTION 1.02.  Compliance Certificates and Opinions.....................................................11
         SECTION 1.03.  Form of Documents Delivered to Purchase Contract Agent...................................11
         SECTION 1.04.  Acts of Holders; Record Dates............................................................12
         SECTION 1.05.  Notices..................................................................................13
         SECTION 1.06.  Notice to Holders; Waiver................................................................15
         SECTION 1.07.  Effect of Headings and Table of Contents.................................................15
         SECTION 1.08.  Successors and Assigns...................................................................15
         SECTION 1.09.  Separability Clause......................................................................15
         SECTION 1.10.  Benefits of Agreement....................................................................16
         SECTION 1.11.  Governing Law............................................................................16
         SECTION 1.12.  Legal Holidays...........................................................................16
         SECTION 1.13.  Counterparts.............................................................................16
         SECTION 1.14.  Inspection of Agreement..................................................................16
         SECTION 1.15.  Appointment of Financial Institution as Agent for the Company............................16

ARTICLE 2
         CERTIFICATE FORMS
         SECTION 2.01.  Forms of Certificates Generally..........................................................17
         SECTION 2.02.  Form of Purchase Contract Agent's Certificate of Authentication..........................18

ARTICLE 3
         THE SECURITIES
         SECTION 3.01.  Amount; Form and Denominations...........................................................18
         SECTION 3.02.  Rights and Obligations Evidenced by the Certificates.....................................18
         SECTION 3.03.  Execution, Authentication, Delivery and Dating...........................................19
         SECTION 3.04.  Temporary Certificates...................................................................20
         SECTION 3.05.  Registration; Registration of Transfer and Exchange......................................20
         SECTION 3.06.  Book-entry Interests.....................................................................22
         SECTION 3.07.  Notices to Holders.......................................................................22
         SECTION 3.08.  Appointment of Successor Depositary......................................................23
         SECTION 3.09.  Definitive Certificates..................................................................23
         SECTION 3.10.  Mutilated, Destroyed, Lost and Stolen Certificates.......................................23
         SECTION 3.11.  Persons Deemed Owners....................................................................24
         SECTION 3.12.  Cancellation.............................................................................25
         SECTION 3.13.  Creation of Treasury Peps Units by Substitution of Treasury Securities...................26
         SECTION 3.14.  Reestablishment of Peps Units............................................................27

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         SECTION 3.15.  Transfer of Collateral upon Occurrence of Termination Event..............................29
         SECTION 3.16.  No Consent to Assumption.................................................................29

ARTICLE 4
         THE PREFERRED SECURITIES, SENIOR DEFERRABLE NOTES AND APPLICABLE OWNERSHIP
         INTEREST OF THE TREASURY PORTFOLIO
         SECTION 4.01.  Interest Payments; Rights to Interest Payments Preserved.................................30
         SECTION 4.02.  Notice and Voting........................................................................31
         SECTION 4.03.  Distribution of Senior Deferrable Notes; Tax Event Redemption............................32

ARTICLE 5
         THE PURCHASE CONTRACTS
         SECTION 5.01.  Purchase of Shares of Common Stock.......................................................33
         SECTION 5.02.  Payment of Purchase Price................................................................35
         SECTION 5.03.  Issuance of Shares of Common Stock.......................................................40
         SECTION 5.04.  Adjustment of Settlement Rate............................................................41
         SECTION 5.05.  Notice of Adjustments and Certain Other Events...........................................47
         SECTION 5.06.  Termination Event; Notice................................................................48
         SECTION 5.07.  Early Settlement.........................................................................48
         SECTION 5.08.  Intentionally Omitted....................................................................50
         SECTION 5.09.  No Fractional Shares.....................................................................50
         SECTION 5.10.  Charges and Taxes........................................................................51

ARTICLE 6
         REMEDIES
         SECTION 6.01.  Unconditional Right of Holders to Purchase Shares of Common Stock........................51
         SECTION 6.02.  Restoration of Rights and Remedies.......................................................51
         SECTION 6.03.  Rights and Remedies Cumulative...........................................................51
         SECTION 6.04.  Delay or Omission Not Waiver.............................................................52
         SECTION 6.05.  Undertaking for Costs....................................................................52
         SECTION 6.06.  Waiver of Stay or Extension Laws.........................................................52

ARTICLE 7
         THE PURCHASE CONTRACT AGENT
         SECTION 7.01.  Certain Duties and Responsibilities......................................................53
         SECTION 7.02.  Notice of Default........................................................................54
         SECTION 7.03.  Certain Rights of Purchase Contract Agent................................................54
         SECTION 7.04.  Not Responsible for Recitals or Issuance of Securities...................................56
         SECTION 7.05.  May Hold Securities......................................................................56
         SECTION 7.06.  Money Held in Custody....................................................................56
         SECTION 7.07.  Compensation and Reimbursement...........................................................56
         SECTION 7.08.  Corporate Purchase Contract Agent Required; Eligibility..................................57

                                                                                                               PAGE
                                                                                                               ----
         SECTION 7.09.  Resignation and Removal; Appointment of Successor........................................57
         SECTION 7.10.  Acceptance of Appointment by Successor...................................................58
         SECTION 7.11.  Merger, Conversion, Consolidation or Succession to Business..............................59
         SECTION 7.12.  Preservation of Information; Communications to Holders...................................59
         SECTION 7.13.  No Obligations of Purchase Contract Agent................................................60
         SECTION 7.14.  Tax Compliance...........................................................................60

ARTICLE 8
         SUPPLEMENTAL AGREEMENTS
         SECTION 8.01.  Supplemental Agreements Without Consent of Holders.......................................61
         SECTION 8.02.  Supplemental Agreements with Consent of Holders..........................................61
         SECTION 8.03.  Execution of Supplemental Agreements.....................................................62
         SECTION 8.04.  Effect of Supplemental Agreements........................................................63
         SECTION 8.05.  Reference to Supplemental Agreements.....................................................63

ARTICLE 9
         MERGER, CONSOLIDATION, SHARE EXCHANGE, SALE OR CONVEYANCE
         SECTION 9.01.  Covenant Not to Merge, Consolidate, Enter into a Share Exchange, Sell
                        or Convey Property Except under Certain Conditions.......................................63
         SECTION 9.02.  Rights and Duties of Successor Corporation...............................................64
         SECTION 9.03.  Officers' Certificate and Opinion of Counsel Given to Purchase Contract
                        Agent....................................................................................64

ARTICLE 10
         COVENANTS
         SECTION 10.01.  Performance under Purchase Contracts....................................................65
         SECTION 10.02.  Maintenance of Office or Agency.........................................................65
         SECTION 10.03.  Company to Reserve Common Stock.........................................................65
         SECTION 10.04.  Covenants as to Common Stock............................................................66
         SECTION 10.05.  Statements of Officers of the Company as to Default.....................................66
         SECTION 10.06.  ERISA...................................................................................66

PURCHASE CONTRACT AGREEMENT, dated as of June 28, 2000, between VALERO ENERGY CORPORATION, a Delaware corporation (the "COMPANY"), and THE BANK OF NEW YORK, a New York banking corporation, acting as purchase contract agent for the Holders of Securities (as defined herein) from time to time (the "PURCHASE CONTRACT AGENT").

RECITALS

The Company has duly authorized the execution and delivery of this Agreement and the Certificates evidencing the Securities.

All things necessary to make the Purchase Contracts, when the Certificates are executed by the Company and authenticated, executed on behalf of the Holders and delivered by the Purchase Contract Agent, as provided in this Agreement, the valid obligations of the Company, and to constitute these presents a valid agreement of the Company, in accordance with its terms, have been done. For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually agreed as follows:

ARTICLE 1
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATIONS

SECTION 1.01. Definitions.

For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires:

(a) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular, and nouns and pronouns of the masculine gender include the feminine and neuter genders;

(b) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles in the United States;

(c) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section, Exhibit or other subdivision;

(d) the following terms have the meanings given to them in the Declaration: (i) Applicable Ownership Interest; (ii) Applicable Principal Amount; (iii) Guarantee; (iv) Primary Treasury Dealer; (v) Pro Rata, (vi) Quotation Agent; (vii) Redemption Amount; (viii)

Redemption Price; (ix) Remarketing, (x) Reset Rate, (xi) Tax Event Redemption,
(xii) Tax Event Redemption Date; (xiii) Two-Year Benchmark Treasury Rate; and
(xiv) Treasury Portfolio; and

(e) the following terms have the meanings given to them in this Section 1.01(e):

"ACT" has the meaning, with respect to any Holder, set forth in Section 1.04.

"AFFILIATE" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.

"AGREEMENT" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more agreements supplemental hereto entered into pursuant to the applicable provisions hereof.

"APPLICABLE MARKET VALUE" has the meaning set forth in Section 5.01.

"APPLICANTS" has the meaning set forth in Section 7.12(b).

"BANKRUPTCY CODE" means title 11 of the United States Code, or any other law of the United States that from time to time provides a uniform system of bankruptcy laws.

"BENEFICIAL OWNER" means, with respect to a Book-Entry Interest, a Person who is the beneficial owner of such Book-Entry Interest as reflected on the books of the Depositary or on the books of a Person maintaining an account with such Depositary (directly as a Depositary Participant or as an indirect participant, in each case in accordance with the rules of such Depositary).

"BOARD OF DIRECTORS" means the board of directors of the Company or a duly authorized committee of that board.

"BOARD RESOLUTION" means one or more resolutions of the Board of Directors, a copy of which has been certified by the Secretary or an Assistant Secretary of the Company, to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification and delivered to the Purchase Contract Agent.

"BOOK-ENTRY INTEREST" means a beneficial interest in a Global Certificate, registered in the name of a Depositary or a nominee thereof, ownership and transfers of which shall be maintained and made through book entries by such Depositary as described in Section 3.06.

"BUSINESS DAY" means any day other than a Saturday or Sunday or a day on which banking institutions in New York City or San Antonio, Texas are authorized or required by law or executive order to remain closed or a day on which the Indenture Trustee or the Property Trustee is closed for business; provided that for purposes of the second paragraph of Section 1.12 only, the term "Business Day" shall also be deemed to exclude any day on which trading on the New York Stock Exchange, Inc. is closed or suspended.

"CASH SETTLEMENT" has the meaning set forth in Section 5.02(a)(i).

"CERTIFICATE" means a PEPS Units Certificate or a Treasury PEPS Units Certificate.

"CLEARING AGENCY" means an organization registered as a "Clearing Agency" pursuant to Section 17A of the Exchange Act that is acting as a depositary for the Securities and in whose name, or in the name of a nominee of that organization, shall be registered a Global Certificate and which shall undertake to effect book-entry transfers and pledges of the Securities.

"CLOSING PRICE" has the meaning set forth in Section 5.01.

"CODE" means the Internal Revenue Code of 1986, as amended.

"COLLATERAL" has the meaning set forth in Section 1.01 of the Pledge Agreement.

"COLLATERAL ACCOUNT" has the meaning set forth in Section 1.01 of the Pledge Agreement.

"COLLATERAL AGENT" means Bank One Trust Company, N.A., as Collateral Agent under the Pledge Agreement until a successor Collateral Agent shall have become such pursuant to the applicable provisions of the Pledge Agreement, and thereafter "Collateral Agent" shall mean the Person who is then the Collateral Agent thereunder.

"COLLATERAL SUBSTITUTION" has the meaning set forth in Section 3.13.

"COMMON STOCK" means the Valero Energy Corporation common stock, par value $0.01 per share.

"COMPANY" means the Person named as the "COMPANY" in the first paragraph of this instrument until a successor shall have become such pursuant to the applicable provision of this Agreement, and thereafter "Company" shall mean such successor.

"CONSTITUENT PERSON" has the meaning set forth in Section 5.04(b).

"CORPORATE TRUST OFFICE" means the principal corporate trust office of the Purchase Contract Agent at which, at any particular time, its corporate trust business shall be administered, which office at the date hereof is located at 101 Barclay Street, Floor 21 West, New York, New York 10286, Attention:
Corporate Trust Trustee Administration.

"COUPON RATE" means the percentage rate per annum at which each Senior Deferrable Note will bear interest initially and, on and after August 18, 2003, the Reset Rate.

"CURRENT MARKET PRICE" has the meaning set forth in Section 5.04(a)(8).

"DECLARATION" means the Amended and Restated Declaration of Trust of VEC Trust I, dated as of June 28, 2000, among the Company as sponsor, the trustees named therein and the holders from time to time of individual beneficial interests in the assets of the Trust.

"DEPOSITARY" means a clearing agency registered under the Exchange Act that is designated to act as Depositary for the Securities as contemplated by Sections 3.06, 3.07, 3.08 and 3.09.

"DEPOSITARY PARTICIPANT" means a broker, dealer, bank, other financial institution or other Person for whom from time to time the Depositary effects book entry transfers and pledges of securities deposited with the Depositary.

"DTC" means The Depository Trust Company.

"EARLY SETTLEMENT" has the meaning set forth in Section 5.07(a).

"EARLY SETTLEMENT AMOUNT" has the meaning set forth in Section 5.07(a).

"EARLY SETTLEMENT DATE" has the meaning set forth in Section 5.07(a).

"EARLY SETTLEMENT RATE" has the meaning set forth in Section 5.07(b).

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.

"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and any statute successor thereto, in each case as amended from time to time, and the rules and regulations promulgated thereunder.

"EXPIRATION DATE" has the meaning set forth in Section 1.04(e).

"EXPIRATION TIME" has the meaning set forth in Section 5.04(a)(6).

"FAILED REMARKETING" has the meaning set forth in Section 5.02(b).

"GLOBAL CERTIFICATE" means a Certificate that evidences all or part of the Securities and is registered in the name of a Clearing Agency or a nominee thereof.

"HOLDER" means, with respect to a Security, the Person in whose name the Security evidenced by a Certificate is registered in the Security Register; provided, however, that in determining whether the Holders of the requisite number of Securities have voted on any matter, then for the purpose of such determination only (and not for any other purpose hereunder), if the Security remains in the form of one or more Global Certificates and if the Depositary which is the registered holder of such Global Certificate has sent an omnibus proxy assigning voting rights to the Depositary Participants to whose accounts the Securities are credited on the record date, the term "HOLDER" shall mean such Depositary Participant acting at the direction of the Beneficial Owners.

"INDENTURE" means the Senior Indenture, dated as of December 12, 1997, between the Company and the Indenture Trustee (including any provisions of the TIA that are deemed incorporated therein), as supplemented by the First Supplemental Indenture dated as of June 28, 2000, pursuant to which the Senior Deferrable Notes will be issued.

"INDENTURE TRUSTEE" means The Bank of New York, a New York banking corporation, as trustee under the Indenture, or any successor thereto.

"ISSUER ORDER" or "ISSUER REQUEST" means a written order or request signed in the name of the Company by its Chairman of the Board, its President or one of its Vice Presidents, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Purchase Contract Agent.

"NON-ELECTING SHARE" has the meaning set forth in Section 5.04(b).

"NYSE" has the meaning set forth in Section 5.01.

"OFFICERS' CERTIFICATE" means a certificate signed by the Chairman of the Board, its President or one of its Vice Presidents, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of the Company, and delivered to the Purchase Contract Agent. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Agreement shall include:

(i) a statement that each officer signing the Officers' Certificate has read the covenant or condition and the definitions relating thereto;

(ii) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Officers' Certificate;

(iii) a statement that, in the opinion of each such officer, each such officer has made such examination or investigation as is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and

(iv) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with.

"OPINION OF COUNSEL" means a written opinion of counsel, who may be counsel to the Company (and who may be an employee of the Company), and who shall be reasonably acceptable to the Purchase Contract Agent. An opinion of counsel may rely on certificates as to matters of fact.

"OUTSTANDING SECURITIES" means, with respect to any Security and as of the date of determination, all Securities evidenced by Certificates theretofore authenticated, executed and delivered under this Agreement, except:

(i) If a Termination Event has occurred, (i) Treasury PEPS Units and (ii) PEPS Units for which the underlying Senior Deferrable Notes have been theretofore deposited with the Purchase Contract Agent in trust for the Holders of such PEPS Units;

(ii) Securities evidenced by Certificates theretofore cancelled by the Purchase Contract Agent or delivered to the Purchase Contract Agent for cancellation or deemed cancelled pursuant to the provisions of this Agreement; and

(iii) Securities evidenced by Certificates in exchange for or in lieu of which other Certificates have been authenticated, executed on behalf of the Holder and delivered pursuant to this Agreement, other than any such Certificate in respect of which there shall have been presented to the Purchase Contract Agent proof satisfactory to it that such Certificate is held by a bona fide purchaser in whose hands the Securities evidenced by such Certificate are valid obligations of the Company;

provided, however, that in determining whether the Holders of the requisite number of the Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company or any Affiliate of the Company shall be disregarded and deemed not to be Outstanding Securities, except that, in determining whether the Purchase Contract Agent shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities that a Responsible Officer of the Purchase Contract Agent knows to be so owned shall be so disregarded. Securities so owned that have been pledged in good faith may be regarded as Outstanding Securities if the pledgee establishes to the satisfaction of the Purchase Contract Agent the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any Affiliate of the Company.

"PAYMENT DATE" means each February 18, May 18, August 18 and November 18, commencing August 18, 2000.

"PEPS UNIT" means the collective rights and obligations of a Holder of a PEPS Units Certificate in respect of a Preferred Security, the Senior Deferrable Notes or an appropriate Applicable Ownership Interest of the Treasury Portfolio, as the case may be, subject in each case to the Pledge thereof, and the related Purchase Contract; provided, that the appropriate Applicable Ownership Interest (as specified in clause (B) of the definition of such term) of the Treasury Portfolio shall not be subject to the Pledge.

"PEPS UNITS CERTIFICATE" means a certificate evidencing the rights and obligations of a Holder in respect of the number of PEPS Units specified on such certificate.

"PERMITTED INVESTMENTS" has the meaning set forth in Section 1.01 of the Pledge Agreement.

"PERSON" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company, trust, unincorporated organization or government or any agency or political subdivision thereof or any other entity of whatever nature.

"PLAN" means an employee benefit plan that is subject to ERISA, a plan or individual retirement account that is subject to Section 4975 of the Code or any entity whose assets are considered assets of any such plan.

"PLEDGE" means the pledge under the Pledge Agreement of the Preferred Securities, the Senior Deferrable Notes, the Treasury Securities or the appropriate Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio, in each case constituting a part of the Securities.

"PLEDGE AGREEMENT" means the Pledge Agreement, dated as of June 28, 2000, among the Company, the Collateral Agent, the Securities Intermediary and the Purchase Contract Agent, on its own behalf and as attorney-in-fact for the Holders from time to time of the Securities.

"PLEDGED SENIOR DEFERRABLE NOTES" has the meaning set forth in the Pledge Agreement.

"PLEDGED PREFERRED SECURITIES" has the meaning set forth in the Pledge Agreement.

"PREDECESSOR CERTIFICATE" means a Predecessor PEPS Units Certificate or a Predecessor Treasury PEPS Units Certificate.

"PREDECESSOR PEPS UNITS CERTIFICATE" of any particular PEPS Units Certificate means every previous PEPS Units Certificate evidencing all or a portion of the rights and obligations of the Company and the Holder under the PEPS Units evidenced thereby; and, for the purposes of this definition, any PEPS Units Certificate authenticated and delivered under Section 3.10 in exchange for or in lieu of a mutilated, destroyed, lost or stolen PEPS Units Certificate shall be

deemed to evidence the same rights and obligations of the Company and the Holder as the mutilated, destroyed, lost or stolen PEPS Units Certificate.

"PREDECESSOR TREASURY PEPS UNITS CERTIFICATE" of any particular Treasury PEPS Units Certificate means every previous Treasury PEPS Units Certificate evidencing all or a portion of the rights and obligations of the Company and the Holder under the Treasury PEPS Units evidenced thereby; and, for the purposes of this definition, any Treasury PEPS Units Certificate authenticated and delivered under Section 3.10 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Treasury PEPS Units Certificate shall be deemed to evidence the same rights and obligations of the Company and the Holder as the mutilated, destroyed, lost or stolen Treasury PEPS Units Certificate.

"PREFERRED SECURITIES" means the Preferred Securities of the Trust, each having a stated liquidation amount of $25, representing preferred undivided beneficial interests in the assets of the Trust.

"PROCEEDS" has the meaning set forth in Section 1.01 of the Pledge Agreement.

"PROPERTY TRUSTEE" means The Bank of New York, as initial property trustee under the Declaration, or any successors thereto that is a financial institution unaffiliated with the Company.

"PURCHASE CONTRACT" means, with respect to any Security, the contract forming a part of such Security and obligating the Company to sell, and the Holder of such Security to purchase, shares of Common Stock on the terms and subject to the conditions set forth in Article Five hereof.

"PURCHASE CONTRACT AGENT" means the Person named as the "PURCHASE CONTRACT AGENT" in the first paragraph of this Agreement until a successor Purchase Contract Agent shall have become such pursuant to the applicable provisions of this Agreement, and thereafter "PURCHASE CONTRACT AGENT" shall mean such Person.

"PURCHASE CONTRACT SETTLEMENT DATE" means August 18, 2003.

"PURCHASE CONTRACT SETTLEMENT FUND" has the meaning set forth in
Section 5.03.

"PURCHASE PRICE" has the meaning set forth in Section 5.01.

"PURCHASED SHARES" has the meaning set forth in Section 5.04(a)(6).

"RECORD DATE" for the interest payable on any Payment Date means, as to any Global Certificate, the Business Day next preceding such Payment Date, and as to any other Certificate, the fifteenth Business Day prior to such Payment Date.

"REFERENCE DEALER" means a dealer engaged in trading of convertible securities.

"REFERENCE PRICE" has the meaning set forth in Section 5.01.

"REMARKETING AGENT" has the meaning set forth in Section 5.02(b).

"REMARKETING AGREEMENT" means the Remarketing Agreement, dated as of June 28, 2000, between the Company and the Remarketing Agent.

"REORGANIZATION EVENT" has the meaning set forth in Section 5.04(b).

"RESPONSIBLE OFFICER" means, with respect to the Purchase Contract Agent, any officer of the Purchase Contract Agent assigned by the Purchase Contract Agent to administer this Purchase Contract Agreement.

"SECURITIES INTERMEDIARY" means Bank One Trust Company, N.A., as Securities Intermediary under the Pledge Agreement until a successor Securities Intermediary shall have become such pursuant to the applicable provisions of the Pledge Agreement, and thereafter "Securities Intermediary" shall mean such successor.

"SECURITY" means a PEPS Unit or a Treasury PEPS Unit, as the case may be.

"SECURITY REGISTER" and "SECURITIES REGISTRAR" have the respective meanings set forth in Section 3.05.

"SENIOR DEFERRABLE NOTES" means the series of Senior Deferrable Notes issued by the Company under the Indenture and held by the Property Trustee.

"SETTLEMENT RATE" has the meaning set forth in Section 5.01.

"STATED AMOUNT" means $25.

"TERMINATION DATE" means the date, if any, on which a Termination Event occurs.

"TERMINATION EVENT" means the occurrence of any of the following events:

(i) at any time on or prior to the Purchase Contract Settlement Date, a judgment, decree or court order shall have been entered granting relief under the Bankruptcy Code, adjudicating the Company to be insolvent, or approving as properly filed a petition seeking reorganization or liquidation of the Company or any other similar applicable Federal or State law, and, unless such judgment, decree or order shall have been entered within 60 days prior to the Purchase Contract Settlement Date, such decree or order shall have continued undischarged and unstayed for a period of 60 days;

(ii) a judgment, decree or court order for the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of the Company or of its property, or for the termination or liquidation of its affairs, shall have been entered, and, unless such judgment, decree or order shall have been entered within 60 days prior to the Purchase Contract Settlement Date, such judgment, decree or order shall have continued undischarged and unstayed for a period of 60 days; or

(iii) at any time on or prior to the Purchase Contract Settlement Date, the Company shall file a petition for relief under the Bankruptcy Code, or shall consent to the filing of a bankruptcy proceeding against it, or shall file a petition or answer or consent seeking reorganization or liquidation under the Bankruptcy Code or any other similar applicable Federal or State law, or shall consent to the filing of any such petition, or shall consent to the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of it or of its property, or shall make an assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due.

"THRESHOLD APPRECIATION PRICE" has the meaning set forth in Section 5.01.

"TIA" means the Trust Indenture Act of 1939, as amended from time to time, or any successor legislation.

"TRADING DAY" has the meaning set forth in Section 5.01.

"TREASURY PEPS UNIT" means, following the substitution of Treasury Securities for Preferred Securities or Senior Deferrable Notes as collateral to secure a Holder's obligations under the Purchase Contract, the collective rights and obligations of a Holder of a Treasury PEPS Units Certificate in respect of such Treasury Securities, subject to the Pledge thereof, and the related Purchase Contract.

"TREASURY PEPS UNITS CERTIFICATE" means a certificate evidencing the rights and obligations of a Holder in respect of the number of Treasury PEPS Units specified on such certificate.

"TREASURY SECURITIES" means zero-coupon U.S. Treasury Securities (CUSIP No. 912820BG1) which mature on August 15, 2003.

"TRUST" means VEC Trust I, a statutory business formed under the laws of the State of Delaware, or any successor thereto by merger or consolidation.

"UNDERWRITING AGREEMENT" means the Underwriting Agreement, dated as of June 22, 2000, between the Company, VEC Trust I and the Underwriters identified in Schedule 1 thereto.

"VICE PRESIDENT" means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president."

SECTION 1.02. Compliance Certificates and Opinions.

Except as otherwise expressly provided by this Agreement, upon any application or request by the Company to the Purchase Contract Agent to take any action in accordance with any provision of this Agreement, the Company shall furnish to the Purchase Contract Agent an Officers' Certificate stating that all conditions precedent, if any, provided for in this Agreement relating to the proposed action have been complied with and, if requested by the Purchase Contract Agent, an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Agreement relating to such particular application or request, no additional certificate or opinion need be furnished.

Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Agreement shall include:

(i) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto;

(ii) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

(iii) a statement that, in the opinion of each such individual, he or she has made such examination or investigation as is necessary to enable such individual to express an informed opinion as to whether or not such covenant or condition has been complied with; and

(iv) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with.

SECTION 1.03. Form of Documents Delivered to Purchase Contract Agent.

In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to

such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous.

Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Agreement, they may, but need not, be consolidated and form one instrument.

SECTION 1.04. Acts of Holders; Record Dates.

(a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Agreement to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Purchase Contract Agent and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "ACT" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Agreement and (subject to Section 7.01) conclusive in favor of the Purchase Contract Agent and the Company, if made in the manner provided in this Section.

(b) The fact and date of the execution by any Person of any such instrument or writing may be proved in any manner which the Purchase Contract Agent deems sufficient.

(c) The ownership of Securities shall be proved by the PEPS Units Register or the Treasury PEPS Units Register, as the case may be.

(d) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Certificate evidencing such Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Purchase Contract Agent or the Company in reliance thereon, whether or not notation of such action is made upon such Certificate.

(e) The Company may set any date as a record date for the purpose of determining the

Holders of Outstanding Securities entitled to give, make or take any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Agreement to be given, made or taken by Holders of Securities. If any record date is set pursuant to this paragraph, the Holders of the Outstanding PEPS Units and the Outstanding Treasury PEPS Units, as the case may be, on such record date, and no other Holders, shall be entitled to take the relevant action with respect to the PEPS Units or the Treasury PEPS Units, as the case may be, whether or not such Holders remain Holders after such record date; provided that no such action shall be effective hereunder unless taken prior to or on the applicable Expiration Date by Holders of the requisite number of Outstanding Securities on such record date. Nothing contained in this paragraph shall be construed to prevent the Company from setting a new record date for any action for which a record date has previously been set pursuant to this paragraph (whereupon the record date previously set shall automatically and with no action by any Person be cancelled and be of no effect), and nothing contained in this paragraph shall be construed to render ineffective any action taken by Holders of the requisite number of Outstanding Securities on the date such action is taken. Promptly after any record date is set pursuant to this paragraph, the Company, at its own expense, shall cause notice of such record date, the proposed action by Holders and the applicable Expiration Date to be given to the Purchase Contract Agent in writing and to each Holder of Securities in the manner set forth in Section 1.06.

With respect to any record date set pursuant to this Section, the Company may designate any date as the "EXPIRATION DATE" and from time to time may change the Expiration Date to any earlier or later day; provided that no such change shall be effective unless notice of the proposed new Expiration Date is given to the Purchase Contract Agent in writing, and to each Holder of Securities in the manner set forth in Section 1.06, prior to or on the existing Expiration Date. If an Expiration Date is not designated with respect to any record date set pursuant to this Section, the Company shall be deemed to have initially designated the 180th day after such record date as the Expiration Date with respect thereto, subject to its right to change the Expiration Date as provided in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be later than the 180th day after the applicable record date.

SECTION 1.05. Notices.

Any notice or communication is duly given if in writing and delivered in Person or mailed by first-class mail (registered or certified, return receipt requested), telecopier (with receipt confirmed) or overnight air courier guaranteeing next day delivery, to the others' address; provided that notice shall be deemed given to the Purchase Contract Agent only upon receipt thereof:

If to the Purchase Contract Agent:

The Bank of New York

101 Barclay Street
Floor 21 West
New York, New York 10286 Telecopier No.: (212) 815-5915 Attention: Corporate Trust Trustee Administration

If to the Company:

Valero Energy Corporation

One Valero Energy Place P.O. Box 500
San Antonio, Texas 78212 (78292-0500) Telecopier No.: (210) 370-2988 Attention: Jay D. Browning

With a copy to:

Valero Energy Corporation

One Valero Energy Place P.O. Box 500
San Antonio, Texas 78212 (78292-0500) Telecopier No.: (210) 370-2497 Attention: Donna M. Titzman

If to the Collateral Agent:

Bank One Trust Company, N.A.
One North State Street, 9th Floor
Chicago, Illinois 60670-0126

Telecopier No.: (312) 407-1708 Attention: Corporate Trust Administration

If to the Property Trustee:

The Bank of New York

101 Barclay Street
Floor 21 West
New York, New York 10286 Telecopier No.: (212) 815-5915 Attention: Corporate Trust Trustee Administration

If to the Indenture Trustee:

The Bank of New York

101 Barclay Street
Floor 21 West
New York, New York 10286 Telecopier No.: (212) 815-5915 Attention: Corporate Trust Trustee Administration

SECTION 1.06. Notice to Holders; Waiver.

Where this Agreement provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at its address as it appears in the applicable Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Agreement provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Purchase Contract Agent, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.

In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Purchase Contract Agent shall constitute a sufficient notification for every purpose hereunder.

SECTION 1.07. Effect of Headings and Table of Contents.

The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.

SECTION 1.08. Successors and Assigns.

All covenants and agreements in this Agreement by the Company and the Purchase Contract Agent shall bind their respective successors and assigns, whether so expressed or not.

SECTION 1.09. Separability Clause.

In case any provision in this Agreement or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions hereof and thereof shall not in any way be affected or impaired thereby.

SECTION 1.10. Benefits of Agreement.

Nothing contained in this Agreement or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder and, to the extent provided hereby, the Holders, any benefits or any legal or equitable right, remedy or claim under this Agreement. The Holders from time to time shall be beneficiaries of this Agreement and shall be bound by all of the terms and conditions hereof and of the Securities evidenced by their Certificates by their acceptance of delivery of such Certificates.

SECTION 1.11. Governing Law.

This Agreement and the Securities shall be governed by, and construed in accordance with, the laws of the State of New York.

SECTION 1.12. Legal Holidays.

In any case where any Payment Date, any Purchase Contract Settlement Date or Early Settlement Date shall not be a Business Day, (notwithstanding any other provision of this Agreement or the Securities), Purchase Contracts shall not be performed and Early Settlement shall not be effected on such date, but Purchase Contracts shall be performed or Early Settlement effected, as applicable, on the next succeeding Business Day with the same force and effect as if made on such Payment Date, Purchase Contract Settlement Date, or Early Settlement Date, as applicable, provided that no interest shall accrue or be payable by the Company or to any Holder for the period from and after any such Purchase Contract Settlement Date, or Early Settlement Date, as applicable, except that, if such next succeeding Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day with the same force and effect as if made on such Purchase Contract Settlement Date, or Early Settlement Date, as applicable.

SECTION 1.13. Counterparts.

This Agreement may be executed in any number of counterparts by the parties hereto on separate counterparts, each of which, when so executed and delivered, shall be deemed an original, but all such counterparts shall together constitute one and the same instrument.

SECTION 1.14. Inspection of Agreement.

A copy of this Agreement shall be available at all reasonable times during normal business hours at the Corporate Trust Office for inspection by any Holder or Beneficial Owner.

SECTION 1.15. Appointment of Financial Institution as Agent for the Company.

The Company may appoint a financial institution (which may be the Collateral Agent) to

act as its agent in performing its obligations and in accepting and enforcing performance of the obligations of the Purchase Contract Agent and the Holders, under this Agreement and the Purchase Contracts, by giving notice of such appointment in the manner provided in Section 1.05 hereof. Any such appointment shall not relieve the Company in any way from its obligations hereunder.

ARTICLE 2
CERTIFICATE FORMS

SECTION 2.01. Forms of Certificates Generally.

The Certificates (including the form of Purchase Contract forming part of each Security evidenced thereby) shall be in substantially the form set forth in Exhibit A hereto (in the case of Certificates evidencing PEPS Units) or Exhibit B hereto (in the case of Certificates evidencing Treasury PEPS Units), with such letters, numbers or other marks of identification or designation and such legends or endorsements printed, lithographed or engraved thereon as may be required by the rules of any securities exchange on which the Securities are listed or any depositary therefor, or as may, consistently herewith, be determined by the officers of the Company executing such Certificates, as evidenced by their execution of the Certificates.

The definitive Certificates shall be printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers of the Company executing the Securities evidenced by such Certificates, consistent with the provisions of this Agreement, as evidenced by their execution thereof.

Every Global Certificate authenticated, executed on behalf of the Holders and delivered hereunder shall bear a legend in substantially the following form:

"THIS CERTIFICATE IS A GLOBAL CERTIFICATE WITHIN THE MEANING OF THE PURCHASE CONTRACT AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (THE "DEPOSITARY"), OR A NOMINEE OF THE DEPOSITARY. THIS CERTIFICATE IS EXCHANGEABLE FOR CERTIFICATES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE PURCHASE CONTRACT AGREEMENT AND NO TRANSFER OF THIS CERTIFICATE (OTHER THAN A TRANSFER OF THIS CERTIFICATE AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REQUESTED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REGISTERED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN."

SECTION 2.02. Form of Purchase Contract Agent's Certificate of Authentication.

The form of the Purchase Contract Agent's certificate of authentication of the Securities shall be in substantially the form set forth on the form of the applicable Certificates.

ARTICLE 3
THE SECURITIES

SECTION 3.01. Amount; Form and Denominations.

The aggregate number of Securities evidenced by Certificates authenticated, executed on behalf of the Holders and delivered hereunder is limited to 6,000,000 (subject to increase up to a maximum of 900,000 to the extent the over-allotment option granted to the Underwriters in the Underwriting Agreement is exercised), except for Certificates authenticated, executed and delivered upon registration of transfer of, in exchange for, or in lieu of, other Certificates pursuant to Section 3.04, 3.05, 3.10, 3.13, 3.14, 5.07 or 8.05.

The Certificates shall be issuable only in registered form and only in denominations of a single PEPS Unit or Treasury PEPS Unit and any integral multiple thereof.

SECTION 3.02. Rights and Obligations Evidenced by the Certificates.

Each PEPS Units Certificate shall evidence the number of PEPS Units specified therein, with each such PEPS Unit representing (1) the ownership by the Holder thereof of a beneficial interest in a Preferred Security, a Senior Deferrable Note or the Applicable Ownership Interest of the Treasury Portfolio, as the case may be, subject to the Pledge of such Preferred Security, such Senior Note or the Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio, as the case may be, by such Holder pursuant to the Pledge Agreement, and (2) the rights and obligations of the Holder thereof and the Company under one Purchase Contract. The Purchase Contract Agent as attorney-in-fact for, and on behalf of, the

Holder of each PEPS Unit shall pledge, pursuant to the Pledge Agreement, the Preferred Security, the Senior Note or the Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio, as the case may be, forming a part of such PEPS Unit, to the Collateral Agent and grant to the Collateral Agent a security interest in the right, title and interest of such Holder in such Preferred Security, such Senior Note or the Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio, as the case may be, for the benefit of the Company, to secure the obligation of the Holder under each Purchase Contract to purchase shares of Common Stock.

Upon the formation of a Treasury PEPS Unit pursuant to Section 3.13, each Treasury PEPS Units Certificate shall evidence the number of Treasury PEPS Units specified therein, with each such Treasury PEPS Unit representing (1) the ownership by the Holder thereof of a 1/40 undivided beneficial interest in a Treasury Security with a principal amount equal to $1,000, subject to the Pledge of such Treasury Security by such Holder pursuant to the Pledge Agreement, and
(2) the rights and obligations of the Holder thereof and the Company under one Purchase Contract.

Prior to the purchase of shares of Common Stock under each Purchase Contract, such Purchase Contracts shall not entitle the Holder of a Security to any of the rights of a holder of shares of Common Stock, including, without limitation, the right to vote or receive any dividends or other payments or to consent or to receive notice as a shareholder in respect of the meetings of shareholders or for the election of directors of the Company or for any other matter, or any other rights whatsoever as a shareholder of the Company.

SECTION 3.03. Execution, Authentication, Delivery and Dating.

Subject to the provisions of Sections 3.13 and 3.14 hereof, upon the execution and delivery of this Agreement, and at any time and from time to time thereafter, the Company may deliver Certificates executed by the Company to the Purchase Contract Agent for authentication, execution on behalf of the Holders and delivery, together with its Issuer Order for authentication of such Certificates, and the Purchase Contract Agent in accordance with such Issuer Order shall authenticate, execute on behalf of the Holders and deliver such Certificates.

The Certificates shall be executed on behalf of the Company by its Chairman of the Board, its President or one of its Vice Presidents. The signature of any of these officers on the Certificates may be manual or facsimile.

Certificates bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Certificates or did not hold such offices at the date of such Certificates.

No Purchase Contract evidenced by a Certificate shall be valid until such Certificate has

been executed on behalf of the Holder by the manual signature of an authorized signatory of the Purchase Contract Agent, as such Holder's attorney-in-fact. Such signature by an authorized signatory of the Purchase Contract Agent shall be conclusive evidence that the Holder of such Certificate has entered into the Purchase Contracts evidenced by such Certificate.

Each Certificate shall be dated the date of its authentication.

No Certificate shall be entitled to any benefit under this Agreement or be valid or obligatory for any purpose unless there appears on such Certificate a certificate of authentication substantially in the form provided for herein executed by an authorized signatory of the Purchase Contract Agent by manual signature, and such certificate upon any Certificate shall be conclusive evidence, and the only evidence, that such Certificate has been duly authenticated and delivered hereunder.

SECTION 3.04. Temporary Certificates.

Pending the preparation of definitive Certificates, the Company shall execute and deliver to the Purchase Contract Agent, and the Purchase Contract Agent shall authenticate, execute on behalf of the Holders, and deliver, in lieu of such definitive Certificates, temporary Certificates which are in substantially the form set forth in Exhibit A or Exhibit B hereto, as the case may be, with such letters, numbers or other marks of identification or designation and such legends or endorsements printed, lithographed or engraved thereon as may be required by the rules of any securities exchange on which the PEPS Units or Treasury PEPS Units, as the case may be, are listed, or as may, consistently herewith, be determined by the officers of the Company executing such Certificates, as evidenced by their execution of the Certificates.

If temporary Certificates are issued, the Company will cause definitive Certificates to be prepared without unreasonable delay. After the preparation of definitive Certificates, the temporary Certificates shall be exchangeable for definitive Certificates upon surrender of the temporary Certificates at the Corporate Trust Office, at the expense of the Company and without charge to the Holder. Upon surrender for cancellation of any one or more temporary Certificates, the Company shall execute and deliver to the Purchase Contract Agent, and the Purchase Contract Agent shall authenticate, execute on behalf of the Holder, and deliver in exchange therefor, one or more definitive Certificates of like tenor and denominations and evidencing a like number of Securities as the temporary Certificate or Certificates so surrendered. Until so exchanged, the temporary Certificates shall in all respects evidence the same benefits and the same obligations with respect to the Securities, evidenced thereby as definitive Certificates.

SECTION 3.05. Registration; Registration of Transfer and Exchange.

The Purchase Contract Agent shall keep at the Corporate Trust Office a register (the "SECURITY REGISTER") in which, subject to such reasonable regulations as it may prescribe, the Purchase Contract Agent shall provide for the registration of Certificates and of transfers of

Certificates (the Purchase Contract Agent, in such capacity, the "SECURITY REGISTRAR"). The Security Registrar shall record separately the registration and transfer of the Certificates evidencing PEPS Units and Treasury PEPS Units

Upon surrender for registration of transfer of any Certificate at the Corporate Trust Office, the Company shall execute and deliver to the Purchase Contract Agent, and the Purchase Contract Agent shall authenticate, execute on behalf of the designated transferee or transferees, and deliver, in the name of the designated transferee or transferees, one or more new Certificates of any authorized denominations, like tenor, and evidencing a like number of PEPS Units or Treasury PEPS Units, as the case may be.

At the option of the Holder, Certificates may be exchanged for other Certificates, of any authorized denominations and evidencing a like number of PEPS Units or Treasury PEPS Units, as the case may be, upon surrender of the Certificates to be exchanged at the Corporate Trust Office. Whenever any Certificates are so surrendered for exchange, the Company shall execute and deliver to the Purchase Contract Agent, and the Purchase Contract Agent shall authenticate, execute on behalf of the Holder, and deliver the Certificates which the Holder making the exchange is entitled to receive.

All Certificates issued upon any registration of transfer or exchange of a Certificate shall evidence the ownership of the same number of PEPS Units or Treasury PEPS Units, as the case may be, and be entitled to the same benefits and subject to the same obligations, under this Agreement as the PEPS Units or Treasury PEPS Units, as the case may be, evidenced by the Certificate surrendered upon such registration of transfer or exchange.

Every Certificate presented or surrendered for registration of transfer or exchange shall (if so required by the Purchase Contract Agent) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Purchase Contract Agent duly executed, by the Holder thereof or its attorney duly authorized in writing.

No service charge shall be made for any registration of transfer or exchange of a Certificate, but the Company and the Purchase Contract Agent may require payment from the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Certificates, other than any exchanges pursuant to Sections 3.06 and 8.05 not involving any transfer.

Notwithstanding the foregoing, the Company shall not be obligated to execute and deliver to the Purchase Contract Agent, and the Purchase Contract Agent shall not be obligated to authenticate, execute on behalf of the Holder and deliver any Certificate in exchange for any other Certificate presented or surrendered for registration of transfer or for exchange on or after the Business Day immediately preceding the earlier of the Purchase Contract Settlement Date or the Termination Date. In lieu of delivery of a new Certificate, upon satisfaction of the applicable conditions specified above in this Section and receipt of appropriate registration or transfer instructions from such Holder, the Purchase Contract Agent shall:

(i) if the Purchase Contract Settlement Date has occurred, deliver the shares of Common Stock issuable in respect of the Purchase Contracts forming a part of the Securities evidenced by such other Certificate; or

(ii) if a Termination Event shall have occurred prior to the Purchase Contract Settlement Date, transfer the Preferred Securities, the Senior Deferrable Notes, the Treasury Securities, or the appropriate Applicable Ownership Interest of the Treasury Portfolio, as the case may be, evidenced thereby, in each case subject to the applicable conditions and in accordance with the applicable provisions of Article Five hereof.

SECTION 3.06. Book-entry Interests.

The Certificates, on original issuance, will be issued in the form of one or more fully registered Global Certificates, to be delivered to the Depositary or its custodian by, or on behalf of, the Company. The Company hereby designates DTC as the initial Depositary. Such Global Certificates shall initially be registered on the books and records of the Company in the name of Cede & Co., the nominee of the Depositary, and no Beneficial Owner will receive a definitive Certificate representing such Beneficial Owner's interest in such Global Certificate, except as provided in Section 3.09. The Purchase Contract Agent shall enter into an agreement with the Depositary if so requested by the Company. Unless and until definitive, fully registered Certificates have been issued to Beneficial Owners pursuant to Section 3.09:

(i) the provisions of this Section 3.06 shall be in full force and effect;

(ii) the Company shall be entitled to deal with the Depositary for all purposes of this Agreement (including receiving approvals, votes or consents hereunder) as the Holder of the Securities and the sole holder of the Global Certificates and shall have no obligation to the Beneficial Owners;

(iii) to the extent that the provisions of this Section 3.06 conflict with any other provisions of this Agreement, the provisions of this Section 3.06 shall control; and

(iv) the rights of the Beneficial Owners shall be exercised only through the Depositary and shall be limited to those established by law and agreements between such Beneficial Owners and the Depositary or the Depositary Participants.

SECTION 3.07. Notices to Holders.

Whenever a notice or other communication to the Holders is required to be given under this Agreement, the Company or the Company's agent shall give such notices and communications to the Holders and, with respect to any Securities registered in the name of the

Depositary or the nominee of the Depositary, the Company or the Company's agent shall, except as set forth herein, have no obligations to the Beneficial Owners.

SECTION 3.08. Appointment of Successor Depositary.

If the Depositary elects to discontinue its services as securities depositary with respect to the Securities, the Company may, in its sole discretion, appoint a successor Depositary with respect to the Securities.

SECTION 3.09. Definitive Certificates.

If:

(i) the Depositary elects to discontinue its services as securities depositary with respect to the Securities and a successor Depositary is not appointed within 90 days after such discontinuance pursuant to Section 3.08; or

(ii) the Company elects after consultation with the Purchase Contract Agent to terminate the book-entry system for the Securities,

then (x) definitive Certificates shall be prepared by the Company with respect to such Securities and delivered to the Purchase Contract Agent and (y) upon surrender of the Global Certificates representing the Securities by the Depositary, accompanied by registration instructions, the Company shall cause definitive Certificates to be delivered to Beneficial Owners in accordance with the instructions of the Depositary. The Company shall not be liable for any delay in delivery of such instructions and may conclusively rely on and shall be protected in relying on, such instructions. Each definitive Certificate so delivered shall evidence Securities of the same kind and tenor as the Global Certificate so surrendered in respect thereof.

SECTION 3.10. Mutilated, Destroyed, Lost and Stolen Certificates.

If any mutilated Certificate is surrendered to the Purchase Contract Agent, the Company shall execute and deliver to the Purchase Contract Agent, and the Purchase Contract Agent shall authenticate, execute on behalf of the Holder, and deliver in exchange therefor, a new Certificate, evidencing the same number of PEPS Units or Treasury PEPS Units, as the case may be, and bearing a Certificate number not contemporaneously outstanding.

If there shall be delivered to the Company and the Purchase Contract Agent (i) evidence to their satisfaction of the destruction, loss or theft of any Certificate, and (ii) such security or indemnity as may be required by them to hold each of them and any agent of any of them harmless, then, in the absence of notice to the Company or the Purchase Contract Agent that such Certificate has been acquired by a bona fide purchaser, the Company shall execute and deliver to the Purchase Contract Agent, and the Purchase Contract Agent shall authenticate, execute on

behalf of the Holder, and deliver to the Holder, in lieu of any such destroyed, lost or stolen Certificate, a new Certificate, evidencing the same number of PEPS Units or Treasury PEPS Units, as the case may be, and bearing a Certificate number not contemporaneously outstanding.

Notwithstanding the foregoing, the Company shall not be obligated to execute and deliver to the Purchase Contract Agent, and the Purchase Contract Agent shall not be obligated to authenticate, execute on behalf of the Holder, and deliver to the Holder, a Certificate on or after the Business Day immediately preceding the earlier of the Purchase Contract Settlement Date or the Termination Date. In lieu of delivery of a new Certificate, upon satisfaction of the applicable conditions specified above in this Section and receipt of appropriate registration or transfer instructions from such Holder, the Purchase Contract Agent shall:

(i) if the Purchase Contract Settlement Date has occurred, deliver the shares of Common Stock issuable in respect of the Purchase Contracts forming a part of the Securities evidenced by such Certificate; or

(ii) if a Termination Event shall have occurred prior to the Purchase Contract Settlement Date, transfer the Preferred Securities, the Senior Deferrable Notes, the Treasury Securities or the appropriate Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio, as the case may be, evidenced thereby, in each case subject to the applicable conditions and in accordance with the applicable provisions of Article Five hereof.

Upon the issuance of any new Certificate under this Section, the Company and the Purchase Contract Agent may require the payment by the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Purchase Contract Agent) connected therewith.

Every new Certificate issued pursuant to this Section in lieu of any destroyed, lost or stolen Certificate shall constitute an original additional contractual obligation of the Company and of the Holder in respect of the Security evidenced thereby, whether or not the destroyed, lost or stolen Certificate (and the Securities evidenced thereby) shall be at any time enforceable by anyone, and shall be entitled to all the benefits and be subject to all the obligations of this Agreement equally and proportionately with any and all other Certificates delivered hereunder.

