VALERO ENERGY CORP/TX
S-3/A, 2000-05-24
PETROLEUM REFINING
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<PAGE>   1


      AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 24, 2000


                                                     REGISTRATION NOS. 333-33846


                                                                    333-33846-01


                                                                    333-33846-02

- --------------------------------------------------------------------------------
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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                             ---------------------


                                AMENDMENT NO. 1


                                       TO

                                    FORM S-3
            REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
                             ---------------------

                           VALERO ENERGY CORPORATION
                                  VEC TRUST I
                                  VEC TRUST II
          (Exact name of each registrant as specified in its charter)

<TABLE>
<S>                                       <C>
                DELAWARE                                 74-1828067
                DELAWARE                                 74-6488423
                DELAWARE                                 74-6488424
     (State or other jurisdiction of                  (I.R.S. Employer
     incorporation or organization)                 Identification Nos.)
                                                    JAY D. BROWNING, ESQ.
                                                          SECRETARY
            ONE VALERO PLACE                          ONE VALERO PLACE
        SAN ANTONIO, TEXAS 78212                  SAN ANTONIO, TEXAS 78212
             (210) 370-2000                            (210) 370-2000
    (Address, including zip code and       (Name, address, including zip code and
telephone number, including area code, of telephone number, including area code, of
                   each                                   agent for
registrant's principal executive office)        service for each registrant)
</TABLE>

                                    Copy to:
                             R. JOEL SWANSON, ESQ.
                               BAKER BOTTS L.L.P.
                                 910 LOUISIANA
                                ONE SHELL PLAZA
                           HOUSTON, TEXAS 77002-4995
                                 (713) 229-1234
                             ---------------------

     APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement.

     If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.  [ ]

     If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act") other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box.  [X]

     If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.  [ ]

     If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering.  [ ]

     If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.  [ ]

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                                                        (Continued on next page)
(Continued from previous page)
<PAGE>   2

                        CALCULATION OF REGISTRATION FEE


<TABLE>
<CAPTION>
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                                                                 PROPOSED MAXIMUM
                   TITLE OF EACH CLASS OF                       AGGREGATE OFFERING           AMOUNT OF
                SECURITIES TO BE REGISTERED                      PRICE(1),(2),(3)         REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------
<S>                                                          <C>                      <C>
Senior Debt Securities and Subordinated Debt Securities of
  Valero Energy Corporation.................................
- --------------------------------------------------------------------------------------------------------------
Common Stock ($.01 par value) of Valero Energy
  Corporation(4)(5).........................................
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Preferred Stock ($.01 par value) of Valero Energy
  Corporation...............................................
- --------------------------------------------------------------------------------------------------------------
Warrants of Valero Energy Corporation.......................
- --------------------------------------------------------------------------------------------------------------
Stock Purchase Contracts of Valero Energy Corporation.......
- --------------------------------------------------------------------------------------------------------------
Stock Purchase Units of Valero Energy Corporation(6)........
- --------------------------------------------------------------------------------------------------------------
Preferred Securities of VEC Trust I and VEC Trust II........
- --------------------------------------------------------------------------------------------------------------
Guarantees of Preferred Securities of VEC Trust I and VEC
  Trust II by Valero Energy Corporation.....................
- --------------------------------------------------------------------------------------------------------------
          TOTAL.............................................      $1,300,000,000            $264,000(7)
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>


(1) Estimated solely for the purpose of calculating the registration fee
    pursuant to Rule 457(o) under the Securities Act and exclusive of accrued
    interest, distributions and dividends, if any. The aggregate initial
    offering price of all securities issued from time to time pursuant to this
    registration statement shall not exceed $1,300,000,000 or the equivalent
    thereof in foreign currencies, foreign currency units or composite
    currencies. Any securities registered hereunder may be sold separately or as
    units with other securities registered hereunder.


(2) There is being registered hereunder such indeterminate number or amount of
    senior and subordinated debt securities, common stock, preferred stock,
    warrants, stock purchase contracts and stock purchase units of Valero Energy
    Corporation and preferred securities of VEC Trust I and VEC Trust II as may
    from time to time be issued at indeterminate prices. Senior debt securities
    and subordinated debt securities may be issued and sold to VEC Trust I and
    VEC Trust II, in which event such debt securities may later be distributed
    to the holders of preferred securities upon a dissolution of VEC Trust I and
    VEC Trust II and the distribution of their assets.


(3) Valero Energy Corporation is also registering under this registration
    statement all guarantees and other obligations that it may have with respect
    to preferred securities that may be issued by VEC Trust I and VEC Trust II.
    No separate consideration will be received for the guarantees or any other
    such obligations.

(4) Each share of common stock includes one preferred share purchase right. No
    separate consideration is payable for the preferred share purchase rights.
    The registration fee for these securities is included in the fee for the
    common stock.


(5) Includes an indeterminate number of shares of common stock to be issued by
    Valero Energy Corporation upon settlement of the stock purchase contracts.



(6) Each stock purchase unit consists of (a) a stock purchase contract, under
    which the holder, upon settlement, will purchase an indeterminate number of
    shares of common stock of Valero Energy Corporation and (b) either a
    beneficial interest in preferred securities of VEC Trust I or VEC Trust II
    or debt obligations of third parties, including U.S. Treasury securities.
    Each beneficial interest will be pledged to secure the obligation of such
    holder to purchase such shares of common stock. No separate consideration
    will be received for the stock purchase contracts.



(7) Paid with original filing.


                             ---------------------

     THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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<PAGE>   3

EXPLANATORY NOTE

     The registration statement contains two forms of prospectuses to be used in
connection with offerings of the following securities:

     (1) Debt securities (consisting of senior debt securities and subordinated
debt securities), common stock, preferred stock and warrants of Valero Energy
Corporation.


     (2) Preferred securities of VEC Trust I or VEC Trust II, debt securities
(consisting of senior debt securities and subordinated debt securities), common
stock, stock purchase contracts and stock purchase units of Valero Energy
Corporation and guarantees by Valero Energy Corporation of preferred securities
that may be issued by VEC Trust I and VEC Trust II.


     Under the shelf process, we may offer any combination of the securities
described in these two prospectuses in one or more offerings with a total
initial offering price of up to $1,300,000,000.
<PAGE>   4


                   SUBJECT TO COMPLETION, DATED MAY 24, 2000


PROSPECTUS

                                 $1,300,000,000

                        [VALERO ENERGY CORPORATION LOGO]

                             SENIOR DEBT SECURITIES
                          SUBORDINATED DEBT SECURITIES
                                  COMMON STOCK
                                PREFERRED STOCK
                                    WARRANTS

Valero Energy Corporation
One Valero Place
San Antonio, Texas 78212

(210) 370-2000

<TABLE>
<S>                                             <C>
                                                THE OFFERING

                                                We may offer from time to time
                                                - Senior debt securities
       The information in this                  - Subordinated debt securities
  prospectus is not complete and may be         - Common stock
  changed. We may not sell these                - Preferred stock
  securities until the registration             - Warrants
  statement filed with the Securities           We will provide the specific terms of the securities in
  and Exchange Commission is effective.         supplements to this prospectus. Our common stock is listed
  This prospectus is not an offer to            on the New York Stock Exchange under the symbol "VLO."
  sell these securities and it is not
  soliciting an offer to buy these
  securities in any jurisdiction where
  the offer or sale is not permitted.
       We will provide the specific
  terms of the securities in one or
  more supplements to this prospectus.
  You should read this prospectus and
  the related prospectus supplement
  carefully before you invest in our
  securities. This prospectus may not
  be used to offer and sell our
  securities unless accompanied by a
  prospectus supplement.
</TABLE>


                             ---------------------

     NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

                The date of this prospectus is           , 2000
<PAGE>   5


                               TABLE OF CONTENTS



<TABLE>
<S>                                                            <C>
About This Prospectus.......................................     3
About Valero Energy Corporation.............................     3
Forward-Looking Information.................................     4
Use of Proceeds.............................................     5
Ratio of Earnings to Fixed Charges..........................     6
Description of Debt Securities..............................     6
Description of Capital Stock................................    14
Description of Warrants.....................................    17
Plan of Distribution........................................    18
Legal Matters...............................................    19
Experts.....................................................    20
Where You Can Find More Information.........................    20
Information We Incorporate by Reference.....................    20
</TABLE>


                             ---------------------

     THIS PROSPECTUS IS PART OF A REGISTRATION STATEMENT WE FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. YOU SHOULD RELY ONLY ON THE INFORMATION WE
HAVE PROVIDED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH ADDITIONAL OR
DIFFERENT INFORMATION. WE ARE NOT MAKING AN OFFER OF THESE SECURITIES IN ANY
JURISDICTION WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD ASSUME THAT THE
INFORMATION IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT IS ACCURATE ONLY AS
OF THE DATE ON THE FRONT OF THE DOCUMENT AND THAT ANY INFORMATION WE HAVE
INCORPORATED BY REFERENCE IS ACCURATE ONLY AS OF THE DATE OF THE DOCUMENT
INCORPORATED BY REFERENCE.

                                        2
<PAGE>   6


                             ABOUT THIS PROSPECTUS



     This prospectus is part of a registration statement that we have filed with
the Securities and Exchange Commission using a "shelf" registration process. The
registration statement also includes a prospectus under which VEC Trust I and
VEC Trust II, two of our subsidiaries, may offer from time to time preferred
securities guaranteed by us and we may offer our related senior debt securities
or subordinated debt securities, which securities may be convertible into our
common stock, and our stock purchase contracts or stock purchase units. Under
the shelf process, we may offer any combination of the securities described in
these two prospectuses in one or more offerings with a total initial offering
price of up to $1,300,000,000. This prospectus provides you with a general
description of the senior debt securities, subordinated debt securities, common
stock, preferred stock and warrants we may offer. Each time we use this
prospectus to offer securities, we will provide a prospectus supplement that
will contain specific information about the terms of that offering. The
prospectus supplement may also add, update or change information contained in
this prospectus. Please carefully read this prospectus and the prospectus
supplement together with the additional information described under the heading
"Where You Can Find More Information."



     References in this prospectus to the terms "we," "us" or "Valero" or other
similar terms mean Valero Energy Corporation, unless we state otherwise or the
context indicates otherwise.



                        ABOUT VALERO ENERGY CORPORATION



     We are one of the largest and most geographically diverse independent
petroleum refining and marketing companies in the United States. As of March 31,
2000, we owned five refineries in Texas, Louisiana and New Jersey, providing us
with core operations on both the Gulf Coast and the East Coast. These refineries
are located in Corpus Christi, Houston, and Texas City in Texas, Krotz Springs,
Louisiana and Paulsboro, New Jersey. In addition, on March 2, 2000, we entered
into an agreement to purchase Exxon Mobil Corporation's Benicia, California
refinery and Exxon-branded California retail assets, which consist of
approximately 80 service station facilities and branded supplier relationships
with approximately 260 Exxon-branded service stations, for a purchase price of
$895 million plus the value of refinery inventories acquired in the transaction.
We believe the acquisition of these assets will provide us with a significant
presence on the West Coast and extends our geographic reach from coast to coast.
The acquisition of the Benicia refinery and the branded supplier relationships
closed on May 15, 2000, and the acquisition of the service station facilities is
expected to close on or about June 15, 2000. The acquisition of the Benicia
refinery increased our throughput capacity from approximately 790,000 barrels
per day to approximately 950,000 barrels per day.