The provisions of this Section are exclusive and shall preclude, to the extent lawful, all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Certificates.

SECTION 3.11. Persons Deemed Owners.

Prior to due presentment of a Certificate for registration of transfer, the Company and the Purchase Contract Agent, and any agent of the Company or the Purchase Contract Agent, may

treat the Person in whose name such Certificate is registered as the owner of the Security evidenced thereby, for the purpose of receiving distributions on the Preferred Securities, the Treasury Securities, the Senior Deferrable Notes, or on the maturing quarterly interest strips of the Treasury Portfolio, as applicable, performance of the Purchase Contracts and for all other purposes whatsoever, whether or not any distributions on the Preferred Securities, the Treasury Securities, the Senior Deferrable Notes, or Treasury Portfolio, as applicable, constituting a part of the Security evidenced thereby shall be overdue and notwithstanding any notice to the contrary, and neither the Company nor the Purchase Contract Agent, nor any agent of the Company or the Purchase Contract Agent, shall be affected by notice to the contrary.

Notwithstanding the foregoing, with respect to any Global Certificate, nothing contained herein shall prevent the Company, the Purchase Contract Agent or any agent of the Company or the Purchase Contract Agent, from giving effect to any written certification, proxy or other authorization furnished by the Depositary (or its nominee), as a Holder, with respect to such Global Certificate or impair, as between such Depositary and the related Beneficial Owner, the operation of customary practices governing the exercise of rights of the Depositary (or its nominee) as Holder of such Global Certificate.

SECTION 3.12. Cancellation.

All Certificates surrendered for delivery of shares of Common Stock on or after the Purchase Contract Settlement Date, upon the transfer of Preferred Securities, Senior Deferrable Notes, the appropriate Applicable Ownership Interest (as specified in clause (A) of the definition of that term) of the Treasury Portfolio or Treasury Securities, as the case may be, after the occurrence of a Termination Event or pursuant to an Early Settlement, or upon the registration of transfer or exchange of a Security, or a Collateral Substitution or the reestablishment of PEPS Units shall, if surrendered to any Person other than the Purchase Contract Agent, be delivered to the Purchase Contract Agent and, if not already cancelled, shall be promptly cancelled by it. The Company may at any time deliver to the Purchase Contract Agent for cancellation any Certificates previously authenticated, executed and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Certificates so delivered shall, upon Issuer Order, be promptly cancelled by the Purchase Contract Agent. No Certificates shall be authenticated, executed on behalf of the Holder and delivered in lieu of or in exchange for any Certificates cancelled as provided in this Section, except as expressly permitted by this Agreement. All cancelled Certificates held by the Purchase Contract Agent shall be disposed of in accordance with its customary practices.

If the Company or any Affiliate of the Company shall acquire any Certificate, such acquisition shall not operate as a cancellation of such Certificate unless and until such Certificate is delivered to the Purchase Contract Agent cancelled or for cancellation.

SECTION 3.13. Creation of Treasury Peps Units by Substitution of Treasury Securities.

Subject to the conditions set forth in this Agreement, a Holder may separate the Preferred Securities or the Senior Deferrable Notes, as applicable, from the related Purchase Contracts in respect of such Holder's PEPS Units by substituting for such Preferred Securities or Senior Deferrable Notes, as applicable, Treasury Securities in an aggregate principal amount equal to the aggregate liquidation amount of such Preferred Securities or the aggregate principal amount of such Senior Deferrable Notes, as applicable (a "COLLATERAL SUBSTITUTION"), at any time from and after the date of this Agreement and prior to or on the seventh Business Day immediately preceding August 18, 2003. To effect such substitution, the Holder must:

(1) deposit with the Securities Intermediary Treasury Securities having an aggregate principal amount equal to the aggregate liquidation amount of the Preferred Securities or the aggregate principal amount of the Senior Deferrable Notes comprising part of such PEPS Units, as the case may be; and

(2) transfer the related PEPS Units to the Purchase Contract Agent accompanied by a notice to the Purchase Contract Agent, substantially in the form of Exhibit C hereto, (i) stating that the Holder has transferred the relevant amount of Treasury Securities to the Securities Intermediary and (ii) requesting that the Purchase Contract Agent instruct the Collateral Agent to release the Preferred Securities or the Senior Deferrable Notes, as the case may be, underlying such PEPS Units, whereupon the Purchase Contract Agent shall promptly provide an instruction to such effect to the Collateral Agent, substantially in the form of Exhibit A to the Pledge Agreement.

Upon receipt of the Treasury Securities described in clause (1) above and the instruction described in clause (2) above, in accordance with the terms of the Pledge Agreement, the Collateral Agent will cause the Securities Intermediary to effect the release of such Preferred Securities or the Senior Deferrable Notes, as the case may be, from the Pledge, free and clear of the Company's security interest therein, and the transfer of such Preferred Securities or the Senior Deferrable Notes, as the case may be, to the Purchase Contract Agent on behalf of the Holder. Upon receipt thereof, the Purchase Contract Agent shall promptly:

(i) cancel the related PEPS Units;

(ii) transfer the Preferred Securities or the Senior Deferrable Notes, as the case may be, to the Holder; and

(iii) authenticate, execute on behalf of such Holder and deliver a Treasury PEPS Units Certificate executed by the Company in accordance with Section 3.03 evidencing the same number of Purchase Contracts as were evidenced by the cancelled PEPS Units.

Holders who elect to separate the Preferred Securities or the Senior Deferrable Notes, as the case may be, from the related Purchase Contracts and to substitute Treasury Securities for such Preferred Securities or the Senior Deferrable Notes, as the case may be, shall be responsible for any fees or expenses payable to the Collateral Agent for its services as Collateral Agent in respect of the substitution, and the Company shall not be responsible for any such fees or expenses.

Holders may make Collateral Substitutions only in integral multiples of 40 PEPS Units. If a Tax Event Redemption has occurred, Holders may no longer convert their PEPS Units into Treasury PEPS Units.

In the event a Holder making a Collateral Substitution pursuant to this
Section 3.13 fails to effect a book-entry transfer of the PEPS Units or fails to deliver PEPS Units Certificates to the Purchase Contract Agent after depositing Treasury Securities with the Collateral Agent, any distributions on the Preferred Securities or the Senior Deferrable Notes constituting a part of such PEPS Units, as the case may be, shall be held in the name of the Purchase Contract Agent or its nominee in trust for the benefit of such Holder, until such PEPS Units are so transferred or the PEPS Units Certificate is so delivered, as the case may be, or, such Holder provides evidence satisfactory to the Company and the Purchase Contract Agent that such PEPS Units Certificate has been destroyed, lost or stolen, together with any indemnity that may be required by the Purchase Contract Agent and the Company.

Except as described in this Section 3.13, for so long as the Purchase Contract underlying a PEPS Unit remains in effect, such PEPS Unit shall not be separable into its constituent parts, and the rights and obligations of the Holder in respect of the Preferred Securities or the Senior Deferrable Notes, as the case may be, and the Purchase Contract comprising such PEPS Unit may be acquired, and may be transferred and exchanged, only as a PEPS Unit.

SECTION 3.14. Reestablishment of Peps Units.

Subject to the conditions set forth in this Agreement, a Holder of Treasury PEPS Units may reestablish PEPS Units at any time (i) prior to or on the seventh Business Day immediately preceding August 18, 2003, by:

(1) depositing with the Securities Intermediary Preferred Securities or Senior Deferrable Notes, as the case may be, having an aggregate liquidation amount (in the case of Preferred Securities) or aggregate principal amount (in the case of Senior Deferrable Notes), as the case may be, equal to the aggregate principal amount at maturity of the Treasury Securities comprising part of the Treasury PEPS Units; and

(2) transferring the related Treasury PEPS Units to the Purchase Contract Agent accompanied by a notice to the Purchase Contract Agent, substantially in the form of Exhibit C hereto, (i) stating that the Holder has transferred the relevant amount of Preferred Securities or Senior Deferrable Notes, as the case may be, to the Securities Intermediary and (ii) requesting that the Purchase Contract Agent instruct the Collateral Agent to release the Treasury Securities underlying such Treasury PEPS Units, whereupon the Purchase Contract Agent shall promptly provide an instruction to such effect to the Collateral Agent, substantially in the form of Exhibit C to the Pledge Agreement.

Upon receipt of the Preferred Securities or the Senior Deferrable Notes, as the case may be, described in clause (1) above and the instruction described in clause (2) above, in accordance with the terms of the Pledge Agreement, the Collateral Agent will cause the Securities Intermediary to effect the release of the Treasury Securities having a corresponding aggregate principal amount at maturity from the Pledge, free and clear of the Company's security interest therein, and the transfer to the Purchase Contract Agent on behalf of the Holder. Upon receipt thereof, the Purchase Contract Agent shall promptly:

(i) cancel the related Treasury PEPS Units;

(ii) transfer the Treasury Securities to the Holder; and

(iii) authenticate, execute on behalf of such Holder and deliver a PEPS Units Certificate executed by the Company in accordance with Section 3.03 evidencing the same number of Purchase Contracts as were evidenced by the cancelled Treasury PEPS Units.

Holders who elect to reestablish PEPS Units shall be responsible for any fees or expenses payable to the Collateral Agent for its services as Collateral Agent in respect of the reestablishment, and the Company shall not be responsible for any such fees or expenses.

Holders of Treasury PEPS Units may only reestablish PEPS Units in integral multiples of 40 Treasury PEPS Units. If a Tax Event Redemption has occurred, Holders may no longer convert their Treasury PEPS Units into PEPS Units.

Except as provided in this Section 3.14, for so long as the Purchase Contract underlying a Treasury PEPS Unit remains in effect, such Treasury PEPS Unit shall not be separable into its constituent parts and the rights and obligations of the Holder of such Treasury PEPS Unit in respect of the 1/40 of a Treasury Security and the Purchase Contract comprising such Treasury PEPS Unit may be acquired, and may be transferred and exchanged, only as a Treasury PEPS Unit.

SECTION 3.15. Transfer of Collateral upon Occurrence of Termination Event.

Upon the occurrence of a Termination Event and the transfer to the Purchase Contract Agent of the Preferred Securities, Senior Deferrable Notes, the appropriate Applicable Ownership Interest of the Treasury Portfolio or the Treasury Securities, as the case may be, underlying the PEPS Units and the Treasury PEPS Units, as the case may be, pursuant to the terms of the Pledge Agreement, the Purchase Contract Agent shall request transfer instructions with respect to such Preferred Securities, Senior Deferrable Notes, the appropriate Applicable Ownership Interest of the Treasury Portfolio or Treasury Securities, as the case may be, from each Holder by written request, substantially in the form of Exhibit D hereto, mailed to such Holder at its address as it appears in the Security Register.

Upon book-entry transfer of the PEPS Units or the Treasury PEPS Units or delivery of a PEPS Units Certificate or Treasury PEPS Units Certificate to the Purchase Contract Agent with such transfer instructions, the Purchase Contract Agent shall transfer the Preferred Securities, Senior Deferrable Notes, the appropriate Applicable Ownership Interest of the Treasury Portfolio or Treasury Securities, as the case may be, underlying such PEPS Units or Treasury PEPS Units, as the case may be, to such Holder by book-entry transfer, or other appropriate procedures, in accordance with such instructions. In the event a Holder of PEPS Units or Treasury PEPS Units fails to effect such transfer or delivery, the Preferred Securities, Senior Deferrable Notes, the appropriate Applicable Ownership Interest of the Treasury Portfolio or Treasury Securities, as the case may be, underlying such PEPS Units or Treasury PEPS Units, as the case may be, and any distributions thereon, shall be held in the name of the Purchase Contract Agent or its nominee in trust for the benefit of such Holder, until the earlier to occur of:

(i) the transfer of such PEPS Units or Treasury PEPS Units or surrender of the PEPS Units Certificate or Treasury PEPS Units Certificate or receipt by the Company and the Purchase Contract Agent from such Holder of satisfactory evidence that such PEPS Units Certificate or Treasury PEPS Units Certificate has been destroyed, lost or stolen, together with any indemnity that may be required by the Purchase Contract Agent and the Company; and

(ii) the expiration of the time period specified in the abandoned property laws of the relevant State.

SECTION 3.16. No Consent to Assumption.

Each Holder of a Security, by acceptance thereof, shall be deemed expressly to have withheld any consent to the assumption under Section 365 of the Bankruptcy Code or otherwise, of the Purchase Contract by the Company or its trustee, receiver, liquidator or a person or entity performing similar functions in the event that the Company becomes the debtor under the Bankruptcy Code or subject to other similar state or Federal law providing for reorganization or liquidation.

ARTICLE 4
THE PREFERRED SECURITIES, SENIOR DEFERRABLE NOTES AND APPLICABLE OWNERSHIP
INTEREST OF THE TREASURY PORTFOLIO

SECTION 4.01. Interest Payments; Rights to Interest Payments Preserved.

Any distribution on any Preferred Security, any Senior Deferrable Note or on the appropriate Applicable Ownership Interest of the Treasury Portfolio, as the case may be, which is paid on any Payment Date shall, subject to receipt thereof by the Purchase Contract Agent from the Collateral Agent as provided by the terms of the Pledge Agreement, be paid to the Person in whose name the PEPS Units Certificate (or one or more Predecessor PEPS Units Certificates) of which such Preferred Security, such Senior Deferrable Note or the appropriate Applicable Ownership Interest of the Treasury Portfolio, as the case may be, is registered at the close of business on the Record Date for such Payment Date.

Each PEPS Units Certificate evidencing Preferred Securities, Senior Deferrable Notes or the appropriate Applicable Ownership Interest of the Treasury Portfolio delivered under this Agreement upon registration of transfer of or in exchange for or in lieu of any other PEPS Units Certificate shall carry the right to distributions accrued and unpaid, and to accrue distributions interest, which were carried by the Preferred Securities, Senior Deferrable Notes or the appropriate Applicable Ownership Interest of the Treasury Portfolio underlying such other PEPS Units Certificate.

In the case of any PEPS Units with respect to which Cash Settlement of the underlying Purchase Contract is properly effected pursuant to Section 5.02 hereof, or with respect to which Early Settlement of the underlying Purchase Contract is properly effected pursuant to Section 5.07 hereof, or with respect to which a Collateral Substitution is effected, in each case on a date that is after any Record Date and prior to or on the next succeeding Payment Date, distributions on the Preferred Securities, Senior Deferrable Notes or on the appropriate Applicable Ownership Interest of the Treasury Portfolio, as the case may be, underlying such PEPS Unit otherwise payable on such Payment Date shall be payable on such Payment Date notwithstanding such Cash Settlement or Early Settlement or Collateral Substitution, and such distributions shall, subject to receipt thereof by the Purchase Contract Agent, be payable to the Person in whose name the PEPS Units Certificate (or one or more Predecessor PEPS Units Certificates) was registered at the close of business on the Record Date. Except as otherwise expressly provided in the immediately preceding sentence, in the case of any PEPS Unit with respect to which Cash Settlement or Early Settlement of the underlying Purchase Contract is properly effected, or with respect to which a Collateral Substitution has been effected, distributions on the related Preferred Securities, Senior Deferrable Notes or the appropriate Applicable Ownership Interest of the Treasury Portfolio, as the case may be, that would otherwise be payable after the Purchase Contract Settlement Date or Early Settlement Date shall not be payable hereunder to the Holder of such PEPS Units; provided, however, that to the extent that such Holder continues to hold separated Preferred Securities or Senior Deferrable Notes that formerly comprised a part of such

Holder's PEPS Unit, such Holder shall be entitled to receive distributions on such separated Preferred Securities or Senior Deferrable Notes.

Not later than 15 calendar days nor more than 30 calendar days prior to the Remarketing Date, the Company shall request the Depositary to notify the Beneficial Owners or Depositary Participants holding Securities of the procedures to be followed by Holders of Securities who intend to effect a Cash Settlement.

SECTION 4.02. Notice and Voting.

Under the terms of the Pledge Agreement, the Purchase Contract Agent will be entitled to exercise the voting and any other consensual rights pertaining to the Pledged Preferred Securities or Pledged Senior Deferrable Notes, but only to the extent instructed in writing by the Holders as described below. Upon receipt of notice of any meeting at which holders of Preferred Securities or Senior Deferrable Notes are entitled to vote or upon any solicitation of consents, waivers or proxies of holders of Preferred Securities or Senior Deferrable Notes, the Purchase Contract Agent shall, as soon as practicable thereafter, mail, first class, postage pre-paid, to the Holders of PEPS Units a notice:

(i) containing such information as is contained in the notice or solicitation;

(ii) stating that each Holder on the record date set by the Purchase Contract Agent therefor (which, to the extent possible, shall be the same date as the record date for determining the holders of Preferred Securities or Senior Deferrable Notes, as the case may be, entitled to vote) shall be entitled to instruct the Purchase Contract Agent as to the exercise of the voting rights pertaining to such Preferred Securities or Senior Deferrable Notes underlying their PEPS Units; and

(iii) stating the manner in which such instructions may be given.

Upon the written request of the Holders of PEPS Units on such record date received by the Purchase Contract Agent at least six days prior to such meeting, the Purchase Contract Agent shall endeavor insofar as practicable to vote or cause to be voted, in accordance with the instructions set forth in such requests, the maximum number of Preferred Securities or Senior Deferrable Notes, as the case may be, as to which any particular voting instructions are received. In the absence of specific instructions from the Holder of a PEPS Unit, the Purchase Contract Agent shall abstain from voting the Preferred Securities or Senior Deferrable Notes underlying such PEPS Unit. The Company hereby agrees, if applicable, to solicit Holders of PEPS Units to timely instruct the Purchase Contract Agent in order to enable the Purchase Contract Agent to vote such Preferred Securities or Senior Deferrable Notes and the Trust shall covenant to this effect in the Declaration.

SECTION 4.03. Distribution of Senior Deferrable Notes; Tax Event Redemption.

Upon the dissolution and liquidation of the Trust in accordance with the Declaration, a principal amount at maturity of Senior Deferrable Notes constituting the assets of the Trust and underlying the Preferred Securities equal to the aggregate liquidation amount of the Pledged Preferred Securities shall be delivered to the Securities Intermediary in exchange for the Pledged Preferred Securities. Thereafter, the Senior Deferrable Notes will be substituted for the Pledged Preferred Securities as the Collateral, and will be held by the Securities Intermediary in the Collateral Account in accordance with the terms of the Pledge Agreement to secure the obligations of each Holder of a PEPS Unit to purchase the Common Stock of the Company under the Purchase Contracts constituting a part of such PEPS Unit. Following the dissolution and liquidation of the Trust, the Holders and the Collateral Agent shall have such security interests, rights and obligations with respect to the Senior Deferrable Notes as the Holders and the Collateral Agent had in respect of the Preferred Securities subject to the Pledge thereof as provided in the Pledge Agreement. The Company may cause to be made in any PEPS Unit Certificates thereafter to be issued such change in phraseology and form (but not in substance) as may be appropriate to reflect the dissolution and liquidation of the Trust and the substitution of Senior Deferrable Notes for Preferred Securities as Collateral.

Upon the occurrence of a Tax Event Redemption prior to the Purchase Contract Settlement Date, the Redemption Price payable on the Tax Event Redemption Date with respect to the Applicable Principal Amount shall be deposited in the Collateral Account in exchange for the Pledged Preferred Securities or the Pledged Senior Deferrable Notes. Thereafter, pursuant to the terms of the Pledge Agreement, the Collateral Agent shall cause the Securities Intermediary to apply an amount equal to the Redemption Amount of such Redemption Price to purchase on behalf of the Holders of PEPS Units the Treasury Portfolio and promptly remit the remaining portion of such Redemption Price to the Purchase Contract Agent for payment to the Holders of such PEPS Units. The Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio will be substituted as Collateral for the Pledged Preferred Securities or the Pledged Senior Deferrable Notes, as the case may be, and will be held by the Collateral Agent in accordance with the terms of the Pledge Agreement to secure the obligation of each Holder of a PEPS Unit to purchase the Common Stock of the Company under the Purchase Contract constituting a part of such PEPS Unit. Following the occurrence of a Tax Event Redemption prior to the Purchase Contract Settlement Date, the Holders of PEPS Units and the Collateral Agent shall have such security interest rights and obligations with respect to the Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio as the Holders of PEPS Units and the Collateral Agent had in respect of the Preferred Securities or Senior Deferrable Notes, as the case may be, subject to the Pledge thereof as provided in the Pledge Agreement, and any reference herein to the Preferred Securities or the Senior Deferrable Notes shall be deemed to be reference to such Treasury Portfolio. The Company may cause to be made in any PEPS Unit Certificates thereafter to be issued such change in phraseology and form (but not in substance) as may be appropriate to reflect the liquidation of the Trust and the substitution of the Applicable Ownership Interest (as specified in

clause (A) of the definition of such term) of the Treasury Portfolio for Preferred Securities or Senior Deferrable Notes as Collateral.

ARTICLE 5
THE PURCHASE CONTRACTS

SECTION 5.01. Purchase of Shares of Common Stock.

Each Purchase Contract shall, unless a Cash Settlement has occurred in accordance with Section 5.02 hereof or an Early Settlement has occurred in accordance with Section 5.07 hereof, obligate the Holder of the related Security to purchase, and the Company to sell, on the Purchase Contract Settlement Date at a price equal to the Stated Amount (the "PURCHASE PRICE"), a number of shares of Common Stock (subject to Section 5.09) equal to the Settlement Rate unless, prior to or on the Purchase Contract Settlement Date, there shall have occurred a Termination Event with respect to the Security of which such Purchase Contract is a part. The "SETTLEMENT RATE" is equal to:

(i) if the Applicable Market Value (as defined below) is greater than or equal to $34.95 (the "THRESHOLD APPRECIATION PRICE"), .71531 shares of Common Stock per Purchase Contract;

(ii) if the Applicable Market Value is less than the Threshold Appreciation Price but greater than $29.125 (the "REFERENCE PRICE"), the number of shares of Common Stock per Purchase Contract having a value, based on the Applicable Market Value, equal to the Stated Amount; and

(iii) if the Applicable Market Value is less than or equal to the Reference Price, .85837 shares of Common Stock per Purchase Contract,

in each case subject to adjustment as provided in Section 5.04 (and in each case rounded upward or downward to the nearest 1/10,000th of a share).

The "APPLICABLE MARKET VALUE" means the average of the Closing Price per share of Common Stock on each of the 20 consecutive Trading Days ending on the third Trading Day immediately preceding the Purchase Contract Settlement Date.

The "CLOSING PRICE" per share of Common Stock on any date of determination means:

(i) the closing sale price as of the 4:15 p.m. close of trading (or, if no closing price is reported, the last reported sale price) per share on the New York Stock Exchange, Inc. (the "NYSE") on such date;

(ii) if the Common Stock is not listed for trading on the NYSE on any such date, the closing sale price per share as reported in the composite transactions for the principal United States securities exchange on which the Common Stock is so listed;

(iii) if the Common Stock is not so listed on a United States national or regional securities exchange, the closing sale price per share as reported by The NASDAQ Stock Market, Inc.;

(iv) if the Common Stock is not so reported, the last quoted bid price for the Common Stock in the over-the-counter market as reported by the National Quotation Bureau or similar organization; or

(v) if such bid price is not available, the average of the mid-point of the last bid and ask prices of the Common Stock on such date from at least three nationally recognized independent investment banking firms retained for this purpose by the Company.

A "TRADING DAY" means a day on which the Common Stock (1) is not suspended from trading on any national or regional securities exchange or association or over-the-counter market at the close of business and (2) has traded at least once on the national or regional securities exchange or association or over-the-counter market that is the primary market for the trading of the Common Stock.

Each Holder of a PEPS Unit or a Treasury PEPS Unit, by its acceptance thereof:

(i) irrevocably authorizes the Purchase Contract Agent to enter into and perform the related Purchase Contract on its behalf as its attorney-in-fact (including the execution of Certificates on behalf of such Holder);

(ii) agrees to be bound by the terms and provisions thereof;

(iii) covenants and agrees to perform its obligations under such Purchase Contracts;

(iv) consents to the provisions hereof;

(v) irrevocably authorizes the Purchase Contract Agent to enter into and perform this Agreement and the Pledge Agreement on its behalf as its attorney-in-fact; and

(vi) consents to, and agrees to be bound by, the Pledge of the Preferred Securities, Senior Deferrable Notes, the Applicable Ownership Interest (as specified in

clause (A) of the definition of such term) of the Treasury Portfolio or the Treasury Securities pursuant to the Pledge Agreement,

provided that upon a Termination Event, the rights of the Holder of such Security under the Purchase Contract may be enforced without regard to any other rights or obligations. Each Holder of a PEPS Unit or a Treasury PEPS Unit, by its acceptance thereof, further covenants and agrees, that to the extent and in the manner provided in Section 5.02 and the Pledge Agreement, but subject to the terms thereof, payments in respect of the Preferred Securities or the Senior Deferrable Notes or the proceeds from the Treasury Securities or the Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio at maturity on the Purchase Contract Settlement Date, as the case may be, shall be paid by the Collateral Agent to the Company in satisfaction of such Holder's obligations under such Purchase Contract and such Holder shall acquire no right, title or interest in such payments.

Upon registration of transfer of a Certificate, the transferee shall be bound (without the necessity of any other action on the part of such transferee) by the terms of this Agreement, the Purchase Contracts underlying such Certificate, the Declaration and the Pledge Agreement and the transferor shall be released from the obligations under this Agreement, the Purchase Contracts underlying the Certificate so transferred and the Pledge Agreement. The Company covenants and agrees, and each Holder of a Certificate, by its acceptance thereof, likewise covenants and agrees, to be bound by the provisions of this paragraph.

SECTION 5.02. Payment of Purchase Price.

(a) (i) Unless a Tax Event Redemption has occurred or a Holder of a PEPS Unit effects an Early Settlement of the underlying Purchase Contract in the manner described in Section 5.07, each Holder who intends to pay in cash to satisfy such Holder's obligations under the Purchase Contract shall notify the Purchase Contract Agent by use of a notice in substantially the form of Exhibit E hereto of his intention to pay in cash ("CASH SETTLEMENT") the Purchase Price for the shares of Common Stock to be purchased pursuant to the related Purchase Contract. Such notice shall be given prior to 5:00 p.m. (New York City time) on the seventh Business Day immediately preceding August 18, 2003. Prior to 11:00
a.m. (New York City time) on the next succeeding Business Day, the Purchase Contract Agent shall notify the Collateral Agent and the Indenture Trustee of the receipt of such notices from Holders intending to make a Cash Settlement.

(ii) A Holder of a PEPS Unit who has so notified the Purchase Contract Agent of his intention to effect a Cash Settlement in accordance with paragraph 5.02(a)(i) above shall pay the Purchase Price to the Securities Intermediary for deposit in the Collateral Account prior to 11:00 a.m. (New York City time) on the fifth Business Day immediately preceding August 18, 2003, in lawful money of the United States by certified or cashiers' check or wire transfer, in each case in immediately available funds payable to or upon the order of the Securities Intermediary. Any cash received by the Collateral Agent shall be invested promptly by the Securities Intermediary in Permitted Investments and paid to the

Company on the Purchase Contract Settlement Date in settlement of the Purchase Contracts in accordance with the terms of this Agreement and the Pledge Agreement. Any funds received by the Securities Intermediary in respect of the investment earnings from such Permitted Investments in excess of the Purchase Price for the shares of Common Stock to be purchased by such Holder shall be distributed to the Purchase Contract Agent when received for payment to the Holder.

(iii) If a Holder of a PEPS Unit fails to notify the Purchase Contract Agent of his intention to make a Cash Settlement in accordance with paragraph 5.02(a)(i) above, or does notify the Purchase Contract Agent as provided in paragraph 5.02(a)(i) above of his intention to pay the Purchase Price in cash, but fails to make such payment as required by paragraph 5.02(a)(ii) above, such Holder shall be deemed to have consented to the disposition of the Pledged Preferred Securities or the Pledged Senior Deferrable Notes pursuant to the Remarketing as described in paragraph 5.02(b) below.

(iv) Promptly after 11:00 a.m. (New York City time) on the fifth Business Day preceding the Purchase Contract Settlement Date, the Purchase Contract Agent, based on notices received by the Purchase Contract Agent pursuant to Section 5.02(a) hereof and notice from the Securities Intermediary regarding cash received by it prior to such time, shall notify the Collateral Agent and the Property Trustee of the aggregate number of Preferred Securities or Senior Deferrable Notes to be tendered for purchase in the Remarketing in a notice substantially in the form of Exhibit F hereto.

(b) In order to dispose of the Preferred Securities or Senior Deferrable Notes, PEPS Units Holders who have not notified the Purchase Contract Agent of their intention to effect a Cash Settlement as provided in paragraph 5.02(a)(i) above, or who have so notified the Purchase Contract Agent but failed to make such payment as required by paragraph 5.02(a)(ii) above, the Company shall engage Morgan Stanley & Co. Incorporated, as Remarketing Agent (the "REMARKETING AGENT"), pursuant to the Remarketing Agreement to sell such Preferred Securities or Senior Deferrable Notes. In order to facilitate the Remarketing, the Purchase Contract Agent, based on the notices specified in
Section 5.02(a)(iv), shall notify the Remarketing Agent, promptly after 11:00
a.m. (New York City time) on the fifth Business Day immediately preceding August 18, 2003, of the aggregate number of Preferred Securities or Senior Deferrable Notes that are part of PEPS Units to be remarketed. Concurrently, the Collateral Agent, pursuant to the terms of the Pledge Agreement, shall cause such Preferred Securities or Senior Deferrable Notes to be presented to the Remarketing Agent for Remarketing.

Upon receipt of such notice from the Purchase Contract Agent and such Preferred Securities or Senior Deferrable Notes, the Remarketing Agent shall, on the third Business Day immediately preceding August 18, 2003, use reasonable efforts to remarket such Preferred Securities or Senior Deferrable Notes on such date at a price equal to 100.25% of the Stated Amount ($25.0625) per Preferred Security or Senior Deferrable Note, as provided in the Remarketing Agreement. The proceeds from the Remarketing shall be invested by the Collateral

Agent in Permitted Investments, in accordance with the Pledge Agreement, and then applied to satisfy in full such PEPS Units Holders' obligations to pay the Purchase Price for the shares of Common Stock under the related Purchase Contracts on the Purchase Contract Settlement Date. In addition, $.0625 per Preferred Security or Senior Deferrable Note of the proceeds shall automatically be remitted to the Remarketing Agent for services rendered in connection with the Remarketing (the "REMARKETING FEE").

If, in spite of using its reasonable efforts, the Remarketing Agent cannot remarket the related Preferred Securities or Senior Deferrable Notes of such Holders of PEPS Units at a price equal to 100.25% of the Stated amount ($25.0625), then the Remarketing Agent shall increase the distribution rate on the Preferred Securities or the interest rate on the Senior Deferrable Notes, as the case may be, so that the market value of such Preferred Securities will equal $25.0625. If the Remarketing Agent determines that it will be able to remarket the related Preferred Securities or Senior Deferrable Notes of such Holders of PEPS Units at a price in excess of 100.25% of the Stated Amount ($25.0625), then the Remarketing Agent shall decrease the distribution rate on the Preferred Securities or the interest rate on the Senior Deferrable Notes, as the case may be, so that the market value of such Preferred Securities or Senior Deferrable Notes will be equal to $25.0625. If the Remarketing Agent cannot Remarket the Preferred Securities or the Senior Deferrable Notes, as the case may be, after such increase or decrease, the Remarketing shall be deemed to have failed (a "FAILED REMARKETING"), an event of default shall be deemed to have occurred under this Agreement and the Pledge Agreement and in accordance with the terms of the Pledge Agreement, the Collateral Agent, for the benefit of the Company, shall exercise its rights as a secured party with respect to such Preferred Securities or Senior Deferrable Notes, including those actions specified in paragraph 5.02(c) below; provided, that if upon a Failed Remarketing the Collateral Agent exercises such rights for the benefit of the Company with respect to such Preferred Securities or Senior Deferrable Notes, any accrued and unpaid distributions on such Preferred Securities or Senior Deferrable Notes shall become payable by the Company to the Purchase Contract Agent for payment to the Beneficial Owner of the PEPS Units to which such Preferred Securities or Senior Deferrable Notes relate. The Company shall cause a notice of such Failed Remarketing to be published on the second Business Day immediately preceding the Purchase Contract Settlement Date in a daily newspaper in the English language of general circulation in the City of New York, which is expected to be The Wall Street Journal, and on Bloomberg News.

(c) With respect to any Preferred Securities or Senior Deferrable Notes which are subject to a Failed Remarketing, the Collateral Agent for the benefit of the Company reserves all of its rights as a secured party with respect thereto and, subject to applicable law and paragraph 5.02(g) below, may, among other things, (i) retain the Preferred Securities or Senior Deferrable Notes in full satisfaction of the Holders' obligations under the Purchase Contracts or
(ii) sell the Preferred Securities or Senior Deferrable Notes in one or more public or private sales.

(d) (i) Unless a Holder of a Treasury PEPS Units or PEPS Units (if a Tax Event Redemption has occurred) effects an Early Settlement of the underlying Purchase Contract

through the early delivery of cash to the Purchase Contract Agent in the manner described in Section 5.07, each Holder of a Treasury PEPS Unit or PEPS Unit (if a Tax Event Redemption has occurred) who intends to pay in cash shall notify the Purchase Contract Agent by use of a notice in substantially the form of Exhibit E hereto of his intention to pay in cash the Purchase Price for the shares of Common Stock to be purchased pursuant to the related Purchase Contract. Such notice shall be given prior to 5:00 p.m. (New York City time) on the second Business Day immediately preceding August 18, 2003. Prior to 11:00 a.m. (New York City time) on the next succeeding Business Day, the Purchase Contract Agent shall notify the Collateral Agent of the receipt of such notices from such Holders intending to make a Cash Settlement. Treasury PEPS Unit holders may make Cash Settlements only in integral multiples of 40 Treasury PEPS Units.

(ii) A Holder of a Treasury PEPS Unit or PEPS Units (if a Tax Event Redemption has occurred) who has so notified the Purchase Contract Agent of his intention to make a Cash Settlement in accordance with paragraph 5.02(d)(i) above shall pay the Purchase Price to the Securities Intermediary for deposit in the Collateral Account prior to 11:00 a.m. (New York City time) on the Business Day immediately preceding August 18, 2003, in lawful money of the United States by certified or cashiers' check or wire transfer, in each case in immediately available funds payable to or upon the order of the Securities Intermediary. Any cash received by the Collateral Agent shall be invested promptly by the Securities Intermediary in Permitted Investments and paid to the Company on the Purchase Contract Settlement Date in settlement of the Purchase Contract in accordance with the terms of this Agreement and the Pledge Agreement. Any funds received by the Securities Intermediary in respect of the investment earnings from the investment in such Permitted Investments in excess of the Purchase Price for the shares of common stock to be purchased by such Holder shall be distributed to the Purchase Contract Agent when received for payment to the Holder.

(iii) If a Holder of a Treasury PEPS Unit or Holder of a PEPS Unit (if a Tax Event Redemption has occurred) fails to notify the Purchase Contract Agent of his intention to make a Cash Settlement in accordance with paragraph 5.02(d)(i) above, or does notify the Purchase Contract Agent as provided in paragraph 5.02(d)(i) above of his intention to pay the Purchase Price in cash, but fails to make such payment as required by paragraph 5.02(d)(ii) above, then upon the maturity of the Pledged Treasury Securities or the appropriate Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio held by the Securities Intermediary on the Business Day immediately preceding the Purchase Contract Settlement Date, the principal amount of the Treasury Securities or the appropriate Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio received by the Securities Intermediary shall be invested promptly in Permitted Investments. On the Purchase Contract Settlement Date, an amount equal to the Purchase Price shall be remitted to the Company as payment thereof without receiving any instructions from the Holder. In the event the sum of the proceeds from the related Pledged Treasury Securities or the appropriate Applicable Ownership Interest (as

specified in clause (A) of the definition of such term) of the Treasury Portfolio and the investment earnings earned from such investments is in excess of the aggregate Purchase Price of the Purchase Contracts being settled thereby, the Collateral Agent shall cause the Securities Intermediary to distribute such excess to the Purchase Contract Agent for the benefit of the Holder of the related Treasury PEPS Unit or PEPS Unit when received.

(iv) A holder of a Preferred Security or Senior Deferred Note that is no longer part of a PEPS Unit may elect to have such Preferred Security or Senior Deferrable Note, as the case may be, remarketed. A holder making such an election must notify the Property Trustee prior to 11:00 a.m. (New York City time) on the fifth Business Day immediately preceding August 18, 2003, of the aggregate number of Preferred Securities or Senior Deferrable Notes, as the case may be, that are not part of PEPS Units to be remarketed. Any such notice will be irrevocable and may not be conditioned upon the level at which the Reset Rate is established in the Remarketing. Concurrently, the Property Trustee shall cause such Preferred Securities or Senior Deferrable Notes, as the case may be, to be presented to the Remarketing Agent for Remarketing.

(e) Any distribution to Holders of excess funds described above shall be payable at the office of the Purchase Contract Agent in New York City maintained for that purpose or, at the option of the Holder, by check mailed to the address of the Person entitled thereto at such address as it appears on the Security Register.

(f) Upon Cash Settlement of any Purchase Contract:

(i) the Collateral Agent will in accordance with the terms of the Pledge Agreement cause the Pledged Preferred Securities, Pledged Senior Deferrable Notes, the appropriate Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio or the Pledged Treasury Securities, as the case may be, underlying the relevant Security to be released from the Pledge, free and clear of any security interest of the Company, and transferred to the Purchase Contract Agent for delivery to the Holder thereof or its designee as soon as practicable; and

(ii) subject to the receipt thereof, the Purchase Contract Agent shall, by book-entry transfer or other appropriate procedures, in accordance with written instructions provided by the Holder thereof, transfer such Preferred Securities, Senior Deferrable Notes, or the appropriate Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio or such Treasury Securities, as the case may be (or, if no such instructions are given to the Purchase Contract Agent by the Holder, the Purchase Contract Agent shall hold such Preferred Securities, Senior Deferrable Notes, or the appropriate Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio or such Treasury Securities, as the case may be, and any interest payment thereon, in the name of the Purchase Contract Agent or its nominee in trust for the benefit of such Holder until the expiration of the time period specified in the abandoned property laws of the relevant state).

(g) The obligations of the Holders to pay the Purchase Price are non-recourse obligations and, except to the extent satisfied by Early Settlement or Cash Settlement, are payable solely out of the proceeds of any Collateral pledged to secure the obligations of the Holders and in no event will Holders be liable for any deficiency between the proceeds of the disposition of Collateral and the Purchase Price.

(h) The Company shall not be obligated to issue any shares of Common Stock in respect of a Purchase Contract or deliver any certificates thereof to the Holder of the related Security unless the Company shall have received payment in full for the aggregate purchase price for the Common Stock to be purchased thereunder in the manner herein set forth.

SECTION 5.03. Issuance of Shares of Common Stock.

Unless a Termination Event or an Early Settlement shall have occurred, subject to Section 5.04(b), on the Purchase Contract Settlement Date upon receipt of the aggregate Purchase Price payable on all Outstanding Securities, the Company shall issue and deposit with the Purchase Contract Agent, for the benefit of the Holders of the Outstanding Securities, one or more certificates representing the shares of Common Stock registered in the name of the Purchase Contract Agent (or its nominee) as custodian for the Holders (such certificates for shares of Common Stock, together with any dividends or distributions for which a record date and payment date for such dividend or distribution has occurred after the Purchase Contract Settlement Date, being hereinafter referred to as the "PURCHASE CONTRACT SETTLEMENT FUND") to which the Holders are entitled hereunder.

Subject to the foregoing, upon surrender of a Certificate to the Purchase Contract Agent on or after the Purchase Contract Settlement Date, together with settlement instructions thereon duly completed and executed, the Holder of such Certificate shall be entitled to receive forthwith in exchange therefor a certificate representing that number of whole shares of Common Stock which such Holder is entitled to receive pursuant to the provisions of this Article Five (after taking into account all Securities then held by such Holder), together with cash in lieu of fractional shares as provided in Section 5.09 and any dividends or distributions with respect to such shares constituting part of the Purchase Contract Settlement Fund, but without any interest thereon, and the Certificate so surrendered shall forthwith be cancelled. Such shares shall be registered in the name of the Holder or the Holder's designee as specified in the settlement instructions provided by the Holder to the Purchase Contract Agent. If any shares of Common Stock issued in respect of a Purchase Contract are to be registered to a Person other than the Person in whose name the Certificate evidencing such Purchase Contract is registered, no such registration shall be made unless the Person requesting such registration has paid any transfer and other taxes required by reason of such registration in a name other than that of the registered Holder of the Certificate evidencing such Purchase Contract or has established to the satisfaction of the Company that such tax either has been paid or is not payable.

SECTION 5.04. Adjustment of Settlement Rate.

(a) Adjustments for Dividends, Distributions, Stock Splits, Etc.

(1) In case the Company shall pay or make a dividend or other distribution on Common Stock in Common Stock, the Settlement Rate in effect at the opening of business on the day following the date fixed for the determination of shareholders entitled to receive such dividend or other distribution shall be increased by dividing such Settlement Rate by a fraction of which:

(i) the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination; and

(ii) the denominator shall be the sum of such number of shares and the total number of shares constituting such dividend or other distribution,

such increase to become effective immediately after the opening of business on the day following the date fixed for such determination. For the purposes of this paragraph (1), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include any shares issuable in respect of any scrip certificates issued in lieu of fractions of shares of Common Stock. The Company shall not pay any dividend or make any distribution on shares of Common Stock held in the treasury of the Company.

(2) In case the Company shall issue rights, warrants or options to all holders of its Common Stock (not being available on an equivalent basis to Holders of the Securities upon settlement of the Purchase Contracts underlying such Securities) entitling them, for a period expiring within 45 days after the record date for the determination of shareholders entitled to receive such rights, warrants or options, to subscribe for or purchase shares of Common Stock at a price per share less than the Current Market Price per share of Common Stock on the date fixed for the determination of shareholders entitled to receive such rights, warrants or options the Settlement Rate in effect at the opening of business on the day following the date fixed for such determination shall be increased by dividing such Settlement Rate by a fraction of which:

(i) the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock which the aggregate of the offering price of the total number of shares of Common Stock so offered for subscription or purchase would purchase at such Current Market Price; and

(ii) the denominator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock so offered for subscription or purchase,

such increase to become effective immediately after the opening of business on the day following the date fixed for such determination. For the purposes of this paragraph (2), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include any shares issuable in respect of any scrip certificates issued in lieu of fractions of shares of Common Stock. The Company agrees that it shall not issue any such rights, warrants or options in respect of shares of Common Stock held in the treasury of the Company.

(3) In case outstanding shares of Common Stock shall be subdivided or split into a greater number of shares of Common Stock, the Settlement Rate in effect at the opening of business on the day following the day upon which such subdivision or split becomes effective shall be proportionately increased, and, conversely, in case outstanding shares of Common Stock shall each be combined into a smaller number of shares of Common Stock, the Settlement Rate in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately reduced, such increase or reduction, as the case may be, to become effective immediately after the opening of business on the day following the day upon which such subdivision, split or combination becomes effective.

(4) In case the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock evidences of its indebtedness or assets (including securities, but excluding any rights, warrants or options referred to in paragraph (2) of this Section 5.04(a), any dividend or distribution paid exclusively in cash and any dividend or distribution referred to in paragraph
(1) of this Section 5.04(a)), the Settlement Rate shall be adjusted so that the same shall equal the rate determined by dividing the Settlement Rate in effect immediately prior to the close of business on the date fixed for the determination of shareholders entitled to receive such distribution by a fraction of which:

(i) the numerator shall be the Current Market Price per share of Common Stock on the date fixed for such determination less the then fair market value (as reasonably determined by the Board of Directors, whose determination shall be conclusive and the basis for which shall be described in a Board Resolution) of the portion of the assets or evidences of indebtedness so distributed applicable to one share of Common Stock; and

(ii) the denominator shall be such Current Market Price per share of Common Stock,

such adjustment to become effective immediately prior to the opening of business on the day following the date fixed for the determination of shareholders entitled to receive such distribution. In any case in which this paragraph (4) is applicable, paragraph (2) of this Section 5.04(a) shall not be applicable. In the event that such dividend or distribution is not so paid or made, the Settlement Rate shall again be adjusted to be the Settlement Rate which would then be in effect if such dividend or distribution had not been declared.

(5) In case the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock cash (excluding:

(i) any quarterly cash dividend on Common Stock to the extent that the aggregate cash dividend per share of Common Stock in any fiscal quarter does not exceed $.08 per share (the "DIVIDEND THRESHOLD"), and

(ii) any dividend or distribution in connection with the liquidation, dissolution or termination of the Company, whether voluntary or involuntary),

then, in such case, the Settlement Rate shall be increased so that the same shall equal the rate determined by dividing the Settlement Rate in effect immediately prior to the close of business on such record date by a fraction of which:

(i) the numerator shall be the Current Market Price of Common Stock on the record date less the amount of cash so distributed (and not excluded as provided above) applicable to one share of Common Stock; and

(ii) the denominator shall be the Current Market Price of Common Stock,

such increase to be effective immediately prior to the opening of business on the day following the record date; provided, however, that in the event the portion of cash so distributed applicable to one share of Common Stock is equal to or greater than the Current Market Price per share of Common Stock on the record date, in lieu of the foregoing adjustment, adequate provision shall be made so that each holder of a Security shall have the right to receive upon settlement of the Securities the amount of cash such Holder would have received had such Holder settled each Security on the record date. In the event that such dividend or distribution is not so paid or made, the Settlement Rate shall again be adjusted to be the Settlement Rate which would then be in effect if such dividend or distribution had not been declared. If any adjustment is required to be made as set forth in this Section 5.04(a)(5) as a result of a distribution that is a quarterly dividend, such adjustment shall be based upon the amount by which such distribution exceeds the amount of the Dividend Threshold. If an adjustment is required to be made as set forth in this Section 5.04(a)(5) above as a result of a distribution that is not a quarterly dividend, such adjustment shall be based upon the full amount of the distribution.

(6) In case a tender or exchange offer made by the Company or any subsidiary of the Company for all or any portion of Common Stock shall expire and such tender or exchange offer (as amended upon the expiration thereof) shall require the payment to shareholders (based on the acceptance (up to any maximum specified in the terms of the tender or exchange offer) of Purchased Shares as herein defined) of an aggregate consideration having a fair market value (as reasonably determined by the Board of Directors, whose determination shall be conclusive and the basis for which shall be described in a Board Resolution) that combined together with the aggregate of the cash plus the fair market value (as reasonably determined by the Board of

Directors, whose determination shall be conclusive and the basis for which shall be described in a Board Resolution), as of the expiration of such tender or exchange offer, of consideration payable in respect of any other tender or exchange offer, by the Company or any subsidiary of the Company for all or any portion of Common Stock expiring within the 12 months preceding the expiration of such tender or exchange offer and in respect of which no adjustment pursuant to this paragraph (6) has been made, and (II) the aggregate amount of any distributions to all holders of Common Stock made exclusively in cash within the 12 months preceding the expiration of such tender or exchange offer and in respect of which no adjustment pursuant to paragraph (6) has been made, exceeds 15% of the product of the Current Market Price per share of Common Stock as of the last time (the "EXPIRATION TIME") tenders could have been made pursuant to such tender or exchange offer (as it may be amended) times the number of shares of Common Stock outstanding (including any tendered shares) on the Expiration Time, then, and in each such case, immediately prior to the opening of business on the day after the date of the Expiration Time, the Settlement Rate shall be adjusted so that the same shall equal the rate determined by dividing the Settlement Rate immediately prior to the close of business on the date of the Expiration Time by a fraction:

(i) the numerator of which shall be equal to (A) the product of (I) the Current Market Price per share of Common Stock on the date of the Expiration Time and (II) the number of shares of Common Stock outstanding (including any tendered shares) on the Expiration Time less (B) the amount of cash plus the fair market value (determined as aforesaid) of the aggregate consideration payable to shareholders based on the transactions described in clauses (I) and (II) above (assuming in the case of clause (I) the acceptance, up to any maximum specified in the terms of the tender or exchange offer, of Purchased Shares); and

(ii) the denominator of which shall be equal to the product of (A) the Current Market Price per share of Common Stock as of the Expiration Time and (B) the number of shares of Common Stock outstanding (including any tendered shares) as of the Expiration Time less the number of all shares validly tendered and not withdrawn as of the Expiration Time (the shares deemed so accepted, up to any such maximum, being referred to as the "PURCHASED SHARES").

(7) The reclassification of Common Stock into securities including securities other than Common Stock (other than any reclassification upon a Reorganization Event to which Section 5.04(b) applies) shall be deemed to involve:

(i) a distribution of such securities other than Common Stock to all holders of Common Stock (and the effective date of such reclassification shall be deemed to be "the date fixed for the determination of shareholders entitled to receive such distribution" and the "date fixed for such determination" within the meaning of paragraph (4) of this Section); and

(ii) a subdivision, split or combination, as the case may be, of the number of shares of Common Stock outstanding immediately prior to such reclassification into the number of shares of Common Stock outstanding immediately thereafter (and the effective date of such reclassification shall be deemed to be "the day upon which such subdivision or split becomes effective" or "the day upon which such combination becomes effective", as the case may be, and "the day upon which such subdivision, split or combination becomes effective" within the meaning of paragraph (3) of this Section).

(8) The "CURRENT MARKET PRICE" per share of Common Stock on any date of determination means the average of the daily Closing Prices for the five consecutive Trading Days selected by the Company commencing not more than 30 Trading Days before, and ending not later than, the earlier of such date of determination and the day before the "ex date" with respect to the issuance or distribution requiring such computation. For purposes of this paragraph, the term "ex date," when used with respect to any issuance or distribution, shall mean the first date on which Common Stock trades on such exchange or in such market without the right to receive such issuance or distribution.

(9) All adjustments to the Settlement Rate shall be calculated to the nearest 1/10,000th of a share of Common Stock (or if there is not a nearest 1/10,000th of a share, to the next lower 1/10,000th of a share). No adjustment in the Settlement Rate shall be required unless such adjustment would require an increase or decrease of at least one percent thereof; provided, however, that any adjustments which by reason of this subparagraph are not required to be made shall be carried forward and taken into account in any subsequent adjustment. If an adjustment is made to the Settlement Rate pursuant to paragraph (1), (2),
(3), (4), (5), (6), (7) or (10) of this Section 5.04(a), an adjustment shall also be made to the Applicable Market Value solely to determine which of clauses
(i), (ii) or (iii) of the definition of Settlement Rate in Section 5.01 will apply on the Purchase Contract Settlement Date. Such adjustment shall be made by multiplying the Applicable Market Value by a fraction of which the numerator shall be the Settlement Rate immediately after such adjustment pursuant to paragraph (1), (2), (3), (4), (5), (6), (7) or (10) of this Section 5.04(a) and the denominator shall be the Settlement Rate immediately prior to such adjustment; provided, however, that if such adjustment to the Settlement Rate is required to be made pursuant to the occurrence of any of the events contemplated by paragraph (1), (2), (3), (4), (5), (6), (7) or (10) of this Section 5.04(a) during the period taken into consideration for determining the Applicable Market Value, appropriate and customary adjustments shall be made to the Settlement Rate.

(10) The Company may, but shall not be required to, make such increases in the Settlement Rate, in addition to those required by this Section, as it considers to be advisable in order to avoid or diminish any income tax to any holders of shares of Common Stock resulting from any dividend or distribution of stock or issuance of rights or warrants to purchase or subscribe for stock or from any event treated as such for income tax purposes or for any other reason.

(b) Adjustment for Consolidation, Merger or Other Reorganization Event.

(1) In the event of:

(i) any consolidation or merger of the Company with or into another Person (other than a merger or consolidation in which the Company is the continuing corporation and in which the shares of Common Stock outstanding immediately prior to the merger or consolidation are not exchanged for cash, securities or other property of the Company or another corporation);

(ii) any sale, transfer, lease or conveyance to another Person of the property of the Company as an entirety or substantially as an entirety;

(iii) any statutory share exchange of the Company with another Person (other than in connection with a merger or acquisition);

(iv) any liquidation, dissolution or termination of the Company other than as a result of or after the occurrence of a Termination Event, (any such event, a "REORGANIZATION EVENT").

the Settlement Rate will be adjusted to provide that each Holder of Securities will receive on the Purchase Contract Settlement Date with respect to each Purchase Contract forming a part thereof, the kind and amount of securities, cash and other property receivable upon such Reorganization Event (without any interest thereon, and without any right to dividends or distribution thereon which have a record date that is prior to the Purchase Contract Settlement Date) by a Holder of the number of shares of Common Stock issuable on account of each Purchase Contract if the Purchase Contract Settlement Date had occurred immediately prior to such Reorganization Event, assuming such Holder of Common Stock is not a Person with which the Company consolidated or into which the Company merged or which merged into the Company or to which such sale or transfer was made, as the case may be (any such Person, a "CONSTITUENT PERSON"), or an Affiliate of a Constituent Person to the extent such Reorganization Event provides for different treatment of Common Stock held by Affiliates of the Company and non-affiliates and such Holder failed to exercise his rights of election, if any, as to the kind or amount of securities, cash and other property receivable upon such Reorganization Event (provided that if the kind or amount of securities, cash and other property receivable upon such Reorganization Event is not the same for each share of Common Stock held immediately prior to such Reorganization Event by other than a Constituent Person or an Affiliate thereof and in respect of which such rights of election shall not have been exercised ("NON-ELECTING SHARE"), then for the purpose of this Section the kind and amount of securities, cash and other property receivable upon such Reorganization Event by each non-electing share shall be deemed to be the kind and amount so receivable per share by a plurality of the non-electing shares).

In the event of such a Reorganization Event, the Person formed by such consolidation, merger or exchange or the Person which acquires the assets of the Company or, in the event of a liquidation, dissolution or termination of the Company, the Company or a liquidating trust created in connection therewith, shall execute and deliver to the Purchase Contract Agent an agreement supplemental hereto providing that each Holder of an Outstanding Security shall have the rights provided by this Section 5.04(b). Such supplemental agreement shall provide for adjustments which, for events subsequent to the effective date of such supplemental agreement, shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section. The above provisions of this Section shall similarly apply to successive Reorganization Events.

(2) In the event of a consolidation or merger of the Company with or into another Person, any merger of another Person into the Company (other than a merger that does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock) in which 30% or more of the total consideration paid to the Company's shareholders consists of cash or cash equivalents, then a Holder of a Security may settle his Purchase Contract for cash as described in Section 5.02(a)(i) or 5.02(d)(i) hereof, as applicable, during the one week period beginning on the twenty-third Trading Day following the closing date of such merger (the "EARLY SETTLEMENT WEEK"), at the applicable Settlement Rate. For the purposes of this Section, the twenty-third Trading Day after the closing of the merger or consolidation shall be deemed to be the Purchase Contract Settlement Date for the purpose of determining the Applicable Market Value and the deadline for submitting the notice to settle early and the related cash payment shall be 5:00 p.m. (New York City time) of the last Business Day of the Early Settlement Week.

(c) All calculations and determinations pursuant to this Section 5.04 shall be made by the Company or its agent and the Purchase Contract Agent shall have no responsibility with respect thereto.

SECTION 5.05. Notice of Adjustments and Certain Other Events.

(a) Whenever the Settlement Rate is adjusted as herein provided, the Company shall:

(i) forthwith compute the adjusted Settlement Rate in accordance with Section 5.04 and prepare and transmit to the Purchase Contract Agent an Officers' Certificate setting forth the Settlement Rate, the method of calculation thereof in reasonable detail, and the facts requiring such adjustment and upon which such adjustment is based; and

(ii) within 10 Business Days following the occurrence of an event that requires an adjustment to the Settlement Rate pursuant to
Section 5.04 (or if the Company is not aware of such occurrence, as soon as practicable after becoming so aware), provide a written notice to the Holders of the Securities of the occurrence of such event and a statement in reasonable detail setting forth the method by which the adjustment to the Settlement Rate was determined and setting forth the adjusted Settlement Rate.

(b) The Purchase Contract Agent shall not at any time be under any duty or responsibility to any Holder of Securities to determine whether any facts exist which may require any adjustment of the Settlement Rate, or with respect to the nature or extent or calculation of any such adjustment when made, or with respect to the method employed in making the same. The Purchase Contract Agent shall not be accountable with respect to the validity or value (or the kind or amount) of any shares of Common Stock, or of any securities or property, which may at the time be issued or delivered with respect to any Purchase Contract; and the Purchase Contract Agent makes no representation with respect thereto. The Purchase Contract Agent shall not be responsible for any failure of the Company to issue, transfer or deliver any shares of Common Stock pursuant to a Purchase Contract or to comply with any of the duties, responsibilities or covenants of the Company contained in this Article.

SECTION 5.06. Termination Event; Notice.

The Purchase Contracts and all obligations and rights of the Company and the Holders thereunder, and the rights and obligations of Holders to purchase Common Stock, shall immediately and automatically terminate, without the necessity of any notice or action by any Holder, the Purchase Contract Agent or the Company, if, prior to or on the Purchase Contract Settlement Date, a Termination Event shall have occurred.

Upon and after the occurrence of a Termination Event, the Securities shall thereafter represent the right to receive the Preferred Securities, the Senior Deferrable Notes, the Treasury Securities or the appropriate Applicable Ownership Interest of the Treasury Portfolio, as the case may be, forming part of such Securities, in accordance with the provisions of Section 5.02 of the Pledge Agreement. Upon the occurrence of a Termination Event, the Company shall promptly but in no event later than two Business Days thereafter give written notice to the Purchase Contract Agent, the Collateral Agent and the Holders, at their addresses as they appear in the Security Register.

SECTION 5.07. Early Settlement.

(a) Subject to and upon compliance with the provisions of this Section 5.07, at the option of the Holder thereof, Purchase Contracts underlying Securities may be settled early ("EARLY SETTLEMENT") on or prior to 5:00 p.m. (New York City time) on the seventh Business Day immediately preceding the Purchase Contract Settlement Date. Holders of Treasury PEPS Units may only settle the related Purchase Contracts in integral multiples of 40 Purchase Contracts. In order to exercise the right to effect Early Settlement with respect to any Purchase Contracts, the Holder of the Certificate evidencing Securities shall deliver to the Purchase Contract Agent at the Corporate Trust Office an Election to Settle Early form (on the reverse side of the Certificate) and any other documents requested by the Purchase Contract Agent and accompanied by payment (payable to the Company in immediately available funds) in an amount (the "EARLY SETTLEMENT AMOUNT") equal to the product of (A) the Stated Amount times (B) the

number of Purchase Contracts with respect to which the Holder has elected to effect Early Settlement.

Except as provided in the immediately preceding sentence, no payment shall be made upon Early Settlement of any Purchase Contract on account of any dividends on the Common Stock issued upon such Early Settlement. If the foregoing requirements are first satisfied with respect to Purchase Contracts underlying any Securities prior to or at 5:00 p.m. (New York City time) on a Business Day, such day shall be the "EARLY SETTLEMENT DATE" with respect to such Securities and if such requirements are first satisfied after 5:00 p.m. (New York City time) on a Business Day or on a day that is not a Business Day, the "EARLY SETTLEMENT DATE" with respect to such Securities shall be the next succeeding Business Day.

(b) Upon Early Settlement of Purchase Contracts by a Holder of the related Securities, the Company shall issue, and the Holder shall be entitled to receive .71531 shares of Common Stock on account of each Purchase Contract as to which Early Settlement is effected (the "EARLY SETTLEMENT RATE"). The Early Settlement Rate shall be adjusted in the same manner and at the same time as the Settlement Rate is adjusted.

(c) No later than the third Business Day after the applicable Early Settlement Date, the Company shall cause:

(i) the shares of Common Stock issuable upon Early Settlement of Purchase Contracts to be issued and delivered, together with payment in lieu of any fraction of a share, as provided in Section 5.09; and

(ii) the related Preferred Securities, Senior Deferrable Notes or the appropriate Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio, in the case of PEPS Units, or the related Treasury Securities or the appropriate Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio, in the case of Treasury PEPS Units, to be released from the Pledge by the Collateral Agent and transferred, in each case, to the Purchase Contract Agent for delivery to the Holder thereof or its designee.

(d) Upon Early Settlement of any Purchase Contracts, and subject to receipt of shares of Common Stock from the Company and the Preferred Securities, Senior Deferrable Notes, the appropriate Applicable Ownership Interest as specified in clause (A) of the definition of such term) of the Treasury Portfolio, or Treasury Securities, as the case may be, from the Securities Intermediary, as applicable, the Purchase Contract Agent shall, in accordance with the instructions provided by the Holder thereof on the Election to Settle Early form (on the reverse of the Certificate evidencing the related Securities):

(i) transfer to the Holder the Preferred Securities, Senior Deferrable Notes, the appropriate Applicable Ownership Interest (as specified in clause (A) of the definition of

such term) of the Treasury Portfolio or Treasury Securities, as the case may be, forming a part of such Securities; and

(ii) deliver to the Holder a certificate or certificates for the full number of shares of Common Stock issuable upon such Early Settlement, together with payment in lieu of any fraction of a share, as provided in Section 5.09.

(e) In the event that Early Settlement is effected with respect to Purchase Contracts underlying less than all the Securities evidenced by a Certificate, upon such Early Settlement the Company shall execute and the Purchase Contract Agent shall authenticate, countersign and deliver to the Holder thereof, at the expense of the Company, a Certificate evidencing the Securities as to which Early Settlement was not effected.

(f) A Holder of a Security who effects Early Settlement may elect to have the Preferred Securities or Senior Deferrable Notes, as the case may be, no longer a part of a PEPS Unit, or Treasury PEPS Unit, as the case may be, remarketed. A Holder making such an election must notify the Property Trustee prior to 11:00 a.m. (New York City time) on the fifth Business Day immediately preceding August 18, 2003, of the aggregate number of Preferred Securities or Senior Deferrable Notes that are not part of PEPS Units or Treasury PEPS Units, as the case may be, to be remarketed. Any such notice will be irrevocable and may not be conditioned upon the level at which the Reset Rate is established in the Remarketing. Concurrently, the Property Trustee shall cause such Preferred Securities or Senior Deferrable Notes, as the case may be, to be presented to the Remarketing Agent for Remarketing.

SECTION 5.08. Intentionally Omitted.

SECTION 5.09. No Fractional Shares.

No fractional shares or scrip representing fractional shares of Common Stock shall be issued or delivered upon settlement on the Purchase Contract Settlement Date or upon Early Settlement of any Purchase Contracts. If Certificates evidencing more than one Purchase Contract shall be surrendered for settlement at one time by the same Holder, the number of full shares of Common Stock which shall be delivered upon settlement shall be computed on the basis of the aggregate number of Purchase Contracts evidenced by the Certificates so surrendered. Instead of any fractional share of Common Stock which would otherwise be deliverable upon settlement of any Purchase Contracts on the Purchase Contract Settlement Date or upon Early Settlement, the Company, through the Purchase Contract Agent, shall make a cash payment in respect of such fractional interest in an amount equal to the value of such fractional shares times the Applicable Market Value. The Company shall provide the Purchase Contract Agent from time to time with sufficient funds to permit the Purchase Contract Agent to make all cash payments required by this Section 5.09 in a timely manner.

SECTION 5.10. Charges and Taxes.

The Company will pay all stock transfer and similar taxes attributable to the initial issuance and delivery of the shares of Common Stock pursuant to the Purchase Contracts; provided, however, that the Company shall not be required to pay any such tax or taxes which may be payable in respect of any exchange of or substitution for a Certificate evidencing a Security or any issuance of a share of Common Stock in a name other than that of the registered Holder of a Certificate surrendered in respect of the Securities evidenced thereby, other than in the name of the Purchase Contract Agent, as custodian for such Holder, and the Company shall not be required to issue or deliver such share certificates or Certificates unless or until the Person or Persons requesting the transfer or issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

ARTICLE 6
REMEDIES

SECTION 6.01. Unconditional Right of Holders to Purchase Shares of Common Stock.

Each Holder of a Security shall have the right, which is absolute and unconditional, to purchase shares of Common Stock pursuant to such Purchase Contract and, in each such case, to institute suit for the enforcement of the right to purchase shares of Common Stock, and such rights shall not be impaired without the consent of such Holder.

SECTION 6.02. Restoration of Rights and Remedies.

If any Holder has instituted any proceeding to enforce any right or remedy under this Agreement and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to such Holder, then and in every such case, subject to any determination in such proceeding, the Company and such Holder shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of such Holder shall continue as though no such proceeding had been instituted.

SECTION 6.03. Rights and Remedies Cumulative.

Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Certificates in the last paragraph of
Section 3.10, no right or remedy herein conferred upon or reserved to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise,

shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

SECTION 6.04. Delay or Omission Not Waiver.

No delay or omission of any Holder to exercise any right or remedy upon a default shall impair any such right or remedy or constitute a waiver of any such right. Every right and remedy given by this Article or by law to the Holders may be exercised from time to time, and as often as may be deemed expedient, by such Holders.

SECTION 6.05. Undertaking for Costs.

All parties to this Agreement agree, and each Holder of a Security, by its acceptance of such Security shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Agreement, or in any suit against the Purchase Contract Agent for any action taken, suffered or omitted by it as Purchase Contract Agent, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees and costs against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; provided that the provisions of this
Section shall not apply to any suit instituted by the Purchase Contract Agent, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% of the Outstanding Securities, or to any suit instituted by any Holder for the enforcement of distributions on any Preferred Securities or interest on any Senior Deferrable Notes on or after the respective Payment Date therefor in respect of any Security held by such Holder, or for enforcement of the right to purchase shares of Common Stock under the Purchase Contracts constituting part of any Security held by such Holder.

SECTION 6.06. Waiver of Stay or Extension Laws.

The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Agreement; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Purchase Contract Agent or the Holders, but will suffer and permit the execution of every such power as though no such law had been enacted.

ARTICLE 7
THE PURCHASE CONTRACT AGENT

SECTION 7.01. Certain Duties and Responsibilities.

(a) The Purchase Contract Agent:

(1) undertakes to perform, with respect to the Securities, such duties and only such duties as are specifically set forth in this Agreement and the Pledge Agreement, and no implied covenants or obligations shall be read into this Agreement or the Pledge Agreement against the Purchase Contract Agent; and

(2) in the absence of bad faith or gross negligence on its part, may, with respect to the Securities, conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Purchase Contract Agent and conforming to the requirements of this Agreement or the Pledge Agreement, as applicable, but in the case of any certificates or opinions which by any provision hereof are specifically required to be furnished to the Purchase Contract Agent, the Purchase Contract Agent shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Agreement or the Pledge Agreement, as applicable (but need not confirm or investigate the accuracy of the mathematical calculations or other facts stated therein).

(b) No provision of this Agreement or the Pledge Agreement shall be construed to relieve the Purchase Contract Agent from liability for its own grossly negligent action, its own grossly negligent failure to act, or its own willful misconduct, except that:

(1) this Subsection shall not be construed to limit the effect of Subsection (a) of this Section;

(2) the Purchase Contract Agent shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Purchase Contract Agent was negligent in ascertaining the pertinent facts; and

(3) no provision of this Agreement or the Pledge Agreement shall require the Purchase Contract Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if indemnity satisfactory to the Purchase Contract Agent is not provided to it.

(4) the Purchase Contract Agent shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a majority in principal amount of the Outstanding Securities.

(c) Whether or not therein expressly so provided, every provision of this Agreement and the Pledge Agreement relating to the conduct or affecting the liability of or affording protection to the Purchase Contract Agent shall be subject to the provisions of this Section.

(d) The Purchase Contract Agent is authorized to execute and deliver the Pledge Agreement in its capacity as Purchase Contract Agent.

SECTION 7.02. Notice of Default.

Within 30 days after the occurrence of any default by the Company hereunder of which a Responsible Officer of the Purchase Contract Agent has actual knowledge, the Purchase Contract Agent shall transmit by mail to the Company and the Holders of Securities, as their names and addresses appear in the Security Register, notice of such default hereunder, unless such default shall have been cured or waived.

SECTION 7.03. Certain Rights of Purchase Contract Agent.

Subject to the provisions of Section 7.01:

(1) the Purchase Contract Agent may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, Senior Note, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;

(2) any request or direction of the Company mentioned herein shall be sufficiently evidenced by an Officers' Certificate, Issuer Order or Issuer Request, and any resolution of the Board of Directors of the Company may be sufficiently evidenced by a Board Resolution;

(3) whenever in the administration of this Agreement or the Pledge Agreement the Purchase Contract Agent shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Purchase Contract Agent (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, conclusively rely upon an Officers' Certificate of the Company;

(4) the Purchase Contract Agent may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;

(5) the Purchase Contract Agent shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debebture, note, other evidence of indebtedness or other paper or document, but the Purchase Contract Agent, in its discretion, and at the expense of the

Company, may make reasonable further inquiry or investigation into such facts or matters related to the execution, delivery and performance of the Purchase Contracts as it may see fit, and, if the Purchase Contract Agent shall determine to make such further inquiry or investigation, it shall be given a reasonable opportunity to examine the relevant books, records and premises of the Company, personally or by agent or attorney and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation;

(6) the Purchase Contract Agent may execute any of the powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys or an Affiliate and the Purchase Contract Agent shall not be responsible for any misconduct or negligence on the part of any agent or attorney or an Affiliate appointed with due care by it hereunder;

(7) the Purchase Contract Agent shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement at the request or direction of any of the Holders pursuant to this Agreement, unless such Holders shall have offered to the Purchase Contract Agent security or indemnity satisfactory to the Purchase Contract Agent against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction;

(8) the Purchase Contract Agent shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Agreement;

(9) the Purchase Contract Agent shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Purchase Contract Agent has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Purchase Contract Agent at the Corporate Trust Office of the Purchase Contract Agent, and such notice references the Securities and this Agreement;

(10) the Purchase Contract Agent may request that the Company deliver an Officers' Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Agreement, which Officers' Certificate may be signed by any person authorized to sign an Officers' Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded; and

(11) the rights, privileges, protections, immunities and benefits given to the Purchase Contract Agent, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Purchase Contract Agent in each of its capacities hereunder, and to each agent, custodian and other Person employed to act hereunder.

SECTION 7.04. Not Responsible for Recitals or Issuance of Securities.

The recitals contained herein and in the Certificates shall be taken as the statements of the Company, and the Purchase Contract Agent assumes no responsibility for their accuracy. The Purchase Contract Agent makes no representations as to the validity or sufficiency of either this Agreement or of the Securities, or of the Pledge Agreement or the Pledge. The Purchase Contract Agent shall not be accountable for the use or application by the Company of the proceeds in respect of the Purchase Contracts.

SECTION 7.05. May Hold Securities.

Any Security Registrar or any other agent of the Company, or the Purchase Contract Agent and its Affiliates, in their individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Company, the Collateral Agent or any other Person with the same rights it would have if it were not Security Registrar or such other agent, or the Purchase Contract Agent. The Company may become the owner or pledgee of Securities.

SECTION 7.06. Money Held in Custody.

Money held by the Purchase Contract Agent in custody hereunder need not be segregated from the other funds except to the extent required by law or provided herein. The Purchase Contract Agent shall be under no obligation to invest or pay interest on any money received by it hereunder except as otherwise provided hereunder agreed in writing with the Company.

SECTION 7.07. Compensation and Reimbursement.

The Company agrees:

(1) to pay to the Purchase Contract Agent compensation for all services rendered by it hereunder and under the Pledge Agreement as the Company and the Purchase Contract Agent shall from time to time agree in writing;

(2) except as otherwise expressly provided for herein, to reimburse the Purchase Contract Agent upon its request for all reasonable expenses, disbursements and advances incurred or made by the Purchase Contract Agent in accordance with any provision of this Agreement and the Pledge Agreement (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its gross negligence or willful misconduct; and

(3) to indemnify the Purchase Contract Agent and any predecessor Purchase Contract Agent for, and to hold it harmless against, any loss, liability or expense incurred without gross negligence or willful misconduct on its part, arising out of or in connection with the acceptance

or administration of its duties hereunder, including the costs and expenses of defending itself against any claim (whether asserted by the Company, a Holder or any other person) or liability in connection with the exercise or performance of any of its powers or duties hereunder.

SECTION 7.08. Corporate Purchase Contract Agent Required; Eligibility.

There shall at all times be a Purchase Contract Agent hereunder which shall be a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to exercise corporate trust powers, having (or being a member of a bank holding company having) a combined capital and surplus of at least $50,000,000, subject to supervision or examination by Federal or State authority and having a corporate trust office in the Borough of Manhattan, New York City, if there be such a corporation in the Borough of Manhattan, New York City, qualified and eligible under this Article and willing to act on reasonable terms. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Purchase Contract Agent shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article.

SECTION 7.09. Resignation and Removal; Appointment of Successor.

(a) No resignation or removal of the Purchase Contract Agent and no appointment of a successor Purchase Contract Agent pursuant to this Article shall become effective until the acceptance of appointment by the successor Purchase Contract Agent in accordance with the applicable requirements of
Section 7.10.

(b) The Purchase Contract Agent may resign at any time by giving written notice thereof to the Company 60 days prior to the effective date of such resignation. If the instrument of acceptance by a successor Purchase Contract Agent required by Section 7.10 shall not have been delivered to the Purchase Contract Agent within 30 days after the giving of such notice of resignation, the resigning Purchase Contract Agent may petition, at the expense of the Company, any court of competent jurisdiction for the appointment of a successor Purchase Contract Agent.

(c) The Purchase Contract Agent may be removed at any time by Act of the Holders of a majority in number of the Outstanding Securities delivered to the Purchase Contract Agent and the Company.

(d) If at any time:

(1) the Purchase Contract Agent fails to comply with Section 310(b) of the TIA, as if the Purchase Contract Agent were an indenture trustee under an indenture qualified

under the TIA, after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months;

(2) the Purchase Contract Agent shall cease to be eligible under Section 7.08 and shall fail to resign after written request therefor by the Company or by any such Holder; or

(3) the Purchase Contract Agent shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Purchase Contract Agent or of its property shall be appointed or any public officer shall take charge or control of the Purchase Contract Agent or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,

then, in any such case, (i) the Company by a Board Resolution may remove the Purchase Contract Agent, or (ii) any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Purchase Contract Agent and the appointment of a successor Purchase Contract Agent.

(e) If the Purchase Contract Agent shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Purchase Contract Agent for any cause, the Company, by a Board Resolution, shall promptly appoint a successor Purchase Contract Agent and shall comply with the applicable requirements of Section 7.10. If no successor Purchase Contract Agent shall have been so appointed by the Company and accepted appointment in the manner required by Section 7.10, any Holder who has been a bona fide Holder of a Security for at least six months, on behalf of itself and all others similarly situated, or the Purchase Contract Agent may petition at the expense of the Company, any court of competent jurisdiction for the appointment of a successor Purchase Contract Agent.

(f) The Company shall give, or shall cause such successor Purchase Contract Agent to give, notice of each resignation and each removal of the Purchase Contract Agent and each appointment of a successor Purchase Contract Agent by mailing written notice of such event by first-class mail, postage prepaid, to all Holders as their names and addresses appear in the applicable Register. Each notice shall include the name of the successor Purchase Contract Agent and the address of its Corporate Trust Office.

SECTION 7.10. Acceptance of Appointment by Successor.

(a) In case of the appointment hereunder of a successor Purchase Contract Agent, every such successor Purchase Contract Agent so appointed shall execute, acknowledge and deliver to the Company and to the retiring Purchase Contract Agent an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Purchase Contract Agent shall become effective and such successor Purchase Contract Agent, without any further act, deed

or conveyance, shall become vested with all the rights, powers, agencies and duties of the retiring Purchase Contract Agent; but, on the request of the Company or the successor Purchase Contract Agent, such retiring Purchase Contract Agent shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Purchase Contract Agent all the rights, powers and trusts of the retiring Purchase Contract Agent and shall duly assign, transfer and deliver to such successor Purchase Contract Agent all property and money held by such retiring Purchase Contract Agent hereunder.

(b) Upon request of any such successor Purchase Contract Agent, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Purchase Contract Agent all such rights, powers and agencies referred to in paragraph 7.10(a) of this Section.

(c) No successor Purchase Contract Agent shall accept its appointment unless at the time of such acceptance such successor Purchase Contract Agent shall be qualified and eligible under this Article.

SECTION 7.11. Merger, Conversion, Consolidation or Succession to Business.

Any corporation into which the Purchase Contract Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Purchase Contract Agent shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Purchase Contract Agent, shall be the successor of the Purchase Contract Agent hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, with the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Certificates shall have been authenticated and executed on behalf of the Holders, but not delivered, by the Purchase Contract Agent then in office, any successor by merger, conversion or consolidation to such Purchase Contract Agent may adopt such authentication and execution and deliver the Certificates so authenticated and executed with the same effect as if such successor Purchase Contract Agent had itself authenticated and executed such Securities.

SECTION 7.12. Preservation of Information; Communications to Holders.

(a) The Purchase Contract Agent shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders received by the Purchase Contract Agent in its capacity as Security Registrar.

(b) If three or more Holders (herein referred to as "applicants") apply in writing to the Purchase Contract Agent, and furnish to the Purchase Contract Agent reasonable proof that each such applicant has owned a Security for a period of at least six months preceding the date of such application, and such application states that the applicants desire to communicate with other Holders with respect to their rights under this Agreement or under the Securities and is

accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, then the Purchase Contract Agent shall mail to all the Holders copies of the form of proxy or other communication which is specified in such request, with reasonable promptness after a tender to the Purchase Contract Agent of the materials to be mailed and of payment, or provision for the payment, of the reasonable expenses of such mailing.

SECTION 7.13. No Obligations of Purchase Contract Agent.

Except to the extent otherwise expressly provided in this Agreement, the Purchase Contract Agent assumes no obligations and shall not be subject to any liability under this Agreement, the Pledge Agreement or any Purchase Contract in respect of the obligations of the Holder of any Security thereunder. The Company agrees, and each Holder of a Certificate, by his acceptance thereof, shall be deemed to have agreed, that the Purchase Contract Agent's execution of the Certificates on behalf of the Holders shall be solely as agent and attorney- in-fact for the Holders, and that the Purchase Contract Agent shall have no obligation to perform such Purchase Contracts on behalf of the Holders, except to the extent expressly provided in Article Five hereof. Anything contained in this Agreement to the contrary notwithstanding, in no event shall the Purchase Contract Agent or its officers, employees or agents be liable under this Agreement to any third party for indirect, special, punitive, or consequential loss or damage of any kind whatsoever, including lost profits, whether or not the likelihood of such loss or damage was known to the Purchase Contract Agent, incurred without any act or deed that is found to be attributable to gross negligence or willful misconduct on the part of the Purchase Contract Agent.

SECTION 7.14. Tax Compliance.

(a) The Company and the Purchase Contract Agent will comply with all applicable certification, information reporting and withholding (including "backup" withholding) requirements imposed by applicable tax laws, regulations or administrative practice with respect to (i) any payments made with respect to the Securities or (ii) the issuance, delivery, holding, transfer, redemption or exercise of rights under the Securities. Such compliance shall include, without limitation, the preparation and timely filing of required returns and the timely payment of all amounts required to be withheld to the appropriate taxing authority or its designated agent.

(b) The Purchase Contract Agent shall comply in accordance with the terms hereof with any written direction received from the Company with respect to the execution or certification of any required documentation and the application of such requirements to particular payments or Holders or in other particular circumstances, and may for purposes of this Agreement conclusively rely on any such direction in accordance with the provisions of Section 7.01(a)(2) hereof.

(c) The Purchase Contract Agent shall maintain all appropriate records documenting compliance with such requirements, and shall make such records available, on written request, to the Company or its authorized representative within a reasonable period of time after receipt of such request.

ARTICLE 8
SUPPLEMENTAL AGREEMENTS

SECTION 8.01. Supplemental Agreements Without Consent of Holders.

Without the consent of any Holders, the Company and the Purchase Contract Agent, at any time and from time to time, may enter into one or more agreements supplemental hereto, in form satisfactory to the Company and the Purchase Contract Agent, to:

(1) evidence the succession of another Person to the Company, and the assumption by any such successor of the covenants of the Company herein and in the Certificates;

(2) evidence and provide for the acceptance of appointment hereunder by a successor Purchase Contract Agent;

(3) add to the covenants of the Company for the benefit of the Holders, or surrender any right or power herein conferred upon the Company;

(4) make provision with respect to the rights of Holders pursuant to the requirements of Section 5.04(b); or

(5) except as provided for in Section 5.04, cure any ambiguity, correct or supplement any provisions herein which may be inconsistent with any other provisions herein, or make any other provisions with respect to such matters or questions arising under this Agreement, provided such action shall not adversely affect the interests of the Holders.

SECTION 8.02. Supplemental Agreements with Consent of Holders.

With the consent of the Holders of not less than a majority of the outstanding Securities voting together as one class, by Act of said Holders delivered to the Company and the Purchase Contract Agent, the Company, when authorized by a Board Resolution, and the Purchase Contract Agent may enter into an agreement or agreements supplemental hereto for the purpose of modifying in any manner the terms of the Purchase Contracts, or the provisions of this Agreement or the rights of the Holders in respect of the Securities; provided, however, that, except as contemplated herein, no such supplemental agreement shall, without the unanimous consent of the Holders of each outstanding Purchase Contract affected thereby,

(1) change any Payment Date;

(2) change the amount or the type of Collateral required to be Pledged to secure a Holder's obligations under the Purchase Contract, impair the right of the Holder of any Purchase Contract to receive distributions on the related Collateral (except for the rights of Holders of PEPS Units to substitute Treasury Securities for the Pledged Preferred Securities or Pledged Senior Deferrable Notes or the Applicable Ownership Interest of the Treasury Portfolio or the rights of Holders or Treasury PEPS Units to substitute Preferred Securities, Senior Deferrable Notes or the Applicable Ownership Interest of the Treasury Portfolio for the Pledged Treasury Securities) or otherwise adversely affect the Holder's rights in or to such Collateral or adversely alter the rights in or to such Collateral;

(3) impair the right to institute suit for the enforcement of any Purchase Contract;

(4) reduce the number of shares of Common Stock to be purchased pursuant to any Purchase Contract, increase the price to purchase shares of Common Stock upon settlement of any Purchase Contract or change the Purchase Contract Settlement Date; or

(5) reduce the percentage of the outstanding Purchase Contracts the consent of whose Holders is required for any such supplemental agreement;

provided that if any amendment or proposal referred to above would adversely affect only the PEPS Units or the Treasury PEPS Units, then only the affected class of Holders as of the record date for the Holders entitled to vote thereon will be entitled to vote on such amendment or proposal, and such amendment or proposal shall not be effective except with the consent of Holders of not less than a majority of such class; and provided, further, that the unanimous consent of the Holders of each outstanding Purchase Contract of such class affected thereby shall be required to approve any amendment or proposal specified in clauses (1) through (5) above.

It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental agreement, but it shall be sufficient if such Act shall approve the substance thereof.

SECTION 8.03. Execution of Supplemental Agreements.

In executing, or accepting the additional agencies created by, any supplemental agreement permitted by this Article or the modifications thereby of the agencies created by this Agreement, the Purchase Contract Agent shall be provided, and (subject to Section 7.01) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution of such supplemental agreement is authorized or permitted by this Agreement. The Purchase Contract Agent may, but shall not be obligated to, enter into any such supplemental agreement which affects the Purchase Contract Agent's own rights, duties or immunities under this Agreement or otherwise.

SECTION 8.04. Effect of Supplemental Agreements.

Upon the execution of any supplemental agreement under this Article, this Agreement shall be modified in accordance therewith, and such supplemental agreement shall form a part of this Agreement for all purposes; and every Holder of Certificates theretofore or thereafter authenticated, executed on behalf of the Holders and delivered hereunder, shall be bound thereby.

SECTION 8.05. Reference to Supplemental Agreements.

Certificates authenticated, executed on behalf of the Holders and delivered after the execution of any supplemental agreement pursuant to this Article may, and shall if required by the Purchase Contract Agent, bear a notation in form approved by the Purchase Contract Agent as to any matter provided for in such supplemental agreement. If the Company shall so determine, new Certificates so modified as to conform, in the opinion of the Purchase Contract Agent and the Company, to any such supplemental agreement may be prepared and executed by the Company and authenticated, executed on behalf of the Holders and delivered by the Purchase Contract Agent in exchange for outstanding Certificates.

ARTICLE 9
MERGER, CONSOLIDATION, SHARE EXCHANGE, SALE OR CONVEYANCE

SECTION 9.01. Covenant Not to Merge, Consolidate, Enter into a Share Exchange, Sell or Convey Property Except under Certain Conditions.

The Company covenants that it will not merge, consolidate or enter into a share exchange with any other Person or sell, assign, transfer, lease or convey all or substantially all of its properties and assets to any Person or group of affiliated Persons in one transaction or a series of related transactions, unless:

(i) either the Company shall be the continuing corporation, or the successor (if other than the Company) shall be a corporation organized and existing under the laws of the United States of America or a State thereof or the District of Columbia and such corporation shall expressly assume all the obligations of the Company under the Purchase Contracts, this Agreement and the Pledge Agreement by one or more supplemental agreements in form reasonably satisfactory to the Purchase Contract Agent and the Collateral Agent, executed and delivered to the Purchase Contract Agent and the Collateral Agent by such corporation; and

(ii) the Company or such successor corporation, as the case may be, shall not, immediately after such merger, consolidation or share exchange, or such sale, assignment, transfer, lease or conveyance, be in default in the performance of any covenant or condition hereunder, under any of the Securities or under the Pledge Agreement.

SECTION 9.02. Rights and Duties of Successor Corporation.

In case of any such merger, consolidation, share exchange, sale, assignment, transfer, lease or conveyance and upon any such assumption by a successor corporation in accordance with Section 9.01, such successor corporation shall succeed to and be substituted for the Company with the same effect as if it had been named herein as the Company. Such successor corporation thereupon may cause to be signed, and may issue either in its own name or in the name of Valero Energy Corporation, any or all of the Certificates evidencing Securities issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Purchase Contract Agent; and, upon the order of such successor corporation, instead of the Company, and subject to all the terms, conditions and limitations in this Agreement prescribed, the Purchase Contract Agent shall authenticate and execute on behalf of the Holders and deliver any Certificates which previously shall have been signed and delivered by the officers of the Company to the Purchase Contract Agent for authentication and execution, and any Certificate evidencing Securities which such successor corporation thereafter shall cause to be signed and delivered to the Purchase Contract Agent for that purpose. All the Certificates issued shall in all respects have the same legal rank and benefit under this Agreement as the Certificates theretofore or thereafter issued in accordance with the terms of this Agreement as though all of such Certificates had been issued at the date of the execution hereof.

In case of any such merger, consolidation, share exchange, sale, assignment, transfer, lease or conveyance such change in phraseology and form (but not in substance) may be made in the Certificates evidencing Securities thereafter to be issued as may be appropriate.

SECTION 9.03. Officers' Certificate and Opinion of Counsel Given to Purchase Contract Agent.

The Purchase Contract Agent, subject to Sections 7.01 and 7.03, shall receive an Officers' Certificate and an Opinion of Counsel as conclusive evidence that any such merger, consolidation, share exchange, sale, assignment, transfer, lease or conveyance, and any such assumption, complies with the provisions of this Article and that all conditions precedent to the consummation of any such merger, consolidation, share exchange, sale, assignment, transfer, lease or conveyance have been met.

ARTICLE 10
COVENANTS

SECTION 10.01. Performance under Purchase Contracts.

The Company covenants and agrees for the benefit of the Holders from time to time of the Securities that it will duly and punctually perform its obligations under the Purchase Contracts in accordance with the terms of the Purchase Contracts and this Agreement.

SECTION 10.02. Maintenance of Office or Agency.

The Company will maintain in the Borough of Manhattan, New York City an office or agency where Certificates may be presented or surrendered for acquisition of shares of Common Stock upon settlement of the Purchase Contracts on the Purchase Contract Settlement Date or Early Settlement and for transfer of Collateral upon occurrence of a Termination Event, where Certificates may be surrendered for registration of transfer or exchange, for a Collateral Substitution or reestablishment of PEPS Units and where notices and demands to or upon the Company in respect of the Securities and this Agreement may be served. The Company will give prompt written notice to the Purchase Contract Agent of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Purchase Contract Agent with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office, and the Company hereby appoints the Purchase Contract Agent as its agent to receive all such presentations, surrenders, notices and demands.

The Company may also from time to time designate one or more other offices or agencies where Certificates may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, New York City for such purposes. The Company will give prompt written notice to the Purchase Contract Agent of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby designates as the place of payment for the Securities the Corporate Trust Office and appoints the Purchase Contract Agent at its Corporate Trust Office as paying agent in such city.

SECTION 10.03. Company to Reserve Common Stock.

The Company shall at all times prior to the Purchase Contract Settlement Date reserve and keep available, free from preemptive rights, out of its authorized but unissued Common Stock the full number of shares of Common Stock issuable against tender of payment in respect of all Purchase Contracts constituting a part of the Securities evidenced by Outstanding Certificates.

SECTION 10.04. Covenants as to Common Stock.

The Company covenants that all shares of Common Stock which may be issued against tender of payment in respect of any Purchase Contract constituting a part of the Outstanding Securities will, upon issuance, be duly authorized, validly issued, fully paid and nonassessable.

SECTION 10.05. Statements of Officers of the Company as to Default.

The Company will deliver to the Purchase Contract Agent, within 140 days after the end of each fiscal year of the Company (which as of the date hereof is December 31) ending after the date hereof, an Officers' Certificate (one of the signers of which shall be the principal executive officer, principal financial officer or principal accounting officer of the Company), stating whether or not to the knowledge of the signers thereof the Company is in default in the performance and observance of any of the terms, provisions and conditions hereof, and if the Company shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge.

SECTION 10.06. ERISA.

Each Holder from time to time of the Securities that is a Plan hereby represents that its acquisition of the PEPS Units and the holding of the same satisfies the applicable fiduciary requirements of ERISA and that it is entitled to exemption relief from the prohibited transaction provisions of ERISA and the Code in accordance with one or more prohibited transaction exemptions or otherwise will not result in a nonexempt prohibited transaction.

[SIGNATURES ON THE FOLLOWING PAGE]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.

VALERO ENERGY CORPORATION

THE BANK OF NEW YORK,
as Purchase Contract Agent

Title:

EXHIBIT A

FACE OF PEPS UNITS CERTIFICATE

"THIS CERTIFICATE IS A GLOBAL CERTIFICATE WITHIN THE MEANING OF THE PURCHASE CONTRACT AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (THE "DEPOSITARY"), OR A NOMINEE OF THE DEPOSITARY. THIS CERTIFICATE IS EXCHANGEABLE FOR CERTIFICATES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE PURCHASE CONTRACT AGREEMENT AND NO TRANSFER OF THIS CERTIFICATE (OTHER THAN A TRANSFER OF THIS CERTIFICATE AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN."

No. 1 Cusip No. 91821d107 Number of PEPS Units 6,900,000

VALERO ENERGY CORPORATION
VEC TRUST I
PEPS UNITS

This PEPS Units Certificate certifies that Cede & Co. is the registered Holder of the number of PEPS Units set forth above. Each PEPS Unit consists of
(i) either (a) the beneficial ownership by the Holder of one Preferred Security (the "PREFERRED SECURITY") of VEC Trust I, a Delaware statutory business trust (the "TRUST"), having a stated liquidation amount of $25, subject to the Pledge of such Preferred Security by such Holder pursuant to the Pledge Agreement, or
(b) upon the occurrence of a Tax Event Redemption prior to the Purchase Contract Settlement Date, the appropriate Applicable Ownership Interest (as specified in clause

(A) of the definition of such term) of the Treasury Portfolio by such Holder pursuant to the Pledge Agreement, and (ii) the rights and obligations of the Holder under one Purchase Contract with Valero Energy Corporation, a Delaware corporation (the "COMPANY"). All capitalized terms used herein which are defined in the Purchase Contract Agreement (as defined on the reverse hereof) have the meaning set forth therein.

Pursuant to the Pledge Agreement, the Preferred Securities or the appropriate Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio, as the case may be, constituting part of each PEPS Unit evidenced hereby has been pledged to the Collateral Agent, for the benefit of the Company, to secure the obligations of the Holder under the Purchase Contract comprising part of such PEPS Unit.

The Pledge Agreement provides that all payments of the liquidation amount with respect to any of the Pledged Preferred Securities or the appropriate Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio, as the case may be, or cash distributions on any Pledged Preferred Securities (as defined in the Pledge Agreement) or the appropriate Applicable Ownership Interest (as specified in clause (B) of the definition of such term) of the Treasury Portfolio, as the case may be, constituting part of the PEPS Units received by the Securities Intermediary shall be paid by wire transfer in same day funds (i) in the case of (A) cash distributions with respect to Pledged Preferred Securities or the appropriate Applicable Ownership Interest (as specified in clause (B) of the definition of such term) of the Treasury Portfolio, as the case may be, and (B) any payments of the liquidation amount with respect to any Preferred Securities or the appropriate Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio, as the case may be, that have been released from the Pledge pursuant to the Pledge Agreement, to the Purchase Contract Agent to the account designated by the Purchase Contract Agent, no later than 2:00 p.m., New York City time, on the Business Day such payment is received by the Securities Intermediary (provided that in the event such payment is received by the Securities Intermediary on a day that is not a Business Day or after 12:30 p.m., New York City time, on a Business Day, then such payment shall be made no later than 10:30 a.m., New York City time, on the next succeeding Business Day) and (ii) in the case of payments of the liquidation amount with respect to any of the Pledged Preferred Securities or the appropriate Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio, to the Company on the Purchase Contract Settlement Date (as described herein) in accordance with the terms of the Pledge Agreement, in full satisfaction of the respective obligations of the Holders of the PEPS Units of which such Pledged Preferred Securities or the Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio, as the case may be, are a part under the Purchase Contracts forming a part of such PEPS Units. Distributions on any Preferred Security or the appropriate Applicable Ownership Interest (as specified in clause (B) of the definition of such term) of the Treasury Portfolio, as the case may be, forming part of a PEPS Unit evidenced hereby, which are payable quarterly in arrears on February 18, May 18, August 18, and November 18 of each year, commencing August 18, 2000 (a "PAYMENT DATE"), shall, subject to receipt thereof by the Purchase Contract Agent from the Securities Intermediary,

be paid to the Person in whose name this PEPS Unit Certificate (or a Predecessor PEPS Unit Certificate) is registered at the close of business on the Record Date for such Payment Date.

Each Purchase Contract evidenced hereby obligates the Holder of this PEPS Units Certificate to purchase, and the Company to sell, on August 18, 2003 (the "PURCHASE CONTRACT SETTLEMENT DATE"), at a price equal to $25 (the "STATED AMOUNT"), a number of shares of Common Stock, $0.01 par value ("COMMON STOCK"), of the Company, equal to the Settlement Rate, unless on or prior to the Purchase Contract Settlement Date there shall have such occurred a Termination Event or an Early Settlement with respect to the PEPS Unit of which such Purchase Contract is a part, all as provided in the Purchase Contract Agreement and more fully described on the reverse hereof. The purchase price (the "PURCHASE PRICE") for the shares of Common Stock purchased pursuant to each Purchase Contract evidenced hereby, if not paid earlier, shall be paid on the Purchase Contract Settlement Date by application of payment received in respect of the liquidation amount with respect to any Pledged Preferred Securities pursuant to the Remarketing or the appropriate Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio, as the case may be, pledged to secure the obligations under such Purchase Contract of the Holder of the PEPS Unit of which such Purchase Contract is a part.

Distributions on the Preferred Securities and the Applicable Ownership Interest (as specified in clause (B) of the definition of such term) will be payable at the office of the Purchase Contract Agent in New York City or, at the option of the Company, by check mailed to the address of the Person entitled thereto as such address appears on the PEPS Units Register.

Reference is hereby made to the further provisions set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.

Unless the certificate of authentication hereon has been executed by the Purchase Contract Agent by manual signature, this PEPS Units Certificate shall not be entitled to any benefit under the Pledge Agreement or the Purchase Contract Agreement or be valid or obligatory for any purpose.

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.

VALERO ENERGY CORPORATION

HOLDER SPECIFIED ABOVE (as to
obligations of such Holder under the
Purchase Contracts)

By: THE BANK OF NEW YORK, not
individually but solely as Attorney-in-Fact
of such Holder

Title:

DATED: June 28, 2000

CERTIFICATE OF AUTHENTICATION
OF PURCHASE CONTRACT AGENT

This is one of the PEPS Units Certificates referred to in the within mentioned Purchase Contract Agreement.

By: THE BANK OF NEW YORK, as
Purchase Contract Agent

Dated: June 28, 2000

(FORM OF REVERSE OF PEPS UNITS CERTIFICATE)

Each Purchase Contract evidenced hereby is governed by a Purchase Contract Agreement, dated as of June 28, 2000 (as may be supplemented from time to time, the "PURCHASE CONTRACT AGREEMENT"), between the Company and The Bank of New York, as Purchase Contract Agent (including its successors hereunder, the "PURCHASE CONTRACT AGENT"), to which Purchase Contract Agreement and supplemental agreements thereto reference is hereby made for a description of the respective rights, limitations of rights, obligations, duties and immunities thereunder of the Purchase Contract Agent, the Company, and the Holders and of the terms upon which the PEPS Units Certificates are, and are to be, executed and delivered.