     We produce premium, environmentally clean products such as reformulated
gasoline, low sulfur diesel and oxygenates and are able to produce gasoline
meeting the specifications of the California Air Resources Board, or CARB
gasoline. We also produce a substantial slate of middle distillates, jet fuel
and petrochemicals. We have distinguished our company among independent refiners
by cost effectively upgrading our refineries to not only increase output but
also increase overall refining complexity and flexibility, enhancing our ability
to process lower cost feedstocks into higher value-added premium products. We
process a wide slate of feedstocks including medium sour crude oils, heavy sweet
crudes and residual fuel oils, or resid, which can typically be purchased at a
discount to West Texas Intermediate, a benchmark crude oil. Excluding the
production of the Benicia refinery, over 55% of our total gasoline production is
reformulated gasoline, which sells at a premium over conventional grades of
gasoline. The Benicia refinery produces approximately 110,000 barrels per day of
gasoline, approximately 95% of which is CARB gasoline. Excluding the production
of the Benicia refinery, we also produce over 75% of our distillate slate as
low-sulfur diesel and jet fuel, which sell for a premium over high-sulfur
heating oil. In addition to our feedstock and product advantages, we have
synergies among our Gulf Coast refineries which allow us to transfer
intermediate feedstocks, such as deasphalted oil and atmospheric tower bottoms,
among the Texas City, Houston and Corpus Christi refineries. Our products are
marketed in 35 states as well as to select export markets.


                                        3
<PAGE>   7


     We were incorporated in Delaware in 1981 as Valero Refining and Marketing
Company, a wholly owned subsidiary of our predecessor company. On July 31, 1997,
our stock was distributed, or spun off, by our predecessor company to its
shareholders, and we changed our name to Valero Energy Corporation. Our common
stock is listed for trading on the New York Stock Exchange under the symbol
"VLO."



     We have our principal executive offices at One Valero Place, San Antonio,
Texas, 78212, and our telephone number is (210) 370-2000.



                          FORWARD-LOOKING INFORMATION



     This prospectus, including the information we incorporate by reference,
contains certain estimates, predictions, projections and other "forward-looking
statements" (as defined in Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934) that involve various risks and
uncertainties. While these forward-looking statements, and any assumptions upon
which they are based, are made in good faith and reflect our current judgment
regarding the direction of our business, actual results will almost always vary,
sometimes materially, from any estimates, predictions, projections, assumptions,
or other future performance suggested herein. These forward-looking statements
can generally be identified by the words "anticipate," "believe," "expect,"
"plan," "intend," "estimate," "project," "budget," "forecast," "will," "could,"
"should," "may" and similar expressions. These forward-looking statements
include, among other things, statements regarding:



     - the acquisition of Exxon Mobil Corporation's Benicia, California refinery
       and Exxon-branded California retail assets and our results of operations
       following the acquisition



     - future refining margins, including gasoline and heating oil margins



     - the expected cost of feedstocks, including crude oil discounts, and
       refining products



     - anticipated levels of crude oil and refined product inventories



     - our anticipated level of capital investments, including deferred
       turnaround and catalyst costs and capital expenditures for regulatory
       compliance and other purposes, and the effect of these capital
       investments on our results of operations



     - refinery utilization rates



     - anticipated trends in the supply and demand for crude oil feedstocks and
       refined products in the United States and elsewhere



     - expectations regarding environmental and other regulatory initiatives,
       and



     - the effect of general economic and other conditions on refining industry
       fundamentals



     We have based our forward-looking statements on our beliefs and assumptions
derived from information available to us at the time the statements are made.
Differences between actual results and any future performance suggested in our
forward-looking statements or projections could result from a variety of
factors, including the following:



     - the domestic and foreign supplies of refined products such as gasoline,
       diesel, heating oil and petrochemicals



     - the domestic and foreign supplies of crude oil and other feedstocks



     - the ability of the members of the Organization of Petroleum Exporting
       Countries to agree to and maintain oil price and production controls



     - the level of consumer demand, including seasonal fluctuations



     - refinery overcapacity or undercapacity


                                        4
<PAGE>   8


     - the actions taken by competitors, including both pricing and the
       expansion and retirement of refining capacity in response to market
       conditions



     - environmental and other regulations at both the state and federal levels
       and in foreign countries



     - political conditions in oil producing regions, including the Middle East



     - the level of foreign imports



     - accidents or other unscheduled shutdowns affecting our plants, machinery,
       pipelines or equipment, or those of our suppliers or customers



     - changes in the cost or availability of transportation for feedstocks and
       refined products



     - write-downs of inventories caused by a material decline in petroleum
       prices



     - the price, availability and acceptance of alternative fuels



     - cancellation of or failure to implement planned capital projects and
       realize the various assumptions and benefits projected for such projects



     - irregular weather, which can unforeseeably affect the price or
       availability of feedstocks and refined products



     - rulings, judgments, or settlements in litigation or other legal matters,
       including unexpected environmental remediation costs in excess of any
       reserves and claims of product liability



     - the introduction or enactment of federal or state legislation which may
       adversely affect our business or operations



     - changes in the credit ratings assigned to our debt securities and trade
       credit, and



     - overall economic conditions



     We caution you that any one of these factors, or a combination of these
factors, could materially affect our future results of operations and whether
our forward-looking statements ultimately prove to be accurate. These
forward-looking statements are not guarantees of our future performance, and our
actual results and future performance may differ materially from those suggested
in our forward-looking statements. When considering these forward-looking
statements, you should keep in mind the factors described under the heading
"Risk Factors" and other cautionary statements in this prospectus and the
documents we have incorporated by reference. We do not intend to update these
statements unless the securities laws require us to do so.



     All subsequent written and oral forward-looking statements attributable to
us or persons acting on our behalf are expressly qualified in their entirety by
the foregoing. We undertake no obligation to publicly release the result of any
revisions to any such forward-looking statements that may be made to reflect
events or circumstances after the date of this report or to reflect the
occurrence of unanticipated events.



                                USE OF PROCEEDS


     Unless we inform you otherwise in the prospectus supplement, we expect to
use the net proceeds from the sale of securities for general corporate purposes.
These purposes may include, but are not limited to:

     - equity investments in existing and future projects

     - acquisitions

     - working capital

     - capital expenditures

     - repayment or refinancing of debt or other corporate obligations

     - repurchases and redemptions of securities

                                        5
<PAGE>   9

Pending any specific application, we may initially invest funds in short-term
marketable securities or apply them to the reduction of short-term indebtedness.


                       RATIO OF EARNINGS TO FIXED CHARGES


     The following table sets forth the ratio of earnings to fixed charges for
the periods indicated:


<TABLE>
<CAPTION>
                                              THREE
                                              MONTHS
                                              ENDED
                                            MARCH 31,           YEARS ENDED DECEMBER 31,
                                           ------------   ------------------------------------
                                           2000    1999   1999    1998   1997    1996    1995
                                           -----   ----   -----   ----   -----   -----   -----
<S>                                        <C>     <C>    <C>     <C>    <C>     <C>     <C>
Ratio of earnings to fixed charges.......  3.42x    --    1.23x    --    4.08x   1.74x   2.61x
</TABLE>



     We have computed the ratios of earnings to fixed charges by dividing
earnings by fixed charges. For this purpose, earnings consist of consolidated
income from continuing operations before income taxes and fixed charges
(excluding capitalized interest), with certain other adjustments. Fixed charges
consist of total interest, whether expensed or capitalized, including
amortization of debt expense and premiums or discounts related to outstanding
indebtedness, and one-third (the proportion deemed representative of the
interest factor) of rental expense. For the three months ended March 31, 1999,
our earnings were insufficient to cover fixed charges by $4.4 million. This
deficiency was due primarily to (i) depressed refined product margins resulting
from weak refining industry fundamentals and (ii) the effect of significant
downtime at our Corpus Christi refinery in early 1999 due to a major maintenance
turnaround and expansion of the heavy oil cracker and related units. For the
year ended December 31, 1998, our earnings were insufficient to cover fixed
charges by $80.6 million. This deficiency was due primarily to a $170.9 million
pre-tax charge to earnings to write down the carrying amount of our refinery
inventories to market value. Excluding the effect of the inventory write-down,
the ratio of earnings to fixed charges would have been 2.68x.



     Prior to our spin-off from our former parent on July 31, 1997, our parent
had preferred stock outstanding which was issued in connection with the
discontinued natural gas related services business. We had no preferred stock
outstanding with respect to continuing operations for any period presented. As a
result, the ratio of earnings to combined fixed charges and preferred stock
dividends for each of the periods is the same as the ratio of earnings to fixed
charges.



                         DESCRIPTION OF DEBT SECURITIES



     The debt securities covered by this prospectus will be our general
unsecured obligations. We will issue senior debt securities under an indenture
dated as of December 12, 1997 between us and The Bank of New York, a New York
banking corporation, as trustee. We will issue subordinated debt securities
under an indenture to be entered into between us and The Bank of New York, as
indenture trustee. The indenture for the senior debt securities and the
indenture for the subordinated debt securities will be substantially identical,
except for the provisions relating to subordination and restrictive covenants.
We sometimes refer to the senior indenture and the subordinated indenture as the
"indentures."


     We have summarized selected provisions of the indentures and the debt
securities below. This summary is not complete. We have filed the senior
indenture and the form of subordinated indenture with the SEC as exhibits to the
registration statement, and you should read the indentures for provisions that
may be important to you before investing in these securities. Please read "Where
You Can Find More Information."

RANKING

     The senior debt securities will constitute senior debt and will rank
equally with all of our unsecured and unsubordinated debt. The subordinated debt
securities will be subordinated to, and thus have a junior

                                        6
<PAGE>   10


position to, the senior debt securities and all of our other senior debt.
Neither indenture limits the amount of debt securities that can be issued under
that indenture or the amount of additional indebtedness Valero or any of its
subsidiaries may incur. We may issue debt securities under either indenture from
time to time in one or more series, each in an amount we authorize prior to
issuance. The trustee will authenticate and deliver debt securities executed and
delivered to it by us as set forth in the applicable indenture.



     Valero is organized as a holding company that owns subsidiary companies.
Its subsidiary companies conduct substantially all of its business. The holding
company structure results in two principal risks:


     - Valero's subsidiaries may be restricted by contractual provisions or
       applicable laws from providing it the cash that it needs to pay parent
       company debt service obligations, including payments on the debt
       securities

     - In any liquidation, reorganization or insolvency proceeding involving
       Valero, your claim as a holder of the debt securities will be effectively
       junior to the claims of holders of any indebtedness or preferred stock of
       our subsidiaries


TERMS


     The prospectus supplement relating to any series of debt securities we are
offering will include specific terms relating to that offering. These terms will
include some or all of the following:

     - whether the debt securities are senior or subordinated debt securities

     - the title of the debt securities

     - any limit on the total principal amount of the debt securities

     - the date or dates on which the principal of the debt securities will be
       payable

     - any interest rate, or the method of determining the interest rate, on the
       debt securities, the date from which interest will accrue, interest
       payment dates and record dates


     - any right to extend or defer the interest payment periods and the
       duration of the extension


     - if other than as set forth in this prospectus, the place or places where
       payments on the debt securities will be payable

     - any optional redemption provisions

     - any sinking fund or other provisions that would obligate us to redeem or
       purchase the debt securities

     - any provisions for the remarketing of the debt securities

     - any changes or additions to the events of default or covenants

     - whether we will issue the debt securities in individual certificates to
       each holder in registered or bearer form, or in the form of temporary or
       permanent global securities held by a depositary on behalf of holders

     - the denominations in which we will issue the debt securities, if other
       than denominations of an integral multiple of $1,000

     - the terms of any right to convert debt securities into shares of our
       common stock or other securities or property

     - whether payments on the debt securities will be payable in foreign
       currency or currency units (including composite currencies) or another
       form

     - any provisions that would determine the amount of principal, premium, if
       any, or interest, if any, on the debt securities by references to an
       index or pursuant to a formula

                                        7
<PAGE>   11

     - the portion of the principal amount of the debt securities that will be
       payable if the maturity is accelerated, if other than the entire
       principal amount

     - any other terms of the debt securities not inconsistent with the relevant
       indentures

     We may sell the debt securities at a discount, which may be substantial,
below their stated principal amount. These debt securities may bear no interest
or interest at a rate that at the time of issuance is below market rates. We
will describe in the prospectus supplement any material United States federal
income tax consequences applicable to those securities.

     If we sell any of the debt securities for any foreign currency or currency
unit or if payments on the debt securities are payable in any foreign currency
or currency unit, we will describe in the prospectus supplement the
restrictions, elections, tax consequences, specific terms and other information
relating to those debt securities and the foreign currency or currency unit.


CONSOLIDATION, MERGER AND SALE



     Valero has agreed in the indentures that we will consolidate with or merge
into any entity or transfer or dispose of all or substantially all of our assets
to any entity only if:


     - Valero is the continuing corporation, or

     - if Valero is not the continuing corporation, the successor is organized
       and existing under the laws of any United States jurisdiction and assumes
       all of Valero's obligations under the indenture and the debt securities,
       and

     - in either case, immediately after giving effect to the transaction, no
       default or event of default would occur and be continuing

EVENTS OF DEFAULT

     Unless we inform you otherwise in the prospectus supplement, the following
are events of default under the indentures with respect to a series of debt
securities:

     - our failure to pay interest on any debt security of that series for 30
       days

     - our failure to pay principal of or any premium on any debt security of
       that series when due

     - our failure to make any sinking fund payment for any debt security of
       that series when due


     - our failure to perform any of our other covenants or breach of any of our
       other warranties in that indenture, other than a covenant or warranty
       included in the indenture solely for the benefit of another series of
       debt securities, and that failure continues for 60 days after written
       notice is given or received as provided in the indentures


     - certain bankruptcy, insolvency or reorganization events involving Valero
       Energy Corporation

     - our failure to pay at final maturity, after the expiration of any
       applicable grace periods, or upon the declaration of acceleration of
       payment of, any of our indebtedness for borrowed money in excess of $25
       million, if such indebtedness is not discharged, or such acceleration is
       not annulled, within 10 days after written notice is given as provided in
       the indentures

     - any other event of default we may provide for that series


     If an event of default for any series of debt securities occurs and is
continuing, the trustee or the holders of at least 25% in principal amount of
the outstanding debt securities of the series affected by the default may
declare the principal amount of all the debt securities of that series to be due
and payable immediately. The holders of a majority in principal amount of the
outstanding debt securities of that series may in some cases rescind and annul
that acceleration.


                                        8
<PAGE>   12

     In most cases, the trustee will be under no obligation to exercise any of
its rights or powers under the indentures at the request or direction of any of
the holders, unless the holders have offered to the trustee reasonable
indemnity. Subject to this provision for indemnification, the holders of a
majority in aggregate principal amount of the outstanding debt securities of any
series may direct the time, method and place of:

     - conducting any proceeding for any remedy available to the trustee

     - exercising any trust or power conferred on the trustee, with respect to
       the debt securities of that series

     Each indenture requires us to furnish to the trustee annually a statement
as to our performance of certain of our obligations under the indenture and as
to any default in performance.

MODIFICATION AND WAIVER

     We may modify or amend each of the indentures without the consent of any
holders of the debt securities in certain circumstances, including to:

     - evidence the assumption of our obligations under the indenture and the
       debt securities by a successor

     - add further covenants for the protection of the holders

     - cure any ambiguity or correct any inconsistency in the indenture, so long
       as such action will not adversely affect the interests of the holders

     - establish the form or terms of debt securities of any series

     - evidence the acceptance of appointment by a successor trustee

     We may modify or amend each indenture with the consent of the holders of a
majority in principal amount of the outstanding debt securities of each series
issued under the indenture affected by the modification or amendment. Without
the consent of the holder of each outstanding debt security affected, however,
no modification may:


     - change the stated maturity of the principal of, or any installment of
       interest on, any debt security



     - reduce the principal amount of, the interest on, or the premium payable
       on, any debt security


     - reduce the amount of principal of discounted debt securities payable upon
       acceleration of maturity

     - change the place of payment or the currency in which any debt security is
       payable

     - impair the right to institute suit for the enforcement of any payment on
       any debt security

     - reduce quorum or voting rights

     The holders of a majority in aggregate principal amount of the outstanding
debt securities of each series may waive past defaults by us under the
indentures with respect to the debt securities of that series only. Those
holders may not, however, waive any default in any payment on any debt security
of that series or compliance with a provision that cannot be modified or amended
without the consent of each holder affected.

DISCHARGE


     We will be discharged from all obligations of any series of debt
securities, except for certain surviving obligations to register the transfer or
exchange of the debt securities and any right by the holders to receive
additional amounts under the indentures if:



     - all debt securities of that series previously authenticated and delivered
       under the relevant indenture have been delivered to the trustee for
       cancellation or

                                        9
<PAGE>   13


     - all debt securities of that series have become due and payable or will
       become due and payable within one year, at maturity or by redemption, and
       we deposit with the trustee, in trust, sufficient money to pay the entire
       indebtedness of all the debt securities of that series on the dates the
       payments are due in accordance with the terms of the debt securities


     To exercise the right of deposit described above, we must deliver to the
trustee an opinion of counsel and an officers' certificate stating that all
conditions precedent to the satisfaction and discharge of the relevant indenture
have been complied with.

FORM, EXCHANGE, REGISTRATION AND TRANSFER

     Unless we inform you otherwise in the prospectus supplement, we will issue
the debt securities only in fully registered form, without coupons, in
denominations of $1,000 and integral multiples.

     Debt securities will be exchangeable for other debt securities of the same
series, the same total principal amount and the same terms in such authorized
denominations as may be requested. Holders may present debt securities for
registration of transfer at the office of the security registrar or any transfer
agent we designate. The security registrar or transfer agent will effect the
transfer or exchange when it is satisfied with the documents of title and
identity of the person making the request. We will not charge a service charge
for any transfer or exchange of the debt securities. We may, however, require
payment of any tax or other governmental charge payable for the registration of
the transfer or exchange.

     We will appoint the trustee under each indenture as security registrar for
the debt securities issued under that indenture. We are required to maintain an
office or agency for transfers and exchanges in each place of payment. We may at
any time designate additional transfer agents for any series of debt securities.

     We will not be required:

     - to issue, register the transfer of or exchange debt securities of a
       series during a period beginning 15 business days prior to the day of
       mailing of a notice of redemption of debt securities of that series
       selected for redemption and ending on the close of business on the day of
       mailing of the relevant notice or

     - to register the transfer of or exchange any debt security, or portion of
       any debt security, called for redemption, except the unredeemed portion
       of any debt security we are redeeming in part

PAYMENT AND PAYING AGENTS

     Unless we inform you otherwise in the prospectus supplement, principal and
interest will be payable, and the debt securities will be transferable and
exchangeable, at the office or offices of the applicable trustee or any paying
agent we designate. At our option, we will pay interest on the debt securities
by check mailed to the holder's registered address or by wire transfer for
global debt securities. Unless we inform you otherwise in a prospectus
supplement, we will make interest payments to the persons in whose name the debt
securities are registered at the close of business on the record date for each
interest payment date.

     In most cases, the trustee and paying agent will repay to us upon written
request any funds held by them for payments on the debt securities that remain
unclaimed for two years after the date upon which that payment has become due.
After payment to us, holders entitled to the money must look to us for payment.

                                       10
<PAGE>   14

BOOK-ENTRY AND SETTLEMENT

     Valero may issue the debt securities of a series in the form of one or more
global debt securities that would be deposited with a depositary or its nominee
identified in the prospectus supplement. The prospectus supplement will
describe:

     - any circumstances under which beneficial owners may exchange their
       interests in a global debt security for certificated debt securities of
       the same series with the same total principal amount and the same terms

     - the manner in which Valero will pay principal of and any premium and
       interest on a global debt security

     - the terms of any depositary arrangement and the rights and limitations of
       owners of beneficial interests in any global debt security

NOTICES

     Notices to holders will be given by mail to the addresses of such holders
as they appear in the security register.

GOVERNING LAW

     New York law will govern each indenture and the debt securities.

THE TRUSTEE


     The Bank of New York is the trustee under the senior indenture. Its address
is 101 Barclay Street, Floor 21 West, New York, New York 10286. Pursuant to the
senior indenture, The Bank of New York serves as trustee with regard to
approximately $450,000,000 aggregate principal amount of our senior unsecured
notes and receives customary fees for its services. The Bank of New York also
will serve as trustee under the subordinated indenture. Please read "About This
Prospectus."



     The holders of a majority in principal amount of the outstanding debt
securities of any series issued under each indenture will have the right to
direct the time, method and place of conducting any proceeding for exercising
any remedy available to the trustee, subject to certain exceptions. If an event
of default occurs and is continuing, the trustee will be required in the
exercise of its powers to use the degree of care and skill of a prudent person
in the conduct of his own affairs. The trustee will be obligated to exercise any
of its rights or powers under the relevant indenture at the request of any
holders of debt securities of any series issued under that indenture only after
those holders have offered the trustee indemnity reasonably satisfactory to it.
The trustee may resign at any time or the holders of a majority in principal
amount of the debt securities may remove the trustee. If the trustee resigns, is
removed or becomes incapable of acting as trustee or if a vacancy occurs in the
office of the trustee for any reason, we will appoint a successor trustee in
accordance with the provisions of the applicable indenture.


     If the trustee becomes one of our creditors, it will be subject to
limitations in the indenture on its rights to obtain payment of claims or to
realize on certain property received for any claim, as security or otherwise.
The trustee may engage in other transactions with us. If, however, it acquires
any conflicting interest, it must eliminate that conflict or resign as required
under the indenture.

SUBORDINATION UNDER THE SUBORDINATED INDENTURE

     Under the subordinated indenture, payment of the principal, interest and
any premium on the subordinated debt securities will generally be subordinated
and junior in right of payment to the prior

                                       11
<PAGE>   15


payment in full of all senior debt. Unless we inform you otherwise in the
prospectus supplement, we may not make any payment of principal of, interest on,
or any premium on, the subordinated debt securities if:


     - we fail to pay the principal, interest, premium or any other amounts on
       any senior debt when due or

     - we default in performing any other covenant (a "covenant default") in any
       senior debt that we have designated if the covenant default allows the
       holders of that senior debt to accelerate the maturity of the senior debt
       they hold

     Unless we inform you otherwise in the prospectus supplement, a covenant
default will prevent us from paying the subordinated debt securities only for up
to 179 days after holders of the senior debt give the trustee for the
subordinated debt securities notice of the covenant default.

     The subordination does not affect our obligation, which is absolute and
unconditional, to pay, when due, the principal of and any premium and interest
on the subordinated debt securities. In addition, the subordination does not
prevent the occurrence of any default under the subordinated indenture.