Unless a Cash Settlement or an Early Settlement has occurred, each Purchase Contract evidenced hereby obligates the Holder of this PEPS Units Certificate to purchase, and the Company to sell, on the Purchase Contract Settlement Date at a price equal to the Stated Amount (the "PURCHASE PRICE"), a number of shares of Common Stock equal to the Settlement Rate, unless, prior to or on the Purchase Contract Settlement Date, there shall have occurred a Termination Event with respect to the Security of which such Purchase Contract is a part or an Early Settlement shall have occurred. The "SETTLEMENT RATE" is equal to:

(1) if the Applicable Market Value (as defined below) is greater than or equal to $34.95 (the "THRESHOLD APPRECIATION PRICE"), .71531 shares of Common Stock per Purchase Contract;

(2) if the Applicable Market Value is less than the Threshold Appreciation Price but greater than $29.125 (the "REFERENCE PRICE"), the number of shares of Common Stock per Purchase Contract having a value, based on the Applicable Market Value, equal to $25; and

(3) if the Applicable Market Value is less than or equal to the Reference Price, .85837 shares of Common Stock per Purchase Contract,

in each case subject to adjustment as provided in the Purchase Contract Agreement (and in each case rounded upward or downward to the nearest 1/10,000th of a share).

No fractional shares of Common Stock will be issued upon settlement of Purchase Contracts, as provided in Section 5.09 of the Purchase Contract Agreement.

Each Purchase Contract evidenced hereby, which is settled either through Early Settlement or Cash Settlement, shall obligate the Holder of the related PEPS Unit to purchase at the Purchase Price, and the Company to sell, a number of shares of Common Stock equal to the Early Settlement Rate or the Settlement Rate, as applicable.

The "APPLICABLE MARKET VALUE" means the average of the Closing Price per share of Common Stock on each of the 20 consecutive Trading Days ending on the third Trading Day immediately preceding the Purchase Contract Settlement Date.

The "CLOSING PRICE" per share of Common Stock on any date of determination means:

(1) the closing sale price (or, if no closing price is reported, the last reported sale price) per share on the New York Stock Exchange, Inc. (the "NYSE") on such date;

(2) if Common Stock is not listed for trading on the NYSE on any such date, the closing sale price per share as reported in the composite transactions for the principal United States securities exchange on which Common Stock is so listed;

(3) if Common Stock is not so listed on a United States national or regional securities exchange, the closing sale price per share as reported by The NASDAQ Stock Market, Inc.;

(4) if Common Stock is not so reported, the last quoted bid price for Common Stock in the over-the-counter market as reported by the National Quotation Bureau or similar organization; or

(5) if such bid price is not available, the average of the mid-point of the last bid and ask prices of Common Stock on such date from at least three nationally recognized independent investment banking firms retained for this purpose by the Company.

A "TRADING DAY" means a day on which Common Stock (1) is not suspended from trading on any national or regional securities exchange or association or over-the-counter market at the close of business and (2) has traded at least once on the national or regional securities exchange or association or over-the-counter market that is the primary market for the trading of Common Stock.

In accordance with the terms of the Purchase Contract Agreement, the Holder of this PEPS Units Certificate may pay the Purchase Price for the shares of Common Stock purchased pursuant to each Purchase Contract evidenced hereby by effecting a Cash Settlement or an Early Settlement or from the proceeds of the Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio or a Remarketing of the related Pledged Preferred Securities. A Holder of PEPS Units who does not effect, on or prior to 11:00 a.m. (New York City time) on the fifth Business Day immediately preceding the Purchase Contract Settlement Date (or in the event a Tax Event Redemption has occurred, the Business Day prior to the Purchase Contract Settlement Date), an effective Cash Settlement or, who does not effect on or prior to 5:00 p.m. (New York City time) on the seventh Business Day prior to the Purchase Contract Settlement Date, an effective Early Settlement, shall pay the Purchase Price for the shares of Common Stock to be delivered under the related Purchase Contract from the proceeds

of the sale of the related Pledged Preferred Securities held by the Collateral Agent. Such sale will be made by the Remarketing Agent pursuant to the terms of the Remarketing Agreement on the third Business Day prior to the Purchase Contract Settlement Date. If, as provided in the Purchase Contract Agreement, upon the occurrence of a Failed Remarketing, the Collateral Agent, for the benefit of the Company, exercises its rights as a secured creditor with respect to the Pledged Preferred Securities related to this PEPS Units certificate, any accrued and unpaid distributions on such Pledged Preferred Securities will become payable by the Company to the holder of this PEPS Units Certificate in the manner provided for in the Purchase Contract Agreement.

The Company shall not be obligated to issue any shares of Common Stock in respect of a Purchase Contract or deliver any certificates therefor to the Holder unless it shall have received payment of the aggregate purchase price for the shares of Common Stock to be purchased thereunder in the manner herein set forth.

Each Purchase Contract evidenced hereby and all obligations and rights of the Company and the Holder thereunder shall terminate if a Termination Event shall occur. Upon the occurrence of a Termination Event, the Company shall give written notice to the Purchase Contract Agent and to the Holders, at their addresses as they appear in the PEPS Unit Register. Upon and after the occurrence of a Termination Event, the Collateral Agent shall release the Pledged Preferred Security or the appropriate Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio forming a part of each PEPS Unit from the Pledge. A PEPS Unit shall thereafter represent the right to receive the Preferred Security or the appropriate Applicable Ownership Interest of the Treasury Portfolio forming a part of such PEPS Unit in accordance with the terms of the Purchase Contract Agreement and the Pledge Agreement.

Under the terms of the Pledge Agreement, the Purchase Contract Agent will be entitled to exercise the voting and any other consensual rights pertaining to the Pledged Preferred Securities. Upon receipt of notice of any meeting at which holders of Preferred Securities are entitled to vote or upon the solicitation of consents, waivers or proxies of holders of Preferred Securities, the Purchase Contract Agent shall, as soon as practicable thereafter, mail to the PEPS Units Holders a notice:

(1) containing such information as is contained in the notice or solicitation;

(2) stating that each PEPS Unit Holder on the record date set by the Purchase Contract Agent therefor (which, to the extent possible, shall be the same date as the record date for determining the holders of Preferred Securities entitled to vote) shall be entitled to instruct the Purchase Contract Agent as to the exercise of the voting rights pertaining to the Preferred Securities constituting a part of such Holder's PEPS Unit; and

(3) stating the manner in which such instructions may be given.

Upon the written request of the PEPS Unit Holders on such record date, the Purchase Contract Agent shall endeavor insofar as practicable to vote or cause to be voted, in accordance with the instructions set forth in such requests, the maximum number of Preferred Securities as to which any particular voting instructions are received. In the absence of specific instructions from the Holder of a PEPS Unit, the Purchase Contract Agent shall abstain from voting the Preferred Security evidenced by such PEPS Unit.

Upon the dissolution and liquidation of the Trust, a principal amount of the Senior Deferrable Notes constituting the assets of the Trust and underlying the Preferred Securities equal to the aggregate liquidation amount of the Pledged Preferred Securities shall be delivered to the Securities Intermediary in exchange for the Pledged Preferred Securities. Thereafter, the Senior Deferrable Notes shall be held by the Securities Intermediary to secure the obligations of each Holder of PEPS Units to purchase shares of Common Stock under the Purchase Contracts constituting a part of such PEPS Units. Following the dissolution and liquidation of the Trust, the Holders and the Collateral Agent shall have such security interests, rights and obligations with respect to the Senior Deferrable Notes as the Holders and the Collateral Agent had in respect of the Pledged Preferred Securities, any reference herein to the Preferred Securities shall be deemed to be a reference to the Senior Deferrable Notes and any reference herein to the liquidation amount of the Preferred Securities shall be deemed to be a reference to the principal amount of the Senior Deferrable Notes.

Upon the occurrence of a Tax Event Redemption prior to the Purchase Contract Settlement Date, the Redemption Price payable on the Tax Event Redemption Date with respect to the Applicable Principal Amount of Senior Deferrable Notes shall be delivered to the Securities Intermediary in exchange for the Pledged Preferred Securities. Thereafter, pursuant to the terms of the Pledge Agreement, the Securities Intermediary will apply an amount equal to the Redemption Amount of such Redemption Price to purchase on behalf of the Holders of PEPS Units, the Treasury Portfolio and promptly (a) transfer the Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio to the Collateral Account to secure the obligations of each Holder of PEPS Units to purchase shares of Common Stock under the Purchase Contracts constituting a part of such PEPS Units, (b) transfer the Applicable Ownership Interest (as specified in clause (B) of the definition of such term) of the Treasury Portfolio to the Purchase Contract Agent for the benefit of the Holders of such PEPS Units and (C) remit the remaining portion of such Redemption Price to the Purchase Contract Agent for payment to the Holders of such PEPS Units.

Following the occurrence of a Tax Event Redemption prior to the Purchase Contract Settlement Date, the Holders of PEPS Units and the Collateral Agent shall have such security interest rights and obligations with respect to the Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio as the Holder of PEPS Units and the Collateral Agent had in respect of the Preferred Securities or Senior Deferrable Notes, as the case may be, subject to the Pledge thereof as provided in the Pledge Agreement and any

reference herein to the Preferred Securities shall be deemed to be a reference to such Treasury Portfolio.

The PEPS Certificates are issuable only in registered form and only in denominations of a single PEPS Unit and any integral multiple thereof. The transfer of any PEPS Units Certificate will be registered and PEPS Units Certificates may be exchanged as provided in the Purchase Contract Agreement. The PEPS Units Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents permitted by the Purchase Contract Agreement. No service charge shall be required for any such registration of transfer or exchange, but the Company and the Purchase Contract Agent may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. A Holder who elects to substitute a Treasury Security for Preferred Securities, thereby creating Treasury PEPS Units, shall be responsible for any fees or expenses payable in connection therewith. Except as provided in the Purchase Contract Agreement, for so long as the Purchase Contract underlying a PEPS Unit remains in effect, such PEPS Unit shall not be separable into its constituent parts, and the rights and obligations of the Holder of such PEPS Unit in respect of the Preferred Securities and Purchase Contract constituting such PEPS Unit may be transferred and exchanged only as a PEPS Unit.

The Holder of PEPS Units may substitute for the Pledged Preferred Securities securing such Holder's obligations under the related Purchase Contracts Treasury Securities in an aggregate principal amount equal to the aggregate liquidation amount of the Pledged Preferred Securities in accordance with the terms of the Purchase Contract Agreement and the Pledge Agreement. From and after such Collateral Substitution, each Security for which such Pledged Treasury Securities secures the Holder's obligation under the Purchase Contract shall be referred to as a "TREASURY PEPS UNIT". A Holder may make such Collateral Substitution only in integral multiples of 40 PEPS Units for 40 Treasury PEPS Units.

A Holder of Treasury PEPS Units may recreate PEPS Units by delivering to the Securities Intermediary Preferred Securities equal to the aggregate principal amount of the Pledged Treasury Securities in exchange for the release of such Pledged Treasury Securities in accordance with the terms of the Purchase Contract Agreement and the Pledge Agreement. A Holder may recreate PEPS Units in integral multiples of 40 Treasury PEPS Units for 40 PEPS Units.

If a Tax Event Redemption has occurred, a PEPS Unit Holder may not create Treasury Peps Units, and a Treasury PEPS Unit Holder may not recreate a PEPS Unit.

The Purchase Contracts and all obligations and rights of the Company and the Holders thereunder shall immediately and automatically terminate, without the necessity of any notice or action by any Holder, the Purchase Contract Agent or the Company, if, on or prior to the Purchase Contract Settlement Date, a Termination Event shall have occurred. Upon the occurrence of a Termination Event, the Company shall promptly but in no event later than two

Business Days thereafter give written notice to the Purchase Contract Agent, the Collateral Agent and the Holders, at their addresses as they appear in the PEPS Units Register. Upon and after the occurrence of a Termination Event, the Collateral Agent shall release the Preferred Securities or the appropriate Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio, as the case may be, from the Pledge in accordance with the provisions of the Pledge Agreement.

Subject to and upon compliance with the provisions of the Purchase Contract Agreement, at the option of the Holder thereof, Purchase Contracts underlying Securities may be settled early ("EARLY SETTLEMENT") as provided in the Purchase Contract Agreement. In order to exercise the right to effect Early Settlement with respect to any Purchase Contracts evidenced by this PEPS Units Certificate, the Holder of this PEPS Units Certificate shall deliver to the Purchase Contract Agent at the Corporate Trust Office an Election to Settle Early form set forth below and any other documents requested by the Purchase Contract Agent duly completed and accompanied by payment in the form of immediately available funds payable to the order of the Company in an amount (the "EARLY SETTLEMENT AMOUNT") equal to the product of (A) $25 times (B) the number of Purchase Contracts with respect to which the Holder has elected to effect Early Settlement.

Upon Early Settlement of Purchase Contracts by a Holder of the related Securities, the Pledged Preferred Securities or the appropriate Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio, as the case may be, underlying such Securities shall be released from the Pledge as provided in the Pledge Agreement and the Holder shall be entitled to receive a number of shares of Common Stock on account of each Purchase Contract forming part of a PEPS Unit as to which Early Settlement is effected equal to .71531 shares of Common Stock per Purchase Contract (the "EARLY SETTLEMENT RATE"). The Early Settlement Rate shall be adjusted in the same manner and at the same time as the Settlement Rate is adjusted as provided in the Purchase Contract Agreement.

Upon registration of transfer of this PEPS Units Certificate, the transferee shall be bound (without the necessity of any other action on the part of such transferee, except as may be required by the Purchase Contract Agent pursuant to the Purchase Contract Agreement), under the terms of the Purchase Contract Agreement and the Purchase Contracts evidenced hereby and the transferor shall be released from the obligations under the Purchase Contracts evidenced by this PEPS Units Certificate. The Company covenants and agrees, and the Holder, by its acceptance hereof, likewise covenants and agrees, to be bound by the provisions of this paragraph.

The Holder of this PEPS Units Certificate, by its acceptance hereof, authorizes the Purchase Contract Agent to enter into and perform the related Purchase Contracts forming part of the PEPS Units evidenced hereby on its behalf as its attorney-in-fact, expressly withholds any consent to the assumption (i.e., affirmance) of the Purchase Contracts by the Company or its trustee in the event that the Company becomes the subject of a case under the Bankruptcy Code, agrees to be bound by the terms and provisions thereof, covenants and agrees to perform his

obligations under such Purchase Contracts, consents to the provisions of the Purchase Contract Agreement, authorizes the Purchase Contract Agent to enter into and perform the Purchase Contract Agreement and the Pledge Agreement on its behalf as its attorney-in-fact, and consents to the Pledge of the Preferred Securities or the appropriate Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio, as the case may be, underlying this PEPS Units Certificate pursuant to the Pledge Agreement. The Holder further covenants and agrees that, to the extent and in the manner provided in the Purchase Contract Agreement and the Pledge Agreement, but subject to the terms thereof, payments in respect to the aggregate liquidation amount of the Pledged Preferred Securities or the appropriate Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio, as the case may be, on the Purchase Contract Settlement Date shall be paid by the Collateral Agent to the Company in satisfaction of such Holder's obligations under such Purchase Contract and such Holder shall acquire no right, title or interest in such payments.

Subject to certain exceptions, the provisions of the Purchase Contract Agreement may be amended with the consent of the Holders of a majority of the Purchase Contracts.

The Purchase Contracts shall be governed by, and construed in accordance with, the laws of the State of New York.

The Company, the Purchase Contract Agent and its Affiliates and any agent of the Company or the Purchase Contract Agent may treat the Person in whose name this PEPS Units Certificate is registered as the owner of the PEPS Units evidenced hereby for the purpose of receiving payments of distributions payable quarterly on the Preferred Securities, performance of the Purchase Contracts and for all other purposes whatsoever, whether or not any payments in respect thereof be overdue and notwithstanding any notice to the contrary, and neither the Company, the Purchase Contract Agent nor any such agent shall be affected by notice to the contrary.

The Purchase Contracts shall not, prior to the settlement thereof, entitle the Holder to any of the rights of a holder of shares of Common Stock.

A copy of the Purchase Contract Agreement is available for inspection at the offices of the Purchase Contract Agent.

TEN COM:                     as tenants in common
UNIF GIFT MIN ACT:                               Custodian
                             -------------------           -------------------
                                   (cust)                        (minor)

TENANT:                      as tenants by the entireties

JT TEN:                      as joint tenants with right of survivorship and not
                             as tenants in common

Additional abbreviations may also be used though not in the above list.

FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto

the within PEPS Units Certificates and all rights thereunder, hereby irrevocably constituting and appointing attorney __________________, to transfer said PEPS Units Certificates on the books of Valero Energy Corporation and VEC Trust I with full power of substitution in the premises.

Dated:                                 Signature
      ----------------------------              --------------------------------

                                       NOTICE: The signature to this assignment
                                       must correspond with the name as it
                                       appears upon the face of the within PEPS
                                       Units Certificates in every particular,
                                       without alteration or enlargement or any
                                       change whatsoever.

         Signature Guarantee:
                             --------------------------------

SETTLEMENT INSTRUCTIONS

The undersigned Holder directs that a certificate for shares of Common Stock deliverable upon settlement on or after the Purchase Contract Settlement Date of the Purchase Contracts underlying the number of PEPS Units evidenced by this PEPS Units Certificate be registered in the name of, and delivered, together with a check in payment for any fractional share, to the undersigned at the address indicated below unless a different name and address have been indicated below. If shares are to be registered in the name of a Person other than the undersigned, the undersigned will pay any transfer tax payable incident thereto.

Dated:
      ---------------------------------     ------------------------------------
                                            Signature
                                            Signature Guarantee:
                                                                ----------------
                                            (if assigned to another person)


If shares are to be registered in the
name of and delivered to a Person other     REGISTERED HOLDER
than the Holder, please (i) print such
Person's name and address and (ii)          Please print name and address of
provide a guarantee of your signature:      Registered Holder:


---------------------------------------     ------------------------------------
Name                                        Name

---------------------------------------     ------------------------------------
Address                                     Address

---------------------------------------     ------------------------------------
---------------------------------------     ------------------------------------
---------------------------------------     ------------------------------------

Social Security or other
Taxpayer Identification
Number, if any
                                            ------------------------------------

ELECTION TO SETTLE EARLY

The undersigned Holder of this PEPS Units Certificate hereby irrevocably exercises the option to effect Early Settlement in accordance with the terms of the Purchase Contract Agreement with respect to the Purchase Contracts underlying the number of PEPS Units evidenced by this PEPS Units Certificate specified below. The undersigned Holder directs that a certificate for shares of Common Stock deliverable upon such Early Settlement be registered in the name of, and delivered, together with a check in payment for any fractional share and any PEPS Units Certificate representing any PEPS Units evidenced hereby as to which Early Settlement of the related Purchase Contracts is not effected, to the undersigned at the address indicated below unless a different name and address have been indicated below. Pledged Preferred Securities or the appropriate Applicable Ownership Interest of the Treasury Portfolio, as the case may be, deliverable upon such Early Settlement will be transferred in accordance with the transfer instructions set forth below. If shares are to be registered in the name of a Person other than the undersigned, the undersigned will pay any transfer tax payable incident thereto.

Dated:
      -----------------------               ------------------------------------
                                            Signature


Signature Guarantee:
                    -----------------------

Number of Securities evidenced hereby as to which Early Settlement of the related Purchase Contracts is being elected:

If shares of Common Stock or PEPS           REGISTERED HOLDER
Units Certificates are to be
registered in the name of and
delivered to and Pledged Preferred
Securities, or the Applicable
Ownership Interest of the Treasury
Portfolio, as the case may be, are to
be transferred to a Person other than
the Holder, please print such Person's
name and address:

                                            Please print name and address of
                                            Registered Holder:


---------------------------------------     ------------------------------------
Name                                        Name

--------------------------------------      ------------------------------------
Address                                     Address

--------------------------------------      ------------------------------------
--------------------------------------      ------------------------------------
--------------------------------------      ------------------------------------

Social Security or other
Taxpayer Identification

Number, if any
                                            ------------------------------------

Transfer Instructions for Pledged Preferred Securities or the Applicable Ownership Interest of the Treasury Portfolio, as the case may be, transferable upon Early Settlement or a Termination Event:

[TO BE ATTACHED TO GLOBAL CERTIFICATES]

=======================================================================================================================
                                                                         Number of PEPS Units
                         Amount of increase in   Amount of decrease in     evidenced by this
                         Number of PEPS Units    Number of PEPS Units     Global Certificate    Signature of authorized
                           evidenced by the        evidenced by the         following such      officer of Trustee or
Date                      Global Certificate      Global Certificate     decrease or increase   Securities Custodian

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EXHIBIT B

FACE OF TREASURY PEPS CERTIFICATE

"THIS CERTIFICATE IS A GLOBAL CERTIFICATE WITHIN THE MEANING OF THE PURCHASE CONTRACT AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (THE "DEPOSITARY"), OR A NOMINEE OF THE DEPOSITARY. THIS CERTIFICATE IS EXCHANGEABLE FOR CERTIFICATES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE PURCHASE CONTRACT AGREEMENT AND NO TRANSFER OF THIS CERTIFICATE (OTHER THAN A TRANSFER OF THIS CERTIFICATE AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN."

No. 1 Cusip No. 91913y209 Number of Treasury PEPS Units 0

VALERO ENERGY CORPORATION
VEC TRUST I
TREASURY PEPS UNITS

This Treasury PEPS Units Certificate certifies that Cede & Co. is the registered Holder of the number of Treasury PEPS Units set forth above. Each Treasury PEPS Unit consists of (i) a 1/40 undivided beneficial ownership interest of a Treasury Security having a principal amount at maturity equal to $1,000, subject to the Pledge of such Treasury Security by such Holder pursuant to the Pledge Agreement, and (ii) the rights and obligations of the Holder under one Purchase Contract with Valero Energy Corporation, a Delaware corporation (the "COMPANY"). All capitalized terms used herein which are defined in the Purchase Contract Agreement (as defined on the reverse hereof) have the meaning set forth therein.

Pursuant to the Pledge Agreement, the Treasury Securities constituting part of each Treasury PEPS Unit evidenced hereby have been pledged to the Collateral Agent, for the benefit of the Company, to secure the obligations of the Holder under the Purchase Contract comprising part of such Treasury PEPS Unit. Each Purchase Contract evidenced hereby obligates the Holder of this Treasury PEPS Units Certificate to purchase, and the Company, to sell, on August 18, 2003, at a price equal to $25 (the "STATED AMOUNT"), a number of shares of Common Stock, $0.01 par value ("COMMON STOCK"), of the Company, equal to the Settlement Rate, unless prior to or on the Purchase Contract Settlement Date there shall have occurred a Termination Event or an Early Settlement with respect to the Treasury PEPS Unit of which such Purchase Contract is a part, all as provided in the Purchase Contract Agreement and more fully described on the reverse hereof. The purchase price (the "PURCHASE PRICE") for the shares of Common Stock purchased pursuant to each Purchase Contract evidenced hereby, if not paid earlier, shall be paid on the Purchase Contract Settlement Date by application of the proceeds from the Treasury Securities at maturity pledged to secure the obligations of the Holder under such Purchase Contract of the Treasury PEPS Unit of which such Purchase Contract is a part.

Reference is hereby made to the further provisions set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.

Unless the certificate of authentication hereon has been executed by the Purchase Contract Agent by manual signature, this Treasury PEPS Units Certificate shall not be entitled to any benefit under the Pledge Agreement or the Purchase Contract Agreement or be valid or obligatory for any purpose.

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.

VALERO ENERGY CORPORATION

HOLDER SPECIFIED ABOVE (as to
obligations of such Holder under the
Purchase Contracts)

By: THE BANK OF NEW YORK, not
individually but solely as Attorney-
in-Fact of such Holder

Title:

Dated: June 28, 2000

CERTIFICATE OF AUTHENTICATION OF
PURCHASE CONTRACT AGENT

This is one of the Treasury PEPS Units referred to in the within-mentioned Purchase Contract Agreement.

By: THE BANK OF NEW YORK, as
Purchase Contract Agent

Dated: June 28, 2000

(REVERSE OF TREASURY PEPS UNITS CERTIFICATE)

Each Purchase Contract evidenced hereby is governed by a Purchase Contract Agreement, dated as of June 28, 2000 (as may be supplemented from time to time, the "PURCHASE CONTRACT AGREEMENT") between the Company and The Bank of New York, as Purchase Contract Agent (including its successors thereunder, herein called the "PURCHASE CONTRACT AGENT"), to which the Purchase Contract Agreement and supplemental agreements thereto reference is hereby made for a description of the respective rights, limitations of rights, obligations, duties and immunities thereunder of the Purchase Contract Agent, the Company and the Holders and of the terms upon which the Treasury PEPS Units Certificates are, and are to be, executed and delivered.

Unless a Cash Settlement or an Early Settlement has occurred, each Purchase Contract evidenced hereby obligates the Holder of this Treasury PEPS Units Certificate to purchase, and the Company to sell, on the Purchase Contract Settlement Date at a price equal to the Stated Amount (the "PURCHASE PRICE") a number of shares of Common Stock equal to the Settlement Rate, unless prior to the Purchase Contract Settlement Date, there shall have occurred a Termination Event with respect to the Security of which such Purchase Contract is a part or an Early Settlement shall have occurred. The "SETTLEMENT RATE" is equal to:

(1) if the Applicable Market Value (as defined below) is greater than or equal to $34.95 (the "THRESHOLD APPRECIATION PRICE"), .71531 shares of Common Stock per Purchase Contract;

(2) if the Applicable Market Value is less than the Threshold Appreciation Price but greater than $29.125 (the "REFERENCE PRICE"), the number of shares of Common Stock per Purchase Contract having a value, based on the Applicable Market Value, equal to $25; and

(3) if the Applicable Market Value is less than or equal to $29.125, then .85837 shares of Common Stock per Purchase Contract,

in each case subject to adjustment as provided in the Purchase Contract Agreement (and in each case rounded upward or downward to the nearest 1/10,000th of a share).

No fractional shares of Common Stock will be issued upon settlement of Purchase Contracts, as provided in Section 5.09 of the Purchase Contract Agreement.

Each Purchase Contract evidenced hereby, which is settled either through Early Settlement or Cash Settlement, shall obligate the Holder of the related Treasury PEPS Unit to purchase at the Purchase Price for cash, and the Company to sell, a number of shares of Common Stock equal to the Early Settlement Rate or the Settlement Rate, as applicable.

The "APPLICABLE MARKET VALUE" means the average of the Closing Prices per share of

Common Stock on each of the 20 consecutive Trading Days ending on the third Trading Day immediately preceding the Purchase Contract Settlement Date.

The "CLOSING PRICE" per share of Common Stock on any date of determination means the:

(1) closing sale price (or, if no closing price is reported, the last reported sale price) per share on the New York Stock Exchange, Inc. (the "NYSE") on such date;

(2) if the Common Stock is not listed for trading on the NYSE on any such date, the closing sale price per share as reported in the composite transactions for the principal United States securities exchange on which the Common Stock is so listed;

(3) if the Common Stock is not so listed on a United States national or regional securities exchange, the closing sale price per share as reported by The NASDAQ Stock Market, Inc.;

(4) if the Common Stock is not so reported, the last quoted bid price for the Common Stock in the over-the-counter market as reported by the National Quotation Bureau or similar organization; or

(5) if such bid price is not available, the average of the mid-point of the last bid and ask prices of the Common Stock on such date from at least three nationally recognized independent investment banking firms retained for this purpose by the Company.

A "TRADING DAY" means a day on which the Common Stock (1) is not suspended from trading on any national or regional securities exchange or association or over-the-counter market at the close of business and (2) has traded at least once on the national or regional securities exchange or association or over-the-counter market that is the primary market for the trading of the Common Stock.

In accordance with the terms of the Purchase Contract Agreement, the Holder of this Treasury PEPS Unit shall pay the Purchase Price for the shares of the Common Stock purchased pursuant to each Purchase Contract evidenced hereby either by effecting a Cash Settlement or an Early Settlement of each such Purchase Contract or by applying a principal amount of the Pledged Treasury Securities underlying such Holder's Treasury PEPS Unit equal to the Stated Amount of such Purchase Contract to the purchase of the Common Stock. A Holder of Treasury PEPS Unit who does not effect, prior to or on 11:00 a.m. (New York City time) on the fifth Business Day immediately preceding the Purchase Contract Settlement Date, an effective Cash Settlement or who does not effect on or prior to 5 p.m. (New York City time) on the seventh Business Day prior to the Purchase Contract Settlement Date an effective Early Settlement, shall pay the Purchase Price for the shares of Common Stock to be issued under the related Purchase Contract from the proceeds of the Pledged Treasury Securities.

The Company shall not be obligated to issue any shares of Common Stock in respect of a Purchase Contract or deliver any certificates therefor to the Holder unless it shall have received payment of the aggregate purchase price for the shares of Common Stock to be purchased thereunder in the manner herein set forth.

Each Purchase Contract evidenced hereby and all obligations and rights of the Company and the Holder thereunder shall terminate if a Termination Event shall occur. Upon the occurrence of a Termination Event, the Company shall give written notice to the Purchase Contract Agent and to the Holders, at their addresses as they appear in the Treasury PEPS Units Register. Upon and after the occurrence of a Termination Event, the Collateral Agent shall release the Pledged Treasury Securities (as defined in the Pledge Agreement) forming a part of each Treasury PEPS Unit. A Treasury PEPS Unit shall thereafter represent the right to receive the interest in the Treasury Security forming a part of such Treasury PEPS Unit, in accordance with the terms of the Purchase Contract Agreement and the Pledge Agreement.

The Treasury PEPS Units Certificates are issuable only in registered form and only in denominations of a single Treasury PEPS and any integral multiple thereof. The transfer of any Treasury PEPS Certificate will be registered and Treasury PEPS Certificates may be exchanged as provided in the Purchase Contract Agreement. The Treasury PEPS Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents permitted by the Purchase Contract Agreement. No service charge shall be required for any such registration of transfer or exchange, but the Company and the Purchase Contract Agent may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. A Holder who elects to substitute Preferred Securities or Senior Deferrable Notes, for Treasury Securities, thereby recreating PEPS Units, shall be responsible for any fees or expenses associated therewith. Except as provided in the Purchase Contract Agreement, for so long as the Purchase Contract underlying a Treasury PEPS Unit remains in effect, such Treasury PEPS Unit shall not be separable into its constituent parts, and the rights and obligations of the Holder of such Treasury PEPS Unit in respect of the Treasury Security and the Purchase Contract constituting such Treasury PEPS Unit may be transferred and exchanged only as a Treasury PEPS Unit.

A Holder of Treasury PEPS Units may recreate PEPS Units by delivering to the Collateral Agent, Preferred Securities or Senior Deferrable Notes with a liquidation amount, in the case of such Preferred Securities or with a principal amount in the case of such Senior Deferrable Notes, equal to the aggregate principal amount at maturity of the Pledged Treasury Securities in exchange for the release of such Pledged Treasury Securities in accordance with the terms of the Purchase Contract Agreement and the Pledge Agreement. From and after such substitution, the Holder's Security shall be referred to as a "PEPS UNIT". Any such creation of PEPS Units may be effected in multiples of 40 Treasury PEPS Units for 40 PEPS Units.

A Holder of PEPS Units may recreate Treasury PEPS Units by delivering to the Collateral Agent Treasury Securities in an aggregate principal amount equal to the aggregate liquidation amount of the Pledged Preferred Securities or the aggregate principal amount at maturity of the Pledged Senior Deferrable Notes, as the case may be, in accordance with the terms of the Purchase Contract Agreement and the Pledge Agreement. Any such recreation of Treasury PEPS Units may be effected only in multiples of 40 PEPS Units for 40 Treasury PEPS Units.

If a Tax Event Redemption has occurred, a Treasury PEPS Unit Holder may not recreate PEPS Units, and a PEPS Unit Holder may not create a Treasury PEPS Unit.

The Purchase Contracts and all obligations and rights of the Company and the Holders thereunder shall immediately and automatically terminate, without the necessity of any notice or action by any Holder, the Purchase Contract Agent or the Company, if, on or prior to the Purchase Contract Settlement Date, a Termination Event shall have occurred. Upon the occurrence of a Termination Event, the Company shall promptly but in no event later than two Business Days thereafter give written notice to the Purchase Contract Agent, the Collateral Agent and the Holders, at their addresses as they appear in the Treasury PEPS Units Register. Upon and after the occurrence of a Termination Event, the Collateral Agent shall release the Treasury Securities from the Pledge in accordance with the provisions of the Pledge Agreement. A Treasury PEPS Unit shall thereafter represent the right to receive the interest in the Treasury Security forming a part of such Treasury PEPS Unit, in accordance with the terms of the Purchase Contract Agreement and the Pledge Agreement.

Subject to and upon compliance with the provisions of the Purchase Contract Agreement, at the option of the Holder thereof, Purchase Contracts underlying Securities may be settled early ("EARLY SETTLEMENT") as provided in the Purchase Contract Agreement. In order to exercise the right to effect Early Settlement with respect to any Purchase Contracts evidenced by this Treasury PEPS Unit, the Holder of this Treasury PEPS Units Certificate shall deliver to the Purchase Contract Agent at the Corporate Trust Office an Election to Settle Early form set forth below and any other documents requested by the Purchase Contract Agent duly completed and accompanied by payment in the form of immediately available funds payable to the order of the Company in an amount (the "EARLY SETTLEMENT AMOUNT") equal to the product of (A) $25 times (B) the number of Purchase Contracts with respect to which the Holder has elected to effect Early Settlement.

Upon Early Settlement of Purchase Contracts by a Holder of the related Securities, the Pledged Treasury Securities underlying such Securities shall be released from the Pledge as provided in the Pledge Agreement and the Holder shall be entitled to receive a number of shares of Common Stock on account of each Purchase Contract forming part of a Treasury PEPS Unit as to which Early Settlement is effected equal to .71531 shares of Common Stock per Purchase Contract (the "EARLY SETTLEMENT RATE"). The Early Settlement Rate shall be adjusted in the same manner and at the same time as the Settlement Rate is adjusted as provided in the Purchase Contract Agreement.

Upon registration of transfer of this Treasury PEPS Certificate, the transferee shall be bound (without the necessity of any other action on the part of such transferee, except as may be required by the Purchase Contract Agent pursuant to the Purchase Contract Agreement), under the terms of the Purchase Contract Agreement and the Purchase Contracts evidenced hereby and the transferor shall be released from the obligations under the Purchase Contracts evidenced by this Treasury PEPS Units Certificate. The Company covenants and agrees, and the Holder, by its acceptance hereof, likewise covenants and agrees, to be bound by the provisions of this paragraph.

The Holder of this Treasury PEPS Units Certificate, by its acceptance hereof, authorizes the Purchase Contract Agent to enter into and perform the related Purchase Contracts forming part of the Treasury PEPS Units evidenced hereby on its behalf as its attorney-in-fact, expressly withholds any consent to the assumption (i.e., affirmance) of the Purchase Contracts by the Company or its trustee in the event that the Company becomes the subject of a case under the Bankruptcy Code, agrees to be bound by the terms and provisions thereof, covenants and agrees to perform its obligations under such Purchase Contracts, consents to the provisions of the Purchase Contract Agreement, authorizes the Purchase Contract Agent to enter into and perform the Purchase Contract Agreement and the Pledge Agreement on its behalf as its attorney-in-fact, and consents to the Pledge of the Treasury Securities underlying this Treasury PEPS Units Certificate pursuant to the Pledge Agreement. The Holder further covenants and agrees, that, to the extent and in the manner provided in the Purchase Contract Agreement and the Pledge Agreement, but subject to the terms thereof, payments in respect to the aggregate principal amount of the Pledged Treasury Securities on the Purchase Contract Settlement Date shall be paid by the Collateral Agent to the Company in satisfaction of such Holder's obligations under such Purchase Contract and such Holder shall acquire no right, title or interest in such payments.

Subject to certain exceptions, the provisions of the Purchase Contract Agreement may be amended with the consent of the Holders of a majority of the Purchase Contracts.

The Purchase Contracts shall for all purposes be governed by, and construed in accordance with, the laws of the State of New York.

The Company, the Purchase Contract Agent and its Affiliates and any agent of the Company or the Purchase Contract Agent may treat the Person in whose name this Treasury PEPS Units Certificate is registered as the owner of the Treasury PEPS Units evidenced hereby for the purpose of receiving payments of interest on the Treasury Securities, performance of the Purchase Contracts and for all other purposes whatsoever, whether or not any payments in respect thereof be overdue and notwithstanding any notice to the contrary, and neither the Company, the Purchase Contract Agent nor any such agent shall be affected by notice to the contrary.

The Purchase Contracts shall not, prior to the settlement thereof, entitle the Holder to any of the rights of a holder of shares of Common Stock.

A copy of the Purchase Contract Agreement is available for inspection at the offices of the Purchase Contract Agent.

TEN COM:                       as tenants in common

UNIF GIFT MIN ACT:             ___________________ Custodian ___________________
                                     (cust)                        (minor)
                               Under Uniform Gifts to Minors Act of
                                                                   -------------
                               -------------------------------------------------

TENANT:                        as tenants by the entireties

JT TEN:                        as joint tenants with right of survivorship and
                               not as tenants in common

Additional abbreviations may also be used though not in the above list.

FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto

the within Treasury PEPS Units Certificates and all rights thereunder, hereby irrevocably constituting and appointing __________________ attorney to transfer said Treasury PEPS Units Certificates on the books of Valero Energy Corporation. and VEC Trust I with full power of substitution in the premises.

Dated:
      ----------------------------     -----------------------------------------
                                       Signature

                                       NOTICE: The signature to this assignment
                                       must correspond with the name as it
                                       appears upon the face of the within
                                       Treasury PEPS Units Certificates in every
                                       particular, without alteration or
                                       enlargement or any change whatsoever.

         Signature Guarantee:
                             ---------------------------

SETTLEMENT INSTRUCTIONS

The undersigned Holder directs that a certificate for shares of Common Stock deliverable upon settlement on or after the Purchase Contract Settlement Date of the Purchase Contracts underlying the number of Treasury PEPS Units evidenced by this Treasury PEPS Units Certificate be registered in the name of, and delivered, together with a check in payment for any fractional share, to the undersigned at the address indicated below unless a different name and address have been indicated below. If shares are to be registered in the name of a Person other than the undersigned, the undersigned will pay any transfer tax payable incident thereto.

Dated:
      ----------------------------     -----------------------------------------
                                       Signature

                                       Signature Guarantee:
                                                           ---------------------
                                       (if assigned to another person)


If shares are to be registered in
the name of and delivered to a         REGISTERED HOLDER
Person other than the Holder,
please (i) print such Person's name
and address and (ii) provide a
guarantee of your signature:           Please print name and address of
                                       Registered Holder:

----------------------------------     -----------------------------------------
Name                                   Name

----------------------------------     -----------------------------------------
Address                                Address

----------------------------------     -----------------------------------------

----------------------------------     -----------------------------------------

----------------------------------     -----------------------------------------

Social Security or other
Taxpayer Identification
Number, if any
                                       -----------------------------------------

ELECTION TO SETTLE EARLY

The undersigned Holder of this Treasury PEPS Units Certificate irrevocably exercises the option to effect Early Settlement in accordance with the terms of the Purchase Contract Agreement with respect to the Purchase Contracts underlying the number of Treasury PEPS Units evidenced by this Treasury PEPS Units Certificate specified below. The option to effect Early Settlement may be exercised only with respect to Purchase Contracts underlying Treasury PEPS with an aggregate Stated Amount equal to $1,000 or an integral multiple thereof. The undersigned Holder directs that a certificate for shares of Common Stock deliverable upon such Early Settlement be registered in the name of, and delivered, together with a check in payment for any fractional share and any Treasury PEPS Units Certificate representing any Treasury PEPS Units evidenced hereby as to which Early Settlement of the related Purchase Contracts is not effected, to the undersigned at the address indicated below unless a different name and address have been indicated below. Pledged Treasury Securities deliverable upon such Early Settlement will be transferred in accordance with the transfer instructions set forth below. If shares are to be registered in the name of a Person other than the undersigned, the undersigned will pay any transfer tax payable incident thereto.

Dated:
      -----------------------          -----------------------------------------
                                       Signature

Signature Guarantee:
                    -----------------------------

Number of Securities evidenced hereby as to which Early Settlement of the related Purchase Contracts is being elected:

If shares of Common Stock of           REGISTERED HOLDER
Treasury PEPS Units Certificates
are to be registered in the name
of and delivered to and Pledged
Treasury Securities are to be
transferred to a Person other than
the Holder, please print such
Person's name and address:

                                       Please print name and address of
                                       Registered Holder:

----------------------------------     -----------------------------------------
              Name                                        Name

----------------------------------     -----------------------------------------
             Address                                     Address

----------------------------------     -----------------------------------------
----------------------------------     -----------------------------------------
----------------------------------     -----------------------------------------

Social Security or other
Taxpayer Identification
Number, if any
                                       -----------------------------------------

Transfer Instructions for Pledged Treasury Securities Transferable Upon Early Settlement or a Termination Event:

[TO BE ATTACHED TO GLOBAL CERTIFICATES]

=======================================================================================================================
                                                                          Number of Treasury
                         Amount of increase in   Amount of decrease in   PEPS Units evidenced
                          Number of Treasury      Number of Treasury        by this Global
                         PEPS Units evidenced    PEPS Units evidenced    Certificate following  Signature of authorized
                             by the Global           by the Global         such decrease or     officer of Trustee or
Date                          Certificate             Certificate              increase         Securities Custodian

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EXHIBIT C

INSTRUCTION TO PURCHASE CONTRACT AGENT

Bank of New York
101 Barclay Street
21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration

Re: [_______ PEPS Units] [_______ Treasury PEPS Units] of Valero Energy Corporation, a Delaware corporation (the "COMPANY") and VEC Trust I.

The undersigned Holder hereby notifies you that it has delivered to Bank One Trust Company, N.A., as Securities Intermediary, for credit to the Collateral Account, $______ aggregate [principal] [liquidation] amount of
[Preferred Securities] [Senior Deferrable Notes] [Treasury Securities] in exchange for the [Pledged Preferred Securities] [Pledged Senior Deferrable Notes] [Pledged Treasury Securities] held in the Collateral Account, in accordance with the Pledge Agreement, dated as of June 28, 2000 (the "PLEDGE AGREEMENT"; unless otherwise defined herein, terms defined in the Pledge Agreement are used herein as defined therein), between you, the Company, the Collateral Agent and the Securities Intermediary. The undersigned Holder has paid all applicable fees relating to such exchange. The undersigned Holder hereby instructs you to instruct the Collateral Agent to release to you on behalf of the undersigned Holder the [Pledged Preferred Securities] [Pledged Senior Deferrable Notes] [Pledged Treasury Securities] related to such [PEPS Units] [Treasury PEPS Units].

Date:
     ------------------------          -----------------------------------------
                                       Signature

                             Signature Guarantee:
                                                 -------------------------------

Please print name and address of Registered Holder:

----------------------------------     -----------------------------------------
Name                                   Social Security or other Taxpayer
                                       Identification Number, if any

Address

----------------------------------

----------------------------------

EXHIBIT D

NOTICE FROM PURCHASE CONTRACT AGENT
TO HOLDERS
(Transfer of Collateral upon Occurrence of a Termination Event)

[HOLDER]

Re: [__________ PEPS Units] [______ Treasury PEPS Units] of Valero Energy Corporation, a Delaware corporation (the "COMPANY") and VEC Trust I

Please refer to the Purchase Contract Agreement, dated as of June 28, 2000 (the "PURCHASE CONTRACT AGREEMENT"; unless otherwise defined herein, terms defined in the Purchase Contract Agreement are used herein as defined therein), between the Company and the undersigned, as Purchase Contract Agent and as attorney-in-fact for the holders of PEPS Units and Treasury PEPS Units from time to time.

We hereby notify you that a Termination Event has occurred and that
[the Senior Deferrable Notes][the Treasury Securities] underlying your ownership interest in _____ [PEPS Units] [Treasury PEPS Units] have been released and are being held by us for your account pending receipt of transfer instructions with respect to such [Senior Deferrable Notes][Treasury Securities] (the "RELEASED SECURITIES").

Pursuant to Section 3.15 of the Purchase Contract Agreement, we hereby request written transfer instructions with respect to the Released Securities. Upon receipt of your instructions and upon transfer to us of your [PEPS Units][Treasury PEPS Units] effected through book-entry or by delivery to us of your [PEPS Units Certificate][Treasury PEPS Units Certificate], we shall transfer the Released Securities by book-entry transfer or other appropriate procedures, in accordance with your instructions. In the event you fail to effect such transfer or delivery, the Released Securities and any distributions thereon, shall be held in our name, or a nominee in trust for your benefit, until such time as such [PEPS Units][Treasury PEPS Units] are transferred or your [PEPS Units Certificate] [Treasury PEPS Units Certificate] is surrendered or satisfactory evidence is provided that such [PEPS Units Certificate][Treasury PEPS Units Certificate] has been destroyed, lost or stolen, together with any indemnification that we or the Company may require.

Date:                                  By: THE BANK OF NEW YORK


                                       -----------------------------------------
                                       Name:
                                       Title: Authorized Signatory

EXHIBIT E

NOTICE TO SETTLE BY CASH

The Bank of New York
101 Barclay Street
21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration

Re: [_______ PEPS Units] [Treasury PEPS Units] of Valero Energy Corporation, a Delaware corporation (the "COMPANY") and VEC Trust I

The undersigned Holder hereby irrevocably notifies you in accordance with Section 5.02 of the Purchase Contract Agreement, dated as of June 28, 2000 (the "PURCHASE CONTRACT AGREEMENT"; unless otherwise defined herein, terms defined in the Purchase Contract Agreement are used herein as defined therein), between the Company and you, as Purchase Contract Agent and as Attorney-in-Fact for the Holders of the Purchase Contracts, that such Holder has elected to pay to the Securities Intermediary for deposit in the Collateral Account, prior to or on 11:00 a.m. (New York City time) on the fifth Business Day immediately preceding the Purchase Contract Settlement Date (in lawful money of the United States by certified or cashiers' check or wire transfer, in immediately available funds), $______ as the Purchase Price for the shares of Common Stock issuable to such Holder by the Company under the related Purchase Contracts on the Purchase Contract Settlement Date. The undersigned Holder hereby instructs you to notify promptly the Collateral Agent of the undersigned Holders' election to make such cash settlement with respect to the Purchase Contracts related to such Holder's [PEPS Units] [Treasury PEPS Units].

Date:
     -----------------------------     -----------------------------------------
                                       Signature


                                       Signature Guarantee:
                                                           ---------------------

Please print name and address of Registered Holder:

EXHIBIT F

NOTICE FROM PURCHASE CONTRACT AGENT
TO COLLATERAL AGENT AND INDENTURE TRUSTEE
(Settlement of Purchase Contract through Remarketing)

Bank One Trust Company, N.A.
One North State Street, 9th Floor
Chicago, Illinois 60670-0126
Attention: Corporate Trust Administration Telecopy: (312) 407-1708

The Bank of New York
101 Barclay Street
21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration Telecopy: (212) 815-5915

Re: __________ PEPS Units of Valero Energy Corporation, a Delaware corporation (the "COMPANY") and VEC Trust I

Please refer to the Purchase Contract Agreement, dated as of June 28, 2000 (the "PURCHASE CONTRACT AGREEMENT"; unless otherwise defined herein, terms defined in the Purchase Contract Agreement are used herein as defined therein), between the Company and the undersigned, as Purchase Contract Agent and as attorney-in-fact for the Holders of PEPS Units from time to time.

In accordance with Section 5.02 of the Purchase Contract Agreement and, based on instructions and Cash Settlements received from Holders of PEPS Units as of 11:00 a.m. (New York City time), the fifth Business Day preceding the Purchase Contract Settlement Date, we hereby notify you that ______ [Preferred Securities] [Senior Deferrable Notes] are to be tendered for purchase in the Remarketing.