     The subordinated indenture will not limit the amount of senior debt that we
may incur. As a result of the subordination of the subordinated debt securities,
if we became insolvent, holders of subordinated debt securities may receive less
on a proportionate basis than other creditors.

     Unless we inform you otherwise in the prospectus supplement, "senior debt"
will mean all indebtedness, including guarantees, of Valero, unless the
indebtedness states that it is not senior to the subordinated debt securities or
our other junior debt.

RESTRICTIVE COVENANTS IN THE SENIOR INDENTURE

     We have agreed to two principal restrictions on our activities for the
benefit of holders of the senior debt securities. Unless waived or amended, the
restrictive covenants summarized below will apply to a series of debt securities
issued under the senior indenture as long as any of those debt securities is
outstanding, unless the prospectus supplement for the series states otherwise.
We have used in this summary description terms that we have defined below under
"-- Glossary."

     Limitations on Liens


     We have agreed that when any senior debt securities are outstanding neither
we nor any of our subsidiaries will create or assume any liens upon any of our
receivables or other assets or any asset, stock or indebtedness of any of our
subsidiaries unless those senior debt securities are secured equally and ratably
with or prior to the debt secured by the lien. This covenant has exceptions that
permit:


     - subject to certain limitations, any lien created to secure all or part of
       the purchase price of any property or to secure a loan made to finance
       the acquisition of the property described in such lien

     - subject to certain limitations, any lien existing on any property at the
       time of its acquisition or created not later than 12 months thereafter

     - subject to certain limitations, any lien created in connection with the
       operation or use of any property acquired or constructed by us and
       created within 12 months after the acquisition, construction or
       commencement of full operations on the property

     - any mechanic's or materialmen's lien or any lien related to workmen's
       compensation or other insurance

     - any lien arising by reason of deposits with or the giving of any form of
       security to any governmental agency, including for taxes and other
       governmental charges

     - liens for taxes or charges which are not delinquent or are being
       contested in good faith

                                       12
<PAGE>   16

     - any judgment lien the execution of which has been stayed or which has
       been adequately appealed and secured

     - any lien incidental to the conduct of our business which was not incurred
       in connection with the borrowing of money or the obtaining of advances or
       credit and which does not materially interfere with the conduct of our
       business

     - any intercompany lien

     - liens incurred in connection with the borrowing of funds, if such funds
       are used within 120 days to repay indebtedness of at least an equal
       amount secured by a lien on our property having a fair market value at
       least equal to the fair market value of the property securing the new
       lien

     - any lien created to secure indebtedness and letter of credit
       reimbursement obligations incurred in connection with the extension of
       working capital financing

     - any lien existing on the date of the indenture

     - subject to an aggregate limit of $60 million, any lien on cash, cash
       equivalents, options or futures positions and other account holdings
       securing derivative obligations or otherwise incurred in connection with
       margin accounts with brokerage or commodities firms

     - subject to an aggregate limit of 10% of our consolidated net tangible
       assets, any liens not otherwise permitted by any of the other exceptions
       set forth in the indenture

     Limitations on Sale/Leaseback Transactions

     We have agreed that neither we nor our subsidiaries would enter into any
sale/leaseback transactions with regard to any principal property, providing for
the leasing back to us or a subsidiary by a third party for a period of more
than three years of any asset which has been or is to be sold or transferred by
us or such subsidiary to such third party or to any other person. This covenant
has exceptions that permit transactions of this nature under the following
circumstances:

     - we would be entitled, pursuant to the "Limitations on Liens" covenant
       described above, to incur indebtedness secured by a lien on the property
       to be leased, without equally and ratably securing the senior debt
       securities then outstanding or

     - within 120 days of the effective date of such sale/leaseback transaction,
       we apply an amount equal to the value of such transaction:

      - to the voluntary retirement of funded debt or

      - to the purchase of another principal property


     In addition, subject to a limit (on an aggregated basis with indebtedness
secured by liens permitted by the limitations on liens covenant described above)
of 10% of our consolidated net tangible assets, we can enter into sale/leaseback
transactions not otherwise permitted by the express provisions of the indenture.


     Glossary

     We define the following terms in the senior indenture. We use them here
with the same definitions. Generally accepted accounting principles should be
used to determine all items in this section, unless otherwise indicated.

     "Consolidated net tangible assets" means the total amount of assets shown
on a consolidated balance sheet of us and our subsidiaries (excluding goodwill
and other intangible assets), less all current liabilities (excluding notes
payable and current maturities of long-term debt).

     "Funded debt" means generally any indebtedness for money borrowed, created,
issued, incurred, assumed or guaranteed which would be classified as long-term
debt.

                                       13
<PAGE>   17

     "Principal Property" means any of our or our subsidiaries' refineries or
refinery-related assets, distribution facilities or other real property which
has a net book value exceeding 2.5% of consolidated net tangible assets, but not
including any property which in our opinion is not material to our and our
subsidiaries' total business conducted as an entirety or any portion of a
particular property that is similarly found not to be material to the use or
operation of such property.

     "Subsidiary" means any entity of which at the time of determination we or
one or more of our subsidiaries owns or controls directly or indirectly more
than 50% of the shares of voting stock or the outstanding partnership or similar
interests and any limited partnership of which we or any one of our subsidiaries
are a general partner.


                          DESCRIPTION OF CAPITAL STOCK


     Our authorized capital stock consists of:

     - 150,000,000 shares of common stock, par value $.01 per share

     - 20,000,000 shares of preferred stock, par value $.01 per share, issuable
       in series

     We have summarized selected aspects of our capital stock below. The summary
is not complete. For a complete description, you should refer to our restated
certificate of incorporation, restated by-laws and the Rights Agreement, dated
as of July 17, 1997 between us and Harris Trust and Savings Bank, as rights
agent, all of which are exhibits to the registration statement of which this
prospectus is part.

COMMON STOCK

     Each share of common stock is entitled to participate equally in dividends
as and when declared by our board of directors. The payment of dividends on our
common stock may be limited by obligations we may have to holders of any
preferred stock. For information regarding restrictions on payments of
dividends, see the prospectus supplement applicable to any issuance of common
stock.

     Common stockholders are entitled to one vote for each share held on all
matters submitted to them. The common stock does not have cumulative voting
rights, meaning that holders of a majority of the shares of common stock voting
for the election of directors can elect all the directors if they choose to do
so.

     If we liquidate or dissolve our business, the holders of common stock will
share ratably in the distribution of assets available for distribution to
stockholders after creditors are paid and preferred stockholders receive their
distributions. The shares of common stock have no preemptive rights and are not
convertible, redeemable or assessable or entitled to the benefits of any sinking
fund.

     All issued and outstanding shares of common stock are fully paid and
nonassessable. Any shares of common stock we offer under this prospectus will be
fully paid and nonassessable.

     The common stock is listed on the New York Stock Exchange and trades under
the symbol "VLO."

PREFERRED STOCK

     Our board of directors can, without action by stockholders, issue one or
more series of preferred stock. The board can determine for each series the
number of shares, designation, relative voting rights, dividend rates,
liquidation and other rights, preferences and limitations. In some cases, the
issuance of preferred stock could delay or discourage a change in control of us.

     We have summarized material provisions of the preferred stock in this
section. This summary is not complete. We will file the form of the preferred
stock with the SEC before we issue any of it, and you should read it for
provisions that may be important to you.

                                       14
<PAGE>   18

     The prospectus supplement relating to any series of preferred stock we are
offering will include specific terms relating to the offering. These terms will
include some or all of the following:

     - the title of the preferred stock

     - the maximum number of shares of the series

     - the dividend rate or the method of calculating the dividend, the date
       from which dividends will accrue and whether dividends will be cumulative

     - any liquidation preference

     - any redemption provisions

     - any sinking fund or other provisions that would obligate us to redeem or
       purchase the preferred stock

     - any terms for the conversion or exchange of the preferred stock for other
       securities of us or any other entity

     - any voting rights

     - any other preferences and relative, participating, optional or other
       special rights or any qualifications, limitations or restrictions on the
       rights of the shares

     Any shares of preferred stock we issue will be fully paid and
nonassessable.

     Our board of directors has reserved for issuance pursuant to our
Stockholder Rights Plan described below a total of 1,500,000 shares of Junior
Participating Preferred Stock, Series I. We have not issued any shares of
preferred stock at the date of this prospectus.

ANTI-TAKEOVER PROVISIONS


     The provisions of Delaware law and our restated certificate of
incorporation and our restated by-laws summarized below may have an
anti-takeover effect and may delay, defer or prevent a tender offer or takeover
attempt that a stockholder might consider in his or her best interest, including
those attempts that might result in a premium over the market price for the
common stock.


Staggered Board of Directors

     Our board of directors is divided into three classes that are elected for
staggered three-year terms. The classification of the board of directors has the
effect of requiring at least two annual stockholder meetings, instead of one, to
effect a change in control of the board of directors. Holders of 60% of the
shares of common stock entitled to vote in the election of directors may remove
a director for cause, but stockholders may not remove any director without
cause.

Fair Price Provision

     Our restated certificate of incorporation contains a fair price provision.
Mergers, consolidations and other business combinations involving us and an
"interested stockholder" require the approval of holders of at least 66 2/3% of
our outstanding voting stock not owned by the interested stockholder. Interested
stockholders include the holder of 15% or more of our outstanding voting stock.
The 66 2/3% voting requirement does not apply, however, if the "continuing
directors," as defined in our restated certificate of incorporation, approve the
business combination, or the business combination meets other specified
conditions.

                                       15
<PAGE>   19

Liability of Our Directors

     As permitted by the Delaware corporations statute, we have included in our
restated certificate of incorporation a provision that limits our directors'
liability for monetary damages for breach of their fiduciary duty of care to us
and our stockholders. The provision does not affect the liability of a director:

     - for any breach of his/her duty of loyalty to us or our stockholders

     - for acts or omissions not in good faith or which involve intentional
       misconduct or a knowing violation of law

     - for the declaration or payment of unlawful dividends or unlawful stock
       repurchases or redemptions or

     - for any transaction from which the director derived an improper personal
       benefit

     This provision also does not affect a director's responsibilities under any
other laws, such as the federal securities laws or state or federal
environmental laws.

Stockholder Proposals and Director Nominations

     Our stockholders can submit stockholder proposals and nominate candidates
for our board of directors if the stockholders follow advance notice procedures
described in our restated by-laws.

     Generally, stockholders must submit a written notice between 60 and 90 days
before the first anniversary of the date of our previous year's annual
stockholders' meeting. To nominate directors, the notice must include the name
and address of the stockholder, the class and number of shares owned by the
stockholder, information about the nominee required by the SEC and a description
of any arrangements or understandings with respect to the election of directors
that exist between the stockholder and any other person. To make stockholder
proposals, the notice must include a description of the proposal, the reasons
for bringing the proposal before the meeting, the name and address of the
stockholder, the class and number of shares owned by the stockholder and any
material interest of the stockholder in the proposal.

     In each case, if we have changed the date of the annual meeting to more
than 30 days before or 60 days after the anniversary date of our previous year's
annual stockholders' meeting, stockholders must submit the notice between 60 and
90 days prior to such annual meeting or no later than 10 days after the day we
make public the date of the annual meeting.

     Director nominations and stockholder proposals that are late or that do not
include all required information may be rejected. This could prevent
stockholders from bringing certain matters before an annual meeting, including
making nominations for directors.

Delaware Anti-takeover Statute

     We are a Delaware corporation and are subject to Section 203 of the
Delaware General Corporation Law. In general, Section 203 prevents us from
engaging in a business combination with an "interested stockholder" (generally,
a person owning 15% or more of our outstanding voting stock) for three years
following the time that person becomes a 15% stockholder unless one of the
following is satisfied:

     - before that person became a 15% stockholder, our board of directors
       approved the transaction in which the stockholder became a 15%
       stockholder or approved the business combination

     - upon completion of the transaction that resulted in the stockholder's
       becoming a 15% stockholder, the stockholder owns at least 85% of our
       voting stock outstanding at the time the transaction began (excluding
       stock held by directors who are also officers and by employee stock plans
       that do not provide employees with the right to determine confidentially
       whether shares held subject to the plan will be tendered in a tender or
       exchange offer) or

                                       16
<PAGE>   20

     - after the transaction in which that person became a 15% stockholder, the
       business combination is approved by our board of directors and authorized
       at a stockholders' meeting by at least two-thirds of the outstanding
       voting stock not owned by the 15% stockholder

     Under Section 203, these restrictions also do not apply to certain business
combinations proposed by a 15% stockholder following the disclosure of an
extraordinary transaction with a person who was not a 15% stockholder during the
previous three years or who became a 15% stockholder with the approval of a
majority of our directors. This exception applies only if the extraordinary
transaction is approved or not opposed by a majority of our directors who were
directors before any person became a 15% stockholder in the previous three
years, or the successors of these directors.

Other Provisions

     Our restated certificate of incorporation also provides that:

     - stockholders may act only at an annual or special meeting and not by
       written consent

     - an 80% vote of the outstanding voting stock is required for the
       stockholders to amend our restated by-laws and

     - an 80% vote of the outstanding voting stock is required to amend our
       restated certificate of incorporation with respect to certain matters,
       including those described in the first two bullet points above

TRANSFER AGENT AND REGISTRAR

     Harris Trust and Savings Bank, Chicago, Illinois, is our transfer agent and
registrar.

STOCKHOLDER RIGHTS PLAN

     We have a stockholder rights plan under which one preferred share purchase
right is attached to each outstanding share of our common stock. The rights
become exercisable under specified circumstances, including any person or group
(an "acquiring person") becoming the beneficial owner of 15% or more of our
outstanding common stock, subject to specified exceptions. Each right entitles
the registered holder to purchase from us one one-hundredth of a share of Junior
Participating Preferred Stock, Series I, at an exercise price of $100, subject
to adjustment under specified circumstances. If events specified in the
stockholder rights plan occur, each holder of rights other than the acquiring
person can exercise their rights. When a holder exercises a right, the holder
will be entitled to receive common stock valued at twice the exercise price of
the right. In some cases, the holder will receive cash, property or other
securities instead of common stock. We may redeem the rights for $0.01 per right
at any time prior to the tenth day after a person or group becomes an acquiring
person. The stockholder rights plan and the rights expire in June 2007.


                            DESCRIPTION OF WARRANTS



     We may issue warrants to purchase debt securities, common stock, preferred
stock or other securities. We may issue warrants independently or together with
other securities. Warrants sold with other securities may be attached to or
separate from the other securities. We will issue warrants under one or more
warrant agreements between us and a warrant agent that we will name in the
prospectus supplement.


     The prospectus supplement relating to any warrants we are offering will
include specific terms relating to the offering. These terms will include some
or all of the following:

     - the title of the warrants

     - the aggregate number of warrants offered

                                       17
<PAGE>   21

     - the designation, number and terms of the debt securities, common stock,
       preferred stock or other securities purchasable upon exercise of the
       warrants and procedures by which those numbers may be adjusted

     - the exercise price of the warrants

     - the dates or periods during which the warrants are exercisable

     - the designation and terms of any securities with which the warrants are
       issued

     - if the warrants are issued as a unit with another security, the date on
       and after which the warrants and the other security will be separately
       transferable

     - if the exercise price is not payable in U.S. dollars, the foreign
       currency, currency unit or composite currency in which the exercise price
       is denominated

     - any minimum or maximum amount of warrants that may be exercised at any
       one time


     - any terms relating to the modification of the warrants


     - any terms, procedures and limitations relating to the transferability,
       exchange or exercise of the warrants


     The description in the prospectus supplement will not necessarily be
complete, and reference will be made to the warrant agreements which will be
filed with the SEC.



                              PLAN OF DISTRIBUTION


     We may sell the offered securities in and outside the United States (a)
through underwriters or dealers, (b) directly to purchasers, including our
affiliates, (c) through agents or (d) through a combination of any of these
methods. The prospectus supplement will include the following information:

     - the terms of the offering


     - the names of any underwriters or agents


     - the name or names of any managing underwriter or underwriters

     - the purchase price of the securities from us

     - the net proceeds to us from the sale of the securities

     - any delayed delivery arrangements

     - any underwriting discounts, commissions and other items constituting
       underwriters' compensation

     - any initial public offering price

     - any discounts or concessions allowed or reallowed or paid to dealers

     - any commissions paid to agents

SALE THROUGH UNDERWRITERS OR DEALERS

     If we use underwriters in the sale, the underwriters will acquire the
securities for their own account. The underwriters may resell the securities
from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. Underwriters may offer securities to the public either
through underwriting syndicates represented by one or more managing underwriters
or directly by one or more firms acting as underwriters. Unless we inform you
otherwise in the prospectus supplement, the obligations of the underwriters to
purchase the securities will be subject to certain conditions, and the
underwriters will be obligated to purchase all the offered

                                       18
<PAGE>   22

securities if they purchase any of them. The underwriters may change from time
to time any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers.

     During and after an offering through underwriters, the underwriters may
purchase and sell the securities in the open market. These transactions may
include overallotment and stabilizing transactions and purchases to cover
syndicate short positions created in connection with the offering. The
underwriters may also impose a penalty bid, which means that selling concessions
allowed to syndicate members or other broker-dealers for the offered securities
sold for their account may be reclaimed by the syndicate if the offered
securities are repurchased by the syndicate in stabilizing or covering
transactions. These activities may stabilize, maintain or otherwise affect the
market price of the offered securities, which may be higher than the price that
might otherwise prevail in the open market. If commenced, the underwriters may
discontinue these activities at any time.

     If we use dealers in the sale of securities, we will sell the securities to
them as principals. They may then resell those securities to the public at
varying prices determined by the dealers at the time of resale. We will include
in the prospectus supplement the names of the dealers and the terms of the
transaction.

DIRECT SALES AND SALES THROUGH AGENTS

     We may sell the securities directly. In this case, no underwriters or
agents would be involved. We may also sell the securities through agents we
designate from time to time. In the prospectus supplement, we will name any
agent involved in the offer or sale of the offered securities, and we will
describe any commissions payable by us to the agent. Unless we inform you
otherwise in the prospectus supplement, any agent will agree to use its
reasonable best efforts to solicit purchases for the period of its appointment.

     We may sell the securities directly to institutional investors or others
who may be deemed to be underwriters within the meaning of the Securities Act of
1933 with respect to any sale of those securities. We will describe the terms of
any such sales in the prospectus supplement.

DELAYED DELIVERY CONTRACTS

     If we so indicate in the prospectus supplement, we may authorize agents,
underwriters or dealers to solicit offers from certain types of institutions to
purchase securities from us at the public offering price under delayed delivery
contracts. These contracts would provide for payment and delivery on a specified
date in the future. The contracts would be subject only to those conditions
described in the prospectus supplement. The prospectus supplement will describe
the commission payable for solicitation of those contracts.

GENERAL INFORMATION

     We may have agreements with the agents, dealers and underwriters to
indemnify them against certain civil liabilities, including liabilities under
the Securities Act of 1933, or to contribute with respect to payments that the
agents, dealers or underwriters may be required to make. Agents, dealers and
underwriters may be customers of, engage in transactions with or perform
services for us in the ordinary course of their businesses.


                                 LEGAL MATTERS



     Mr. Jay D. Browning, Esq., Managing Attorney, Corporate Law and Secretary
of Valero, will issue opinions about the legality of the offered securities for
us. Mr. Browning is our employee and at May 1, 2000, beneficially owned 1,419
shares of our common stock (including shares held under employee benefit plans)
and held options under our employee stock option plans to purchase an additional
28,412 shares of our common stock. None of such shares or options were granted
in connection with the offering of the securities. Any underwriters will be
advised about other issues relating to any offering by their own legal counsel.


                                       19
<PAGE>   23


                                    EXPERTS



     Our audited consolidated financial statements incorporated by reference in
this prospectus from our annual report on Form 10-K for the year ended December
31, 1999 have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
incorporated in this prospectus by reference in reliance upon the authority of
said firm as experts in accounting and auditing in giving said report.



                      WHERE YOU CAN FIND MORE INFORMATION


     We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You can read and copy any materials we file with the
SEC at the SEC's public reference room at 450 Fifth Street, N.W., Washington,
D.C. 20549. You can obtain information about the operation of the SEC's public
reference room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a
web site that contains information we file electronically with the SEC, which
you can access over the Internet at http://www.sec.gov. You can obtain
information about us at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.

     This prospectus is part of a registration statement we have filed with the
SEC relating to the securities we may offer. As permitted by SEC rules, this
prospectus does not contain all of the information we have included in the
registration statement and the accompanying exhibits and schedules we file with
the SEC. You may refer to the registration statement, the exhibits and schedules
for more information about us and our securities. The registration statement,
exhibits and schedules are available at the SEC's public reference room or
through its web site.


                    INFORMATION WE INCORPORATE BY REFERENCE


     We are incorporating by reference information we file with the SEC, which
means that we are disclosing important information to you by referring you to
those documents. The information we incorporate by reference is an important
part of this prospectus, and information that we file later with the SEC
automatically will update and supersede this information. We incorporate by
reference the documents listed below and any future filings we make with the SEC
under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
until we sell all the securities:

     - our annual report on Form 10-K for the year ended December 31, 1999


     - our quarterly report on Form 10-Q for the quarterly period ended March
       31, 2000


     - the description of our common stock contained in our registration
       statement on Form 8-A, as may be amended from time to time to update that
       description

     - the description of the rights associated with our common stock contained
       in our registration statement on Form 8-A, as may be amended from time to
       time to update that description


     - our current report on Form 8-K dated March 17, 2000 and filed with the
       SEC on March 20, 2000


     You may request a copy of these filings (other than an exhibit to those
filings unless we have specifically incorporated that exhibit by reference into
the filing), at no cost, by writing or telephoning us at the following address:

     Valero Energy Corporation
     One Valero Place
     San Antonio, Texas 78212
     Attention: Investor Relations
     Telephone: (210) 370-2139

                                       20
<PAGE>   24


                   SUBJECT TO COMPLETION, DATED MAY   , 2000


PROSPECTUS

                                 $1,300,000,000

                        [VALERO ENERGY CORPORATION LOGO]

                             SENIOR DEBT SECURITIES


                      JUNIOR SUBORDINATED DEBT SECURITIES

                                  COMMON STOCK

                            STOCK PURCHASE CONTRACTS


                              STOCK PURCHASE UNITS


                                  VEC TRUST I
                                  VEC TRUST II

        TRUST PREFERRED SECURITIES FULLY AND UNCONDITIONALLY GUARANTEED,
                            AS DESCRIBED HEREIN, BY

                           VALERO ENERGY CORPORATION


         ONE VALERO PLACE, SAN ANTONIO, TEXAS 78212     (210) 370-2000

                             ---------------------


<TABLE>
<S>                                           <C>
      The information in this                 THE TRUSTS
 prospectus is not complete and may be
 changed. We may not sell these               VEC Trust I and VEC Trust II are subsidiaries of Valero
 securities until the registration            Energy Corporation. They exist for the purpose of issuing
 statement filed with the Securities          trust preferred securities.
 and Exchange Commission is effective.
 This prospectus is not an offer to           THE OFFERING
 sell these securities and it is not
 soliciting an offer to buy these             Trust Preferred Securities
 securities in any jurisdiction where         The trusts may offer from time to time trust preferred
 the offer or sale is not permitted.          securities representing undivided beneficial interests in
                                              the assets of the issuing trust. The trusts will use the
      We will provide the specific            proceeds from the sale of their trust preferred securities
 terms of the securities in one or more       to purchase Valero's debt securities.
 supplements to this prospectus. You
 should read this prospectus and the          Debt Securities
 related prospectus supplement
 carefully before you invest in our           Valero may issue from time to time its debt securities to
 securities. This prospectus may not be       the trusts. These debt securities may be distributed to
 used to offer and sell our securities        holders of the trust preferred securities if and when a
 unless accompanied by a prospectus           trust is dissolved. The debt securities may be convertible
 supplement.                                  into shares of Valero's common stock. The debt securities
                                              will be unsecured, and can be either pari passu with or
                                              subordinate and junior in right of payment to Valero's
                                              senior debt. We will indicate the type of debt securities to
                                              be issued in a prospectus supplement.