Date:                                  By: THE BANK OF NEW YORK


                                       -----------------------------------------
                                       Name:
                                       Title: Authorized Officer

EXHIBIT 4.5

VALERO ENERGY CORPORATION

and

BANK ONE TRUST COMPANY, N.A., as Collateral Agent

and

BANK ONE TRUST COMPANY, N.A., as Securities Intermediary

and

THE BANK OF NEW YORK, as Purchase Contract Agent

PLEDGE AGREEMENT

Dated as of June 28, 2000

Section 1.  Definitions.............................................................................1

Section 2.  Pledge..................................................................................5
        Section 2.1  Pledge.........................................................................5
        Section 2.2  Control; Financing Statement...................................................5
        Section 2.3  Termination....................................................................5

Section 3.  Distributions on Pledged Collateral.....................................................6
        Section 3.1  Income Distributions...........................................................6
        Section 3.2  Principal Payments Following Termination Event.................................6
        Section 3.3  Principal Payments Prior To or On Purchase Contract Settlement Date............6
        Section 3.4  Payments to Purchase Contract Agent............................................7
        Section 3.5  Assets Not Properly Released...................................................7

Section 4.  Control.................................................................................7
        Section 4.1  Establishment of Collateral Account............................................7
        Section 4.2  Treatment as Financial Assets..................................................8
        Section 4.3  Sole Control by Collateral Agent...............................................8
        Section 4.4  Securities Intermediary's Location.............................................8
        Section 4.5  No Other Claims................................................................8
        Section 4.6  Investment and Release.........................................................8
        Section 4.7  Statements and Confirmations...................................................9
        Section 4.8  Tax Allocations................................................................9
        Section 4.9  No Other Agreements............................................................9
        Section 4.10 Powers Coupled With An Interest................................................9

Section 5.  Initial Deposit; Establishment of Treasury PEPS Units and
            Reestablishment of PEPS Units...........................................................9
        Section 5.1  Initial Deposit of Trust Preferred Securities..................................9
        Section 5.2  Establishment of Treasury PEPS Units...........................................9
        Section 5.3  Reestablishment of PEPS Units.................................................11
        Section 5.4  Termination Event.............................................................13
        Section 5.5  Cash Settlement...............................................................14
        Section 5.6  Early Settlement..............................................................15
        Section 5.7  Application of Proceeds in Settlement of Purchase Contracts...................16
        Section 5.8  Tax Event Redemption..........................................................17

Section 6.  Voting Rights - Trust Preferred Securities and Pledged Senior Deferrable Notes.........17

Section 7.  Rights and Remedies....................................................................18
        Section 7.1  Rights and Remedies of the Collateral Agent...................................18
        Section 7.2  Substitution of Senior Deferrable Notes.......................................19
        Section 7.3  Tax Event Redemption..........................................................19
        Section 7.4  Substitutions.................................................................20

Section 8.   Representations and Warranties; Covenants.............................................20
        Section 8.1  Representations and Warranties................................................20
        Section 8.2  Covenants.....................................................................21

Section 9.  The Collateral Agent and the Securities Intermediary...................................21
        Section 9.1  Appointment, Powers and Immunities............................................21
        Section 9.2  Instructions of the Company...................................................22
        Section 9.3  Reliance by Collateral Agent and Securities Intermediary......................23
        Section 9.4  Rights in Other Capacities....................................................23
        Section 9.5  Non-Reliance on Collateral Agent and Securities Intermediary..................23
        Section 9.6  Compensation and Indemnity....................................................23
        Section 9.7  Failure to Act................................................................24
        Section 9.8  Resignation of Collateral Agent and Securities Intermediary...................25
        Section 9.9  Right to Appoint Agent or Advisor.............................................26
        Section 9.10 Survival......................................................................26
        Section 9.11 Exculpation...................................................................27

Section 10.  Amendment.............................................................................27
        Section 10.1  Amendment Without Consent of Holders.........................................27
        Section 10.2  Amendment With Consent of Holders............................................27
        Section 10.3  Execution of Amendments......................................................28
        Section 10.4  Effect of Amendments.........................................................28
        Section 10.5  Reference to Amendments......................................................29

Section 11.  Miscellaneous.........................................................................29
        Section 11.1  No Waiver....................................................................29
        Section 11.2  Governing Law................................................................29
        Section 11.3  Notices......................................................................29
        Section 11.4  Successors and Assigns.......................................................30
        Section 11.5  Counterparts.................................................................30
        Section 11.6  Severability.................................................................30
        Section 11.7  Expenses, etc. ..............................................................30
        Section 11.8  Security Interest Absolute...................................................31
        Section 11.9  Notice of Tax Event, Tax Event Redemption and Termination Event..............31

EXHIBIT A   INSTRUCTION FROM PURCHASE CONTRACT AGENT TO COLLATERAL
              AGENT (Establishment of Treasury PEPS Units)........................................A-1

EXHIBIT B   INSTRUCTION FROM COLLATERAL AGENT TO SECURITIES
              INTERMEDIARY (Establishment of Treasury PEPS Units).................................B-1

EXHIBIT C   INSTRUCTION FROM PURCHASE CONTRACT AGENT TO COLLATERAL
              AGENT (Reestablishment of PEPS Units )..............................................C-1

EXHIBIT D   INSTRUCTION FROM COLLATERAL AGENT TO SECURITIES
              INTERMEDIARY (Reestablishment of PEPS Units)........................................D-1

EXHIBIT E   NOTICE OF CASH SETTLEMENT FROM SECURITIES INTERMEDIARY
              TO PURCHASE CONTRACT AGENT (Cash Settlement Amounts)................................E-1

PLEDGE AGREEMENT

PLEDGE AGREEMENT, dated as of June 28, 2000, among Valero Energy Corporation, a Delaware corporation (the "COMPANY"), Bank One Trust Company, N.A., a national banking association, as collateral agent (in such capacity, together with its successors in such capacity, the "COLLATERAL AGENT"), Bank One Trust Company, N.A. a national banking association, as securities intermediary with respect to the Collateral Account (in such capacity, together with its successors in such capacity, the "SECURITIES INTERMEDIARY"), and The Bank of New York, as purchase contract agent and as attorney-in-fact of the Holders from time to time of the Securities under the Purchase Contract Agreement (in such capacity, together with its successors in such capacity, the "PURCHASE CONTRACT AGENT").

RECITALS

The Company and the Purchase Contract Agent are parties to the Purchase Contract Agreement dated as of the date hereof (as modified and supplemented and in effect from time to time, the "PURCHASE CONTRACT AGREEMENT"), pursuant to which there may be issued up to 6,000,000 Premium Equity Participating Security Units--PEPS(SM) Units (the "SECURITIES") (including 900,000 Securities relating to the over-allotment option granted to the underwriters pursuant to the Underwriting Agreement).

Each PEPS Unit, at issuance, consists of a unit comprised of (a) a stock purchase contract (the "PURCHASE CONTRACT") under which the Holder will purchase from the Company on the Purchase Contract Settlement Date, for an amount equal to $25 (the "STATED AMOUNT"), a number of shares of Valero Energy Corporation, Inc. common stock, par value $0.01 ("COMMON STOCK"), equal to the Settlement Rate, and (b) beneficial ownership of a Trust Preferred Security (a "PREFERRED SECURITY") issued by VEC Trust I (the "TRUST"), having a liquidation amount equal to the Stated Amount and maturing on August 18, 2005.

Pursuant to the terms of the Purchase Contract Agreement and the Purchase Contracts, the Holders of the Securities have irrevocably authorized the Purchase Contract Agent, as attorney-in-fact of such Holders, among other things, to execute and deliver this Agreement on behalf of such Holders and to grant the pledge provided herein of the Collateral Account to secure the Obligations.

Accordingly, the Company, the Collateral Agent, the Securities Intermediary and the Purchase Contract Agent, on its own behalf and as attorney-in-fact of the Holders from time to time of the Securities, agree as follows:

SECTION 1. DEFINITIONS.

For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires:

(a) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular;

(b) the words "HEREIN," "HEREOF" and "HEREUNDER" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section, Exhibit or other subdivision;

(c) the following terms which are defined in the UCC shall have the meanings set forth therein: "CERTIFICATED SECURITY," "CONTROL," "FINANCIAL ASSET," "ENTITLEMENT ORDER," "SECURITIES ACCOUNT" and "SECURITY ENTITLEMENT;"

(d) the following terms have the meanings assigned to them in the Purchase Contract Agreement: "ACT," "BANKRUPTCY CODE," "BOARD RESOLUTION,"
"BUSINESS DAY," "CASH SETTLEMENT," "CERTIFICATE," "EARLY SETTLEMENT," "EARLY SETTLEMENT AMOUNT," "EARLY SETTLEMENT DATE," "HOLDER," "OFFICERS' CERTIFICATE," "OPINION OF COUNSEL," "OUTSTANDING SECURITIES," "PEPS UNIT," "PURCHASE CONTRACT," "PURCHASE CONTRACT SETTLEMENT DATE," "PURCHASE PRICE," "REMARKETING AGENT," "REMARKETING AGREEMENT," "SENIOR DEFERRABLE NOTES," "SETTLEMENT RATE," "TERMINATION EVENT," "TREASURY PEPS UNIT," and "UNDERWRITING AGREEMENT;"

(e) the following terms have the meanings assigned to them in the Amended and Restated Declaration of Trust of VEC Trust I, of even date herewith (the "DECLARATION"): "APPLICABLE OWNERSHIP INTEREST," "APPLICABLE PRINCIPAL AMOUNT," "FAILED REMARKETING," "INDENTURE," "INDENTURE TRUSTEE," "PRIMARY TREASURY DEALER," "PROPERTY TRUSTEE," "QUOTATION AGENT," "REDEMPTION AMOUNT," "REDEMPTION PRICE," "TAX EVENT," "TAX EVENT REDEMPTION," "TAX EVENT REDEMPTION DATE," and "TREASURY PORTFOLIO;" and

(f) the following terms have the meanings given to them in this Section 1(f):

"AGREEMENT" means this Pledge Agreement, as the same may be amended, modified or supplemented from time to time.

"CASH" means any coin or currency of the United States as at the time shall be legal tender for payment of public and private debts.

"COLLATERAL ACCOUNT" means the collective reference to:

(1) the securities account of Bank One Trust Company, N.A., as Collateral Agent, maintained by the Securities Intermediary and designated "Bank One Trust Company, N.A., as Collateral Agent of Valero Energy Corporation, as pledgee of The Bank of New York, as the Purchase Contract Agent on behalf of and as attorney-in-fact for the Holders";

(2) all investment property and other financial assets from time to time credited to the Collateral Account, including, without limitation, (A) the Preferred Securities and security entitlements relating thereto which are a component of the PEPS Units from time to time, (B) the Applicable Ownership Interests (as specified in Clause (A) of the

definition of such term) of the Holders with respect to the Treasury Portfolio which are a component of the PEPS Units from time to time;
(C) the Senior Deferrable Notes and security entitlements relating thereto which are a component of the PEPS Units from time to time, (D) any Treasury Securities and security entitlements relating thereto delivered from time to time upon establishment of Treasury PEPS Units in accordance with Section 5.2 hereof and (E) payments made by Holders pursuant to Section 5.5 hereof;

(3) all Proceeds of any of the foregoing (whether such Proceeds arise before or after the commencement of any proceeding under any applicable bankruptcy, insolvency or other similar law, by or against the pledgor or with respect to the pledgor); and

(4) all powers and rights now owned or hereafter acquired under or with respect to the Collateral Account

((2), (3) and (4), being collectively referred to as the "COLLATERAL").

"COMPANY" means the Person named as the "COMPANY" in the first paragraph of this instrument until a successor shall have become such, and thereafter "COMPANY" shall mean such successor.

"OBLIGATIONS" means, with respect to each Holder, the collective reference to all obligations and liabilities of such Holder under such Holder's Purchase Contract, the Purchase Contract Agreement, and this Agreement or any other document made, delivered or given in connection herewith or therewith, in each case whether on account of principal, interest (including, without limitation, interest accruing before and after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to such Holder, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to the Company or the Collateral Agent or the Securities Intermediary that are required to be paid by the Holder pursuant to the terms of any of the foregoing agreements).

"PERMITTED INVESTMENTS" means any one of the following which shall mature not later than the next succeeding Business Day:

(1) any evidence of indebtedness with an original maturity of 365 days or less issued, or directly and fully guaranteed or insured, by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support of the timely payment thereof or such indebtedness constitutes a general obligation of it);
(2) deposits, certificates of deposit or acceptances with an original maturity of 365 days or less of any institution which is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $200.0 million at the time of deposit (and which may include the Collateral Agent); (3) investments with an original maturity of 365 days or less of any Person that is fully and unconditionally guaranteed by a bank referred to in clause (2); (4) repurchase agreements and reverse repurchase agreements relating to marketable direct obligations issued or unconditionally guaranteed by the United States Government or issued by any agency thereof and backed as to timely payment by the full faith and credit of the United

States Government; (5) investments in commercial paper, other than commercial paper issued by the Company or its affiliates, of any corporation incorporated under the laws of the United States or any State thereof, which commercial paper has a rating at the time of purchase at least equal to "A-1" by Standard & Poor's Ratings Services ("S&P") or at least equal to "P-1" by Moody's Investors Service, Inc. ("MOODY'S"); and (6) investments in money market funds (including, but not limited to, money market funds managed by the Collateral Agent or an affiliate of the Collateral Agent) registered under the Investment Company Act of 1940, as amended, rated in the highest applicable rating category by S&P or Moody's.

"PERSON" means any legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company, trust, unincorporated organization or government or any agency or political subdivision thereof.

"PLEDGE" means the lien and security interest created by this Agreement.

"PLEDGED PREFERRED SECURITIES" means the Preferred Securities and security entitlements with respect thereto from time to time credited to the Collateral Account and not then released from the Pledge.

"PLEDGED SENIOR DEFERRABLE NOTES" means Senior Deferrable Notes and security entitlements with respect thereto from time to time credited to the Collateral Account and not then released from the Pledge.

"PLEDGED TREASURY SECURITIES" means Treasury Securities and security entitlements with respect thereto from time to time credited to the Collateral Account and not then released from the Pledge.

"PROCEEDS" has the meaning ascribed thereto in the UCC and includes, without limitation, all interest, dividends, cash, instruments, securities, financial assets (as defined in Section 8-102(a)(9) of the UCC) and other property received, receivable or otherwise distributed upon the sale, exchange, collection or disposition of any financial assets from time to time held in the Collateral Account.

"PURCHASE CONTRACT AGENT" has the meaning specified in the paragraph preceding the recitals of this Agreement.

"TRADES" means the Treasury/Reserve Automated Debt Entry System maintained by the Federal Reserve Bank of New York pursuant to the TRADES Regulations.

"TRADES REGULATIONS" means the regulations of the United States Department of the Treasury, published at 31 C.F.R. Part 357, an amended from time to time. Unless otherwise defined herein, all terms defined in the TRADES Regulations are used herein as therein defined.

"TRANSFER" means in the case of certificated securities in registered form, delivery as provided in Section 8-301(a) of the UCC, indorsed to the transferee or in blank by an effective endorsement; in the case of Treasury Securities, registration of the transferee as the owner of such Treasury Securities on TRADES; and in the case of security entitlements, including,

without limitation, security entitlements with respect to Treasury Securities, a securities intermediary indicating by book entry that such security entitlement has been credited to the transferee's securities account.

"TREASURY SECURITIES" means zero-coupon U.S. treasury securities (Cusip No. 912820BG1) which mature on August 15, 2003.

"UCC" means the Uniform Commercial Code as in effect in the State of New York from time to time.

"VALUE" means, with respect to any item of Collateral on any date, as to (1) Cash, the face amount thereof and (2) Treasury Securities, the aggregate principal amount thereof at maturity and (3) the Preferred Securities, the liquidation amount thereof.

SECTION 2. PLEDGE.

SECTION 2.1 PLEDGE.

Each Holder, acting through the Purchase Contract Agent as such Holder's attorney-in-fact, hereby pledges and grants to the Collateral Agent, as agent of and for the benefit of the Company, a continuing first priority security interest in and to, and a lien upon and right of set-off against, all of such Holder's right, title and interest in and to the Collateral Account to secure the prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of the Obligations. The Collateral Agent shall have all of the rights, remedies and recourses with respect to the Collateral afforded a secured party by the UCC, in addition to, and not in limitation of, the other rights, remedies and recourses afforded to the Collateral Agent by this Agreement.

SECTION 2.2 CONTROL; FINANCING STATEMENT.

(a) The Collateral Agent shall have control of the Collateral Account pursuant to the provisions of Section 4 of this Agreement.

(b) Subsequent to the date of initial issuance of the Securities, the Purchase Contract Agent shall deliver to the Collateral Agent a financing statement prepared by the Company for filing in the Office of the Secretary of State of the State of New York and any other jurisdictions which the Company deems necessary, signed by the Purchase Contract Agent, as attorney-in-fact for the Holders, as Debtors, and describing the Collateral.

SECTION 2.3 TERMINATION.

As to each Holder, this Agreement and the Pledge created hereby shall terminate upon the satisfaction of such Holder's Obligations. Upon such termination, the Securities Intermediary shall Transfer such Holder's portion of the Collateral to the Purchase Contract Agent for

distribution to such Holder in accordance with his interest, free and clear of any lien, pledge or security interest created hereby.

SECTION 3. DISTRIBUTIONS ON PLEDGED COLLATERAL.

SECTION 3.1 INCOME DISTRIBUTIONS.

All income distributions received by the Securities Intermediary on account of the Preferred Securities, the Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio, the Senior Deferrable Notes or Permitted Investments from time to time held in the Collateral Account shall be distributed to the Purchase Contract Agent (ABA No. 021000018, GLA No. 111-565, A/C No. 072645, Re: Valero Energy Corp.) for the benefit of the applicable Holders as provided in the Purchase Contracts or Purchase Contract Agreement.

SECTION 3.2 PRINCIPAL PAYMENTS FOLLOWING TERMINATION EVENT.

All payments received by the Securities Intermediary following a Termination Event of (1) the liquidation amount of Pledged Preferred Securities or securities entitlements thereto, or (2) the Applicable Ownership Interests (as specified in Clause (A) of the definition thereof) of the Treasury Portfolio, (3) the aggregate principal amount of the Pledged Senior Deferrable Notes or securities entitlements thereto, or (4) the principal amount of the Pledged Treasury Securities, shall be distributed to the Purchase Contract Agent for the benefit of the applicable Holders for distribution to such Holders in accordance with their respective interests.

SECTION 3.3 PRINCIPAL PAYMENTS PRIOR TO OR ON PURCHASE CONTRACT SETTLEMENT DATE.

(a) Subject to the provisions of Section 7.2, and except as provided in clause 3.3(b) below, if no Termination Event shall have occurred, all payments received by the Securities Intermediary of (1) the liquidation amount with respect to the Pledged Preferred Securities or security entitlements with respect thereto, (2) Applicable Ownership Interests (as specified in Clause (A) of the definition thereof) of the Treasury Portfolio, (3) the aggregate principal amount with respect to the Pledged Senior Deferrable Notes or security entitlements with respect thereto or (4) the principal amount of Pledged Treasury Securities, shall be held and invested in Permitted Investments until the Purchase Contract Settlement Date and on the Purchase Contract Settlement Date distributed to the Company as provided in Section 5.7 hereof. Any balance remaining in the Collateral Account shall be distributed to the Purchase Contract Agent for the benefit of the applicable Holders for distribution to such Holders in accordance with their respective interests. Upon the request of the Securities Intermediary, the Company shall instruct the Securities Intermediary as to the type of Permitted Investments in which any payments made under this Section shall be invested, provided, however, that if the Company fails to deliver such instructions by 10:30 a.m. (New York City time), the Securities Intermediary shall invest such payments in the Permitted Investments described in clause 6 of the definition of Permitted Investments.

(b) All payments received by the Securities Intermediary of (1) the liquidation amount of Preferred Securities or security entitlements with respect thereto, (2) Applicable Ownership interests (as specified in Clause (A) of the definition thereof) of the Treasury Portfolio, (3) the aggregate principal amount with respect to the Senior Deferrable Notes or security entitlements with respect thereto or (4) the principal amount of Treasury Securities or security entitlements with respect thereto, that, in each case, have been released from the Pledge shall be distributed to the Purchase Contract Agent for the benefit of the applicable Holders for distribution to such Holders in accordance with their respective interests.

SECTION 3.4 PAYMENTS TO PURCHASE CONTRACT AGENT.

The Securities Intermediary shall use all commercially reasonable efforts to deliver payments to the Purchase Contract Agent hereunder to the account designated by the Purchase Contract Agent for such purpose not later than 12:00 p.m. (New York City time) on the Business Day such payment is received by the Securities Intermediary; provided, however, that if such payment is received on a day that is not a Business Day or after 11:00 A.M. (New York City time) on a Business Day, then the Securities Intermediary shall use all commercially reasonable efforts to deliver such payment no later than 10:30 a.m. (New York City time) on the next succeeding Business Day.

SECTION 3.5 ASSETS NOT PROPERLY RELEASED.

If the Purchase Contract Agent or any Holder shall receive any principal payments on account of financial assets credited to the Collateral Account and not released therefrom in accordance with this Agreement, the Purchase Contract Agent or such Holder shall hold the same as trustee of an express trust for the benefit of the Company and, upon receipt of an Officers' Certificate of the Company so directing, promptly deliver the same to the Securities Intermediary for credit to the Collateral Account or to the Company for application to the Obligations of the Holders, and the Purchase Contract Agent and Holders shall acquire no right, title or interest in any such payments of principal amounts so received.

SECTION 4. CONTROL

SECTION 4.1 ESTABLISHMENT OF COLLATERAL ACCOUNT.

The Securities Intermediary hereby confirms that:

(1) the Securities Intermediary has established the Collateral Account;

(2) the Collateral Account is a securities account;

(3) subject to the terms of this Agreement, the Securities Intermediary shall treat the Purchase Contract Agent as entitled to exercise the rights that comprise any financial asset credited to the Collateral Account;

(4) all property delivered to the Securities Intermediary pursuant to this Agreement or the Purchase Contract Agreement will be credited promptly to the Collateral Account;

(5) all securities or other property underlying any financial assets credited to the Collateral Account shall be registered in the name of the Securities Intermediary, indorsed to the Securities Intermediary or in blank, or credited to another securities account maintained in the name of the Securities Intermediary, and in no case will any financial asset credited to the Collateral Account be registered in the name of the Purchase Contract Agent or any Holder, payable to the order of the Purchase Contract Agent or any Holder or specially indorsed to the Purchase Contract Agent or any Holder.

SECTION 4.2 TREATMENT AS FINANCIAL ASSETS.

Each item of property (whether investment property, financial asset, security, instrument or cash) credited to the Collateral Account shall be treated as a financial asset.

SECTION 4.3 SOLE CONTROL BY COLLATERAL AGENT.

Except as provided in Section 6, at all times prior to the termination of the Pledge, the Collateral Agent shall have sole control of the Collateral Account, and the Securities Intermediary shall take instructions and directions with respect to the Collateral Account solely from the Collateral Agent. If at any time the Securities Intermediary shall receive an entitlement order issued by the Collateral Agent and relating to the Collateral Account, the Securities Intermediary shall comply with such entitlement order without further consent by the Purchase Contract Agent or any Holder or any other Person. Until termination of the Pledge, the Securities Intermediary will not comply with any entitlement orders issued by the Purchase Contract Agent or any Holder.

SECTION 4.4 SECURITIES INTERMEDIARY'S LOCATION.

The Collateral Account, and the rights and obligations of the Securities Intermediary, the Collateral Agent, the Purchase Contract Agent and the Holders with respect thereto, shall be governed by the laws of the State of New York. Regardless of any provision in any other agreement, for purposes of the UCC, New York shall be deemed to be the Securities Intermediary's location.

SECTION 4.5 NO OTHER CLAIMS.

Except for the claims and interest of the Collateral Agent and of the Purchase Contract Agent and the Holders in the Collateral Account, the Securities Intermediary (without making any investigation) does not know of any claim to, or interest in, the Collateral Account or in any financial asset credited thereto. If any person asserts any lien, encumbrance or adverse claim (including any writ, garnishment, judgment, warrant of attachment, execution or similar process) against the Collateral Account or in any financial asset carried therein, the Securities Intermediary will promptly notify the Collateral Agent and the Purchase Contract Agent.

SECTION 4.6 INVESTMENT AND RELEASE.

All proceeds of financial assets from time to time deposited in the Collateral Account shall be invested and reinvested as provided in this Agreement. At all times prior to termination of the Pledge, no property shall be released from the Collateral Account except in accordance with this Agreement or upon written instructions of the Collateral Agent.

SECTION 4.7 STATEMENTS AND CONFIRMATIONS.

The Securities Intermediary will promptly send copies of all statements, confirmations and other correspondence concerning the Collateral Account and any financial assets credited thereto simultaneously to each of the Purchase Contract Agent and the Collateral Agent at their addresses for notices under this Agreement.

SECTION 4.8 TAX ALLOCATIONS.

The Purchase Contract Agent shall report all items of income, gain, expense and loss recognized in the Collateral Account, to the extent such reporting is required by law, to the Internal Revenue Service and all state and local taxing authorities under the names and taxpayer identification numbers of the Holders which are the beneficial owners thereof. Neither the Securities Intermediary nor the Collateral Agent shall have any tax reporting duties hereunder.

SECTION 4.9 NO OTHER AGREEMENTS.

The Securities Intermediary has not entered into, and prior to the termination of the Pledge will not enter into, any agreement with any other Person relating to the Collateral Account or any financial assets credited thereto, including, without limitation, any agreement to comply with entitlement orders of any Person other than the Collateral Agent.

SECTION 4.10 POWERS COUPLED WITH AN INTEREST.

The rights and powers granted in this Section 4 to the Collateral Agent have been granted in order to perfect its security interests in the Collateral Account, are powers coupled with an interest and will be affected neither by the bankruptcy of the Purchase Contract Agent or any Holder nor by the lapse of time. The obligations of the Securities Intermediary under this Section 4 shall continue in effect until the termination of the Pledge.

SECTION 5. INITIAL DEPOSIT; ESTABLISHMENT OF TREASURY PEPS UNITS AND RE-ESTABLISHMENT OF PEPS UNITS

SECTION 5.1 INITIAL DEPOSIT OF TRUST PREFERRED SECURITIES.

Prior to or concurrently with the execution and delivery of this Agreement, the Purchase Contract Agent, on behalf of the initial Holders of the PEPS Units, shall Transfer to the Securities Intermediary, for credit to the Collateral Account, the Preferred Securities or security entitlements relating thereto, and the Securities Intermediary shall indicate by book-entry that a securities entitlement to such Preferred Securities has been credited to the Collateral Account.

SECTION 5.2 ESTABLISHMENT OF TREASURY PEPS UNITS.

(a) So long as no Tax Event Redemption shall have occurred, and the Trust shall not have been dissolved and liquidated, at any time prior to or on the seventh Business Day immediately preceding August 18, 2003, a Holder of PEPS Units shall have the right to establish or reestablish Treasury PEPS Units by substitution of Treasury Securities or security entitlements with respect thereto for the Pledged Preferred Securities comprising a part of such Holder's PEPS Units in integral multiples of 40 PEPS Units by:

(1) Transferring to the Securities Intermediary for credit to the Collateral Account Treasury Securities or security entitlements with respect thereto having a Value equal to the aggregate liquidation amount of the Pledged Preferred Securities to be released, accompanied by a notice, substantially in the form of Exhibit C to the Purchase Contract Agreement, whereupon the Purchase Contract Agent shall deliver to the Collateral Agent a notice, substantially in the form of Exhibit A hereto, (A) stating that such Holder has Transferred Treasury Securities or security entitlements with respect thereto to the Securities Intermediary for credit to the Collateral Account, (B) stating the Value of the Treasury Securities or security entitlements with respect thereto Transferred by such Holder and (C) requesting that the Collateral Agent release from the Pledge the Pledged Preferred Securities that are a component of such PEPS Units; and

(2) delivering the related PEPS Units to the Purchase Contract Agent.

Upon receipt of such notice and confirmation that Treasury Securities or security entitlements with respect thereto have been credited to the Collateral Account as described in such notice, the Collateral Agent shall instruct the Securities Intermediary by a notice, substantially in the form of Exhibit B hereto, to release such Pledged Preferred Securities from the Pledge by Transfer to the Purchase Contract Agent for distribution to such Holder, free and clear of any lien, pledge or security interest created hereby.

(b) If a Tax Event Redemption has occurred and the Treasury Portfolio has become a component of the PEPS Units, a Holder of PEPS Units shall not have the right to establish or reestablish Treasury PEPS Units.

(c) If no Tax Event Redemption shall have occurred, but the Trust shall have been dissolved and liquidated, and the Senior Deferrable Notes have become a component of the PEPS Units, at any time on or prior to the seventh Business Day immediately preceding August 18, 2003, a Holder of PEPS Units shall have the right to substitute Treasury Securities or security entitlements with respect thereto for the Pledged Senior Deferrable Notes comprising a part of such Holder's PEPS Units in integral multiples of 40 PEPS Units by:

(1) Transferring to the Securities Intermediary for credit to the Collateral Account Treasury Securities or security entitlements with respect thereto having a Value equal to the aggregate principal amount at maturity of Pledged Senior Deferrable Notes to be released, accompanied by a notice, substantially in the form of Exhibit C to the Purchase Contract Agreement, whereupon the Purchase Contract Agent shall deliver to the

Collateral Agent a notice, substantially in the form of Exhibit A hereto, (A) stating that such Holder has Transferred Treasury Securities or security entitlements with respect thereto to the Securities Intermediary for credit to the Collateral Account, (B) stating the Value of the Treasury Securities or securities entitlements with respect thereto Transferred by such Holder and (C) requesting that the Collateral Agent release from the Pledge the Pledged Senior Deferrable Notes that are a component of such PEPS Units; and

(2) delivering the related PEPS Units to the Purchase Contract Agent.

Upon receipt of such notice and confirmation that Treasury Securities or security entitlements with respect thereto have been credited to the Collateral Account as described in such notice, the Collateral Agent shall instruct the Securities Intermediary by a notice, substantially in the form of Exhibit B hereto, to release such Pledged Senior Deferrable Notes from the Pledge by Transfer to the Purchase Contract Agent for distribution to such Holder free and clear of any lien, pledge or security interest created hereby.

(d) Upon credit to the Collateral Account of Treasury Securities or security entitlements with respect thereto delivered by a Holder of PEPS Units and receipt of the related instruction from the Collateral Agent, the Securities Intermediary shall release the Pledged Preferred Securities or the Pledged Senior Deferrable Notes, as the case may be, and shall promptly transfer the same to the Purchase Contract Agent for distribution to such Holder, free and clear of any lien, pledge or security interest created hereby.

SECTION 5.3 RE-ESTABLISHMENT OF PEPS UNITS.

(a) So long as no Tax Event Redemption shall have occurred, and the Trust shall not have been dissolved and liquidated, at any time on or prior to the seventh Business Day immediately preceding August 18, 2003, a Holder of Treasury PEPS Units shall have the right to reestablish PEPS Units by substitution of Preferred Securities or security entitlements with respect thereto for Pledged Treasury Securities in integral multiples of 40 Treasury PEPS Units by:

(1) Transferring to the Securities Intermediary for credit to the Collateral Account Preferred Securities or security entitlements with respect thereto having a liquidation amount equal to the Value of the Pledged Treasury Securities to be released, accompanied by a notice, substantially in the form of Exhibit C to the Purchase Contract Agreement, whereupon the Purchase Contract Agent shall deliver to the Collateral Agent a notice, substantially in the form of Exhibit C hereto, stating that such Holder has Transferred Trust Preferred Securities or security entitlements with respect thereto to the Securities Intermediary for credit to the Collateral Account and requesting that the Collateral Agent release from the Pledge the Pledged Treasury Securities related to such Treasury PEPS Units; and

(2) Delivering the related Treasury PEPS Units to the Purchase Contract Agent.

Upon receipt of such notice and confirmation that Preferred Securities or security entitlements thereto have been credited to the Collateral Account as described in such notice, the Collateral Agent shall instruct the Securities Intermediary by a notice in the form provided in Exhibit D to release such Pledged Treasury Securities from the Pledge by Transfer to the Purchase Contract Agent for distribution to such Holder, free and clear of any lien, pledge or security interest created hereby.

(b) If a Tax Event Redemption has occurred and the Treasury Portfolio has become a component of the PEPS Units, a holder of a Treasury PEPS Unit shall not have the right to reestablish a PEPS Unit.

(c) If no Tax Event Redemption shall have occurred, but the Trust shall have been dissolved and liquidated, and the Senior Deferrable Notes have become a component of the PEPS Units, at any time on or prior to the seventh Business Day immediately preceding August 18, 2003, a Holder of Treasury PEPS Units shall have the right to reestablish PEPS Units by substitution of Senior Deferrable Notes or security entitlements with respect thereto for Pledged Treasury Securities in integral multiples of 40 Treasury PEPS Units by:

(1) Transferring to the Securities Intermediary for credit to the Collateral Account Senior Deferrable Notes or security entitlements with respect thereto having a principal amount equal to the Value of the Pledged Treasury Securities to be released, accompanied by a notice, substantially in the form of Exhibit C to the Purchase Contract Agreement, whereupon the Purchase Contract Agent shall deliver to the Collateral Agent a notice, substantially in the form of Exhibit C hereto, stating that such Holder has Transferred the Senior Deferrable Notes or security entitlements with respect thereto to the Securities Intermediary for credit to the Collateral Account and requesting that the Collateral Agent release from the Pledge the Pledged Treasury Securities related to such Treasury PEPS Units; and

(2) delivering the related Treasury PEPS Units to the Purchase Contract Agent.

Upon receipt of such notice and confirmation that Senior Deferrable Notes or security entitlements with respect thereto have been credited to the Collateral Account as described in such notice, the Collateral Agent shall instruct the Securities Intermediary by a notice in the form provided in Exhibit D to release such Pledged Treasury Securities from Pledge by Transfer to the Purchase Contract Agent for distribution to such Holder, free and clear of any lien, pledge or security interest created hereby.

(d) Upon credit to the Collateral Account of Preferred Securities or security entitlements with respect thereto or Senior Deferrable Notes or security entitlements with respect thereto, as the case may be, delivered by a Holder of Treasury PEPS Units and receipt of the related instruction from the Collateral Agent, the Securities Intermediary shall release the Pledged Treasury Securities and shall promptly transfer the same to the Purchase Contract Agent for distribution to such Holder, free and clear of any lien, pledge or security interest created hereby.

SECTION 5.4 TERMINATION EVENT.

(a) Upon receipt by the Collateral Agent of written notice from the Company or the Purchase Contract Agent that a Termination Event has occurred, the Collateral Agent shall release all Collateral from the Pledge and shall promptly Transfer:

(1) any Pledged Preferred Securities or security entitlements with respect thereto or the Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio (if a Tax Event Redemption has occurred and the Treasury Portfolio has become a component of the PEPS Units) or the Pledged Senior Deferrable Notes (if the Trust has been dissolved and liquidated, and the Senior Deferrable Notes or security entitlements with respect thereto have become a component of the PEPS Units);

(2) any Pledged Treasury Securities, and

(3) payments by Holders (or the Permitted Investments of such payments) pursuant to Section 5.5 hereof,

to the Purchase Contract Agent for the benefit of the Holders for distribution to such Holders in accordance with their respective interests, free and clear of any lien, pledge or security interest or other interest created hereby; provided, however, if any Holder shall be entitled to receive less than $1,000 with respect to his interest in the Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio, the Purchase Contract Agent shall have the right to dispose of such interest for cash and deliver to such Holder cash in lieu of delivering the Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio.

(b) If such Termination Event shall result from the Company's becoming a debtor under the Bankruptcy Code, and if the Collateral Agent shall for any reason fail promptly to effectuate the release and Transfer of all Pledged Preferred Securities, the Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio, the Pledged Senior Deferrable Notes, the Pledged Treasury Securities or payments by Holders (or the Permitted Investments of such payments) pursuant to Section 5.5 hereof, as the case may be, as provided by this Section 5.4, the Purchase Contract Agent shall:

(1) use its best efforts to obtain an opinion of a nationally recognized law firm reasonably acceptable to the Collateral Agent to the effect that, as a result of the Company's being the debtor in such a bankruptcy case, the Collateral Agent will not be prohibited from releasing or Transferring the Collateral as provided in this Section 5.4, and shall deliver such opinion to the Collateral Agent within ten days after the occurrence of such Termination Event, and if (A) the Purchase Contract Agent shall be unable to obtain such opinion within ten days after the occurrence of such Termination Event or (B) the Collateral Agent shall continue, after delivery of such opinion, to refuse to effectuate the release and Transfer of all Preferred Securities, Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio, all the Pledged Senior Deferrable Notes, the Pledged Treasury Securities, the payments by Holders or the Permitted Investments of such payments pursuant to Section 5.5 hereof or

the Proceeds of any of the foregoing, as the case may be, as provided in this Section 5.4, then the Purchase Contract Agent shall within fifteen days after the occurrence of such Termination Event commence an action or proceeding in the court having jurisdiction of the Company's case under the Bankruptcy Code seeking an order requiring the Collateral Agent to effectuate the release and transfer of all Pledged Preferred Securities, Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio, all the Pledged Senior Deferrable Notes, the Pledged Treasury Securities, or the payments by Holders or the Permitted Investments of such payments pursuant to Section 5.5 hereof, or as the case may be, as provided by this Section 5.4; or

(2) commence an action or proceeding like that described in clause 5.4(b)(1) hereof within ten days after the occurrence of such Termination Event.

SECTION 5.5 CASH SETTLEMENT.

(a) Upon receipt by the Collateral Agent of (1) a notice from the Purchase Contract Agent promptly after the receipt by the Purchase Contract Agent of a notice from a Holder of PEPS Units that such Holder has elected, in accordance with the procedures specified in Section 5.4(a)(i) or (d)(i) of the Purchase Contract Agreement, respectively, to effect a Cash Settlement and (2) payment by such Holder by deposit in the Collateral Account prior to or on 11:00
a.m. (New York City time) on the fifth Business Day immediately preceding August 18, 2003, in the case of a PEPS Unit, unless a Tax Event Redemption has occurred, or on the Business Day prior to August 18, 2003 in the case of Treasury PEPS or a PEPS Unit, if a Tax Event Redemption has occurred, of the Purchase Price in lawful money of the United States by certified or cashier's check or wire transfer of immediately available funds payable to or upon the order of the Securities Intermediary, then the Collateral Agent shall:

(1) instruct the Securities Intermediary promptly to invest any such Cash in Permitted Investments;

(2) release from the Pledge the PEPS Unit holder's or the Treasury PEPS Unit holder's related Pledged Preferred Securities, Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio, the Pledged Senior Deferrable Notes or Pledged Treasury Securities, as applicable, as to which such Holder has elected to effect a Cash Settlement pursuant to this Section 5.5(a); and

(3) instruct the Securities Intermediary to Transfer all such Pledged Preferred Securities, Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio, Pledged Senior Deferrable Notes or the Pledged Treasury Securities, as the case may be, to the Purchase Contract Agent for the benefit of such Holder, in each case free and clear of the Pledge created hereby, for distribution to such Holder.

Upon the request of the Securities Intermediary, the Company shall instruct the Securities Intermediary as to the type of Permitted Investments in which any such Cash shall be invested;

provided, however, that if the Company fails to deliver such instructions by 10:30 a.m. (New York City time), the Securities Intermediary shall invest such Cash in the Permitted Investments described in clause 6 of the definition of Permitted Investments.

Upon receipt of the proceeds upon the maturity of the Permitted Investments on the Purchase Contract Settlement Date, the Collateral Agent shall (A) instruct the Securities Intermediary to pay the portion of such proceeds and deliver any certified or cashier's checks received, in an aggregate amount equal to the Purchase Price, to the Company on the Purchase Contract Settlement Date, and (B) instruct the Securities Intermediary to release any amounts in excess of the Purchase Price earned from such Permitted Investments to the Purchase Contract Agent for distribution to such Holder.

(a) If a Holder of PEPS Units (if a Tax Event Redemption shall not have occurred) notifies the Purchase Contract Agent as provided in paragraph 5.4(a)(i) of the Purchase Contract Agreement of its intention to pay the Purchase Price in cash, but fails to make such payment as required by paragraph 5.4(a)(ii) of the Purchase Contract Agreement, such Holder shall be deemed to have consented to the disposition of such Holder's Pledged Preferred Securities or Pledged Senior Deferrable Notes in accordance with paragraph 5.4(a)(iii) of the Purchase Contract Agreement.

(b) If a Holder of a Treasury PEPS Unit or a Holder of PEPS Unit (if a Tax Event Redemption shall have occurred) notifies the Purchase Contract Agent as provided in paragraph 5.4(d)(i) of the Purchase Contract Agreement of its intention to pay the Purchase Price in cash, but fails to make such payment as required by paragraph 5.4(d)(ii) of the Purchase Contract Agreement, such Holder shall be deemed to have elected to pay the Purchase Price in accordance with paragraph 5.4(d)(iii) of the Purchase Contract Agreement.

(c) As soon as practicable after 11:00 a.m. (New York City time) on the fifth Business Day immediately preceding the Purchase Contract Settlement Date, the Securities Intermediary shall deliver to the Purchase Contract Agent a notice, substantially in the form of Exhibit E hereto, stating (i) the amount of cash that it has received with respect to the Cash Settlement of PEPS Units and
(ii) the amount of cash that it has received with respect to the Cash Settlement of Treasury PEPS Units.

SECTION 5.6 EARLY SETTLEMENT.

Upon receipt by the Collateral Agent of a notice from the Purchase Contract Agent that a Holder of Securities has elected to effect Early Settlement of its obligations under the Purchase Contracts forming a part of such Securities in accordance with the terms of the Purchase Contracts and
Section 5.9 of the Purchase Contract Agreement (which notice shall set forth the number of such Purchase Contracts as to which such Holder has elected to effect Early Settlement), and that the Purchase Contract Agent has received from such Holder, and paid to the Company as confirmed in writing by the Company, the related Early Settlement Amounts pursuant to the terms of the Purchase Contracts and the Purchase Contract Agreement and that all conditions to such Early Settlement have been satisfied, then the Collateral Agent shall release from the Pledge, (1) Pledged Preferred Securities or the appropriate Applicable Ownership

Interest (as specified in clause (A) of the definitions at such term) of the Treasury Portfolio or Pledged Senior Deferrable Notes in the case of a Holder of PEPS Units or (2) Pledged Treasury Securities, in the case of a Holder of Treasury PEPS Units, with a Value equal to the product of (x) the Stated Amount times (y) the number of Purchase Contracts as to which such Holder has elected to effect Early Settlement, and shall instruct the Securities Intermediary to Transfer all such Pledged Preferred Securities or the appropriate Applicable Ownership Interest (as specified in clause (A) of the definitions at such term) of the Treasury Portfolio or Pledged Senior Deferrable Notes or Pledged Treasury Securities, as the case may be, to the Purchase Contract Agent for the benefit of such Holder, in each case free and clear of the Pledge created hereby, for distribution to such Holder. A Treasury PEPS Unit holder may settle early only in integral multiples of 40 Purchase Contracts.

SECTION 5.7 APPLICATION OF PROCEEDS IN SETTLEMENT OF PURCHASE CONTRACTS.

(a) If a Holder of PEPS Units (if a Tax Event Redemption has not occurred) has not elected to make an effective Cash Settlement by notifying the Purchase Contract Agent in the manner provided for in Section 5.4(a)(i) in the Purchase Contract Agreement, or has given such notice but failed to deliver the required cash prior to 11:00 A.M. (New York City time) on the fifth Business Day immediately preceding August 18, 2003, such Holder shall be deemed to have elected to pay for the shares of Common Stock to be issued under such Purchase Contracts from the Proceeds of the remarketing of the related Pledged Preferred Securities or Pledged Senior Deferrable Notes. Upon notice of such event from the Purchase Contract Agent, the Collateral Agent shall instruct the Securities Intermediary to Transfer the related Pledged Preferred Securities or Pledged Senior Deferrable Notes to the Remarketing Agent for remarketing. Upon receiving such Pledged Preferred Securities or Pledged Senior Deferrable Notes, the Remarketing Agent, pursuant to the terms of the Remarketing Agreement, will use reasonable efforts to remarket such Pledged Preferred Securities or Pledged Senior Deferrable Notes. The Remarketing Agent will deposit the Proceeds of such remarketing (less $0.0625 per each Preferred Security remarketed, which shall be retained by the Remarketing Agent as a fee for its services in the Remarketing) in the Collateral Account, and the Securities Intermediary shall invest the Proceeds of the remarketing in Permitted Investments in clause 6 of the definition of Permitted Investments. On the Purchase Contract Settlement Date, the Purchase Contract Agent shall give written direction to the Collateral Agent specifying the instruction the Collateral Agent shall give to the Securities Intermediary in order to apply a portion of the Proceeds from such remarketing equal to the aggregate liquidation amount of the Preferred Securities or aggregate principal amount of such Pledged Senior Deferrable Note to satisfy in full such Holder's obligations to pay the Purchase Price to purchase the shares of Common Stock under the related Purchase Contracts and the balance of the Proceeds from the remarketing, if any, that shall be transferred to the Purchase Contract Agent for the benefit of such Holder for distribution to such Holder.

If the Remarketing Agent advises the Collateral Agent in writing that there has been a Failed Remarketing, thus resulting in an event of default under the Purchase Contract Agreement and hereunder, the Collateral Agent, for the benefit of the Company shall, at the written direction of the Company, dispose of the Pledged Preferred Securities or Pledged Senior Deferrable Notes

in accordance with applicable law and satisfy in full, from such disposition, such Holder's obligations to pay the Purchase Price for the shares of Common Stock.

(b) If a Holder of a Treasury PEPS Unit or a Holder of PEPS Unit (if a Tax Event Redemption has occurred) has not elected to make an effective Cash Settlement by notifying the Purchase Contract Agent in the manner provided for in Section 5.4(d)(i) of the Purchase Contract Agreement, or has given such notice but failed to make such payment in the manner required by Section 5.4(d)(ii) of the Purchase Contract Agreement, such Holder shall be deemed to have elected to pay for the shares of Common Stock to be issued under such Purchase Contracts from the Proceeds of the related Pledged Treasury Securities or such Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio, as the case may be. Promptly, after 11:00 a.m. (New York City time) on the Business Day immediately prior to the Purchase Contract Settlement Date, the Securities Intermediary shall invest the Cash Proceeds of the maturing Pledged Treasury Securities or such Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury portfolios, as the case may be, in Permitted Investments in clause 6 of the definition of Permitted Investments, unless prior to 10:30 a.m. (New York City time), the Company shall otherwise instruct the Securities Intermediary as to the type of Permitted Investments in which any such Cash Proceeds shall be invested. Without receiving any instruction from any such Holder, the Collateral Agent shall apply the Proceeds of the related Pledged Treasury Securities or such Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio, as the case may be, to the settlement of such Purchase Contracts on the Purchase Contract Settlement Date. In the event the sum of the Proceeds from the related Pledged Treasury Securities or such Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio as the case may be, and the investment earnings from the investment in Permitted Investments exceeds the aggregate Purchase Price of the Purchase Contracts being settled thereby, the Collateral Agent shall instruct the Securities Intermediary to distribute such excess, when received, to the Purchase Contract Agent for the benefit of such Holder for distribution to such Holder.

SECTION 5.8 TAX EVENT REDEMPTION.

If the Securities Intermediary receives notice that a Tax Event Redemption has occurred prior to the Purchase Contract Settlement Date, the Securities Intermediary shall apply the Redemption Amount to purchase the Treasury Portfolio and the Securities Intermediary shall credit the Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio to the Collateral Account and shall transfer the Applicable Ownership Interest (as specified in clause (B) of the definition of such term) of the Treasury Portfolio to the Purchase Contract Agent for distribution to the Holders of the PEPS Units. Upon credit to the Collateral Account of the Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio having a Value equal to the liquidation amount of the Pledged Preferred Securities or the aggregate principal amount of the Pledged Senior Deferrable Notes, the Securities Intermediary shall release the Pledged Preferred Securities or the Pledged Senior Deferrable Notes, as applicable, from the Collateral Account and shall promptly transfer the Pledged Preferred Securities to the Trust and the Pledged Senior Deferrable Notes to the Company, as applicable.

SECTION 6. VOTING RIGHTS - TRUST PREFERRED SECURITIES AND PLEDGED SENIOR DEFERRABLE NOTES

The Purchase Contract Agent may exercise, or refrain from exercising, any and all voting and other consensual rights pertaining to the Pledged Preferred Securities or the Pledged Senior Deferrable Notes or any part thereof for any purpose not inconsistent with the terms of this Agreement and in accordance with the terms of the Purchase Contract Agreement; provided, that the Purchase Contract Agent shall not exercise or shall not refrain from exercising such right, as the case may be, if, in the judgment of the Purchase Contract Agent, such action would impair or otherwise have a material adverse effect on the value of all or any of the Pledged Preferred Securities or the Pledged Senior Deferrable Notes; and provided, further, that the Purchase Contract Agent shall give the Company and the Collateral Agent at least five Business Days' prior written notice of the manner in which it intends to exercise, or its reasons for refraining from exercising, any such right. Upon receipt of any notices and other communications in respect of any Pledged Preferred Securities or the Pledged Senior Deferrable Notes, including notice of any meeting at which holders of the Preferred Securities or the Pledged Senior Deferrable Notes are entitled to vote or solicitation of consents, waivers or proxies of holders of the Preferred Securities or Senior Deferrable Notes, the Collateral Agent shall use reasonable efforts to send promptly to the Purchase Contract Agent such notice or communication, and as soon as reasonably practicable after receipt of a written request therefor from the Purchase Contract Agent, execute and deliver to the Purchase Contract Agent such proxies and other instruments in respect of such Pledged Preferred Securities or the Pledged Senior Deferrable Notes (in form and substance satisfactory to the Collateral Agent) as are prepared by the Purchase Contract Agent with respect to the Pledged Preferred Securities or the Pledged Senior Deferrable Notes.