                                              Guarantee

                                              Valero will guarantee the trusts' payment obligations on the
                                              trust preferred securities as described in this prospectus
                                              and the prospectus supplement. We will provide the specific
                                              terms of the guarantee in a prospectus supplement.

                                              Stock Purchase Contracts

                                              Valero may issue stock purchase contracts obligating holders
                                              to purchase from Valero a specified number of shares of
                                              common stock in the future. The stock purchase contracts may
                                              be issued separately or as a part of stock purchase units
                                              consisting of a stock purchase contract and debt securities,
                                              trust preferred securities or debt obligations of third
                                              parties, including U.S. treasury securities, securing the
                                              holders' obligations to purchase common stock under the
                                              stock purchase contracts. We will provide the specific terms
                                              of the stock purchase contracts and stock purchase units in
                                              a prospectus supplement.

                                              Our common stock is listed on the New York Stock Exchange
</TABLE>                                      under the symbol "VLO."


                             ---------------------

     NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

                The date of this prospectus is           , 2000
<PAGE>   25

                               TABLE OF CONTENTS


<TABLE>
<S>                                                            <C>
About This Prospectus.......................................     3
Summary Information -- Q&A..................................     4
About Valero Energy Corporation.............................     6
Forward-Looking Information.................................     7
Use of Proceeds.............................................     8
Accounting Treatment Relating to Trust Securities...........     9
Ratio of Earnings to Fixed Charges..........................     9
The Trusts..................................................     9
Description of the Trust Preferred Securities...............    11
Description of the Trust Preferred Securities Guarantee.....    23
Description of the Debt Securities..........................    26
Relationship Among the Trust Preferred Securities, the Debt
  Securities and the Guarantee..............................    34
Description of Stock Purchase Contracts and Stock Purchase
  Units.....................................................    36
Description of Capital Stock................................    36
Plan of Distribution........................................    40
Legal Matters...............................................    41
Experts.....................................................    41
Where You Can Find More Information.........................    41
Information We Incorporate by Reference.....................    42
</TABLE>


                             ---------------------

     THIS PROSPECTUS IS PART OF A REGISTRATION STATEMENT WE FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. YOU SHOULD RELY ONLY ON THE INFORMATION WE
HAVE PROVIDED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH ADDITIONAL OR
DIFFERENT INFORMATION. WE ARE NOT MAKING AN OFFER OF THESE SECURITIES IN ANY
JURISDICTION WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD ASSUME THAT THE
INFORMATION IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT IS ACCURATE ONLY AS
OF THE DATE ON THE FRONT OF THE DOCUMENT AND THAT ANY INFORMATION WE HAVE
INCORPORATED BY REFERENCE IS ACCURATE ONLY AS OF THE DATE OF THE DOCUMENT
INCORPORATED BY REFERENCE.

                                        2
<PAGE>   26


                             ABOUT THIS PROSPECTUS



     This prospectus is part of a registration statement we have filed with the
Securities and Exchange Commission using a "shelf" registration process. The
registration statement also includes a prospectus under which Valero may offer
from time to time its senior debt securities, subordinated debt securities,
shares of common or preferred stock and warrants. Under the shelf process, we
may offer any combination of the securities described in these two prospectuses
in one or more offerings with a total initial offering price of up to
$1,300,000,000. This prospectus provides you with a general description of the
trust preferred securities, the debt securities to be issued by Valero, the
Valero common stock into which the debt securities may be convertible or which
may be issued pursuant to Valero's stock purchase contracts, Valero's guarantee,
Valero's stock purchase contracts and Valero's stock purchase units. Each time
we use this prospectus to offer securities, we will provide a prospectus
supplement that will contain specific information about the terms of that
offering. The prospectus supplement may also add, update or change information
contained in this prospectus. Please carefully read this prospectus and the
prospectus supplement together with the additional information described under
the heading "Where You Can Find More Information."



     We have not included separate financial statements of the trusts in this
prospectus. We do not consider that such financial statements are material to
holders of the trust preferred securities because:


     - each trust is a newly created special purpose entity

     - neither trust has any operating history or independent operations


     - neither trust is engaged in, nor will it engage in, any activity other
       than issuing trust preferred and trust common securities, investing in
       and holding Valero's debt securities and engaging in related activities



     Furthermore, the combination of Valero's obligations under the debt
securities, the associated indentures, the declarations of trust and the
guarantees provide a full, irrevocable and unconditional guarantee of payments
of distributions and other amounts due on the trust preferred securities. In
addition, we do not expect that the trusts will file reports with the SEC under
the Securities Exchange Act of 1934.



     References in this prospectus to the terms "we," "us" or "Valero" or other
similar terms mean Valero Energy Corporation, unless we state otherwise or the
context indicates otherwise.


                                        3
<PAGE>   27


                           SUMMARY INFORMATION -- Q&A



     This summary provides a brief overview of the key aspects of the trusts,
the trust preferred securities, the stock purchase contracts and the stock
purchase contract units. The term "trust" refers to the VEC Trust for the
specific transaction. This summary does not contain all information that is
important to you. We encourage you to read carefully this prospectus and the
prospectus supplement to understand fully the terms of the securities that are
important to you in making a decision about whether to invest.



WHAT ARE THE TRUST PREFERRED SECURITIES?



     Each trust preferred security represents an undivided beneficial interest
in the assets of a trust. Each trust preferred security will entitle the holder
to receive cash distributions as described in this prospectus and the prospectus
supplement.


WHO ARE THE TRUSTS?

     Each of VEC Trust I and VEC Trust II is a Delaware business trust. The
principal office of each trust is One Valero Place, San Antonio, TX 78212 and
the telephone number is (210) 370-2000.


     Valero will own all common securities of each trust. Each trust will use
the proceeds from the sale of the trust preferred securities and the trust
common securities to purchase a series of Valero's debt securities with the same
financial terms as the trust preferred and trust common securities. The debt
securities may be subordinated debt securities or senior debt securities. We
will specify the type of debt security in a prospectus supplement. The trusts
exist only to issue the trust preferred and trust common securities, invest in
and hold Valero's debt securities and engage in related activities.


     There are five trustees of each trust. Three of them, referred to as
regular trustees, are officers or employees of Valero. The Bank of New York will
act as the property trustee of each trust, and The Bank of New York (Delaware)
will act as the Delaware trustee of each trust.


     We will provide in the prospectus supplement additional information about
the issuing trust.



WHEN WILL YOU RECEIVE DISTRIBUTIONS ON THE TRUST PREFERRED SECURITIES?


     The only source of cash to make payments on the trust preferred securities
issuable by each trust will be payments on the debt securities it purchases from
Valero.



     If you purchase trust preferred securities of a trust, you are entitled to
receive cash distributions at the rate specified in the prospectus supplement.
Unless we inform you otherwise in the prospectus supplement, distributions will
accumulate from the date the trust issues the trust preferred securities and
will be paid in arrears on the dates we specify in the prospectus supplement. We
may, however, defer distributions as described below.


WHEN WILL PAYMENT OF YOUR DISTRIBUTIONS BE DEFERRED?


     If Valero defers interest payments on the debt securities held by a trust,
the trust will defer distributions on the related trust preferred securities. We
will describe in the prospectus supplement any rights to defer distributions on
the trust preferred securities by extending the interest payment period on the
debt securities.



     During any deferral period, except as described on page 12, Valero will not
be permitted to:


     - declare or pay a dividend on its shares of capital stock


     - except in limited circumstances, redeem, purchase, acquire or make a
       distribution or liquidation payment on any of its shares of capital stock


     - make a payment on or repay, repurchase or redeem any debt that ranks
       equally with or junior to the debt securities or

     - make a guarantee payment on any guarantee by Valero of the debt of any of
       its subsidiaries if that guarantee ranks equally with or junior to the
       debt securities


WHAT IS VALERO'S GUARANTEE OF THE TRUST PREFERRED SECURITIES?



     Under each trust preferred securities guarantee, to the extent provided
herein, Valero will irrevocably and unconditionally guarantee that


                                        4
<PAGE>   28


if it makes a payment on the debt securities to the relevant trust but, for any
reason, the trust does not make the corresponding distribution or redemption
payment to the holders of the related trust preferred securities, then Valero
will make the payments directly to the holders of the trust preferred
securities.



     The following obligations of Valero taken together will provide a full and
unconditional guarantee of payments due on the trust preferred securities:


     - its obligations to make payments on the debt securities


     - its obligations under the trust preferred securities guarantee and its
       obligations under the amended and restated declaration of trust of the
       trust, which establishes the terms of the trust


We will provide the specific terms of the guarantee in a prospectus supplement.

WHEN COULD THE DEBT SECURITIES BE DISTRIBUTED TO YOU?


     Unless we inform you otherwise in the prospectus supplement, the holder of
the trust common securities has the right to dissolve the trust at any time. If
the trust is dissolved, after satisfaction of the trust's creditors, the trust
may distribute debt securities on a proportionate basis to the holders of trust
preferred and trust common securities.



WILL THE TRUST PREFERRED SECURITIES BE LISTED ON A STOCK EXCHANGE?



     If specified in the prospectus supplement, we will apply to list the trust
preferred securities on the New York Stock Exchange.



WILL HOLDERS OF THE TRUST PREFERRED SECURITIES HAVE ANY VOTING RIGHTS?



     Generally, the holders of the trust preferred securities will not have any
voting rights.



WHAT ARE THE STOCK PURCHASE CONTRACTS?



     The stock purchase contracts are contracts obligating holders to purchase
from Valero, and Valero to sell to the holders, a specified number of shares of
Valero's common stock at a future date or dates. The price per share of common
stock and the number of shares of common stock may be fixed at the time the
stock purchase contracts are issued or may be determined by reference to a
specific formula set forth in the stock purchase contracts.



WHAT ARE THE STOCK PURCHASE UNITS?



     Each stock purchase unit consists of a stock purchase contract and debt
securities, trust preferred securities or debt obligations of third parties,
including U.S. treasury securities, which secure the holders' obligations to
purchase the common stock under the stock purchase contract.


                                        5
<PAGE>   29


                        ABOUT VALERO ENERGY CORPORATION



     We are one of the largest and most geographically diverse independent
petroleum refining and marketing companies in the United States. As of March 31,
2000, we owned five refineries in Texas, Louisiana and New Jersey, providing us
with core operations on both the Gulf Coast and the East Coast. These refineries
are located in Corpus Christi, Houston, and Texas City in Texas, Krotz Springs,
Louisiana and Paulsboro, New Jersey. In addition, on March 2, 2000, we entered
into an agreement to purchase Exxon Mobil Corporation's Benicia, California
refinery and Exxon-branded California retail assets, which consist of
approximately 80 service station facilities and branded supplier relationships
with approximately 260 Exxon-branded service stations, for a purchase price of
$895 million plus the value of refinery inventories acquired in the transaction.
We believe the acquisition of these assets will provide us with a significant
presence on the West Coast and extends our geographic reach from coast to coast.
The acquisition of the Benicia refinery and the branded supplier relationships
closed on May 15, 2000, and the acquisition of the service station facilities is
expected to close on or about June 15, 2000. The acquisition of the Benicia
refinery increased our throughput capacity from approximately 790,000 barrels
per day to approximately 950,000 barrels per day.



     We produce premium, environmentally clean products such as reformulated
gasoline, low sulfur diesel and oxygenates and are able to produce gasoline
meeting the specifications of the California Air Resources Board, or CARB
gasoline. We also produce a substantial slate of middle distillates, jet fuel
and petrochemicals. We have distinguished our company among independent refiners
by cost effectively upgrading our refineries to not only increase output but
also increase overall refining complexity and flexibility, enhancing our ability
to process lower cost feedstocks into higher value-added premium products. We
process a wide slate of feedstocks including medium sour crude oils, heavy sweet
crudes and residual fuel oils, or resid, which can typically be purchased at a
discount to West Texas Intermediate, a benchmark crude oil. Excluding the
production of the Benicia refinery, over 55% of our total gasoline production is
reformulated gasoline, which sells at a premium over conventional grades of
gasoline. The Benicia refinery produces approximately 110,000 barrels per day of
gasoline, approximately 95% of which is CARB gasoline. Excluding the production
of the Benicia refinery, we also produce over 75% of our distillate slate as
low-sulfur diesel and jet fuel, which sell for a premium over high-sulfur
heating oil. In addition to our feedstock and product advantages, we have
synergies among our Gulf Coast refineries which allow us to transfer
intermediate feedstocks, such as deasphalted oil and atmospheric tower bottoms,
among the Texas City, Houston and Corpus Christi refineries. Our products are
marketed in 35 states as well as to select export markets.



     We were incorporated in Delaware in 1981 as Valero Refining and Marketing
Company, a wholly owned subsidiary of our predecessor company. On July 31, 1997,
our stock was distributed, or spun off, by our predecessor company to its
shareholders, and we changed our name to Valero Energy Corporation. Our common
stock is listed for trading on the New York Stock Exchange under the symbol
"VLO."



     We have our principal executive offices at One Valero Place, San Antonio,
Texas, 78212, and our telephone number is (210) 370-2000.


                                        6
<PAGE>   30


                          FORWARD-LOOKING INFORMATION



     This prospectus, including the information we incorporate by reference,
contains certain estimates, predictions, projections and other "forward-looking
statements" (as defined in Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934) that involve various risks and
uncertainties. While these forward-looking statements, and any assumptions upon
which they are based, are made in good faith and reflect our current judgment
regarding the direction of our business, actual results will almost always vary,
sometimes materially, from any estimates, predictions, projections, assumptions,
or other future performance suggested herein. These forward-looking statements
can generally be identified by the words "anticipate," "believe," "expect,"
"plan," "intend," "estimate," "project," "budget," "forecast," "will," "could,"
"should," "may" and similar expressions. These forward-looking statements
include, among other things, statements regarding:



     - the acquisition of Exxon Mobil Corporation's Benicia, California refinery
       and Exxon-branded California retail assets and our results of operations
       following the acquisition



     - future refining margins, including gasoline and heating oil margins



     - the expected cost of feedstocks, including crude oil discounts, and
       refining products



     - anticipated levels of crude oil and refined product inventories



     - our anticipated level of capital investments, including deferred
       turnaround and catalyst costs and capital expenditures for regulatory
       compliance and other purposes, and the effect of these capital
       investments on our results of operations



     - refinery utilization rates



     - anticipated trends in the supply and demand for crude oil feedstocks and
       refined products in the United States and elsewhere



     - expectations regarding environmental and other regulatory initiatives,
       and



     - the effect of general economic and other conditions on refining industry
       fundamentals



     We have based our forward-looking statements on our beliefs and assumptions
derived from information available to us at the time the statements are made.
Differences between actual results and any future performance suggested in our
forward-looking statements or projections could result from a variety of
factors, including the following:



     - the domestic and foreign supplies of refined products such as gasoline,
       diesel, heating oil and petrochemicals



     - the domestic and foreign supplies of crude oil and other feedstocks



     - the ability of the members of the Organization of Petroleum Exporting
       Countries to agree to and maintain oil price and production controls



     - the level of consumer demand, including seasonal fluctuations



     - refinery overcapacity or undercapacity



     - the actions taken by competitors, including both pricing and the
       expansion and retirement of refining capacity in response to market
       conditions



     - environmental and other regulations at both the state and federal levels
       and in foreign countries



     - political conditions in oil producing regions, including the Middle East



     - the level of foreign imports



     - accidents or other unscheduled shutdowns affecting our plants, machinery,
       pipelines or equipment, or those of our suppliers or customers


                                        7
<PAGE>   31


     - changes in the cost or availability of transportation for feedstocks and
       refined products



     - write-downs of inventories caused by a material decline in petroleum
       prices



     - the price, availability and acceptance of alternative fuels



     - cancellation of or failure to implement planned capital projects and
       realize the various assumptions and benefits projected for such projects



     - irregular weather, which can unforeseeably affect the price or
       availability of feedstocks and refined products



     - rulings, judgments, or settlements in litigation or other legal matters,
       including unexpected environmental remediation costs in excess of any
       reserves and claims of product liability



     - the introduction or enactment of federal or state legislation which may
       adversely affect our business or operations



     - changes in the credit ratings assigned to our debt securities and trade
       credit, and



     - overall economic conditions



     We caution you that any one of these factors, or a combination of these
factors, could materially affect our future results of operations and whether
our forward-looking statements ultimately prove to be accurate. These
forward-looking statements are not guarantees of our future performance, and our
actual results and future performance may differ materially from those suggested
in our forward-looking statements. When considering these forward-looking
statements, you should keep in mind the factors described under the heading
"Risk Factors" and other cautionary statements in this prospectus and the
documents we have incorporated by reference. We do not intend to update these
statements unless the securities laws require us to do so.



     All subsequent written and oral forward-looking statements attributable to
us or persons acting on our behalf are expressly qualified in their entirety by
the foregoing. We undertake no obligation to publicly release the result of any
revisions to any such forward-looking statements that may be made to reflect
events or circumstances after the date of this report or to reflect the
occurrence of unanticipated events.



                                USE OF PROCEEDS


     Unless we inform you otherwise in the prospectus supplement, we expect to
use the net proceeds from the sale of securities for general corporate purposes.
These purposes may include, but are not limited to:

     - equity investments in existing and future projects

     - acquisitions

     - working capital

     - capital expenditures

     - repayment or refinancing of debt or other corporate obligations

     - repurchases and redemptions of securities

Pending any specific application, we may initially invest funds in short-term
marketable securities or apply them to the reduction of short-term indebtedness.


     Each trust will use all proceeds from the sale of the trust preferred
securities and the trust common securities to purchase Valero's debt securities.


                                        8
<PAGE>   32


               ACCOUNTING TREATMENT RELATING TO TRUST SECURITIES



     The financial statements of any trust issuing securities will be
consolidated with our financial statements, with the trust preferred securities
shown on our consolidated financial statements as Valero-obligated mandatorily
convertible preferred capital trust securities of a subsidiary trust. Our
financial statements will include a footnote that discloses, among other things,
that the assets of the trust consist of our debt securities and will specify the
designation, principal amount, interest rate and maturity date of the debt
securities.



                       RATIO OF EARNINGS TO FIXED CHARGES


     The following table sets forth the ratio of earnings to fixed charges for
the periods indicated:


<TABLE>
<CAPTION>
                                        THREE MONTHS
                                            ENDED
                                          MARCH 31,           YEARS ENDED DECEMBER 31,
                                        -------------   -------------------------------------
                                        2000    1999    1999    1998    1997    1996    1995
                                        -----   -----   -----   -----   -----   -----   -----
<S>                                     <C>     <C>     <C>     <C>     <C>     <C>     <C>
Ratio of earnings to fixed charges....  3.42x      --   1.23x      --   4.08x   1.74x   2.61x
</TABLE>



     We have computed the ratios of earnings to fixed charges by dividing
earnings by fixed charges. For this purpose, earnings consist of consolidated
income from continuing operations before income taxes and fixed charges
(excluding capitalized interest), with certain other adjustments. Fixed charges
consist of total interest, whether expensed or capitalized, including
amortization of debt expense and premiums or discounts related to outstanding
indebtedness, and one-third (the proportion deemed representative of the
interest factor) of rental expense. For the three months ended March 31, 1999,
our earnings were insufficient to cover fixed charges by $4.4 million. This
deficiency was due primarily to (i) depressed refined product margins resulting
from weak refining industry fundamentals and (ii) the effect of significant
downtime at our Corpus Christi refinery in early 1999 due to a major maintenance
turnaround and expansion of the heavy oil cracker and related units. For the
year ended December 31, 1998, our earnings were insufficient to cover fixed
charges by $80.6 million. This deficiency was due primarily to a $170.9 million
pre-tax charge to earnings to write down the carrying amount of our refinery
inventories to market value. Excluding the effect of the inventory write-down,
the ratio of earnings to fixed charges would have been 2.68x.



     Prior to our spin-off from our former parent on July 31, 1997, our parent
had preferred stock outstanding which was issued in connection with the
discontinued natural gas related services business. We had no preferred stock
outstanding with respect to continuing operations for any period presented. As a
result, the ratio of earnings to combined fixed charges and preferred stock
dividends is the same as the ratio of earnings to fixed charges.



                                   THE TRUSTS


     Each of the trusts is created under the Delaware Business Trust Act and
will be governed by an amended and restated declaration of trust among the
trustees of each trust and Valero. Each declaration will be qualified under the
Trust Indenture Act of 1939.

     We have summarized selected provisions of the declarations below. This
summary is not complete. For a complete description, we encourage you to read
the applicable form of declaration, which we have filed with the SEC. Please
read "Where You Can Find More Information."

     The address of the principal office of each trust is One Valero Place, San
Antonio, Texas 78212, and the telephone number of each trust at that address is
(210) 370-2000.

                                        9
<PAGE>   33

SECURITIES OF EACH TRUST


     When a trust issues its trust preferred securities, you and the other
holders of the trust preferred securities will own all of the issued and
outstanding trust preferred securities of the trust. Valero will acquire all of
the issued and outstanding trust common securities of each trust, representing
an undivided beneficial interest in the assets of each trust of at least 3%. The
trust preferred securities will be substantially identical to the trust common
securities and will rank equally with the trust common securities, except that:



     - if a trust enforcement event under the declaration of trust occurs and is
       continuing, the holders of trust preferred securities will have the right
       to receive payments before the holders of the trust common securities
       receive payments



     - the holders of trust common securities have the exclusive right to
       appoint, remove or replace the trustees and to increase or decrease the
       number of trustees


     Each trust will exist primarily for the purposes of:


     - issuing its trust preferred and trust common securities


     - investing the proceeds from the sale of its securities in Valero's debt
       securities

     - engaging in only such other activities as are necessary or incidental to
       issuing its securities and purchasing and holding Valero's debt
       securities


     The rights of the holders of the trust preferred securities of a trust,
including economic rights, rights to information and voting rights, will be
contained in and governed by the applicable declaration of trust, the Delaware
Business Trust Act and the Trust Indenture Act of 1939.