SECTION 7. RIGHTS AND REMEDIES.

SECTION 7.1. RIGHTS AND REMEDIES OF THE COLLATERAL AGENT.

(a) In addition to the rights and remedies specified in Section 5.7 hereof or otherwise available at law or in equity, after an event of default (as specified in Section 7.1(b) below) hereunder, the Collateral Agent shall have all of the rights and remedies with respect to the Collateral of a secured party under the UCC (whether or not the UCC is in effect in the jurisdiction where the rights and remedies are asserted) and the TRADES Regulations and such additional rights and remedies to which a secured party is entitled under the laws in effect in any jurisdiction where any rights and remedies hereunder may be asserted. Without limiting the generality of the foregoing, such remedies may include, to the extent permitted by applicable law, (1) retention of the Pledged Preferred Securities, Pledged Senior Deferrable Notes, Pledged Treasury Securities or the appropriate Applicable Ownership Interest (as specified in clause (A) of the definition of such term) in full satisfaction of the Holders' obligations under the Purchase Contracts and the Purchase Contract Agreement or
(2) sale of the Pledged Preferred Securities, Pledged Senior Deferrable Notes, Pledged Treasury Securities or the appropriate Applicable Ownership Interest (as specified in clause (A) of the definition of such term) in one or more public or private sales.

(b) Without limiting any rights or powers otherwise granted by this Agreement to the Collateral Agent, in the event the Collateral Agent is unable to make payments to the Company on account of the appropriate Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio, or on account of principal payments of any Pledged Treasury Securities as provided in Section 3 hereof, in satisfaction of the Obligations of the Holder of the PEPS Units (if a Tax Event Redemption has occurred) of which such appropriate Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio or the Holder of the Treasury PEPS Units of which such Pledged Treasury Securities, as applicable, is a part under the related Purchase Contracts, the inability to make such payments shall constitute an event of default hereunder and the Collateral Agent shall have and may exercise, with reference to such Pledged Treasury Securities or the appropriate Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio, as applicable, any and all of the rights and remedies available to a secured party under the UCC and the TRADES Regulations after default by a debtor, and as otherwise granted herein or under any other law.

(c) Without limiting any rights or powers otherwise granted by this Agreement to the Collateral Agent, the Collateral Agent is hereby irrevocably authorized to receive and collect all payments of (i) the liquidation amount of the Pledged Preferred Securities, (ii) the principal amount of the Pledged Senior Deferrable Notes, (iii) the principal amount of the Pledged Treasury Securities and (iv) the principal amount of the Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio, subject, in each case, to the provisions of Section 3 hereof, and as otherwise granted herein.

(d) The Purchase Contract Agent and each Holder of Securities agrees that, from time to time, upon the written request of the Collateral Agent or the Purchase Contract Agent, such Holder shall execute and deliver such further documents and do such other acts and things as the Collateral Agent may reasonably request in order to maintain the Pledge, and the perfection and priority thereof, and to confirm the rights of the Collateral Agent hereunder. The Purchase Contract Agent shall have no liability to any Holder for executing any documents or taking any such acts requested by the Collateral Agent hereunder, except for liability for its own negligent acts, its own negligent failure to act or its own willful misconduct.

SECTION 7.2 SUBSTITUTION OF SENIOR DEFERRABLE NOTES.

If the Trust shall have been dissolved and liquidated prior to the Purchase Contract Settlement Date, the Securities Intermediary shall transfer to the Collateral Agent Senior Deferrable Notes having a Value equal to the liquidation amount of the Pledged Preferred Securities for credit to the Collateral Account. Upon credit to the Collateral Account of such Senior Deferrable Notes, the Collateral Agent shall release the Pledged Preferred Securities from the Collateral Account and shall promptly transfer the same to the Trust.

SECTION 7.3 TAX EVENT REDEMPTION.

Upon the occurrence of a Tax Event Redemption prior to the Purchase Contract Settlement Date, the Redemption Price payable on the Tax Event Redemption Date with respect

to the Applicable Principal Amount shall be credited to the Collateral Account by the Property Trustee or, in case there has been a dissolution of the Trust and the distribution of the related Senior Deferrable Notes, by the Indenture Trustee, on or prior to 12:30 p.m., New York City time on such Tax Event Redemption date, by federal funds check or wire transfer of immediately available funds. The Collateral Agent is hereby authorized to present the Pledged Preferred Securities or the Pledged Senior Deferrable Notes for payment as may be required by their respective terms. Upon receipt of such funds, the Pledged Preferred Securities or Pledged Senior Deferrable Notes, as the case may be, shall be released from the Collateral Account. In the event such funds are credited to the Collateral Account, the Collateral Agent, at the written direction of the Company, shall instruct the Securities Intermediary to (a) apply an amount equal to the Redemption Amount of such Redemption Price to purchase the Treasury Portfolio from the Quotation Agent for credit to the Collateral Account and (b) promptly remit the remaining portion of such Redemption Price, if any, to the Purchase Contract Agent for payment to the Holders of PEPS Units.

SECTION 7.4 SUBSTITUTIONS.

Whenever a Holder has the right to substitute Treasury Securities, Trust Preferred Securities, Senior Deferrable Notes or security entitlements for any of them or the appropriate Applicable Ownership Interest of the Treasury Portfolio, as the case may be, for financial assets held in the Collateral Account, such substitution shall not constitute a novation of the security interest created hereby.

SECTION 8. REPRESENTATIONS AND WARRANTIES; COVENANTS.

SECTION 8.1 REPRESENTATIONS AND WARRANTIES.

Each Holder from time to time, acting through the Purchase Contract Agent as attorney- in-fact (it being understood that the Purchase Contract Agent shall not be liable for any representation or warranty made by or on behalf of a Holder), hereby represents and warrants to the Collateral Agent (with respect to such Holder's interest in the Collateral), which representations and warranties shall be deemed repeated on each day a Holder Transfers Collateral that:

(1) such Holder has the power to grant a security interest in and lien on the Collateral;

(2) such Holder is the sole beneficial owner of the Collateral and, in the case of Collateral delivered in physical form, is the sole holder of such Collateral and is the sole beneficial owner of, or has the right to Transfer, the Collateral it Transfers to the Securities Intermediary for credit to the Collateral Account, free and clear of any security interest, lien, encumbrance, call, liability to pay money or other restriction other than the security interest and lien granted under Section 2 hereof;

(3) upon the Transfer of the Collateral to the Securities Intermediary for credit to the Collateral Account, the Collateral Agent, for the benefit of the Company, will have a

valid and perfected first priority security interest therein (assuming that any central clearing operation or any securities intermediary or other entity not within the control of the Holder involved in the Transfer of the Collateral, including the Collateral Agent and the Securities Intermediary, gives the notices and takes the action required of it hereunder and under applicable law for perfection of that interest and assuming the establishment and exercise of control pursuant to Section 4 hereof); and

(4) the execution and performance by the Holder of its obligations under this Agreement will not result in the creation of any security interest, lien or other encumbrance on the Collateral other than the security interest and lien granted under Section 2 hereof or violate any provision of any existing law or regulation applicable to it or of any mortgage, charge, pledge, indenture, contract or undertaking to which it is a party or which is binding on it or any of its assets.

SECTION 8.2 COVENANTS.

The Holders from time to time, acting through the Purchase Contract Agent as their attorney-in-fact (it being understood that the Purchase Contract Agent shall not be liable for any covenant made by or on behalf of a Holder), hereby covenant to the Collateral Agent that for so long as the Collateral remains subject to the Pledge:

(1) neither the Purchase Contract Agent nor such Holders will create or purport to create or allow to subsist any mortgage, charge, lien, pledge or any other security interest whatsoever over the Collateral or any part of it other than pursuant to this Agreement; and

(2) neither the Purchase Contract Agent nor such Holders will sell or otherwise dispose (or attempt to dispose) of the Collateral or any part of it except for the beneficial interest therein, subject to the Pledge hereunder, transferred in connection with the Transfer of the Securities.

SECTION 9. THE COLLATERAL AGENT AND THE SECURITIES INTERMEDIARY.

It is hereby agreed as follows:

SECTION 9.1 APPOINTMENT, POWERS AND IMMUNITIES.

The Collateral Agent shall act as agent for the Company hereunder with such powers as are specifically vested in the Collateral Agent by the terms of this Agreement, together with such other powers as are reasonably incidental thereto. The Collateral Agent shall:

(1) have no duties or responsibilities except those expressly set forth in this Agreement and no implied covenants or obligations shall be inferred from this Agreement against the Collateral Agent, nor shall the Collateral Agent be bound by the provisions of any agreement by any party hereto beyond the specific terms hereof;

(2) not be responsible for any recitals contained in this Agreement, or in any certificate or other document referred to or provided for in, or received by it under, this Agreement, the Securities or the Purchase Contract Agreement, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement (other than as against the Collateral Agent), the Securities or the Purchase Contract Agreement or any other document referred to or provided for herein or therein or for any failure by the Company or any other Person (except the Collateral Agent) to perform any of its obligations hereunder or thereunder or for the perfection, priority or, except as expressly required hereby, maintenance of any security interest created hereunder;

(3) not be required to initiate or conduct any litigation or collection proceedings hereunder (except pursuant to directions furnished under Section 9.2 hereof, subject to Section 9.6 hereof);

(4) not be responsible for any action taken or omitted to be taken by it hereunder or under any other document or instrument referred to or provided for herein or in connection herewith or therewith, except for its own negligence or willful misconduct; and

(5) not be required to advise any party as to selling or retaining, or taking or refraining from taking any action with respect to, any securities or other property deposited hereunder.

Subject to the foregoing, during the term of this Agreement, the Collateral Agent shall take all reasonable action in connection with the safekeeping and preservation of the Collateral hereunder.

No provision of this Agreement shall require the Collateral Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder. In no event shall the Collateral Agent be liable for any amount in excess of the Value of the Collateral. Notwithstanding the foregoing, each of the Collateral Agent and the Securities Intermediary in its individual capacity hereby waives any right of setoff, bankers' lien, liens or perfection rights as securities intermediary or any counterclaim with respect to any of the Collateral.

SECTION 9.2 INSTRUCTIONS OF THE COMPANY.

The Company shall have the right, by one or more written instruments executed and delivered to the Collateral Agent, to direct the time, method and place of conducting any proceeding for the realization of any right or remedy available to the Collateral Agent, or of exercising any power conferred on the Collateral Agent, or to direct the taking or refraining from taking of any action authorized by this Agreement; provided, however, that (i) such direction shall not conflict with the provisions of any law or of this Agreement and (ii) the Collateral Agent shall be adequately indemnified as provided herein. Nothing contained in this Section 9.2 shall impair the right of the Collateral Agent in its discretion to take any action or omit to take any action which it deems proper and which is not inconsistent with such direction.

SECTION 9.3 RELIANCE BY COLLATERAL AGENT AND SECURITIES INTERMEDIARY.

Each of the Securities Intermediary and the Collateral Agent shall be entitled to rely upon any certification, order, judgment, opinion, notice or other written communication (including, without limitation, any thereof by e-mail or similar electronic means, telecopy, telex or facsimile) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons (without being required to determine the correctness of any fact stated therein) and consult with and rely upon advice, opinions and statements of legal counsel and other experts selected by the Collateral Agent and the Securities Intermediary. As to any matters not expressly provided for by this Agreement, the Collateral Agent and the Securities Intermediary shall in all cases be fully protected in acting, or in refraining from acting, hereunder in accordance with instructions given by the Company in accordance with this Agreement.

SECTION 9.4 RIGHTS IN OTHER CAPACITIES.

The Collateral Agent and the Securities Intermediary and their affiliates may (without having to account therefor to the Company) accept deposits from, lend money to, make their investments in and generally engage in any kind of banking, trust or other business with the Purchase Contract Agent, any other Person interested herein and any Holder of Securities (and any of their respective subsidiaries or affiliates) as if it were not acting as the Collateral Agent or the Securities Intermediary, as the case may be, and the Collateral Agent, the Securities Intermediary and their affiliates may accept fees and other consideration from the Purchase Contract Agent and any Holder of Securities without having to account for the same to the Company; provided that each of the Securities Intermediary and the Collateral Agent covenants and agrees with the Company that it shall not accept, receive or permit there to be created in favor of itself and shall take no affirmative action to permit there to be created in favor of any other Person, any security interest, lien or other encumbrance of any kind in or upon the Collateral other than the lien created by the Pledge.

SECTION 9.5 NON-RELIANCE ON COLLATERAL AGENT AND SECURITIES INTERMEDIARY.

Neither the Securities Intermediary nor the Collateral Agent shall be required to keep itself informed as to the performance or observance by the Purchase Contract Agent or any Holder of Securities of this Agreement, the Purchase Contract Agreement, the Securities or any other document referred to or provided for herein or therein or to inspect the properties or books of the Purchase Contract Agent or any Holder of Securities. Neither the Collateral Agent nor the Securities Intermediary shall have any duty or responsibility to provide the Company with any credit or other information concerning the affairs, financial condition or business of the Purchase Contract Agent or any Holder of Securities (or any of their respective affiliates) that may come into the possession of the Collateral Agent or the Securities Intermediary or any of their respective affiliates.

SECTION 9.6 COMPENSATION AND INDEMNITY.

The Company agrees to:

(1) pay the Collateral Agent and the Securities Intermediary from time to time such compensation as shall be agreed in writing between the Company and the Collateral Agent or the Securities Intermediary, as the case may be, for all services rendered by them hereunder;

(2) indemnify and hold harmless the Collateral Agent, the Securities Intermediary and each of their respective directors, officers, agents and employees (collectively, the "INDEMNITEES"), harmless from and against any and all claims, liabilities, losses, damages, fines, penalties and expenses (including reasonable fees and expenses of counsel) (collectively, "LOSSES" and individually, a "LOSS") that may be imposed on, incurred by, or asserted against, the Indemnitees or any of them for following any instructions or other directions upon which either the Collateral Agent or the Securities Intermediary is entitled to rely pursuant to the terms of this Agreement; and

(3) in addition to and not in limitation of paragraph (2) immediately above, indemnify and hold the Indemnitees and each of them harmless from and against any and all Losses that may be imposed on, incurred by or asserted against, the Indemnitees or any of them in connection with or arising out of the Collateral Agent's or the Securities Intermediary's acceptance or performance of its powers and duties under this Agreement, provided the Collateral Agent or the Securities Intermediary has not acted with negligence or engaged in willful misconduct or bad faith with respect to the specific Loss against which indemnification is sought.

SECTION 9.7 FAILURE TO ACT.

In the event of any ambiguity in the provisions of this Agreement or any dispute between or conflicting claims by or among the parties hereto or any other Person with respect to any funds or property deposited hereunder, then at its sole option, each of the Collateral Agent and the Securities Intermediary shall be entitled, after prompt notice to the Company and the Purchase Contract Agent, to refuse to comply with any and all claims, demands or instructions with respect to such property or funds so long as such dispute or conflict shall continue, and the Collateral Agent and the Securities Intermediary shall not be or become liable in any way to any of the parties hereto for its failure or refusal to comply with such conflicting claims, demands or instructions. The Collateral Agent and the Securities Intermediary shall be entitled to refuse to act until either:

(1) such conflicting or adverse claims or demands shall have been finally determined by a court of competent jurisdiction or settled by agreement between the conflicting parties as evidenced in a writing satisfactory to the Collateral Agent or the Securities Intermediary; or

(2) the Collateral Agent or the Securities Intermediary shall have received security or an indemnity satisfactory to it sufficient to save it harmless from and against any and all loss, liability or reasonable out-of-pocket expense which it may incur by reason of its acting.

The Collateral Agent and the Securities Intermediary may in addition elect to commence an interpleader action or seek other judicial relief or orders as the Collateral Agent or the Securities Intermediary may deem necessary. Notwithstanding anything contained herein to the contrary, neither the Collateral Agent nor the Securities Intermediary shall be required to take any action that is in its opinion contrary to law or to the terms of this Agreement, or which would in its opinion subject it or any of its officers, employees or directors to liability.

SECTION 9.8 RESIGNATION OF COLLATERAL AGENT AND SECURITIES INTERMEDIARY.

(a) Subject to the appointment and acceptance of a successor Collateral Agent as provided below:

(1) the Collateral Agent may resign at any time by giving notice thereof to the Company and the Purchase Contract Agent as attorney-in-fact for the Holders of Securities;

(2) the Collateral Agent may be removed at any time by the Company; and

(3) if the Collateral Agent fails to perform any of its material obligations hereunder in any material respect for a period of not less than 20 days after receiving written notice of such failure by the Purchase Contract Agent and such failure shall be continuing, the Collateral Agent may be removed by the Purchase Contract Agent.

The Purchase Contract Agent shall promptly notify the Company of any removal of the Collateral Agent pursuant to clause (3) of the immediately preceding sentence. Upon any such resignation or removal, the Company shall have the right to appoint a successor Collateral Agent. If no successor Collateral Agent shall have been so appointed and shall have accepted such appointment within 30 days after the retiring Collateral Agent's giving of notice of resignation or the Company or the Purchase Contract Agent giving notice of such removal, then the retiring Collateral Agent may petition any court of competent jurisdiction for the appointment of a successor Collateral Agent. The Collateral Agent shall be a bank or a national banking association which has an office (or an agency office) in New York City with a combined capital and surplus of at least $50,000,000 and shall not be the Purchase Contract Agent or any of its affiliates. Upon the acceptance of any appointment as Collateral Agent hereunder by a successor Collateral Agent, such successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Collateral Agent, and the retiring Collateral Agent shall take all appropriate action to transfer any money and property held by it hereunder (including the Collateral) to such successor Collateral Agent. The retiring Collateral Agent shall, upon such succession, be discharged from its duties and obligations as Collateral Agent hereunder. After any retiring Collateral Agent's resignation hereunder as Collateral Agent, the provisions of this Section 9 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Collateral Agent.

(b) Subject to the appointment and acceptance of a successor Securities Intermediary as provided below:

(1) the Securities Intermediary may resign at any time by giving notice thereof to the Company and the Purchase Contract Agent as attorney-in-fact for the Holders of Securities;

(2) the Securities Intermediary may be removed at any time by the Company; and

(3) if the Securities Intermediary fails to perform any of its material obligations hereunder in any material respect for a period of not less than 20 days after receiving written notice of such failure by the Purchase Contract Agent and such failure shall be continuing, the Securities Intermediary may be removed by the Purchase Contract Agent.

The Purchase Contract Agent shall promptly notify the Company of any removal of the Securities Intermediary pursuant to clause (3) of the immediately preceding sentence. Upon any such resignation or removal, the Company shall have the right to appoint a successor Securities Intermediary. If no successor Securities Intermediary shall have been so appointed and shall have accepted such appointment within 30 days after the retiring Securities Intermediary's giving of notice of resignation or the Company or the Purchase Contract Agent giving notice of such removal, then the retiring Securities Intermediary may petition any court of competent jurisdiction for the appointment of a successor Securities Intermediary. The Securities Intermediary shall be a bank or a national banking association which has an office (or an agency office) in New York City with a combined capital and surplus of at least $50,000,000 and shall not be the Purchase Contract Agent or any of its affiliates. Upon the acceptance of any appointment as Securities Intermediary hereunder by a successor Securities Intermediary, such successor Securities Intermediary shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Securities Intermediary, and the retiring Securities Intermediary shall take all appropriate action to transfer any money and property held by it hereunder (including the Collateral) to such successor Securities Intermediary. The retiring Securities Intermediary shall, upon such succession, be discharged from its duties and obligations as Securities Intermediary hereunder. After any retiring Securities Intermediary's resignation hereunder as Securities Intermediary, the provisions of this Section 9 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Securities Intermediary.

SECTION 9.9 RIGHT TO APPOINT AGENT OR ADVISOR.

The Collateral Agent shall have the right to appoint agents or advisors in connection with any of its duties hereunder, and the Collateral Agent shall not be liable for any action taken or omitted by, or in reliance upon the advice of, such agents or advisors selected in good faith. The appointment of agents pursuant to this Section 9.9 shall be subject to prior consent of the Company, which consent shall not be unreasonably withheld.

SECTION 9.10 SURVIVAL.

The provisions of this Section 9 shall survive termination of this Agreement and the resignation or removal of the Collateral Agent or the Securities Intermediary.

SECTION 9.11 EXCULPATION.

Anything contained in this Agreement to the contrary notwithstanding, in no event shall the Collateral Agent or the Securities Intermediary or their officers, directors, employees or agents be liable under this Agreement to any third party for indirect, special, punitive, or consequential loss or damage of any kind whatsoever, including, but not limited to, lost profits, whether or not the likelihood of such loss or damage was known to the Collateral Agent or the Securities Intermediary, or any of them.

SECTION 10 AMENDMENT.

SECTION 10.1 AMENDMENT WITHOUT CONSENT OF HOLDERS.

Without the consent of any Holders, the Company, the Collateral Agent, the Securities Intermediary and the Purchase Contract Agent, at any time and from time to time, may amend this Agreement, in form satisfactory to the Company, the Collateral Agent, the Securities Intermediary and the Purchase Contract Agent, to:

(1) evidence the succession of another Person to the Company, and the assumption by any such successor of the covenants of the Company;

(2) evidence and provide for the acceptance of appointment hereunder by a successor Collateral Agent, Securities Intermediary or Purchase Contract Agent;

(3) add to the covenants of the Company for the benefit of the Holders, or surrender any right or power herein conferred upon the Company, provided such covenants or such surrender do not adversely affect the validity, perfection or priority of the Pledge created hereunder; or

(4) cure any ambiguity (or formal defect), correct or supplement any provisions herein which may be inconsistent with any other such provisions herein, or make any other provisions with respect to such matters or questions arising under this Agreement, provided such action shall not adversely affect the interests of the Holders.

SECTION 10.2 AMENDMENT WITH CONSENT OF HOLDERS.

With the consent of the Holders of not less than a majority of the Purchase Contracts at the time outstanding, by Act of such Holders delivered to the Company, the Purchase Contract Agent, the Securities Intermediary or the Collateral Agent, as the case may be, the Company, when duly authorized, the Purchase Contract Agent, the Securities Intermediary and the Collateral Agent may amend this Agreement for the purpose of modifying in any manner the provisions of this Agreement or the rights of the Holders in respect of the Securities; provided, however, that no such supplemental agreement shall, without the unanimous consent of the Holders of each Outstanding Security adversely affected thereby:

(1) Change the amount or type of Collateral underlying a Security (except for the rights of holders of PEPS Units to substitute the Treasury Securities for the Pledged Preferred Securities or the Pledged Senior Deferrable Notes, as the case may be, or the rights of Holders of Treasury PEPS Units to substitute Preferred Securities or Senior Deferrable Notes, as applicable, for the Pledged Treasury Securities), impair the right of the Holder of any Security to receive distributions on the underlying Collateral or otherwise adversely affect the Holder's rights in or to such Collateral; or

(2) otherwise effect any action that would require the consent of the Holder of each Outstanding Security affected thereby pursuant to the Purchase Contract Agreement if such action were effected by an agreement supplemental thereto; or

(3) reduce the percentage of Purchase Contracts the consent of whose Holders is required for any such amendment;

provided that if any amendment or proposal referred to above would adversely affect only the PEPS Units or only the Treasury PEPS Units, then only the affected class of Holders as of the record date for the Holders entitled to vote thereon will be entitled to vote on such amendment or proposal, and such amendment or proposal shall not be effective except with the consent of Holders of not less than a majority of such class; provided, further, that the unanimous consent of the Holders of each outstanding Purchase Contract of such class affected thereby shall be required to approve any amendment or proposal specified in clauses (1) through (3) above.

It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed amendment, but it shall be sufficient if such Act shall approve the substance thereof.

SECTION 10.3 EXECUTION OF AMENDMENTS.

In executing any amendment permitted by this Section, the Collateral Agent, the Securities Intermediary and the Purchase Contract Agent shall be entitled to receive and (subject to Section 7.1 of the Purchase Contract Agreement with respect to the Purchase Contract Agent) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by this Agreement and that all conditions precedent, if any, to the execution and delivery of such amendment have been satisfied.

SECTION 10.4 EFFECT OF AMENDMENTS.

Upon the execution of any amendment under this Section, this Agreement shall be modified in accordance therewith, and such amendment shall form a part of this Agreement for all purposes; and every Holder of Certificates theretofore or thereafter authenticated, executed on behalf of the Holders and delivered under the Purchase Contract Agreement shall be bound thereby.

SECTION 10.5 REFERENCE TO AMENDMENTS.

Certificates authenticated, executed on behalf of the Holders and delivered after the execution of any amendment pursuant to this Section may, and shall if required by the Collateral Agent or the Purchase Contract Agent, bear a notation in form approved by the Purchase Contract Agent and the Collateral Agent as to any matter provided for in such amendment. If the Company shall so determine, new Security Certificates so modified as to conform, in the opinion of the Collateral Agent, the Purchase Contract Agent and the Company, to any such amendment may be prepared and executed by the Company and authenticated, executed on behalf of the Holders and delivered by the Purchase Contract Agent in accordance with the Purchase Contract Agreement in exchange for Outstanding Security Certificates.

SECTION 11. MISCELLANEOUS.

SECTION 11.1 NO WAIVER.

No failure on the part of the Collateral Agent, the Securities Intermediary or any of their respective agents to exercise, and no course of dealing with respect to, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise by the Collateral Agent, the Securities Intermediary or any of their respective agents of any right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies herein are cumulative and are not exclusive of any remedies provided by law.

SECTION 11.2 GOVERNING LAW.

THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK. The Company, the Collateral Agent, the Securities Intermediary and the Holders from time to time of the Securities, acting through the Purchase Contract Agent as their attorney-in-fact, hereby submit to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York state court sitting in New York City for the purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. The Company, the Collateral Agent, the Securities Intermediary and the Holders from time to time of the Securities, acting through the Purchase Contract Agent as their attorney-in-fact, irrevocably waive, to the fullest extent permitted by applicable law, any objection which they may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum.

SECTION 11.3 NOTICES.

All notices, requests, consents and other communications provided for herein (including, without limitation, any modifications of, or waivers or consents under, this Agreement) shall be given or made in writing (including, without limitation, by telecopy) delivered to the intended recipient at the "ADDRESS FOR NOTICES" specified below its name on the signature pages hereof or, as to any party, at such other address as shall be designated by such party in a notice to the other parties. Except as otherwise provided in this Agreement, all such communications shall be

deemed to have been duly given when transmitted by telecopier or personally delivered or, in the case of a mailed notice, upon receipt, in each case given or addressed as aforesaid.

SECTION 11.4 SUCCESSORS AND ASSIGNS.

This Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of the Company, the Collateral Agent, the Securities Intermediary and the Purchase Contract Agent, and the Holders from time to time of the Securities, by their acceptance of the same, shall be deemed to have agreed to be bound by the provisions hereof and to have ratified the agreements of, and the grant of the Pledge hereunder by, the Purchase Contract Agent.

SECTION 11.5 COUNTERPARTS.

This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Agreement by signing any such counterpart.

SECTION 11.6 SEVERABILITY.

If any provision hereof is invalid and unenforceable in any jurisdiction, then, to the fullest extent permitted by law, (i) the other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in order to carry out the intentions of the parties hereto as nearly as may be possible and (ii) the invalidity or unenforceability of any provision hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction.

SECTION 11.7 EXPENSES, ETC.

The Company agrees to reimburse the Collateral Agent and the Securities Intermediary for:

(1) all reasonable costs and expenses of the Collateral Agent and the Securities Intermediary (including, without limitation, the reasonable fees and expenses of counsel to the Collateral Agent and the Securities Intermediary), in connection with (i) the negotiation, preparation, execution and delivery or performance of this Agreement and (ii) any modification, supplement or waiver of any of the terms of this Agreement;

(2) all reasonable costs and expenses of the Collateral Agent and the Securities Intermediary (including, without limitation, reasonable fees and expenses of counsel) in connection with (i) any enforcement or proceedings resulting or incurred in connection with causing any Holder of Securities to satisfy its obligations under the Purchase Contracts forming a part of the Securities and (ii) the enforcement of this Section 11.7;

(3) all transfer, stamp, documentary or other similar taxes, assessments or charges levied by any governmental or revenue authority in respect of this Agreement or any other

document referred to herein and all costs, expenses, taxes, assessments and other charges incurred in connection with any filing, registration, recording or perfection of any security interest contemplated hereby;

(4) all fees and expenses of any agent or advisor appointed by the Collateral Agent and consented to by the Company under Sections 9.3 and 9.9 of this Agreement; and

(5) any other out-of-pocket costs and expenses reasonably incurred by the Collateral Agent and the Securities Intermediary in connection with the performance of their duties hereunder.

SECTION 11.8 SECURITY INTEREST ABSOLUTE.

All rights of the Collateral Agent and security interests hereunder, and all obligations of the Holders from time to time hereunder, shall be absolute and unconditional irrespective of:

(1) any lack of validity or enforceability of any provision of the Purchase Contracts or the Securities or any other agreement or instrument relating thereto;

(2) any change in the time, manner or place of payment of, or any other term of, or any increase in the amount of, all or any of the obligations of Holders of the Securities under the related Purchase Contracts, or any other amendment or waiver of any term of, or any consent to any departure from any requirement of, the Purchase Contract Agreement or any Purchase Contract or any other agreement or instrument relating thereto; or

(3) any other circumstance which might otherwise constitute a defense available to, or discharge of, a borrower, a guarantor or a pledger.

SECTION 11.9 NOTICE OF TAX EVENT, TAX EVENT REDEMPTION AND TERMINATION EVENT.

Upon the occurrence of a Tax Event, a Tax Event Redemption or a Termination Event, the Company shall deliver written notice to the Collateral Agent and the Securities Intermediary. Upon the written request of the Collateral Agent or the Securities Intermediary, the Company shall inform such party whether or not a Tax Event, a Tax Event Redemption or a Termination Event has occurred.

[SIGNATURES ON THE FOLLOWING PAGE]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.

----------------------------------           -----------------------------------
VALERO ENERGY CORPORATION                    THE BANK OF NEW YORK as
                                             Purchase Contract Agent and as
                                             attorney-in-fact of the Holders
                                             from time to time of the Securities

By:                                          By:
   -------------------------------               -------------------------------
   Name: John D. Gibbons                         Name:
   Title: Vice President and Chief               Title:
           Financial Officer



Address for Notices:                         Address for Notices:

Valero Energy Corporation                    The Bank of New York
One Valero Place                             101 Barclay Street
P.O. Box 500                                 21 West
San Antonio, Texas 78212 (78292-0500)        New York, NY 10286
Attention: Jay D. Browning                   Attention: Corporate Trust Trustee
Telecopy: (210) 370-2988                     Administration
With a copy to: Donna M. Titzman             Telecopy: (212) 815-5915
Telecopy: (210) 370-2497



----------------------------------           -----------------------------------
BANK ONE TRUST COMPANY, N.A.,                BANK ONE TRUST COMPANY, N.A.,
as Collateral Agent                          as Securities Intermediary

By:                                          By:
   -------------------------------               -------------------------------
   Name:                                         Name:
   Title:                                        Title:

Address for Notices:                         Address for Notices:

Bank One Trust Company, N.A.                 Bank One Trust Company, N.A.
One North State Street, 9th Floor            One North State Street, 9th Floor
Chicago, Illinois 60670-0126                 Chicago, Illinois 60670-0126
Attention:  Corporate Trust                  Attention:  Corporate Trust
             Administration                               Administration
Telecopy: (312) 407-1708                     Telecopy: (312) 407-1708

EXHIBIT A

INSTRUCTION
FROM PURCHASE CONTRACT AGENT
TO COLLATERAL AGENT
(Establishment of Treasury PEPS Units)

Bank One Trust Company, N.A.
One North State Street, 9th Floor
Chicago, Illinois 60670-0126
Attention: Corporate Trust Administration Telecopy: (312) 407-1708

Re: PEPS Units of Valero Energy Corporation. (the "COMPANY") and VEC Trust I

The securities account of Bank One Trust Company, N.A., as Collateral Agent, maintained by the Securities Intermediary and designated "The Bank One Trust Company, N.A., as Collateral Agent of Valero Energy Corporation, as pledgee of The Bank of New York, as the Purchase Contract Agent on behalf of and as attorney-in-fact for the Holders" (the "COLLATERAL ACCOUNT")

Please refer to the Pledge Agreement, dated as of June 28, 2000 (the "PLEDGE AGREEMENT"), among the Company, you, as Collateral Agent, Bank One Trust Company, N.A., as Securities Intermediary, and the undersigned, as Purchase Contract Agent and as attorney-in- fact for the holders of PEPS Units from time to time. Capitalized terms used herein but not defined shall have the meaning set forth in the Pledge Agreement.

We hereby notify you in accordance with Section 5.2 of the Pledge Agreement that the holder of securities named below (the "HOLDER") has elected to substitute $__________ Value of Treasury Securities or security entitlements thereto in exchange for [an equal Value of [Pledged Preferred Securities]
[Pledged Senior Deferrable Notes] relating to _________ PEPS Units] and has delivered to the undersigned a notice stating that the Holder has Transferred such Treasury Securities or security entitlements thereto to the Securities Intermediary, for credit to the Collateral Account.

We hereby request that you instruct the Securities Intermediary, upon confirmation that such Treasury Securities or security entitlements thereto have been credited to the Collateral Account, to release to the undersigned [an equal Value of [Pledged Preferred Securities] [Pledged Senior Deferrable Notes]] in accordance with Section 5.2 of the Pledge Agreement. We also hereby confirm that no Tax Event Redemption has occurred.

Date:                              as Purchase Contract Agent and as
      ---------------------        attorney-in-fact of the Holders from time to
                                   time of the Securities


                                   By:
                                       -----------------------------------------
                                       Name:

Title:

Please print name and address of Holder electing to substitute Treasury Securities or security entitlements thereto for the [Pledged Preferred Securities] [Pledged Senior Deferrable Notes]:

-------------------------------------            -------------------------------
                Name                             Social Security or other
                                                 Taxpayer Identification Number,
                                                 if any


-------------------------------------
               Address


-------------------------------------

EXHIBIT B

INSTRUCTION
FROM COLLATERAL AGENT
TO SECURITIES INTERMEDIARY
(Establishment of Treasury PEPS Units)

Bank One Trust Company, N.A., as Securities Intermediary One North State Street, 9th Floor
Chicago, Illinois 60670-0126
Attention: Corporate Trust Administration Telecopy: (312) 407-1708

Re: PEPS Units of Valero Energy Corporation (the "COMPANY") and VEC Trust I

The securities account of Bank One Trust Company, N.A., as Collateral Agent, maintained by the Securities Intermediary and designated "The Bank One Trust Company, N.A., as Collateral Agent of Valero Energy Corporation, as pledgee of The Bank of New York, as the Purchase Contract Agent on behalf of and as attorney-in-fact for the Holders" (the "COLLATERAL ACCOUNT")

Please refer to the Pledge Agreement, dated as of June 28, 2000 (the "PLEDGE AGREEMENT"), among the Company, you, as Securities Intermediary, The Bank of New York, as Purchase Contract Agent and as attorney-in-fact for the holders of PEPS Units from time to time, and the undersigned, as Collateral Agent. Capitalized terms used herein but not defined shall have the meanings set forth in the Pledge Agreement.

When you have confirmed that $__________ Value of Treasury Securities or security entitlements thereto has been credited to the Collateral Account by or for the benefit of _________, as Holder of PEPS Units (the "HOLDER"), you are hereby instructed to release from the Collateral Account [an equal Value of
[Preferred Securities or security entitlements thereto] [Senior Deferrable Notes or security entitlements thereto]] relating to _____ PEPS Units of the Holder] by Transfer to the Purchase Contract Agent.

BANK ONE TRUST COMPANY, N.A.,
as Collateral Agent

Title:

Please print name and address of Holder:

-------------------------------------            -------------------------------
                Name                             Social Security or other
                                                 Taxpayer Identification Number,
                                                 if any


-------------------------------------
               Address


-------------------------------------

EXHIBIT C

INSTRUCTION
FROM PURCHASE CONTRACT AGENT
TO COLLATERAL AGENT
(Reestablishment of PEPS Units )

Bank One Trust Company, N.A.
One North State Street, 9th Floor
Chicago, Illinois 60670-0126
Attention: Corporate Trust Administration Telecopy: (312) 407-1708

Re: ________________ PEPS Units of Valero Energy Corporation (the "COMPANY") and VEC Trust I

Please refer to the Pledge Agreement dated as of June 28, 2000 (the "PLEDGE AGREEMENT"), among the Company, you, as Collateral Agent, Bank One Trust Company, N.A., as Securities Intermediary, and the undersigned, as Purchase Contract Agent and as attorney-in- fact for the holders of PEPS Units from time to time. Capitalized terms used herein but not defined shall have the meaning set forth in the Pledge Agreement.

We hereby notify you in accordance with Section 5.3(a) of the Pledge Agreement that the holder of securities listed below (the "HOLDER") has elected to substitute [$ _______ Value of [Preferred Securities or security entitlements thereto] [Senior Deferrable Notes or security entitlements thereto]] in exchange for $__________ Value of Pledged Treasury Securities and has delivered to the undersigned a notice stating that the holder has Transferred such [Preferred Securities or security entitlements thereto] [Senior Deferrable Notes or security entitlements thereto] to the Securities Intermediary, for credit to the Collateral Account.

We hereby request that you instruct the Securities Intermediary, upon confirmation that such [Preferred Securities or security entitlements thereto]
[Senior Deferrable Notes or security entitlements thereto] have been credited to the Collateral Account, to release to the undersigned $__________ Value of Treasury Securities or security entitlements thereto related to _____ PEPS Units of such Holder in accordance with Section 5.3(a) of the Pledge Agreement. We also hereby confirm that no Tax Event Redemption has occurred.

                                          as Purchase Contract Agent

Date:                                     By:
      -------------------                     ----------------------------------
                                              Name:

Title:

Please print name and address of Holder electing to substitute [Preferred Securities or security entitlements thereto] [Pledged Senior Deferrable Notes or security entitlements thereto] for Pledged Treasury Securities:

-------------------------------------            -------------------------------
                Name                             Social Security or other
                                                 Taxpayer Identification Number,
                                                 if any


-------------------------------------
               Address


-------------------------------------

EXHIBIT D

INSTRUCTION
FROM COLLATERAL AGENT
TO SECURITIES INTERMEDIARY
(Reestablishment of PEPS Units)

Bank One Trust Company, N.A., as Securities Intermediary One North State Street, 9th Floor
Chicago, Illinois 60670-0126
Attention: Corporate Trust Administration Telecopy: (312) 407-1708

Re: _____________________ PEPS Units of Valero Energy Corporation (the "COMPANY") and VEC Trust I

The securities account of Bank One Trust Company, N.A., as Collateral Agent, maintained by the Securities Intermediary and designated "The Bank One Trust Company, N.A., as Collateral Agent of Valero Energy Corporation, as pledgee of the Bank of New York, as the Purchase Contract Agent on behalf of and as attorney-in-fact for the Holders" (the "COLLATERAL ACCOUNT")

Please refer to the Pledge Agreement dated as of June 28, 2000 (the "PLEDGE AGREEMENT"), among the Company, you, as Securities Intermediary, The Bank of New York, as Purchase Contract Agent and as attorney-in-fact for the holders of PEPS Units from time to time, and the undersigned, as Collateral Agent. Capitalized terms used herein but no defined shall have the meaning set forth in the Pledge Agreement.

When you have confirmed that $ __________ Value of [Preferred Securities or security entitlements thereto] [Senior Deferrable Notes or security entitlements thereto] has been credited to the Collateral Account by or for the benefit of ________________, as Holder of PEPS Units (the "HOLDER"), you are hereby instructed to release from the Collateral Account $ ________________ Value of Treasury Securities or security entitlements thereto by Transfer to the Purchase Contract Agent.

Dated:                                        By:
       --------------------                       ------------------------------
                                                  Name:

Title:

-------------------------------------            -------------------------------
                Name                             Social Security or other
                                                 Taxpayer Identification Number,
                                                 if any


-------------------------------------
               Address


-------------------------------------

EXHIBIT E

NOTICE OF CASH SETTLEMENT FROM SECURITIES INTERMEDIARY
TO PURCHASE CONTRACT AGENT
(Cash Settlement Amounts)

The Bank of New York
101 Barclay Street
21 West
New York, NY 10286
Attention: Corporate Trust Trustee Administration Telecopy: (212) 815-5915

Re: _____________________ PEPS Units of Valero Energy Corporation (the "COMPANY") and VEC Trust I

Please refer to the Pledge Agreement dated as of June 28, 2000 (the "PLEDGE AGREEMENT"), by and among you, the Company, Bank One Trust Company, N.A., as Collateral Agent and the undersigned, as Securities Intermediary. Unless otherwise defined herein, terms defined in the Pledge Agreement are used herein as defined therein.

In accordance with Section 5.5(d) of the Pledge Agreement, we hereby notify you that as of 11:00 a.m. (New York City time) on the fifth Business Day immediately preceding August 18 2003, we have received (i) $ _______________ in immediately available funds paid in an aggregate amount equal to the Purchase Price to the Company on the Purchase Contract Settlement Date with respect to ________________ PEPS Units and (ii) $ ___________ in immediately available funds paid in an aggregate amount equal to the Purchase Price to the Company on the Purchase Contract Settlement Date with respect to ______ Treasury PEPS Units.

Date:                                         By:
       --------------------                       ------------------------------
                                                  Name:
                                                  Title:

VALERO ENERGY CORPORATION

and

THE BANK OF NEW YORK

as Trustee

7 3/4% Senior Deferrable Notes due 2005

FIRST SUPPLEMENTAL INDENTURE

Dated as of June 28, 2000

FIRST SUPPLEMENTAL INDENTURE, dated as of June 28, 2000, (herein called the "First Supplemental Indenture"), between Valero Energy Corporation, a corporation duly organized and existing under the laws of the State of Delaware (hereinafter called the "Company"), party of the first part, and The Bank of New York, a New York banking corporation, as Trustee under the Indenture referred to below (hereinafter called the "Trustee"), party of the second part.

WITNESSETH:

WHEREAS, the Company has heretofore executed and delivered to the Trustee an Indenture, dated as of December 12, 1997 (hereinafter called the "Indenture"), to provide for the issuance from time to time of certain of its unsecured senior notes (hereinafter called the "Securities"), the form and terms of which are to be established as set forth in Sections 201 and 301 of the Indenture; and

WHEREAS, Section 901 of the Indenture provides, among other things, that the Company and the Trustee may enter into indentures supplemental to the Indenture for, among other things, the purpose of establishing the form or terms of the Securities of any series as permitted in Sections 201 and 301 of the Indenture; and

WHEREAS, the Company desires to create a series of the Securities in an aggregate principal amount of up to $177,835,075 to be designated the "7 3/4% Senior Deferrable Notes due 2005" (the "Senior Notes"), and all action on the part of the Company necessary to authorize the issuance of the Senior Notes under the Indenture and this First Supplemental Indenture has been duly taken; and

WHEREAS, all acts and things necessary to make the Senior Notes when executed by the Company and completed, authenticated and delivered by the Trustee as in the Indenture and this First Supplemental Indenture provided, the valid and binding obligations of the Company and to constitute these presents a valid and binding supplemental indenture and agreement according to its terms, have been done and performed; and

WHEREAS, Section 901 of the Indenture provides, among other things, that the Company and the Trustee may enter into indentures supplemental to the Indenture to, among other things, add to the covenants of the Company for the benefit of the Holders of all or any series of Securities; and

WHEREAS, VEC Trust I, a Delaware statutory business trust (the "Trust"), has offered to the public up to $172,500,000, in aggregate liquidation amount of its 7 3/4% Trust Preferred Securities (the "Preferred Securities") and, in connection therewith, the Company has agreed to purchase up to $5,335,075 in value of the aggregate liquidation amount of the Trust's common securities (the "Common Securities" and together with the Preferred Securities, the "Trust Securities"), each representing an undivided beneficial interest in the assets of the Trust, and proposes to invest the proceeds from such offerings in up to $177,835,075 aggregate principal amount of the Senior Notes;

NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:

That in consideration of the premises, the Company covenants and agrees with the Trustee, for the equal benefit of holders of the Senior Notes, as follows:

ARTICLE I
DEFINITIONS

Section 1.1 Definition of Terms. Unless the context otherwise requires:

(a) a term not defined herein that is defined in the Indenture has the same meaning when used in this First Supplemental Indenture;

(b) a term defined anywhere in this First Supplemental Indenture has the same meaning throughout;

(c) the singular includes the plural and vice versa;

(d) a reference to a Section or Article is to a
Section or Article of this First Supplemental Indenture;

(e) headings are for convenience of reference only and do not affect interpretation;

(f) the following terms have the meanings given to them in the Declaration: (i) Applicable Margin; (ii) Applicable Principal Amount; (iii) Common Securities; (iv) Delaware Trustee; (v) Failed Remarketing;
(vi) Guarantee; (vii) Majority in Liquidation Amount; (viii) Preferred Securities; (ix) Preferred Security Certificate; (x) Property Trustee; (xi) Redemption Amount; (xii) Redemption Price; (xiii) Regular Trustees; (xiv) Remarketing Agreement; (xv) Tax Event; (xvi) Remarketing Date; (xvii) Reset Rate; (xviii) Tax Event Redemption; (xix) Treasury Portfolio; and (xx) Two-Year Benchmark Treasury Rate;

(g) the following terms have the meanings given to them in the Purchase Contract Agreement: (i) Cash Settlement; (ii) PEPS Units;
(iii) Purchase Contract and (iv) Purchase Contract Settlement Date; (v) Treasury PEPS Unit; (vi) Global Certificate;

(h) the following terms have the meanings given to them in this Section 1.1(h):

"Business Day" means any day other than a Saturday or Sunday or a day on which banking institutions in the city of New York, New York or San Antonio, Texas are authorized or required by law or executive order to remain closed or a day on which the principal corporate trust office of the Trustee or the Property Trustee is closed for business.

"Declaration" means the Amended and Restated Declaration of Trust of the Trust, dated as of June 28, 2000, as amended and restated from time to time.

"Direct Action" has the meaning specified in Section 6.2.

"Primary Treasury Dealer" means a primary U.S. government securities dealer in New York City.

"Purchase Contract Agreement" means the Purchase Contract Agreement dated as of June 28, 2000 between the Company and The Bank of New York, as Purchase Contract Agent.

"Quotation Agent" means (i) Morgan Stanley & Co. Incorporated and its respective successors, provided that if Morgan Stanley & Co. Incorporated ceases to be a Primary Treasury Dealer, the Company will substitute another Primary Treasury Dealer therefor, or (ii) any other Primary Treasury Dealer selected by the Company.

"Remarketing" means (i) as long as the Trust has not been liquidated, the operation of the procedures for remarketing specified in Section 7.13 of the Declaration and
(ii) if the Trust has been liquidated, the operation of the procedures for remarketing specified in Section 5.02 of the Purchase Contract Agreement.

"Remarketing Agent" shall mean Morgan Stanley & Co. Incorporated or any successor remarketing agent selected by the Company.

ARTICLE II
TERMS AND ISSUANCE OF THE SENIOR NOTES

Section 2.1 Issue of Senior Notes. A series of Securities which shall be designated the "7 3/4% Senior Deferrable Notes due 2005" shall be executed, authenticated and delivered in accordance with the provisions of, and shall in all respects be subject to, the terms, conditions and covenants of the Indenture and this First Supplemental Indenture (including the form of Senior Note set forth as Exhibits A and B hereto). The aggregate principal amount of Senior Notes of the series created hereby which may be authenticated and delivered under the Indenture shall not, except as permitted by the provisions of the Indenture, exceed $177,835,075. The Senior Notes shall be initially issued in certificated form to the Trust (the "Initial Senior Notes") and shall be substantially in the Form of Exhibit B attached hereto. The terms of such Senior Notes are herein incorporated by reference and are part of the First Supplemental Indenture.

Section 2.2 Maturity. Unless a Tax Event Redemption occurs, the entire principal amount of the Senior Notes will mature and become due and payable together with any accrued and unpaid interest thereon, on August 18, 2005 (the "Maturity Date").

Section 2.3 Global Senior Notes. If distributed to holders of Preferred Securities in connection with the involuntary or voluntary liquidation and dissolution of the Trust:

(a) If the Preferred Securities are held in book-entry form, the Initial Senior Notes may be presented to the Trustee by the Property Trustee in exchange for a Global Security in the form of Exhibit A in an aggregate principal amount equal to all Outstanding Senior Notes (a "Global Senior Note"). The Depositary for the Global Senior Note will be The Depository Trust Company. The Global Senior Note will be registered in the name of the Depositary or its nominee, Cede & Co., and delivered by the Trustee to the Depositary or a custodian appointed by the Depositary for crediting to the accounts of its participants pursuant to the instructions of the Property Trustee. The Company upon any such presentation shall execute a Global Senior Note in such aggregate principal amount and deliver the same to the Trustee for authentication and delivery in accordance with the Indenture and this First Supplemental Indenture. Payments on the Senior Notes issued as a Global Senior Note will be made to the Depositary or its nominee.

(b) If any Preferred Securities are held in non book-entry certificated form ("Non Book-Entry Preferred Securities"), the Initial Senior Notes may be presented to the Trustee by the Property Trustee, and such Non Book-Entry Preferred Securities will be deemed to represent beneficial interests in Senior Notes presented to the Trustee by the Property Trustee having an aggregate principal amount equal to the aggregate liquidation amount of the Non Book-Entry Preferred Securities until the Preferred Security Certificates representing such Non Book-Entry Preferred Securities are presented to the Security Registrar for transfer or reissuance, at which time such Preferred Security Certificates will be canceled and a Senior Note registered in the name of the holder of the Preferred Security Certificate or the transferee of the holder of such Preferred Security Certificate, as the case may be, with an aggregate principal amount equal to the aggregate liquidation amount of the Preferred Security Certificate canceled will be executed by the Company and delivered to the Trustee for authentication and delivery in accordance with the Indenture and this First Supplemental Indenture. On issue of such Senior Notes, Senior Notes with an equivalent aggregate principal amount that were presented by the Property Trustee to the Trustee will be deemed to have been canceled.

Section 2.4 Interest. (a) Each Senior Note will bear interest at the rate of 7 3/4% per annum from June 28, 2000 until the Purchase Contract Settlement Date, and at the Reset Rate thereafter, payable quarterly in arrears on February 18, May 18, August 18 and November 18 of each year, commencing August 18, 2000 (the "Interest Payment Dates").

(b) The Regular Record Dates for the payment of interest on the Senior Notes on any Interest Payment Date, shall be (i) as long as the Senior Notes are represented by a Global Senior Note or the Initial Senior Notes, the Business Day preceding each Interest Payment Date or (ii) if the Senior Notes are issued pursuant to Section 2.3(b) above, the fifteenth Business Day prior to each Interest Payment Date.

(c) The interest rate on the Senior Notes outstanding on and after the Remarketing Date will be reset to the Reset Rate. The Reset Rate will be equal to the rate per annum that results from the Remarketing, provided that if a Failed Remarketing occurs, the Reset Rate will be equal to (i) the Two-Year Benchmark Treasury Rate plus (ii) the Applicable Margin.

(d) The amount of interest payable on the Senior Notes for any period will be computed (i) for any full quarterly period on the basis of a 360-day year of twelve 30-day months and (ii) for any period shorter than a full quarterly period, on the basis of a 30-day month and, for any period less than a month, on the basis of the actual number of days elapsed per 30-day month. In the event that any date on which interest is payable on the Senior Notes is not a Business Day, then payment of the interest payable on such date will be made on the next day that is a Business Day (and without interest or other payment in respect of any such delay), except that, if such Business Day is in the next calendar year, then such payment will be made on the preceding Business Day.

Section 2.5 Redemption. (a) If a Tax Event occurs and is continuing, the Company may, at its option and upon not less than 30 nor more than 60 days' notice to the Holders of the Senior Notes, redeem the Senior Notes in whole (but not in part) within 90 days following the occurrence of such Tax Event, at a price equal to, for each Senior Note, the Redemption Price. The aggregate Redemption Price shall be paid prior to 12:00 noon, New York City time, on the date of redemption (the "Tax Event Redemption Date") or such earlier time as the Company determines, provided that the Company shall have deposited with the Trustee an amount sufficient to pay the aggregate Redemption Price by 10:00 a.m. on the Tax Event Redemption Date. Such redemption shall otherwise be in accordance with the provisions of Article III of the Indenture.

(b) Except as provided in Section 2.5(a), the Company will have no right to redeem the Senior Notes.

(c) The Senior Notes will not be subject to a sinking fund provision.

Section 2.6 Events of Default. So long as the Senior Notes are held by the Trust, it shall be an Event of Default with respect to the Senior Notes if the Trust shall have voluntarily or involuntarily dissolved, wound up its business or otherwise terminated its existence except in connection with (i) the distribution of the Senior Notes held by the Trust to the holders of the Preferred Securities and Common Securities in liquidation of their interests in the Trust, (ii) the redemption of all of the outstanding Preferred Securities and Common Securities or (iii) a consolidation, conversion, amalgamation, merger or other transaction involving the Trust that is permitted under Section 3.15 of the Declaration.

Section 2.7 Paying Agent; Security Registrar. If the Senior Notes are issued in certificated form, the Paying Agent and the Security Registrar for the Senior Notes shall be the Property Trustee.

Section 2.8 Extension of Interest Payment Period. The Company shall have the right at any time and from time to time, prior to August 18, 2003, to defer payments of interest by extending the interest payment period of such Senior Notes for a period not exceeding

12 consecutive quarters or extending beyond August 18, 2003 (the "Extension Period"), during which Extension Period no interest shall be due and payable. To the extent permitted by applicable law, interest, the payment of which has been deferred because of the extension of the interest payment period pursuant to this Section 2.8, will bear interest thereon at the rate of 7 3/4% compounded quarterly for each quarter of the Extension Period ("Compounded Interest"). At the end of the Extension Period, the Company shall pay all interest accrued and unpaid on the Senior Notes and Compounded Interest (together, "Deferred Interest") that shall be payable to the Holders of the Senior Notes in whose names the Senior Notes are registered in the Security Register on the first Regular Record Date after the end of the Extension Period. During any such Extension Period or an Event of Default, however, the Company shall not (a) make any payment of principal, interest or premium, if any, on or repay, repurchase or redeem any debt securities that rank junior to the Senior Notes in the right of payment issued by the Company, or (b) make any guarantee payments with respect to any guarantee by the Company of any securities of any of its subsidiaries if such guarantee ranks junior to the Senior Notes in right of payment or (c) declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of the Company's capital stock, except for or as a result of (i) dividends or distributions in, or options, warrants or rights to subscribe for or purchase, the Company's common stock; (ii) any declaration of a dividend in connection with the implementation of a shareholder's rights plan, or the issuance of shares under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto; (iii) a reclassification of the Company's capital stock solely into shares of one or more classes or series of the Company's capital stock or the exchange or conversion of one class or series of the Company's capital stock for or into another class or series of the Company's capital stock; (iv) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged; and (v) the purchase of the Company's common stock in connection with the Company's normal course issuer bid-purchases for the satisfaction by the Company of its obligations under any benefit plans for the Company and the Company's subsidiaries' directors, officers or employees or under any of the Company's dividend reinvestment plans. Prior to the expiration of any Extension Period, the Company may further extend such period, provided that such period together with all such previous and further extensions thereof shall not exceed 12 quarters or extend beyond August 18, 2003. Upon termination of any Extension Period and the payment of all Deferred Interest then due, the Company may commence a new Extension Period, subject to the foregoing requirements. No interest shall be due and payable during an Extension Period except at the end thereof, but the Company, at its option, may prepay on any Interest Payment Date all or any portion of the interest accrued during the then elapsed portion of an Extension Period.

Section 2.9 Notice of Extension. The Company shall give written notice to the Trustee of its election of any Extension Period (or any further extension thereof) at least five Business Days before the earlier of
(i) the date the interest on the Senior Notes would have been payable except for the election to begin or extend the Extension Period; (ii) the date the Trustee is required to give notice to any securities exchange or to Holders of Senior Notes of the Record Date or the Interest Payment Date, and (iii) the Record Date.

Section 2.10 Place of Payment. The Place of Payment will be initially the principal corporate trust office of the Trustee which, at the date hereof, is located at 101 Barclay, 21 West, New York, New York 10286, Attention: Corporate Trust Administration Department.

ARTICLE III
EXPENSES

Section 3.1 Payment of Expenses. In connection with the offering, sale and issuance of the Senior Notes to the Trust in connection with the sale of the Preferred Securities and Common Securities by the Trust, the Company will:

(a) pay for all costs and expenses relating to the offering, sale and issuance of the Senior Notes, including compensation of the Trustee under the Indenture in accordance with the provisions of Section 607 of the Indenture; and

(b) pay for all costs and expenses of the Trust, including, but not limited to, costs and expenses relating to the organization of the Trust, the offering, sale and issuance of the Trust Securities; the fees and expenses of the Property Trustee (including, without limitation, those incurred in connection with the enforcement by the Property Trustee of the rights of the holders of the Preferred Securities), the Delaware Trustee and the Regular Trustees; the costs and expenses relating to the operation of the Trust (including, without limitation, costs and expenses of accountants, attorneys, statistical or bookkeeping services, expenses for printing and engraving and computing or accounting equipment, paying agent(s), registrar(s), transfer agent(s), duplicating, travel and telephone and other telecommunications expenses); and costs and expenses incurred in connection with the acquisition, financing and disposition of Trust assets;

(c) be primarily liable for any indemnification obligations arising with respect to the Declaration; and

(d) pay any and all taxes (other than United States withholding taxes attributable to the Trust or its assets) and all liabilities, costs and expenses with respect to such taxes of the Trust.

ARTICLE IV
COVENANTS

Section 4.1 Covenants in the Event of an Event of Default. As long as the Senior Notes are held by the Trust, if an Event of Default occurs and written notice of such event has been given to the Company, then the Company may not:

(a) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of its capital stock; or

(b) make any payment of principal, interest or premium, if any, on or repay, repurchase or redeem any debt securities that rank on a parity with or junior in interest to the Senior Notes or make any guarantee payments with respect to any guarantee by the Company of the debt securities of any subsidiary of the Company if such guarantee ranks on a parity with

or junior in interest to the Senior Notes; other than (i) purchases or acquisitions of capital stock of the Company in connection with the satisfaction by the Company of its obligations under any employee benefit plans or the satisfaction by the Company of its obligations pursuant to any contract or security outstanding on the date of such Event of Default requiring the Company to purchase capital stock of the Company, (ii) as a result of a reclassification of the Company's capital stock for another class or series of the Company's capital stock, (iii) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (iv) dividends or distributions in capital stock of the Company, (v) redemptions or repurchases of any rights pursuant to a rights agreement and (vi) payments under the Guarantee.

Section 4.2 Additional Covenants Relating to the Trust. For as long as the Preferred Securities remain outstanding, the Company will:

(a) maintain, directly or indirectly, 100% ownership of the Common Securities;

(b) cause the Trust to remain a statutory business trust and not to voluntarily dissolve, wind up, liquidate or be terminated, except as permitted by the Declaration;

(c) use its commercially reasonable efforts to ensure that the Trust will not be an "investment company" required to be registered under the Investment Company Act of 1940;

(d) not take any action that would be reasonably likely to cause the Trust to be classified as an association or a publicly traded partnership taxable as a corporation for United States federal income tax purposes; and

(e) pay all of the debts and obligations of the Trust (other than with respect to the securities issued by the Trust) and all costs and expenses of the Trust (including, but not limited to, all costs and expenses relating to the organization of the Trust, the fees and expenses of the trustees and all costs and expenses relating to the operation of the Trust) and any and all taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed on the Trust by the United States, or any other taxing authority, so that the net amounts received and retained by the Trust after paying such expenses will be equal to the amounts the Trust would have received had no such costs or expenses been incurred by or imposed on the Trust.

ARTICLE V
ORIGINAL ISSUE OF SENIOR NOTES

Section 5.1 Original Issue of Senior Notes. Senior Notes in an aggregate principal amount of up to $177,835,075 may, upon execution of this First Supplemental Indenture, be executed by the Company and delivered to the Trustee for authentication, and the Trustee shall thereupon authenticate and deliver said Senior Notes upon receipt of a Company Order for authentication and delivery, without any further action by the Company.

ARTICLE VI
RIGHTS OF HOLDERS OF PREFERRED SECURITIES

Section 6.1 Preferred Security Holders' Rights.
Notwithstanding Section 507 of the Indenture, if the Property Trustee fails to enforce its rights under the Senior Notes after a holder of Preferred Securities has made a written request, the holder of Preferred Securities may, to the fullest extent permitted by law, institute a legal proceeding directly against the Company to enforce the Property Trustee's rights under the Indenture without first instituting any legal proceeding against the Property Trustee or any other Person.

Section 6.2 Direct Action. Notwithstanding any other provision of the Indenture, for as long as any Preferred Securities remain outstanding, to the fullest extent permitted by law, if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Company to pay interest or principal on the Senior Notes on the date such interest or principal is otherwise payable (or in the case of redemption, the redemption date), then a holder of Preferred Securities may institute a proceeding directly against the Company (a "Direct Action") to enforce payment to such holder of the principal or interest on Senior Notes having an aggregate principal amount equal to the aggregate liquidation amount of the Preferred Securities of such holder.

Section 6.3 Payments Pursuant to Direct Actions. The Company will have the right to set off against its obligations to the Trust, as Holder of the Senior Notes, any payment made to a holder of Preferred Securities in connection with a Direct Action.

Section 6.4 Modifications. So long as any Preferred Securities remain outstanding, (i) no amendment to this Indenture shall be made that adversely affects the holders of the Preferred Securities in any material respect, and no termination of this Indenture shall occur, and no waiver of any Event of Default or compliance with any covenant under this Indenture shall be effective, without the prior consent of the holders of at least a Majority in Liquidation Amount (as defined in the Declaration) of the Preferred Securities then outstanding unless and until the principal of (and premium, if any, on) the Senior Note and all accrued and unpaid interest thereon have been paid in full, and (ii) no amendment shall be made to this Article VI of this First Supplemental Indenture that would impair the rights of the holders of the Preferred Securities without the prior consent of the holders of each Preferred Security then outstanding unless and until the principal of (and premium, if any, on) the Senior Note and all accrued and unpaid interest thereon have been paid in full.

ARTICLE VII
REMARKETING

Section 7.1 Effectiveness of this Article. Upon a distribution of the Senior Notes upon the liquidation and dissolution of the Trust which occurs prior to the Remarketing of the Preferred Securities pursuant to the Declaration, the Senior Notes shall be Remarketed in accordance with the Remarketing procedures of the Declaration where all references in the Remarketing procedures to Preferred Securities shall be read as references to the Senior Notes, unless the context requires otherwise. Until such a distribution, or if such distribution occurs

after the Remarketing of the Preferred Securities pursuant to the Declaration, this Article VII will have no effect.

ARTICLE VIII
ACCELERATION OF MATURITY

Section 8.1 Automatic Acceleration. Notwithstanding Section 502 of the Indenture, if an Event of Default with respect to the Senior Notes specified in clauses (5) or (6) of Section 501 of the Indenture occurs and is continuing, the principal of the Senior Notes shall become due and payable immediately, without any declaration, notice or other act on the part of the Trustee or any holder thereof.

ARTICLE IX
MISCELLANEOUS

Section 9.1 Execution of Supplemental Indenture. This First Supplemental Indenture is executed and shall be construed as an indenture supplemental to the Indenture and, as provided in the Indenture, this First Supplemental Indenture forms a part thereof.

Section 9.2 Conflict with Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with another provision hereof which is required to be included in this First Supplemental Indenture by any of the provisions of the Trust Indenture Act, such required provision shall control.

Section 9.3 Effect of Headings. The Article and Section headings herein are for convenience only and shall not affect the construction hereof.

Section 9.4 Successors and Assigns. All covenants and agreements in this First Supplemental Indenture by the Company shall bind its successors and assigns, whether so expressed or not.

Section 9.5 Separability Clause. In case any provision in this First Supplemental Indenture or in the Senior Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

Section 9.6 Benefits of First Supplemental Indenture. Nothing in this First Supplemental Indenture or in the Senior Notes, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder and the holders, any benefit or any legal or equitable right, remedy or claim under this First Supplemental Indenture.

Section 9.7 Governing Law. This First Supplemental Indenture and each Senior Note shall be deemed to be a contract made under the laws of the State of New York, and for all purposes shall be governed by and construed in accordance with the laws of said State.

IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be duly executed and attested and the Company has caused its corporate seal to be hereunto affixed and attested, all as of the day and year first above written.

[Seal]                                       By:
                                                -------------------------------
                                                John D. Gibbons, Vice President
                                                and Chief Financial Officer

Attest:


--------------------------------
Jay D. Browning, Secretary

THE BANK OF NEW YORK
as Trustee

Title:

Attest:

STATE OF TEXAS          )
                        )  ss.:
COUNTY OF BEXAR         )

On the 28th day of June 2000, before me personally came John D. Gibbons, to me known, who, being by me duly sworn, did depose and say that he is Vice President and Chief Financial Officer of Valero Energy Corporation, the corporation described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority.

STATE OF ________          )
                           ) ss.:
COUNTY OF________          )

                  On the ____ day of June 2000, before me personally came

________________, to me known, who, being by me duly sworn, did depose and say that he is ________________ of The Bank of New York, the national banking association described in and which executed the foregoing instrument; that he knows the seal of said association; that the seal affixed to said instrument is such association seal; that it was so affixed by authority of the Board of Directors of said association, and that he signed his name thereto by like authority.

EXHIBIT A

[FORM OF FACE OF SENIOR DEFERRABLE NOTE]

THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY. THIS GLOBAL SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES HEREINAFTER DESCRIBED AND MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY NOMINEE TO A SUCCESSOR OF THE DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR.

REGISTERED REGISTERED

VALERO ENERGY CORPORATION

VALERO ENERGY CORPORATION, a corporation duly organized and existing under the laws of Delaware (herein called the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay VEC Trust I, or registered assigns, the principal sum of _______________________ Dollars on August 18, 2005, and to pay interest on said principal sum from __________, 2000, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, quarterly in arrears on February 18, May 18, August 18 and November 18 of each year (an "Interest Payment Date") commencing August 18, 2000, at the rate of ___% per annum until August 18, 2003, and at the Reset Rate thereafter, until the principal hereof shall have become due and payable, and on any overdue principal and premium, if any, and (without duplication and to the extent that payment of such interest is enforceable under applicable law) on any

overdue installment of interest at the same rate per annum compounded quarterly. Any deferred interest shall accrue interest at the rate set forth in the First Supplemental Indenture. The amount of interest payable for any period will be computed (1) for any full quarterly period on the basis of a 360-day year of twelve 30-day months and (2) for any period shorter than a full quarterly period, on the basis of a 30-day month and, for any period less than a month, on the basis of the actual number of days elapsed per 30-day month. In the event that any date on which interest is payable is not a Business Day, then payment of the interest payable on such date will be made on the next day that is a Business Day (and without any interest or other payment in respect of such delay), except that, if such Business Day is in the next calendar year, then such payment will be made on the preceding Business Day. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, referred to on the reverse side hereof, be paid to the Holder in whose name this Security (or one or more Predecessor Securities, as defined in said Indenture) is registered at the close of business on the Regular Record Date for such interest installment, which, shall be the close of business on the Business Day preceding such Interest Payment Date. Any such interest installment not punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date, and may be paid to the Holder in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date to be fixed by the Trustee referred to on the reverse side hereof for the payment of such defaulted interest, notice whereof shall be given to the Holders of the Security not less than 10 days prior to such Special Record Date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Security may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture.

Payment of the principal of and premium, if any, and interest on this Security will be made at the office or agency of the Trustee maintained for that purpose in such coin or currency of the United States of America that at the time of payment is legal tender for payment of public and private debts. The Company may pay principal and interest by check payable in such money mailed to the Holder's registered address or by wire transfer to a dollar account designated by the Holder.

Interest on the Securities is deferrable in accordance with the terms of the First Supplemental Indenture.

This Security is, to the extent provided in the Indenture, unsecured and will rank in right of payment on a parity with all other unsecured and unsubordinated obligations of the Company.

Unless the Certificate of Authentication hereon has been executed by or on behalf of the Trustee, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. The provisions of this Security are continued on the reverse side hereof, and such continued provisions shall for all purposes have the same effect as though fully set forth at this place.

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal.

Dated:                             By:
                                      ---------------------------------------
                                      John D. Gibbons, Vice President
                                      and Chief Financial Officer

Attest:

(FORM OF CERTIFICATE OF AUTHENTICATION)

CERTIFICATE OF AUTHENTICATION

This is one of the Securities of the series referred to in

the within-mentioned Indenture.

Dated: THE BANK OF NEW YORK, as

Trustee

(FORM OF REVERSE OF SENIOR DEFERRABLE NOTE)

VALERO ENERGY CORPORATION

This Senior Deferrable Note is one of a duly authorized series of securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under an Indenture, dated as of December 12, 1997, as amended and supplemented (as amended and supplemented, the "Indenture"), between the Company and The Bank of New York as Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the face hereof, limited in aggregate principal amount to $___________.

All terms used in this Security that are defined in the Indenture shall have the meanings assigned to them in the Indenture.

This Security is not subject to any sinking fund, nor may this Security be redeemed at the option of the Company prior to the Maturity Date except upon the occurrence of a Tax Event as described below.

The Indenture contains provisions for defeasance at any time of the entire indebtedness of this Security upon compliance by the Company with certain conditions set forth therein.

If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture.

If a Tax Event occurs and is continuing, the Company may, at its option and upon not less than 30 nor more than 60 days' notice to the Holders of the Securities, redeem the Securities in whole (but not in part) within 90 days following the occurrence of such Tax Event at the Redemption Price. The Redemption Price shall be paid prior to 12:00 noon, New York City time, on the Tax Event Redemption Date, by check or wire transfer in immediately available funds at such place and to such account as may be designated by each such Holder.

The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities at the time of all series to be affected (voting as

a class). The Indenture also contains provisions permitting the Holders of a majority in aggregate principal amount of the Outstanding Securities of each series at the time, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.

No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and premium, if any, and interest, if any, on this Security at the times, place and rate, and in the coin or currency, herein prescribed.

This Security shall be exchangeable for Securities registered in the names of Persons other than the Depositary with respect to such series or its nominee only as provided in this paragraph. This Security shall be so exchangeable if (x) the Depositary is at any time unwilling or unable to continue as Depositary for such series, (y) the Company executes and delivers to the Trustee a Company Order providing that this Security shall be so exchangeable or (z) there shall have occurred and be continuing an Event of Default with respect to the Securities of such series. Securities so issued in exchange for this Security shall be of the same series, having the same interest rate, if any, and maturity and having the same terms as this Security, in authorized denominations and in the aggregate having the same principal amount as this Security and registered in such names as the Depositary for such Global Security shall direct.

As provided in the Indenture and subject to certain limitations therein set forth, the transfer of a Security of the series of which this Security is a part is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in any place where the principal of and premium, if any, and interest, if any, on this Security are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.

The Securities of the series of which this Security is a part are issuable only in registered form without coupons in denominations of $25 and in integral multiples thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same.

No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Holder in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.

This Security shall be governed by and construed in accordance with the laws of the State of New York.

All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture.

EXHIBIT B

[FORM OF FACE OF SENIOR DEFERRABLE NOTE]

VALERO ENERGY CORPORATION

VALERO ENERGY CORPORATION, a corporation duly organized and existing under the laws of Delaware (herein called the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay VEC Trust I, or registered assigns, the principal sum of _______________________ Dollars on August 18, 2005, and to pay interest on said principal sum from __________, 2000, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, quarterly in arrears on February 18, May 18, August 18 and November 18 of each year (an "Interest Payment Date") commencing August 18, 2000, at the rate of 7 3/4% per annum until August 18, 2003, and at the Reset Rate thereafter, until the principal hereof shall have become due and payable, and on any overdue principal and premium, if any, and (without duplication and to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the same rate per annum compounded quarterly. Any deferred interest shall accrue interest at the rate set forth in the First Supplemental Indenture. The amount of interest payable for any period will be computed (1) for any full quarterly period on the basis of a 360-day year of twelve 30-day months and (2) for any period shorter than a full quarterly period, on the basis of a 30-day month and, for any period less than a month, on the basis of the actual number of days elapsed per 30-day month. In the event that any date on which interest is payable is not a Business Day, then payment of the interest payable on such date will be made on the next day that is a Business Day (and without any interest or other payment in respect of such delay), except that, if such Business Day is in the next calendar year, then such payment will be made on the preceding Business Day. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, referred to on the reverse side hereof, be paid to the Holder in whose name this Security (or one or more Predecessor Securities as defined in said Indenture) is registered at the close of business on the Regular Record Date for such interest installment, which, shall be the close of business on the Business Day preceding such Interest Payment Date. Any such interest installment not punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date, and may be paid to the Holder in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date to be fixed by the Trustee referred to on the reverse side hereof for the payment of such defaulted interest, notice whereof shall be given to the Holders of the Security not less than 10 days prior to such Special Record Date, or may be paid at any time in any other lawful manner not

inconsistent with the requirements of any securities exchange on which the Security may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture.

Payment of the principal of and premium, if any, and interest on this Security will be made at the office or agency of the Trustee maintained for that purpose in such coin or currency of the United States of America that at the time of payment is legal tender for payment of public and private debts. The Company may pay principal and interest by check payable in such money mailed to the Holder's registered address or by wire transfer to a dollar account designated by the Holder

Interest on the Securities is deferrable in accordance with the terms of the First Supplemental Indenture.

This Security is, to the extent provided in the Indenture, unsecured and will rank in right of payment on a parity with all other unsecured and unsubordinated obligations of the Company.

Unless the Certificate of Authentication hereon has been executed by or on behalf of the Trustee, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. The provisions of this Security are continued on the reverse side hereof, and such continued provisions shall for all purposes have the same effect as though fully set forth at this place.

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal.

Dated:                                   By:
                                            -----------------------------------
                                            John D. Gibbons, Vice President
                                            and Chief Financial Officer

                                         Attest:


                                         By:
                                            -----------------------------------
                                            Jay D. Browning, Secretary

(FORM OF CERTIFICATE OF AUTHENTICATION)

Dated:                                       THE BANK OF NEW YORK,
                                             as Trustee


                                             By:
                                                -------------------------------
                                                Authorized Signatory

(FORM OF REVERSE OF SENIOR DEFERRABLE NOTE)

VALERO ENERGY CORPORATION

___% SENIOR DEFERRABLE NOTE DUE 2005

This Senior Deferrable Note is one of a duly authorized series of securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under an Indenture, dated as of December 12, 1997, as amended and supplemented (as amended and supplemented, the "Indenture"), between the Company and The Bank of New York, as Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the face hereof, limited in aggregate principal amount to $___________.

All terms used in this Security that are defined in the Indenture shall have the meanings assigned to them in the Indenture.

This Security is not subject to any sinking fund, nor may this Security be redeemed at the option of the Company prior to the Maturity Date except upon the occurrence of a Tax Event as described below.

The Indenture contains provisions for defeasance at any time of the entire indebtedness of this Security upon compliance by the Company with certain conditions set forth therein.

If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture.

If a Tax Event occurs and is continuing, the Company may, at its option and upon not less than 30 nor more than 60 days' notice to the Holders of the Securities, redeem the Securities in whole (but not in part) within 90 days following the occurrence of such Tax Event at the Redemption Price. The Redemption Price shall be paid prior to 12:00 noon, New York City time, on the Tax Event Redemption Date, by check or wire transfer in immediately available funds at such place and to such account as may be designated by each such Holder.

The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities at the time of all series to be affected (voting as a class). The Indenture also contains provisions permitting the Holders of a majority in aggregate principal amount of the Outstanding Securities of each series at the time, on behalf of

the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.

No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and premium, if any, and interest, if any, on this Security at the times, place and rate, and in the coin or currency, herein prescribed.

As provided in the Indenture and subject to certain limitations therein set forth, the transfer of a Security of the series of which this Security is a part is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in any place where the principal of and premium, if any, and interest, if any, on this Security are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.

The Securities of the series of which this Security is a part are issuable only in registered form without coupons in denominations of $25 and in integral multiples thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same.

No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Holder in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.

This Security shall be governed by and construed in accordance with the laws of the State of New York.

All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture.

EXHIBIT 4.8

REMARKETING AGREEMENT

June 28, 2000

MORGAN STANLEY & CO. INCORPORATED
1585 Broadway
New York, New York 10036

Ladies and Gentlemen:

Morgan Stanley & Co. Incorporated (the "Remarketing Agent") is undertaking to remarket the 7 3/4% Trust Preferred Securities due August 18, 2005 (the "Trust Preferred Securities"), issued by VEC Trust I, a Delaware business trust (the "Trust"), pursuant to Amended and Restated Declaration of Trust (the "Declaration"), dated as of June 28, 2000 by and among Valero Energy Corporation, a Delaware corporation (the "Company"), as Sponsor, Jay D. Browning, John D. Gibbons and Donna M. Titzman, as the initial Regular Trustees, The Bank of New York, as the initial Property Trustee, and The Bank of New York (Delaware), as the initial Delaware Trustee, not in their individual capacities but solely as Trustees, and the Holders, from time to time, of the Securities representing undivided beneficial ownership interests in the assets of the Trust to be issued pursuant to the Declaration.

The Remarketing (as defined below) of the Trust Preferred Securities is provided for in the Declaration, the Pledge Agreement and the Purchase Contract Agreement (as defined below).

If a liquidation and dissolution of the Trust shall have occurred prior to the Purchase Contract Settlement Date and the Senior Deferrable Notes have been distributed to the holders of the Trust Preferred Securities all references herein to "Trust Preferred Securities" shall instead be references to "Senior Deferrable Notes" and references to "Remarketed Trust Preferred Securities" shall instead be references to "Remarketed Senior Deferrable Notes", unless the context otherwise requires.

Section 1. Definitions.

(a) Capitalized terms used and not defined in this Agreement shall have the meanings set forth in the Purchase Contract Agreement, dated as of June 28, 2000 (the "Purchase Contract Agreement"), between the Company and The Bank of New York, as Purchase Contract Agent (the "Purchase Contract Agent").

(b) As used in this Agreement, the following terms have the following meanings:

"Guarantee Agreement" means the guarantee agreement dated June 28, 2000 between the Company and The Bank of New York.

"Remarketed Trust Preferred Securities" means the Trust Preferred Securities subject to the Remarketing, as identified to the Remarketing Agent by the Purchase Contract Agent after 11:00 a.m., New York City time, on the fifth Business Day immediately preceding August 18, 2003;

"Remarketing Procedures" means the procedures in connection with the Remarketing of the Trust Preferred Securities described in the Purchase Contract Agreement, the Pledge Agreement and the Declaration, as the case may be; and

"Remarketing" means the remarketing of the Remarketed Trust Preferred Securities pursuant to the Remarketing Procedures.

"Rights Agreement" means the rights agreement dated as of July 17, 1997 between the Company and Harris Trust and Savings Bank.

"Transaction Documents" means the Purchase Contract Agreement, the Pledge Agreement and the Declaration, collectively.

Section 2. Appointment and Obligations of the Remarketing Agent.

(a) The Company hereby appoints Morgan Stanley & Co. Incorporated as exclusive remarketing agent (the "Remarketing Agent"), and Morgan Stanley & Co. Incorporated hereby (1) accepts appointment as Remarketing Agent, for the purpose of (a) Remarketing Remarketed Trust Preferred Securities on behalf of the holders thereof and (b) performing such other duties as are assigned to the Remarketing Agent in the Remarketing Procedures, all in accordance with and pursuant to the Remarketing Procedures, and (2) accepts and will perform all obligations of the Remarketing Agent set forth in the Declaration, the Pledge Agreement and the Purchase Contract Agreement.

(b) The Remarketing Agent agrees to (1) use reasonable efforts to remarket the Remarketed Trust Preferred Securities tendered or deemed tendered to the Remarketing Agent in the Remarketing, (2) notify the Company, the Depositary and the Indenture Trustee promptly of the Reset Rate and (3) carry out such other duties as are assigned to the Remarketing Agent in the Remarketing Procedures, all in accordance with the provisions of the Remarketing Procedures.

(c) On the third Business Day immediately preceding the Purchase Contract Settlement Date (the "Remarketing Date"), the Remarketing Agent shall use reasonable efforts to remarket the Trust Preferred Securities tendered or deemed tendered for purchase at a price equal to 100.25% of the aggregate stated liquidation amount thereof.

(d) If, as a result of the efforts described in 2(c), the Remarketing Agent has determined that it will be able to remarket all of the Preferred Securities tendered or deemed

tendered for purchase at a price of 100.25% of the aggregate stated liquidation amount of such Preferred Securities, the Remarketing Agent shall determine the Reset Rate, which shall be the rate per annum (rounded to the nearest one-thousandth (0.001) of one percent per annum), sufficient to cause the then-current aggregate market value of the Preferred Securities to be equal to 100.25% of the aggregate stated liquidation amount of such Preferred Securities, that the Remarketing Agent determines, in its sole reasonable judgment, to be the lowest rate per annum that will enable it to remarket all of the Preferred Securities tendered or deemed tendered for Remarketing.

(e) If none of the Holders of the Preferred Securities or the holders of the PEPS Units elect to have Preferred Securities remarketed in the Remarketing, the Reset Rate shall be the rate determined by the Remarketing Agent, in its sole reasonable discretion, as the rate that would have been established had a Remarketing been held on the Remarketing Date.

(f) Upon receipt of the proceeds from the Remarketing, the Remarketing Agent shall: (1) retain $.0625 per Remarketed Trust Preferred Security as a remarketing fee for the performance of its services as Remarketing Agent hereunder; and (2) remit to the Collateral Agent all other proceeds of the Remarketed Trust Preferred Securities subject to the Pledge Agreement.

(g) If, by 4:00 p.m., New York City time, on the Remarketing Date, the Remarketing Agent is unable to remarket all of the Trust Preferred Securities tendered or deemed tendered for purchase pursuant to the terms and conditions hereof, a Failed Remarketing shall be deemed to have occurred, and the Remarketing Agent shall so advise by telephone the Depositary, the Property Trustee, the Trust and the Company. In the event of a Failed Remarketing, the Reset Rate shall equal the Two Year Benchmark Treasury Rate plus the Applicable Margin.

(h) By approximately 4:30 p.m., New York City time, on the Remarketing Date (provided there has not been a Failed Remarketing), the Remarketing Agent shall advise, by telephone:

(1) the Depositary, the Property Trustee, the Indenture Trustee, the Trust and the Company of the Reset Rate determined in the Remarketing and the number of Remarketed Trust Preferred Securities sold in the Remarketing;

(2) each purchaser (or the Depositary Participant thereof) of Remarketed Trust Preferred Securities of the Reset Rate and the number of Remarketed Trust Preferred Securities such purchaser is to purchase; and

(3) each purchaser to give instructions to its Depositary Participant to pay the purchase price on the Purchase Contract Settlement Date in same day funds against delivery of the Remarketed Trust Preferred Securities purchased through the facilities of the Depositary.

Section 3. Representations and Warranties of the Company and the Trust.

The Company and the Trust jointly and severally represent and warrant
(i) on and as of the date hereof, (ii) on and as of the date the Prospectus or other Remarketing Materials (each as defined in Section 3(a) below) are first distributed in connection with the Remarketing (the "Commencement Date"), (iii) on and as of the Remarketing Date, and (iv) on and as of the Purchase Contract Settlement Date that:

(a) A registration statement (File Nos. 333-33846, 333-33846-01 and 333-33846-02) in respect of the initial offering of the Trust Preferred Securities has been filed with the Securities and Exchange Commission (the "Commission") on Form S-3; a registration statement on Form S-3, if required in connection with the Remarketing also may be prepared by the Company; the last of such registration statement including all exhibits thereto and the documents incorporated by reference in the prospectus contained in such registration statement at the time such part of such registration statement became effective but excluding each Form T-1 filed in connection therewith, and any post-effective amendment thereto is referred to herein as the "Registration Statement"; the Registration Statement, in the form heretofore delivered or to be delivered to the Remarketing Agent, excluding exhibits, but including all documents incorporated by reference in the prospectus contained therein, has been declared effective by the Commission in such form; and no stop order suspending the effectiveness of the Registration Statement has been issued and no proceeding for that purpose has been initiated or threatened by the Commission; any preliminary prospectus included in the Registration Statement or filed with the Commission pursuant to Rule 424(a) of the rules and regulations of the Commission under the Securities Act of 1933, as amended (the "Securities Act"), being hereinafter called a "Preliminary Prospectus"; the prospectus relating to the Trust Preferred Securities, in the form in which first filed, or transmitted for filing, with the Commission after the effective date of the Registration Statement pursuant to Rule 424(b), being hereinafter called the "Prospectus"; any reference herein to any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to the applicable form under the Securities Act, as of the date of such Preliminary Prospectus or Prospectus, as the case may be; any reference to any amendment or supplement to any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include any documents filed after the date of such Preliminary Prospectus or Prospectus, as the case may be, under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and incorporated by reference in such Preliminary Prospectus or Prospectus, as the case may be; any reference to any amendment to the Registration Statement shall be deemed to refer to and include any annual report of the Company filed pursuant to Section 13(a) or 15(d) of the Exchange Act after the effective date of the Registration Statement that is incorporated by reference in the Registration Statement; and any reference to the Prospectus as amended or supplemented shall be deemed to refer to the Prospectus as amended or supplemented in relation to the applicable Trust Preferred Securities in the form in which it is filed with the Commission pursuant to Rule 424(b) under the Securities Act in accordance with Section 5(a) hereof, including any documents incorporated by reference therein as of the date of such filing.

Reference made herein to any Preliminary Prospectus, the Prospectus or any other information furnished by the Company to the Remarketing Agent for distribution to investors in

connection with the Remarketing (the "Remarketing Materials") shall be deemed to refer to and include any documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the Securities Act as of the date of such Preliminary Prospectus or the Prospectus, as the case may be, or, in the case of Remarketing Materials, referred to as incorporated by reference therein, and any reference to any amendment or supplement to any Preliminary Prospectus, the Prospectus or the Remarketing Materials shall be deemed to refer to and include any document filed under the Exchange Act, after the date of such Preliminary Prospectus or the Prospectus incorporated by reference therein pursuant to Item 12 of Form S-3 or, if so incorporated, the Remarketing Materials, as the case may be;

(b) The documents incorporated by reference in the Prospectus, when they became effective or were filed with the Commission, as the case may be, conformed in all material respects to the requirements of the Securities Act or the Exchange Act, as applicable, and the rules and regulations of the Commission thereunder, and none of such documents contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and any further documents so filed and incorporated by reference in the Prospectus or any further amendment or supplement thereto, when such documents become effective or are filed with the Commission, as the case may be, will conform in all material respects to the requirements of the Securities Act or the Exchange Act, as applicable, and the rules and regulations of the Commission thereunder and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information relating to the Remarketing Agent furnished in writing to the Company by the Remarketing Agent or its counsel expressly for use in the Prospectus;

(c) The Registration Statement conforms (and the Prospectus and any further amendments or supplements to the Registration Statement or the Prospectus, when they become effective or are filed with the Commission, as the case may be, will conform) in all material respects to the requirements of the Securities Act and the rules and regulations promulgated thereunder, and the Registration Statement, the Prospectus and the Remarketing Materials (and any amendment or supplement thereto) as of their respective effective or filing dates and as of the Commencement Date, Remarketing Date and Purchase Contract Settlement Date do not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided that no representation and warranty is made as to any statement of eligibility on Form T-1 filed or incorporated by reference as part of the Registration Statement, the Prospectus or the Remarketing Materials, or as to information relating to the Remarketing Agent contained in or omitted from the Registration Statement, the Prospectus or the Remarketing Materials in reliance upon and in conformity with written information furnished to the Company by the Remarketing Agent;

(d) The Trust has no subsidiaries. Neither the Trust nor the Company (including all of its subsidiaries taken as a whole, each a "Subsidiary" and, collectively, the "Subsidiaries")

has incurred any material adverse change, or any development involving a prospective material adverse change in the condition, financial or otherwise, or in its earnings, business or operations from that set forth in the Prospectus (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement);

(e) This Agreement has been duly authorized, executed and delivered by each of the Company and the Trust, and this Agreement conforms to the description thereof in the Transaction Documents;

(f) Each of the Company and its Subsidiaries has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, with corporate power and authority to own or lease its properties and conduct its business as described in the Remarketing Materials, and is duly qualified to do business and is in good standing in each jurisdiction in which the character of the business conducted by it or the location of the properties owned or leased by it makes such qualification necessary, except to the extent that the failure to be so qualified or to be in good standing would not have a material adverse effect on the Company and its Subsidiaries, taken as a whole. All of the shares of capital stock of each Subsidiary have been duly authorized and validly issued, are fully paid and nonassessable. All of the outstanding shares of capital stock of each Subsidiary are owned directly or indirectly by the Company, free and clear of any claim, lien, encumbrance or security interest;

(g) The Senior Deferrable Notes have been duly authorized, and, when issued and delivered pursuant to the Indenture, will have been duly executed, authenticated, issued and delivered and will constitute valid and binding obligations of the Company entitled to the benefits provided by the Indenture; the Indenture has been duly authorized, executed and delivered by the Company and constitutes a valid and binding instrument, enforceable in accordance with its terms, except as the enforceability thereof is subject to the effect of (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other laws relating to or affecting creditors' rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); and the Indenture will conform to the descriptions thereof in the Prospectus;

(h) Each of the Guarantee and the Guarantee Agreement has been duly authorized and when validly executed and delivered by the Company will constitute a legal, valid and binding obligation of the Company, enforceable in accordance with its terms, except as the enforceability thereof is subject to the effect of (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other laws relating to or affecting creditors' rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); and the Guarantee will conform to the description thereof in the Prospectus;

(i) Neither the Company nor any of its Subsidiaries is, nor with the giving of notice or lapse of time or both would be, in violation of or in default under, nor will the execution, delivery and performance by the Company of its obligations under, this Agreement, the Declaration, the Guarantee Agreement and the Indenture and the consummation of the

transactions (the "Transactions") contemplated in this Agreement, the Declaration, the Guarantee, the Indenture, nor will compliance by the Company with its obligations under this Agreement, the Declaration, the Guarantee Agreement and the Indenture, result in a violation of, or constitute a default under, (1) the certificate of incorporation, by-laws or other governing documents of the Company or any of its Subsidiaries, (2) any agreement, indenture or other instrument to which the Company or any of its Subsidiaries is a party or by which any of them is bound, or to which any of their properties is subject, or (3) any law, rule, administrative regulation or decree of any court or any governmental agency or body having jurisdiction over the Company, its Subsidiaries or any of their properties, or result in the creation or imposition of any lien, charge, claim or encumbrance upon any property or asset of the Company or any of its Subsidiaries which would be material to the Company and its Subsidiaries taken as a whole. Except for permits and similar authorizations required under the Securities Act, the Trust Indenture Act, and the securities or Blue Sky laws of certain jurisdictions, and except for such permits and authorizations as have been obtained, no consent, approval, authorization or order of any court, governmental agency or body or financial institution is required for the Guarantee or the consummation of the Transactions;

(j) The Trust has been duly created and is validly existing as a statutory business trust in good standing under the Business Trust Act of the State of Delaware (the "Delaware Trust Act") and is a "grantor trust" for federal income tax purposes, with the trust power and authority to own property and conduct its business as described in the Prospectus, and has conducted and will conduct no business other than the transactions contemplated by the Underwriting Agreement as described in the Prospectus; the Trust will not be a party to or bound by any agreement or instrument other than this Agreement, the Underwriting Agreement and the other agreements entered into in connection with the transactions contemplated hereby or thereby; the Trust has no liabilities or obligations other than those arising out of the transactions contemplated by this Agreement, the Underwriting Agreement and the Declaration; and the Trust is not a party to or subject to any action, suit or proceeding of any nature;

(k) The Declaration has been duly authorized by the Company, as Sponsor, and, when duly executed and delivered by the Company, as Sponsor, and the Regular Trustees (assuming due authorization, execution and delivery by the Property Trustee and the Delaware Trustee), will constitute a legal, valid and binding obligation of the Sponsor and the Trustees, enforceable against the Sponsor and the Trustees in accordance with its terms, except as the enforceability thereof is subject to the effect of (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other laws relating to or affecting creditors' rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); and the Declaration will conform to the description thereof contained in the Prospectus;

(l) The Trust Preferred Securities have been duly authorized and, when executed and authenticated in accordance with the provisions of the Declaration, and delivered to and paid for by the underwriters in accordance with the terms of the Underwriting Agreement, will be validly issued and (subject to the terms of the Declaration) fully paid and non-assessable undivided beneficial interests in the assets of the Trust, and the issuance of such Trust Preferred Securities will not be subject to any preemptive or similar rights. Holders of the Trust Preferred

Securities will be entitled to the same limitation of personal liability as that extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. The common securities of the Trust have been duly authenticated under the Declaration and, when issued and delivered to the Company against payment therefor as described in the Prospectus, will be validly issued undivided beneficial interests in the assets of the Trust, and the issuance of such common securities of the Trust will not be subject to any preemptive rights;

(m) The Trust is not, nor with the giving of notice or lapse of time or both would be, in violation of or in default under, nor will the execution, delivery and performance by the Trust of its obligations under this Agreement, the Underwriting Agreement and the Trust Preferred Securities and the common securities of the Trust, the purchase of the Senior Deferrable Notes by the Trust from the Company, the distribution of the Senior Deferrable Notes upon the liquidation of the Trust in the circumstances contemplated by the Declaration, or the consummation by the Trust of the transactions contemplated in this Agreement, the Declaration or the Underwriting Agreement (the "Trust Transactions"), result in a violation of any statute or order, rule or regulation of any court or governmental agency or body having jurisdiction over the Trust or any of its assets. Except for permits and similar authorizations required under the Securities Act, the qualification of the Declaration under the Trust Indenture Act and the securities or Blue Sky laws of certain jurisdictions, and except for such permits and authorizations as have been obtained, no consent, approval, authorization or order of any court, governmental agency or body or financial institution is required for the consummation of the Trust Transactions;

(n) The Trust, the Company and its Subsidiaries have good and indefeasible title to all material real and personal property owned by them, in each case free and clear of all mortgages, liens, encumbrances and defects, except such as are described or referred to in the Remarketing Materials, or such as do not materially affect the values of such property and do not unreasonably interfere with the use made or proposed to be made of such property by the Trust or the Company or such Subsidiaries; and any real property and buildings held under lease by the Trust and the Company and its Subsidiaries are held by them under valid, existing and enforceable leases with such exceptions as are not material and do not unreasonably interfere with the use made or proposed to be made of such property and buildings by the Trust and the Company or such Subsidiaries;

(o) There are no legal or governmental investigations or proceedings pending or threatened to which the Trust, the Company or any of its Subsidiaries is a party or to which any of the properties of the Trust, the Company or any of its Subsidiaries is subject, that are required to be described in the Registration Statement or the Prospectus and are not so described or any statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement that are not described or filed as required;

(p) The Company has prepared its financial statements on a consistent basis in accordance with generally accepted accounting principles. The pro forma financial statements of the Company, and the related notes thereto, included in the Prospectus present fairly in all

material respects the pro forma financial position of the Company, as of the dates indicated and the results of its operations for the periods specified; the pro forma combined financial information, and the related notes thereto, included in the Prospectus has been prepared in accordance with the applicable requirements of the Exchange Act and is based upon good faith estimates and assumptions believed by the Company to be reasonable;

(q) Neither the Company nor the Trust is, and after giving effect to the offering and sale of the securities contemplated pursuant to the Underwriting Agreement and the application of the proceeds thereof as described in the Prospectus, neither will be, required to register as an "investment company" as such term is defined in the Investment Company Act of 1940, as amended;

(r) The execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement, the Rights Agreement, the Purchase Contract Agreement, the Securities, the Pledge Agreement, the Declaration, the Guarantee, the Guarantee Agreement, the Senior Deferrable Notes, the Indenture and the Underwriting Agreement will not contravene any provision of applicable law or the certificate of incorporation or by-laws of the Company or any agreement or other instrument binding upon the Company or any of its Subsidiaries that is material to the Company and its Subsidiaries, taken as a whole, or any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or any Subsidiary, and no consent, approval, authorization or order of, or qualification with, any governmental body or agency that has not already been obtained is required for the performance by the Company of its obligations under this Agreement, the Rights Agreement, the Purchase Contract Agreement, the Securities, the Pledge Agreement, the Declaration, the Guarantee, the Guarantee Agreement, the Senior Deferrable Notes, the Indenture or the Underwriting Agreement, except such as may be required by the securities or Blue Sky laws of the various states in connection with the offer and sale of the Securities;

(s) Neither the Company nor any of its Subsidiaries is in violation of its corporate charter or by-laws or other constitutive document or in default under any agreement, indenture or instrument, which default could reasonably be expected to have a material adverse effect on the business, properties, financial condition or results of operations of the Company and its Subsidiaries, taken as a whole, and no event or condition has occurred or exists which, with the giving of notice or the lapse of time or both, would result in any such violation or default which would have such an effect.

(t) The Company and its Subsidiaries (i) are in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Laws"),
(ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and
(iii) are in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, singly or in the aggregate, have a material adverse effect on the Company and its Subsidiaries, taken as a whole; and except, in each case,

as described in the Prospectus (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement);

(u) Except as described in the Prospectus (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement), there are no costs or liabilities associated with Environmental Laws (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties) which would, singly or in the aggregate, have a material adverse effect on the Company and its Subsidiaries, taken as a whole;

(v) All licenses, permits, consents, certificates of need, authorizations, certifications, accreditations, franchises, approvals, grants of rights by, or filings or registrations with, any federal, state, local or foreign court or governmental or public body, authority, or other instrumentality or third person (including without limitation the Federal Energy Regulatory Commission ("FERC")) (any of the foregoing a "License") necessary for either the Company and its Subsidiaries to own, build, maintain or operate their respective businesses or properties have been duly authorized and obtained, and are in full force and effect, except where the failure to so be obtained or in effect would not, individually or in the aggregate, have a material adverse effect on the Company and its Subsidiaries, taken as a whole; and the Company and its Subsidiaries are in compliance in all material respects with all provisions thereof; no event has occurred which permits (or with the passage of time would permit) the revocation or termination of any License, or which could result in the imposition of any restriction thereon, which is of such a nature or the effect of which would reasonably be expected to have a material adverse effect on the Company and its Subsidiaries, taken as a whole; no material License is the subject of any pending or, to the best of the Company's knowledge, threatened challenge or revocation which, if such License were revoked, would reasonably be expected to have a material adverse effect on the Company and its Subsidiaries, taken as a whole; the Company and its Subsidiaries are not required to obtain any material License that has not already been obtained from, or effect any material filing or registration that has not already been effected with, the FERC or any other federal, state or local regulatory authority in connection with the execution and delivery of this Agreement, the Rights Agreement, the Purchase Contract Agreement, the Securities, the Pledge Agreement, the Declaration, the Guarantee, the Guarantee Agreement, the Senior Deferrable Notes, the Indenture or the Underwriting Agreement; and except, in each case, as described in the Prospectus (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement);

(w) The certificate delivered pursuant to paragraph (e) of Section 6 hereof and all other documents delivered by the Company or its representatives in connection with the issuance and sale of the Remarketed Trust Preferred Securities were on the dates on which they were delivered, or will be on the dates on which they are to be delivered, in all material respects true and complete.

Section 4. Fees.

For the performance of its services as Remarketing Agent hereunder, the Remarketing Agent shall retain from the proceeds of the Remarketing an amount equal to .25% of the $25 Stated Amount of all Remarketed Trust Preferred Securities.

Section 5. Covenants of the Company.

The Company covenants and agrees as follows:

(a) (1) To prepare any registration statement or the Prospectus, if required in connection with the Remarketing, in a form approved by the Remarketing Agent and to file any such prospectus pursuant to the Securities Act within the period required by the Securities Act and the rules and regulations thereunder;

(2) to advise the Remarketing Agent, promptly after it receives notice thereof, of the time when any amendment to the Registration Statement has been filed or becomes effective or any supplement to the Prospectus or any amended Prospectus has been filed and to furnish the Remarketing Agent with copies thereof;

(3) to file promptly all reports and any definitive proxy or information statements required to be filed by the Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of the Prospectus and for so long as the delivery of a prospectus is required in connection with the offering or sale of the Remarketed Trust Preferred Securities;

(4) to advise the Remarketing Agent, promptly after it receives notice thereof, of the issuance by the Commission of any stop order or of any order preventing or suspending the use of the Prospectus, of the suspension of the qualification of any of the Remarketed Trust Preferred Securities for offering or sale in any jurisdiction, of the initiation or threatening of any proceeding for any such purpose, or of any request by the Commission for the amending or supplementing of the Registration Statement or the Prospectus or for additional information, and, in the event of the issuance of any stop order or of any order preventing or suspending the use of any Prospectus or suspending any such qualification, to use promptly its best efforts to obtain its withdrawal.

(b) To furnish promptly to the Remarketing Agent and to counsel to the Remarketing Agent a conformed copy of the Registration Statement as originally filed with the Commission, and each amendment thereto filed with the Commission, including all consents and exhibits filed therewith.

(c) To furnish to the Remarketing Agent in New York City such copies of the following documents as the Remarketing Agent shall reasonably request:
(1) conformed copies of the Registration Statement as originally filed with the Commission and each amendment thereto (in each case excluding exhibits); (2) the Prospectus and any amended or supplemented Prospectus;
(3) any document incorporated by reference in the

Prospectus (excluding exhibits thereto); and (4) any Remarketing Materials; and, if the delivery of a prospectus is required at any time in connection with the Remarketing and if at such time any event shall have occurred as a result of which the Prospectus as then amended or supplemented would include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Prospectus is delivered, not misleading, or if for any other reason it shall be necessary during such same period to amend or supplement the Prospectus or to file under the Exchange Act any document incorporated by reference in the Prospectus in order to comply with the Securities Act or the Exchange Act, to notify the Remarketing Agent and, upon its request, to file such document and to prepare and furnish without charge to the Remarketing Agent and to any dealer in securities as many copies as the Remarketing Agent may from time to time reasonably request of an amended or supplemented Prospectus which will correct such statement or omission or effect such compliance.

(d) To file promptly with the Commission any amendment to the Registration Statement or the Prospectus or any supplement to the Prospectus that may, in the reasonable judgment of the Company or the Remarketing Agent, be required by the Securities Act or requested by the Commission.

(e) Prior to filing with the Commission (1) any amendment to the Registration Statement or supplement to the Prospectus or (2) any Prospectus pursuant to Rule 424 of the Rules and Regulations, to furnish a copy thereof to the Remarketing Agent and counsel to the Remarketing Agent; and not to file any such amendment or supplement which shall be reasonably disapproved by the Remarketing Agent promptly after reasonable notice.

(f) As soon as practicable, but in any event not later than eighteen months, after the Effective Date of the Registration Statement, to make "generally available to its security holders" an "earnings statement" of the Company and its Subsidiaries complying with (which need not be audited)
Section 11(a) of the Securities Act and the Rules and Regulations (including, at the option of the Company, Rule 158). The terms "generally available to its security holders" and "earnings statement" shall have the meanings set forth in Rule 158 of the Rules and Regulations.

(g) To take such action as the Remarketing Agent may reasonably request in order to qualify the Remarketed Trust Preferred Securities for offer and sale under the securities or "blue sky" laws of such jurisdictions as the Remarketing Agent may reasonably request; provided that in no event shall the Company be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction.

(h) To pay: (1) the costs incident to the preparation and printing of the Registration Statement, Prospectus and any Remarketing Materials and any amendments or supplements thereto; (2) the costs of distributing the Registration Statement, Prospectus and any Remarketing Materials and any amendments or supplements thereto; (3) the fees and expenses of qualifying the Remarketed Trust Preferred Securities under

the securities laws of the several jurisdictions as provided in Section 5(g) and of preparing, printing and distributing a Blue Sky Memorandum (including related fees and expenses of counsel to the Remarketing Agent);
(4) all other costs and expenses incident to the performance of the obligations of the Company, hereunder; and (5) the reasonable fees and expenses of counsel to the Remarketing Agent in connection with their duties hereunder.

Section 6. Conditions to the Remarketing Agent's Obligations.

The obligations of the Remarketing Agent hereunder are subject to the following conditions:

(a) The Prospectus shall have been timely filed with the Commission; no stop order suspending the effectiveness of the Registration Statement or any part thereof or suspending the qualification of the Indenture shall have been issued and no proceeding for that purpose shall have been initiated or threatened by the Commission; and any request of the Commission for inclusion of additional information in the Registration Statement or the Prospectus or otherwise shall have been complied with.

(b) The Remarketing Agent shall not have discovered and disclosed to the Company prior to or on the Remarketing Date that the Prospectus, the Registration Statement, or the Remarketing Materials or any amendment or supplement thereto contains any untrue statement of a fact which, in the opinion of counsel for the Remarketing Agent, is material or omits to state any fact which, in the opinion of such counsel, is material and is required to be stated therein or is necessary to make the statements therein not misleading.

(c) Since the respective dates as of which information is given in the Remarketing Materials (1) trading generally shall not have been suspended or materially limited on or by, as the case may be, any of the New York Stock Exchange, the American Stock Exchange or the National Association of Securities Dealers, Inc., (2) trading of any securities of the Company shall not have been suspended on any exchange or in any over-the-counter market, (3) a general moratorium on commercial banking activities in New York shall not have been declared by either federal or New York State authorities or (4) there shall not have occurred any outbreak or escalation of hostilities or any change in financial markets or any calamity or crisis that, in your judgment, is material and adverse and in the case of any of the events specified in clauses (1), (2), (3) and (4), such event, singly or together with any other such event, makes it, in the judgment of the Remarketing Agent, impracticable to proceed with the Remarketing on the terms and in the manner contemplated in the Prospectus and in the Remarketing Materials.

(d) The representations and warranties of the Company contained herein shall be true and correct in all material respects on and as of the Remarketing Date, and the Company shall have performed in all material respects all covenants and agreements herein contained to be performed on its part at or prior to the Remarketing Date.

(e) The Company shall have furnished to the Remarketing Agent a certificate, dated the Remarketing Date, of the Chief Executive Officer and the Treasurer satisfactory to the Remarketing Agent stating that: (1) no order suspending the effectiveness of the Registration Statement or prohibiting the sale of the Remarketed Trust Preferred Securities is in effect, and no proceedings for such purpose are pending before or, to the knowledge of such officers, threatened by the Commission; (2) the representations and warranties of the Company in Section 3 are true and correct on and as of the Remarketing Date and the Company has performed in all material respects all covenants and agreements contained herein to be performed on its part at or prior to the Remarketing Date; (3) the Registration Statement, as of its Effective Date, and the Remarketing Materials, as of their respective dates, did not contain any untrue statement of a material fact and did not omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and the Prospectus did not contain any untrue statement of material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

(f) On the Remarketing Date, the Remarketing Agent shall have received a letter addressed to the Remarketing Agent and dated such date, in form and substance satisfactory to the Remarketing Agent, of Arthur Andersen LLP, containing statements and information of the type ordinarily included in accountants' "comfort letters" with respect to certain financial information contained in the Prospectus and in the Remarketing Materials.

(g) Baker Botts L.L.P., outside counsel to the Company, Jay D. Browning, Esq., counsel to the Company, and Richards, Layton & Finger, P.A., Delaware counsel to the Company and the Trust, shall have furnished to the Remarketing Agent their opinion letters addressed to the Remarketing Agent and dated the Remarketing Date, in form and substance reasonably satisfactory to the Remarketing Agent addressing such matters as are set forth in such counsels' opinions furnished pursuant to Sections 5(d), 5(e) and 5(f), respectively, of the Underwriting Agreement dated June 22, 2000 among the Company, the Trust and the underwriters named therein relating to 6,000,000 7 3/4% Premium Equity Participating Securities Units -- PEPS(SM) Units, adapted as necessary to relate to the securities being remarketed hereunder and to the Remarketing Materials;

(h) Davis Polk & Wardwell, counsel for the Remarketing Agent, shall have furnished to the Remarketing Agent its opinion, addressed to the Remarketing Agent and dated the Remarketing Date, in form and substance satisfactory to the Remarketing Agent;

(i) Subsequent to the execution and delivery of this Agreement and prior to the Closing Date, there shall not have occurred any downgrading, nor shall any notice have been given of any intended or potential downgrading or of any review for a possible change that does not indicate an improvement, in the rating accorded any of the Company's securities by any "nationally recognized statistical rating organization," as such term is defined for purposes of Rule 436(g)(2) under the Securities Act.

Section 7. Indemnification.

(a) The Company agrees to indemnify and hold harmless the Remarketing Agent and each person, if any, who controls the Remarketing Agent within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof, any preliminary prospectus or the Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or any other Remarketing Materials, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to the Remarketing Agent furnished to the Company in writing by the Remarketing Agent expressly for use therein; provided, that the foregoing indemnity agreement with respect to any preliminary prospectus shall not inure to the benefit of the Remarketing Agent from whom the person asserting any such losses, claims, damages or liabilities purchased Remarketed Trust Preferred Securities, or any person controlling such Remarketing Agent, if a copy of the Prospectus (as then amended or supplemented if the Trust and the Company shall have furnished any amendments or supplements thereto) was not sent or given by or on behalf of such Remarketing Agent to such person, if required by law so to have been delivered, at or prior to the written confirmation of the sale of the Remarketed Trust Preferred Securities to such person, and if the Prospectus (as so amended or supplemented) would have cured the defect giving rise to such losses, claims, damages or liabilities, unless such failure is the result of noncompliance by the Company with Section 5(c) hereof.

(b) The Remarketing Agent agrees to indemnify and hold harmless the Company, the directors of the Company, the officers of the Company who signed the Registration Statement, the Trustees and each person, if any, who controls the Company or the Trust within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof, any preliminary prospectus or the Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or any other Remarketing Materials, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but only with reference to information relating to such Remarketing Agent furnished to the Company in writing by the Remarketing Agent expressly for the use in the Registration Statement, any preliminary prospectus, the Prospectus or any amendments or supplements thereto.

(c) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to Section 7(a) or 7(b), such person (the "indemnified party") shall promptly notify the person against whom such indemnity may be sought (the "indemnifying party") in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in respect of the legal expenses of any indemnified party in connection with any proceeding or related proceedings in the same jurisdiction, be liable for (i) the fees and expenses of more than one separate firm (in addition to any local counsel) for the Remarketing Agent and all persons, if any, who control the Remarketing Agent within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act and (ii) the fees and expenses of more than one separate firm (in addition to any local counsel) for the Company, its directors, its officers who sign the Registration Statement and each person, if any, who controls the Company within the meaning of either such Section, and that all such fees and expenses shall be reimbursed as they are incurred. In the case of any such separate firm for the Remarketing Agent and such control persons of the Remarketing Agent, such firm shall be designated in writing by the Remarketing Agent. In the case of any such separate firm for the Company, and such directors, officers and control persons of the Company, such firm shall be designated in writing by the Company. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested the indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by the second and third sentences of this paragraph, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such

indemnified party from all liability on claims that are the subject matter of such proceeding.

Section 8. Contribution.

(a) To the extent the indemnification provided for in Section 7(a) or 7(b) is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each indemnifying party under such subsections, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party or parties on the other hand from the Remarketing or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the indemnifying party or parties on the one hand and of the indemnified party or parties on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Remarketing Agent on the other hand in connection with the Remarketing shall be deemed to be in the same respective proportions as the total principal amount of Remarketed Trust Preferred Securities less the fee paid to the Remarketing Agent on the one hand and the fee paid to the Remarketing Agent on the other hand bear to the total principal amount of the Remarketed Trust Preferred Securities. The relative fault of the Company on the one hand and the Remarketing Agent on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Remarketing Agent and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

(b) The Company and the Remarketing Agent agree that it would not be just or equitable if contribution pursuant to this Section 8 were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in
Section 8(a). The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this
Section 8, the Remarketing Agent shall not be required to contribute any amount in excess of the amount by which the fees received by it under
Section 4 exceed the amount of any damages that the Remarketing Agent has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The remedies

provided for in Section 7 and this Section 8 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity.

(c) The indemnity and contribution provisions contained in Section 7 and this Section 8 and the representations, warranties and other statements of the Company contained in this Agreement shall remain operative and in full force and effect regardless of any termination of this Agreement, any investigation made by or on behalf of the Remarketing Agent or any person controlling the Remarketing Agent, or the Company, its officers or directors or any person controlling the Company and the completion of the Remarketing.

Section 9. Resignation and Removal of the Remarketing Agent.

The Remarketing Agent may resign and be discharged from its duties and obligations hereunder, and the Company or the Trust may remove the Remarketing Agent, by giving 60 days' prior written notice, in the case of a resignation, to the Company, the Depository, the Property Trustee, the Trust and the Indenture Trustee and, in the case of a removal, the removed Remarketing Agent, the Depository, the Property Trustee, the Trust and the Indenture Trustee; provided, however, that:

(a) the Company may not remove the Remarketing Agent unless (1) the Remarketing Agent becomes involved as a debtor in a bankruptcy, insolvency or similar proceeding, (2) the Remarketing Agent shall not be among the 15 underwriters with the largest volume underwritten in dollars, on a lead or co-managed basis, of U.S. domestic debt securities during the twelve-month period ended as of the last calendar quarter preceding the Remarketing Date, (3) the Remarketing Agent shall be subject to one or more legal restrictions preventing the performance of its obligations hereunder, or
(4) the Remarketing Agent shall determine that (i) the Company has not met its obligation under Section 6(d) or (ii) using its reasonable efforts, the Remarketing Agent would be unable to consummate the Remarketing on the terms and in the manner contemplated in the Prospectus and the Remarketing Materials;

(b) the Remarketing Agent may not resign without reasonable cause; and

(c) no such resignation nor any such removal shall become effective until the Company shall have appointed at least one nationally recognized broker-dealer as successor Remarketing Agent and such successor Remarketing Agent shall have entered into a remarketing agreement with the Company and the Trust, in which it shall have agreed to conduct the Remarketing in accordance with the Remarketing Procedures in all material respects.

In any such case, the Company will use its reasonable efforts to appoint a successor Remarketing Agent and enter into such a remarketing agreement with such person as soon as reasonably practicable. The provisions of Sections 7 and 8 shall survive the resignation or removal of any Remarketing Agent pursuant to this Agreement.

Section 10. Dealing in the Remarketed Trust Preferred Securities.

The Remarketing Agent, when acting as a Remarketing Agent or in its individual or any other capacity, may, to the extent permitted by law, buy, sell, hold and deal in any of the Remarketed Trust Preferred Securities. The Remarketing Agent may exercise any vote or join in any action which any beneficial owner of Remarketed Trust Preferred Securities may be entitled to exercise or take pursuant to the Declaration with like effect as if it did not act in any capacity hereunder. The Remarketing Agent, in its individual capacity, either as principal or agent, may also engage in or have an interest in any financial or other transaction with the Company as freely as if it did not act in any capacity hereunder.

Section 11. Remarketing Agent's Performance; Duty of Care.

The duties and obligations of the Remarketing Agent shall be determined solely by the express provisions of this Agreement, the Declaration, the Pledge Agreement and the Purchase Contract Agreement. No implied covenants or obligations of or against the Remarketing Agent shall be read into this Agreement, the Declaration, the Pledge Agreement or the Purchase Contract Agreement. In the absence of bad faith on the part of the Remarketing Agent, the Remarketing Agent may conclusively rely upon any document furnished to it, as to the truth of the statements expressed in any of such documents. The Remarketing Agent shall be protected in acting upon any document or communication reasonably believed by it to have been signed, presented or made by the proper party or parties except as otherwise set forth herein. The Remarketing Agent, acting under this Agreement, shall incur no liability to the Company, the Trust or to any holder of Remarketed Trust Preferred Securities in its individual capacity or as Remarketing Agent for any action or failure to act, on its part in connection with a Remarketing or otherwise, except if such liability is judicially determined to have resulted from its failure to comply with the material terms of this Agreement or the gross negligence or willful misconduct on its part.

Section 12. Termination.

This Agreement shall terminate as to the Remarketing Agent on the effective date of the resignation or removal of the Remarketing Agent pursuant to Section 9. In addition, this Agreement may be terminated (a) by the Company or the Trust by notifying the Remarketing Agent at any time before the time when the Remarketed Trust Preferred Securities are first generally offered by the Remarketing Agent to dealers by letter or telegram, or (b) by the Remarketing Agent by notifying the Company and the Trust at or prior to 10:00 a.m. (New York City time) five business days prior to the Remarketing Date by letter or telegram if any of the conditions described in Section 6 are not satisfied.

If this Agreement is terminated pursuant to any of the provisions hereof, except as otherwise provided herein, the Company shall not be under any liability to the Remarketing Agent and the Remarketing Agent shall not be under any liability to the Company, except that (a) if this Agreement is terminated by the Remarketing Agent because of any failure or refusal on the part of the Company to comply with the terms or to fulfill any of the conditions of this

Agreement, the Company will reimburse the Remarking Agent for all of its out-of-pocket expenses (including the fees and disbursements of its counsel) reasonably incurred by it, and (b) if the Remarketing Agent failed or refused to purchase the Remarketed Trust Preferred Securities hereunder, without some reason sufficient hereunder to justify the cancellation or termination of if obligations hereunder, the Remarketing Agent shall not be relieved of liability to the Company for damages occasioned by its default.

Section 13. Notices.

All statements, requests, notices and agreements hereunder shall be in writing, and:

(a) if to the Remarketing Agent, shall be delivered or sent by mail, telex or facsimile transmission to Morgan Stanley & Co. Incorporated, 1585 Broadway, New York, New York 10036, Attention: David Ballard (Fax:
212-761-0538);

(b) if to the Company, shall be delivered or sent by mail, telex or facsimile transmission to One Valero Place, P.O. Box 500, San Antonio, Texas 78212, Attention: Jay D. Browning, Corporate Secretary (Fax:
210-370-2988) and Donna M. Titzman, Treasurer (Fax: 210-370-2497); and

(c) if to the Trust, shall be delivered or sent by mail, telex or facsimile transmission to One Valero Place, P.O. Box 500, San Antonio, Texas 78212, Attention: Jay D. Browning, Corporate Secretary (Fax:
210-370-2988) and Donna M. Titzman, Treasurer (Fax: 210-370-2497).

Any such statements, requests, notices or agreements shall take effect at the time of receipt thereof.

Section 14. Persons Entitled to Benefit of Agreement.

This Agreement shall inure to the benefit of and be binding upon the Remarketing Agent, the Company, the Trust and their respective successors. This Agreement and the terms and provisions hereof are for the sole benefit of only those persons, except that (x) the representations, warranties, indemnities and agreements of the Company contained in this Agreement shall also be deemed to be for the benefit of the Remarketing Agent and the person or persons, if any, who control the Remarketing Agent within the meaning of Section 15 of the Securities Act and (y) the indemnity agreement of the Remarketing Agent contained in
Section 7(b) of this Agreement shall be deemed to be for the benefit of the Company's and the Trust's directors, officers and Trustees who sign the Registration Statement and any person controlling the Company or the Trust within the meaning of Section 15 of the Securities Act. Nothing contained in this Agreement is intended or shall be construed to give any person, other than the persons referred to herein, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein.

Section 15. Survival.

The respective indemnities, representations, warranties and agreements of the Company and the Remarketing Agent contained in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall survive the Remarketing and shall remain in full force and effect, regardless of any investigation made by or on behalf of any of them or any person controlling any of them.

Section 16. Governing Law.

This Agreement shall be governed by, and construed in accordance with, the laws of New York.

Section 17. Counterparts.

This Agreement may be executed in one or more counterparts and, if executed in more than one counterpart, the executed counterparts shall each be deemed to be an original but all such counterparts shall together constitute one and the same instrument.

Section 18. Headings.

The headings herein are inserted for convenience of reference only and are not intended to be part of, or to affect the meaning or interpretation of, this Agreement.

If the foregoing correctly sets forth the agreement between the Company, the Trust and the Remarketing Agent, please indicate your acceptance in the space provided for that purpose below.

[SIGNATURES ON THE FOLLOWING PAGE]

Very truly yours,

VALERO ENERGY CORPORATION

VEC TRUST I

By: Valero Energy Corporation,
as Sponsor

Accepted:

MORGAN STANLEY & CO. INCORPORATED

EXHIBIT 4.9

VALERO ENERGY CORPORATION

OFFICERS' CERTIFICATE

This Officer's Certificate is being executed and delivered (a) pursuant to Sections 102, 301 and 303 of the Indenture dated as of December 12, 1997 (the "Indenture") by and between Valero Energy Corporation, a Delaware corporation
(the "Company"), and The Bank of New York, as trustee (the "Trustee"), and (b)
in connection with the order dated June 29, 2000 by the Company to the Trustee (the "Order") for the authentication and delivery by the Trustee of $200,000,000 aggregate principal amount of the Company's 8 3/8% Notes due 2005 and $200,000,000 aggregate principal amount of the Company's 8 3/4% Notes due 2030 (collectively, the "Notes"). The undersigned hereby certify that they are the duly elected or appointed and acting Vice President and Chief Financial Officer and the duly elected or appointed and acting Secretary of the Company, respectively, and further certify that:

(a). As of June 23, 2000, other terms of the Notes (including the form of the Notes) set forth in Annex A hereto were established by the Special Committee designated by the Board of Directors of the Company.

(b). The undersigned have read Sections 102, 301 and 303 of the Indenture and the definitions in the Indenture relating thereto.

(c). The statements made herein are based either upon the personal knowledge of the persons making this Certificate or on information, data and reports furnished to such persons by the officers, counsel, department heads or employees of the Company who have knowledge of the facts involved.

(d). The undersigned have examined the Order, and they have examined the covenants, conditions and provisions of the Indenture relating thereto.

(e). In the opinion of the undersigned, they have made such examination or investigation as is necessary to enable them to express an informed opinion as to whether or not all conditions provided for in the Indenture with respect to the authentication of the Notes have been complied with.

(f). In the opinion of the undersigned, all conditions precedent provided in the Indenture to the authentication by the Trustee of the Notes have been complied with.

IN WITNESS WHEREOF, the undersigned have executed this certificate as of this 29th day of June, 2000.

/s/ JOHN D. GIBBONS
------------------------
John D. Gibbons
Vice President and Chief
Financial Officer



/s/ JAY D. BROWNING
------------------------
Jay D. Browning
Secretary

ANNEX A

VALERO ENERGY CORPORATION

8 3/8% Notes due 2005
8 3/4% Notes due 2030

Two series of Securities are hereby established pursuant to Section 301 of the Indenture dated as of December 12, 1997 (the "Indenture"), between Valero Energy Corporation, a Delaware corporation (the "Company"), and The Bank of New York, as Trustee (in such capacity, the "Trustee"), as follows (capitalized terms used and not defined herein shall have the meanings assigned to them in the Indenture, and all references herein to a Section shall refer to the corresponding Section in the Indenture):

1. The title of the 8 3/8% Notes due 2005 shall be "8 3/8% Notes due 2005" (the "2005 Notes"), and the title of the 8 3/4% Notes due 2030 shall be "8 3/4% Notes due 2030" (the "2030 Notes" and together with the 2005 Notes, the "Notes").

2. The limit upon the aggregate principal amount of the 2005 Notes that may be authenticated and delivered under the Indenture (except for 2005 Notes authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other 2005 Notes pursuant to Sections 304, 305, 306, 906 or 1207) is $200,000,000.

3. The limit upon the aggregate principal amount of the 2030 Notes that may be authenticated and delivered under the Indenture (except for 2030 Notes authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other 2030 Notes pursuant to Sections 304, 305, 306, 906 or 1207) is $200,000,000.

4. Each series of Notes shall be initially issued as Registered Securities in the form of one or more global securities under the Indenture. The Depository Trust Company is hereby designated as the Depository for these global Securities under the Indenture.

As long as any Note is in global form, then, notwithstanding clause
(11) of Section 301 and the provisions of Section 302, any such global Note shall represent such of the outstanding Notes as shall be specified therein and may provide that it shall represent the aggregate amount of outstanding Notes from time to time endorsed thereon and that the aggregate amount of outstanding Notes represented thereby may from time to time be reduced to reflect exchanges. Any endorsement of a global Note to reflect the amount, or any increase or decrease in the amount, of outstanding Notes represented thereby shall be made by the Trustee in such manner and upon instructions given by such Person or Persons as shall be specified in such Note or in a Company Order to be delivered to the Trustee pursuant to Section 303. Subject to the provisions of Section 303 and, if applicable Section 304, the Trustee shall deliver and redeliver any Note in permanent global form in the manner and upon instructions given by the Person or Persons specified in such Note or in the applicable Company Order. With respect to the Notes of any series that are represented by a global Note, the Company authorizes the execution and delivery by the Trustee of a letter of representations or other similar agreement or instrument in the form customarily provided for by the Depository appointed with respect to such global Note. Any global Note may be deposited with the Depository or its nominee, or may remain in the custody of the Trustee pursuant to a FAST Balance Certificate Agreement or similar agreement between the Trustee and the Depository. If a Company Order has been, or simultaneously is, delivered, any instructions by the Company with respect to endorsement or delivery or redelivery of a Note in global form shall be in writing but need not comply with Section 102 and need not be accompanied by an Opinion of Counsel.

Members of, or participants in, the Depository ("Agent Members") shall have no rights under the Indenture with respect to any global Note held on their behalf by the Depository, or the Trustee as its custodian, or under such global Note and the Depository may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such global Note for all purposes whatsoever. Notwithstanding the foregoing, (i) the registered holder of a global Note may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through an Agent Member, to take any action that a Holder is entitled to take under the Indenture or the Notes and (ii) nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee, from giving effect to any written certification, proxy or other authorization furnished by the Depository or shall impair, as between the Depository and its Agent Members, the operation of customary practices governing the exercise of the rights of a beneficial owner of any Note.

Notwithstanding Section 305, and except as otherwise provided pursuant to Section 301, transfers of a global Note shall be limited to transfers of such global Note in whole but not in part, to the Depository, its successors or their respective nominees. Interests of beneficial owners in a global Note may be transferred in accordance with the rules and procedures of the Depository. In all other respects, Notes shall be transferred to all beneficial owners in exchange for their beneficial interest in a Global Security solely as expressly provided in Section 305.

In connection with any transfer of a portion of the beneficial interest in a global Note to beneficial owners pursuant hereto and Section 305, the Security Registrar shall reflect on its books and records the date and a decrease in the principal amount of the global Note of the applicable series in an amount equal to the principal amount of the beneficial interest in the global Note to be transferred, and the Company shall execute, and the Trustee upon receipt of a Company Order for the authentication and delivery of Notes shall authenticate and deliver, one or more Notes of like tenor and amount.

In connection with the transfer of an entire global Note to beneficial owners pursuant hereto and Section 305, the global Security shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute, and the Trustee shall authenticate and deliver, to each beneficial owner identified by the Depository in exchange for its beneficial interest in the global Note, an equal aggregate principal amount of Notes of the applicable series of authorized denominations.

Neither the Company nor the Trustee will have any responsibility or liability for any aspect of the records relating to, or payments made on account of, Notes by the Depository, or for maintaining, supervising or reviewing any records of the Depository relating to such Notes. Neither the Company nor the Trustee shall be liable for any delay by the related global Note Holder or the Depository in identifying the beneficial owners, and each such Person may conclusively rely on, and shall be protected in relying on, instructions from such global Note Holder or the Depository for all purposes (including with respect to the registration and delivery, and the respective principal amounts, of the Notes to be issued).

Notwithstanding the provisions of Sections 201 and 307, unless otherwise specified as contemplated by Section 301, payment of principal of, premium (if any) or interest on any global Note shall be made to the Person or Persons specified in such global Note.

5. The dates on which the principal of the 2005 Notes and the 2030 Notes are payable shall be June 15, 2005 and June 15, 2030, respectively.

6. The rate at which the 2005 Notes shall bear interest shall be 8 3/8% per annum and the rate at which the 2030 Notes shall bear interest shall be 8 3/4% per annum. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The date from which interest shall accrue for the Notes shall be June 29, 2000. The Interest Payment Dates on which interest on the Notes shall be payable are June 15 and December 15, commencing December 15, 2000. Interest on the Notes shall be payable to the persons in whose name the Notes are registered at the close of business on the Regular Record Date for such interest payment, except in the case of default interest, which will be payable as provided in the Indenture. The Regular Record Date for the interest payable on the Notes on any Interest Payment Date shall be the June 1 and December 1, as the case may be, immediately preceding such Interest Payment Date. No Additional Amounts shall be payable with respect to the Notes.

7. The place or places where the principal of, premium (if any) and interest on the Notes shall be payable is at the office or agency of the Trustee in New York, New York or such other offices or agencies maintained for such purpose as the Company may from time to time and in accordance with the Indenture designate. If appropriate wire transfer instructions have been received by the Trustee at its Corporate Trust Office or at its corporate trust facility in the Borough of Manhattan, The City of New York, not later than 5 Business Days prior to the record date for an applicable Interest Payment Date, then payments in respect of the Notes evidenced by a global Security (including principal, premium, if any, and interest) shall be made by wire transfer of immediately available funds to the accounts specified by the Holder of such global Note. In all other cases, payment of interest on the Notes may be made at the option of the Company by check mailed to the address of the person entitled thereto as such address shall appear in the Security Register.

8. Each series of Notes will be redeemable, in whole or in part, at the option of the Company at any time, at a redemption price equal to the greater of (i) 100% of the principal amount of the applicable series of Notes, and (ii) as

determined by the Quotation Agent (as defined below), the sum of the present values of the remaining scheduled payments of principal and interest thereon (not including any portion of such payments of interest accrued as of the date of redemption) discounted to the date of redemption on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate (as defined below) plus 25 basis points with respect to the 2005 Notes and 37.5 basis points with respect to the 2030 Notes plus, in each case, accrued interest thereon to the date of redemption.

"Adjusted Treasury Rate" means, with respect to any date of redemption, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such date of redemption.

"Comparable Treasury Issue" means the United States Treasury security selected by the Quotation Agent as having a maturity comparable to the remaining term of the series of Notes to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such Notes.

"Comparable Treasury Price" means, with respect to any date of redemption, (i) the average of the Reference Treasury Dealer Quotations for such date of redemption, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (ii) if the Trustee obtains fewer than three such Reference Treasury Dealer Quotations, the average of all such Reference Treasury Dealer Quotations.

"Quotation Agent" means the Reference Treasury Dealer appointed by the Company.

"Reference Treasury Dealers" means (i) each of J. P. Morgan Securities Inc., Credit Suisse First Boston Corporation, and Morgan Stanley & Co. Incorporated and their respective successors; provided, however, that if any of the foregoing shall cease to be a primary U.S. Government securities dealer in New York City (a "Primary Treasury Dealer"), the Company shall substitute therefor another Primary Treasury Dealer; and
(ii) any other Primary Treasury Dealer selected by the Company.

"Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any date of redemption, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third Business Day preceding such date of redemption.

Notice of any redemption will be mailed at least 30 days but not more than 60 days before the date of redemption to each Holder of the applicable series of Notes to be redeemed. Unless the Company defaults in payment of the redemption price, on and after the date of redemption, interest will cease to accrue on the Notes or portions thereof called for redemption.

9. The Notes shall not be entitled to the benefit of any sinking fund, any optional repurchase or redemption right in favor of any holder thereof or other mandatory repurchase or redemption provisions.

10. The Notes shall be in substantially the form of Attachment A hereto (the "Form of Note").

11. Each Note that is a global Security shall bear the legend set forth on the face of the Form of Note.

ATTACHMENT A TO TERMS OF NOTE

[FACE OF SECURITY]

THIS SECURITY IS A GLOBAL SECURITY AS PROVIDED FOR IN THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN SUCH LIMITED CIRCUMSTANCES.

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

VALERO ENERGY CORPORATION

______% NOTES(1) DUE 20_

REGISTERED CUSIP No.

VALERO ENERGY CORPORATION, a Delaware corporation (the "Company," which term includes any successor Person under the Indenture hereinafter referred to), for value received promises to pay to Cede & Co. or registered assigns, the principal sum of ____________ Dollars or such lesser amount as indicated on the schedule of exchanges of definitive Securities, on _________, 20__.

Interest Payment Dates: _________ 15 and ________ 15

Regular Record Dates: __________ 1 and _________ 1

Reference is hereby made to the further provisions of this Security set forth in the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.

(1) Two Notes will be issued if the Notes are issued as a single series in the principal amount of $___ million: a $___ million Note to be registered "R-001" and a $___ million Note to be registered "R-002".

IN WITNESS WHEREOF, the Company has caused this Security to be signed manually or by facsimile by its duly authorized officers and its corporate seal or a facsimile thereof to be affixed hereto or imprinted hereon.

Dated:          , 2000
      ----------
[SEAL]                                               VALERO ENERGY CORPORATION


                                                     By:(2)
                                                           ---------------------
                                                           Name:

Title:

ATTEST:

                                                THE BANK OF NEW YORK, as Trustee

Dated:           , 2000                         By:
      -----------                                  -----------------------------
                                                        Authorized Signatory


----------

(2) Executed by Chairman of Board, President, Vice President serving as Chief Financial Officer or Treasurer.

(3) Attested by Secretary or one of the Assistant Secretaries.

[REVERSE OF SECURITY]

VALERO ENERGY CORPORATION

_____% NOTES DUE 20_

This Security is one of a duly authorized issue of debentures, notes or other evidences of indebtedness of VALERO ENERGY CORPORATION, a Delaware corporation (the "Company"), issued under the Indenture hereinafter referred to and is one of a series of such debentures, notes or other evidences of indebtedness designated pursuant thereto as __% Notes due 20__ (the "Securities") of the Company.

1. Interest. The Company promises to pay interest on the principal amount of this Security at ____% per annum from ________, 2000 until Maturity of the Securities. The Company will pay interest semiannually on _______ and ________ of each year (each an "Interest Payment Date") and on the Maturity of the Securities, or if any such day is not a Business Day, on the next succeeding Business Day. Interest on the Securities will accrue from the most recent Interest Payment Date on which interest has been paid or, if no interest has been paid, from ________, 2000; provided that if there is no existing Default in the payment of, or provisions for, interest, and if this Security is authenticated between a Regular Record Date referred to on the face hereof (whether or not a Business Day) and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided, further, that the first Interest Payment Date shall be ________, 2000. The interest so payable, and punctually paid or provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest as set forth on the face hereof, provided, however, that interest payable at Maturity of this Security will be payable to the Person to whom the principal hereof shall be payable. Any such interest which is so payable, but is not punctually paid or duly provided for on any Interest Payment Date, shall forthwith cease to be payable to the registered Holder on such Regular Record Date, and may be paid as more fully provided in the Indenture. Interest will be computed on the basis of a 360-day year of twelve 30-day months.

2. Method of payment. Payment of the principal of (and premium, if any) and interest on this Security will be made at the office or agency of the Company maintained for that purpose at the Corporate Trust Office of the Trustee in the Borough of Manhattan, The City of New York, or at such other offices or agencies maintained for such purpose as the Company may from time to time and in accordance with the Indenture designate, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that (i) payment of interest may, at the option of the Company, be made (subject to collection) by check mailed to the address of the Person entitled thereto as such address shall appear on the Security Register or, with respect to Securities evidenced by a global Security, if appropriate wire transfer instructions have been received in writing by the Trustee at its Corporate Trust Office or at its corporate trust facility in the Borough of Manhattan, The City of New York, not later than 5 Business Days prior to the record date for an applicable Interest Payment Date, be made by wire transfer of immediately available funds in accordance with such wire transfer instructions; and (ii) payment of available funds upon surrender of this Security will be made at the Corporate Trust Office of the Trustee or at the corporate trust facility of the Trustee located in the Borough of Manhattan, The City of New York, or at such additional offices or agencies maintained for such purpose as the Company may from time to time and in accordance with the Indenture designate.

3. Certain Office. Initially, The Bank of New York, the Trustee under the Indenture (in such capacity, the "Trustee"), will, at its Corporate Trust Office in the Borough of Manhattan, The City of New York, act as the Company's office or agency where the Securities may be presented or surrendered for payment, where the Securities may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities and the Indenture may be served.

4. Indenture. The Company issued the Securities under an Indenture dated as of December 12, 1997 (the "Indenture") between the Company and the Trustee. The terms of the Securities include those stated in the Indenture (including terms defined therein, which terms when used herein, unless the context requires otherwise, shall have the meanings assigned to such terms in the Indenture) and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb) (the "TIA"), as in effect on the date of execution of the Indenture. The Securities are subject to all such terms, and Holders are referred to the Indenture and the TIA for a statement of such terms. The Securities are unsecured general obligations of the Company limited to $________ in

aggregate principal amount and will rank on a parity with all other unsecured and unsubordinated indebtedness of the Company. The Indenture provides for the issuance of other series of debentures, notes and other evidences of Indebtedness (including the Securities, the "Debt Securities") thereunder.

5. Denominations, Transfer, Exchange. The Securities are in registered form without coupons and, if not in global form, in denominations of $1,000 and integral multiples of $1,000. The transfer of Securities may be registered and Securities may be exchanged as provided in the Indenture. The Security Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Security Registrar need not exchange or register the transfer of any Securities during the period beginning on the opening of business 15 days before the day of mailing of a notice of redemption of the Securities and ending at the close of business on the day of such mailing or of any Securities selected for redemption, except the unredeemed portion of any Securities being redeemed in part.

6. Persons Deemed Owners. The Holder of a Security shall be treated as its owner for all purposes.

7. Redemption. The Securities will be redeemable, in whole or in part, at the option of the Company at any time, at a redemption price equal to the greater of (i) 100% of the principal amount of such Securities, and (ii) as determined by the Quotation Agent (as defined below), the sum of the present values of the remaining scheduled payments of principal and interest thereon (not including any portion of such payments of interest accrued as of the date of redemption) discounted to the date of redemption on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate (as defined below) plus ____ basis points plus, in each case, accrued interest thereon to the date of redemption.

"Adjusted Treasury Rate" means, with respect to any date of redemption, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such date of redemption.

"Comparable Treasury Issue" means the United States Treasury security selected by the Quotation Agent as having a maturity comparable to the remaining term of the Securities to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such Securities.

"Comparable Treasury Price" means, with respect to any date of redemption, (i) the average of the Reference Treasury Dealer Quotations for such date of redemption, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (ii) if the Trustee obtains fewer than three such Reference Treasury Dealer Quotations, the average of all such Reference Treasury Dealer Quotations.

"Quotation Agent" means the Reference Treasury Dealer appointed by the Company.

"Reference Treasury Dealers" means (i) each of J. P. Morgan Securities Inc., Credit Suisse First Boston Corporation and Morgan Stanley & Co. Incorporated and their respective successors; provided, however, that if any of the foregoing shall cease to be a primary U.S. Government securities dealer in New York City (a "Primary Treasury Dealer"), the Company shall substitute therefor another Primary Treasury Dealer; and
(ii) any other Primary Treasury Dealer selected by the Company.

"Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any date of redemption, the average, as determined by Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third Business Day preceding such date of redemption.

Notice of any redemption will be mailed at least 30 days but not more than 60 days before the date of redemption to each Holder of the Securities to be redeemed. Unless the Company defaults in payment of the redemption price, on and after the date of redemption, interest will cease to accrue on the Securities or portions thereof called for redemption.

8. Amendments and Waivers. Subject to certain exceptions and limitations, the Indenture or the Securities may be supplemented with the consent of the Holders of not less than a majority in aggregate principal amount of the outstanding Securities, and any past default under the Indenture with respect to the Securities, and its consequences, may be waived (other than a default in the payment of the principal of (or premium, if any) or interest on the Securities or in respect of a covenant or provision of the Indenture which under Article 9 thereof cannot be modified or amended without the consent of the Holder of each outstanding Security) by the Holders of not less than a majority in principal amount of the outstanding Securities in accordance with the terms of the Indenture. Without the consent of any Holder, the Company and the Trustee may supplement the Indenture or the Securities (i) to cure any ambiguity, omission, defect or inconsistency, in each case which shall not be inconsistent with the provisions of the Indenture and which shall not adversely affect the interest of the Holders of the Securities in any material respect;
(ii) to evidence the assumption by a successor Person of the obligations of the Company under the Indenture and this Security; (iii) to change or eliminate any restrictions on the payment of principal (or premium, if any) on Registered Securities, to permit Registered Securities to be exchanged for Bearer Securities or to permit the issuance of Securities in uncertificated form, provided any such action shall not adversely affect the interest of the Holders of the Securities in any material respect; (iv) to add to the covenants of the Company for the benefit of the Holders of the Securities or Holders of other series of Debt Securities, or to surrender any right or power conferred by the Indenture upon the Company; (v) to add to, delete from or revise the conditions, limitations and restrictions on the authorized amount, terms or purpose of issue, authentication and delivery of the Securities as set forth in the Indenture; or (vi) to evidence and provide for the acceptance of appointment under the Indenture by a successor Trustee with respect to the Securities and to add to or change any of the provisions of the Indenture as shall be necessary to provide for or facilitate the administration of the trusts thereunder by more than one Trustee, pursuant to the requirements of the Indenture.

The right of any Holder to participate in any consent required or sought pursuant to any provision of the Indenture (and the obligation of the Company to obtain any such consent otherwise required from such Holder) may be subject to the requirement that such Holder shall have been the Holder of record of any Securities with respect to which consent is required or sought as of a date fixed in accordance with the terms of the Indenture.

Subject to certain exceptions and limitations set forth in the Indenture, without the consent of each Holder affected, the Company may not (i) change the Stated Maturity of the principal of or any installment of interest on any Security, (ii) reduce the principal amount of, or any premium or interest on, any Security, (iii) change any Place of Payment where, or the currency in which, any Security or any premium or interest thereon is payable,
(iv) impair the right to institute suit for the enforcement of any payment with respect to any Security after the Stated Maturity thereof (or, in the case of redemption, on or after the applicable Redemption Date), (v) reduce the percentage in principal amount of the outstanding Securities whose Holders must consent to a supplement or waiver, or reduce the requirements in Section 1504 of the Indenture for quorum or voting, or make any change in the percentage of principal amount of Securities necessary to waive compliance with certain provisions of the Indenture or (vi) waive a continuing Default or Event of Default in the payment of principal of or premium (if any) or interest on the Securities.

A supplemental indenture that changes or eliminates any covenant or other provision of the Indenture which has expressly been included solely for the benefit of one or more particular series of Debt Securities under the Indenture, or which modifies the rights of the Holders of Debt Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under the Indenture of the Holders of Debt Securities of any other series.

9. Defaults and Remedies. Events of Default are defined in the Indenture and generally include: (i) failure to pay principal of or any premium on any Security when due and payable; (ii) failure to pay any interest on any Security when due and payable, and the continuation of the default for 30 days;
(iii) failure to perform any other covenant, or breach of any warranty, of the Company in the Indenture, continued for 60 days after written notice is given or received as provided in the Indenture; (iv) certain events of bankruptcy, insolvency, or reorganization; and (v) failure to pay at final maturity (after the expiration of any applicable grace periods) or upon the declaration of acceleration of payment of indebtedness for borrowed money of the Company or any Subsidiary in excess of $25 million, if such indebtedness is not discharged, or such acceleration is not annulled, within 10 days after written notice. If any Event of Default at any time outstanding occurs and is continuing, either the Trustee or the Holders of at least 25% in aggregate principal amount of the then outstanding Securities may declare the principal amount of all Securities to be due and payable immediately. At any time after a declaration or occurrence of acceleration with respect to the Securities has been made, but before a judgment or decree based on acceleration has been obtained, the Holders of a majority in

aggregate principal amount of the then outstanding Securities may, under certain circumstances, rescind and annul the acceleration.

Holders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may require indemnity reasonably satisfactory to it before it enforces the Indenture or the Securities. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Securities may direct the Trustee in its exercise of any trust or power with respect to the Securities. The Trustee may withhold from Holders notice of any continuing default (except a default in payment of principal, premium (if any) or interest) if in good faith it determines that withholding notice is in their interests. The Company must furnish an annual compliance certificate to the Trustee. 10. Discharge Prior to Maturity. The Indenture with respect to the Securities shall be discharged and canceled upon the payment of all Securities and, as provided in the Indenture, shall be discharged except for certain obligations upon the irrevocable deposit with the Trustee of funds sufficient for such payment.

10. Discharge Prior to Maturity. The Indenture with respect to the Securities shall be discharged and canceled upon the payment of all Securities and, as provided in the Indenture, shall be discharged except for certain obligations upon the irrevocable deposit with the Trustee of funds sufficient for such payment.

11. Trustee Dealings with Company. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not Trustee.

12. Authentication. This Security shall not be valid until authenticated by the manual signature of an authorized signer of the Trustee.

13. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Securities as a convenience to the Holders of the Securities. No representation is made as to the correctness of such numbers as printed on the Securities and reliance may be placed only on the other identification numbers printed thereon.

14. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform gifts to Minors Act).

15. Restrictions on Transfer. By its acceptance of any Security bearing a legend restricting transfer, each Holder of a Security acknowledges the restrictions on transfer of such Security set forth in the officers' certificate executed pursuant to Section 303 of the Indenture in respect of the Securities and such legend and agrees that it will transfer such Security only as provided in such officers' certificate and in the Indenture.

THE COMPANY WILL FURNISH TO ANY HOLDER UPON WRITTEN REQUEST AND

WITHOUT CHARGE A COPY OF THE INDENTURE. REQUEST MAY BE MADE TO:

VALERO ENERGY CORPORATION
ONE VALERO PLACE
SAN ANTONIO, TEXAS 78212
TELEPHONE: (210) 370-2000
ATTENTION: GENERAL COUNSEL

                                                                        Principal Amount of         Signature of
                       Amount of decrease in   Amount of increase in   this global Security    authorized officer of
                        Principal Amount of     Principal Amount of       following such        Trustee or Security
Date of Exchange       this global Security    this global Security   decrease (or increase)         Registrar
----------------       --------------------    --------------------   ----------------------         ---------

ASSIGNMENT FORM

To assign this Security, fill in the form below: (I) or (we) assign and transfer this Security to __________________________ (Insert assignee's social security or tax I.D. number)

and irrevocably appoint ________________________ as agent to transfer this Security on the books of the Company. The agent may substitute another to act for him.

Date:                                   Your Signature:
     -----------------                                  ---------------------
                                                        (Sign exactly as your
                                                        name appears on the face
                                                        of this Security)