POWERS AND DUTIES OF TRUSTEES

     The number of trustees of each trust will initially be five. Three of the
trustees will be individuals who are officers or employees of Valero. The fourth
trustee will be The Bank of New York, which will serve as the property trustee
under the declaration of trust for purposes of the Trust Indenture Act of 1939.
The fifth trustee will be The Bank of New York (Delaware), which has its
principal place of business in the State of Delaware.

     The property trustee will own and hold for your benefit Valero's debt
securities purchased by a trust. The property trustee will also:

     - generally exercise the rights, powers and privileges of a holder of the
       debt securities

     - maintain exclusive control of a segregated non-interest bearing bank
       account to hold all payments on the debt securities

     - promptly make distributions to the holders of the trust securities out of
       funds from the property account


The Bank of New York, acting in its capacity as guarantee trustee, will hold for
your benefit a trust preferred securities guarantee, which will be separately
qualified under the Trust Indenture Act of 1939.



     Because Valero will own all of the trust common securities of each trust,
Valero will have the exclusive right to appoint, remove or replace trustees and
to increase or decrease the number of trustees. In most cases, there will be at
least five trustees. The term of a trust will be described in the applicable
prospectus supplement, but may dissolve earlier as provided in the applicable
declaration of trust.


     The duties and obligations of the trustees of a trust will be governed by
the declaration of that trust, the Delaware Business Trust Act and the Trust
Indenture Act of 1939.

                                       10
<PAGE>   34

BOOKS AND RECORDS


     The books and records of each trust will be maintained at the principal
office of the trust and will be open for inspection by each holder of trust
preferred securities of the trust or any authorized representative for any
purpose reasonably related to the holder's interest in the trust during normal
business hours.


THE PROPERTY TRUSTEE


     The property trustee, for the benefit of the holders of the trust
securities, generally will exercise all rights under the applicable indenture
for the debt securities deposited in the trust as trust assets, including the
right to enforce Valero's obligations under the debt securities upon the
occurrence of an event of default under the applicable indenture.



     The declaration of trust provides that if we fail to make interest or other
payments on the debt securities when due (taking account of any extension
period), the holders of the trust preferred securities may direct the property
trustee to enforce its rights under the applicable indenture. If the property
trustee fails to enforce its rights under the indenture in respect of an event
of default under the indenture, any holder of record of trust preferred
securities may, to the fullest extent permitted by applicable law, institute a
legal proceeding against us to enforce the property trustee's rights under the
indenture without first instituting any legal proceeding against the property
trustee or any other person or entity. Notwithstanding the foregoing, if a trust
enforcement event has occurred and is continuing and such event is attributable
to our failure to pay interest, premium or principal on the debt securities on
the date such interest, premium or principal is otherwise payable, then a holder
of trust preferred securities may institute a direct action against us for
payment of such holder's pro rata share. If a holder brings such a direct
action, we will be entitled to that holder's rights under the applicable
declaration of trust to the extent of any payment made by us to that holder.
EXCEPT AS EXPRESSLY PROVIDED IN THE PRECEDING SENTENCES OR IN THE APPLICABLE
PROSPECTUS SUPPLEMENT, THE HOLDERS OF THE TRUST PREFERRED SECURITIES WILL NOT BE
ABLE TO EXERCISE DIRECTLY ANY OTHER REMEDY AVAILABLE TO THE HOLDERS OF THE
APPLICABLE SERIES OF DEBT SECURITIES.



                 DESCRIPTION OF THE TRUST PREFERRED SECURITIES


TERMS


     The terms of the trust preferred securities will include those stated in
the amended and restated declaration of trust and those made a part of that
declaration by the Trust Indenture Act of 1939. For a complete description of
the trust preferred securities, we encourage you to read the prospectus
supplement and the amended and restated declaration of trust, a form of which we
have filed with the SEC. Please read "Where You Can Find More Information."



     The prospectus supplement relating to trust preferred securities being
offered will include specific terms relating to the offering. These terms will
include some or all of the following:



     - the designation of the trust preferred securities



     - the number of trust preferred securities issued by the trust



     - the annual distribution rate, the distribution payment dates, the record
       dates for distribution payments and the additional amounts, if any, that
       may be payable with respect to the trust preferred securities


     - whether distributions will be cumulative and compounding and, if so, the
       dates from which distributions will be cumulative or compounded


     - the amounts that will be paid out of the assets of the trust to the
       holders of trust preferred securities upon dissolution, winding-up or
       termination of the trust


     - any repurchase or redemption provisions

                                       11
<PAGE>   35


     - any voting rights of the trust preferred securities in addition to those
       required by law



     - terms for any conversion or exchange of the debt securities or the trust
       preferred securities into other securities



     - any rights to defer distributions on the trust preferred securities by
       extending the interest payment period on the debt securities



     - any other relevant terms, rights, preferences, privileges, limitations or
       restrictions of the trust preferred securities



We also will describe in the prospectus supplement the material United States
federal income tax considerations applicable to any offering of trust preferred
securities.



     The regular trustees, on behalf of the trust and pursuant to the
declaration of trust, will issue one class of trust preferred securities and one
class of trust common securities. The trust securities will represent undivided
beneficial ownership interests in the assets of the trust.



GENERAL



     Except as described below, the trust preferred securities will rank
equally, and payments will be made thereon proportionately, with the trust
common securities. The property trustee of the trust will hold legal title to
the debt securities in trust for the benefit of the holders of the trust
securities. We will execute a guarantee agreement for the benefit of the holders
of the trust preferred securities. The guarantee will not guarantee the payment
of distributions (as defined below) or any amounts payable on redemption or
liquidation of the trust preferred securities when the trust does not have funds
on hand available to make such payments. Certain material United States federal
income tax consequences and special considerations applicable to the trust
preferred securities will be described in the applicable prospectus supplement.



DISTRIBUTIONS



     Distributions on each trust preferred security will accumulate and be
payable at a rate specified in the applicable prospectus supplement. The amount
of distributions payable for any period will be computed on the basis of a
360-day year of twelve 30-day months and the actual number of days elapsed per
30-day month unless otherwise specified in the applicable prospectus supplement.
Distributions that are in arrears will accumulate additional distributions at
the rate per annum if and as specified in the applicable prospectus supplement.
The term "distributions" means cumulative cash distributions that accumulate at
the per annum rate specified in the applicable prospectus supplement, together
with any additional amounts unless otherwise stated.



     Unless otherwise specified in the applicable prospectus supplement,
distributions on the trust preferred securities will be cumulative, will
accumulate from the date of original issuance and will be payable on such dates
as are specified in the applicable prospectus supplement. If the date on which
any distributions on the trust securities are payable is not a business day (as
defined below), then payment of such distributions will be made on the next
business day (without any interest or other payment in respect of any such
delay), provided that if such next business day falls in the next calendar year,
then payment of such distributions will be made on the business day immediately
preceding the payment date. A "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 indenture trustee, or the principal
office of the property trustee, is closed for business.



     If provided in the applicable prospectus supplement, we will have the right
under the indenture to defer payments of interest on the debt securities from
time to time by extending the applicable interest payment period for a period or
periods that will be specified in the applicable prospectus supplement. If we
exercise our right to defer interest payments on the debt securities, then any
payments of distributions on the trust preferred securities also would be
deferred. During an extension period, interest will continue to


                                       12
<PAGE>   36


accrue on the debt securities (compounded quarterly), and, as a result,
distributions would continue to accumulate at the rate per annum if and as
specified in the applicable prospectus supplement. During any extension period,
we may not:



     - declare or pay any dividends or distributions on, or redeem, purchase,
       acquire, or make a liquidation payment with respect to, any of our
       capital stock



     - make any payment of principal, interest or premium, if any, on or repay,
       repurchase or redeem any debt securities that rank equally with or junior
       in interest to the debt securities or make any guarantee payments with
       respect to any guarantee by us of the debt of any subsidiary of ours if
       such guarantee ranks equally with or junior in interest to the debt
       securities



     However, even during an extension period, we may:



     - purchase or acquire our capital stock in connection with the satisfaction
       by us of our obligations under any employee benefit plans or pursuant to
       any contract or security outstanding on the first day of any extension
       period requiring us to purchase our capital stock



     - reclassify our capital stock or exchange or convert one class or series
       of our capital stock for another class or series of our capital stock



     - purchase fractional interests in shares of our capital stock pursuant to
       the conversion or exchange provisions of such capital stock or the
       security being converted or exchanged



     - declare dividends or distributions in our capital stock



     - redeem or repurchase any rights pursuant to a rights agreement, and



     - make payments under the guarantee related to the trust preferred
       securities



     Prior to the termination of any extension period, we may further extend the
extension period, but the total duration of any extension period may not exceed
20 consecutive quarters or extend beyond the stated maturity of the debt
securities. Once any extension period terminates and we have paid all amounts
then due, we may commence a new extension period, provided that such extension
period together with all extensions thereof may not exceed 20 quarters or extend
beyond the stated maturity of the debt securities. Once an extension period has
terminated, any deferred distributions, including accumulated additional
amounts, will be paid to those holders of record of the trust securities
appearing on the books and records of the trust on the first record date,
following the termination of such extension period.



     It is expected that any revenue available for the payment of distributions
to holders of the trust preferred securities will be limited to payments we make
to the trust under the debt securities. If we do not make interest payments on
the debt securities, then the property trustee will not have any funds available
to pay distributions on the trust preferred securities. The payment of
distributions (if and to the extent the trust has funds legally available for
the payment of such distributions and cash sufficient to make such payments) is
guaranteed by us as set forth under "Description of the Preferred Securities
Guarantee."



     The property trustee will pay distributions to the holders of the trust
preferred securities as such holders appear on the trust's securities register
on the relevant record dates. As long as the trust preferred securities are
represented by one or more global securities, the relevant record dates will be
the close of business on the business day next preceding each distribution date,
unless a different regular record date is established or provided for the
corresponding interest payment date on the debt securities. If any trust
preferred securities are not represented by global securities, then the relevant
record date for such trust preferred securities will be the date, at least 15
days prior to the relevant distribution date, that is specified in the
applicable prospectus supplement.


                                       13
<PAGE>   37


REDEMPTION OR EXCHANGE



  Mandatory Redemption



     Unless otherwise specified in the applicable prospectus supplement, if the
debt securities held by the trust are repaid or redeemed in whole or in part,
either upon their maturity date or earlier, then the property trustee will use
the proceeds from such repayment or redemption to redeem trust securities having
an aggregate liquidation amount equal to the aggregate principal amount of the
debt securities being repaid or redeemed. The redemption price per trust
security will be equal to the aggregate stated amount of the trust securities
being redeemed plus any accumulated and unpaid distributions thereon to the date
of redemption plus the related amount of the premium, if any, we paid upon the
concurrent redemption of the debt securities. In the event of a partial
redemption, the trust securities will be redeemed among all of the holders of
trust securities on a pro rata basis. Holders of the trust securities will
receive at least 30 days but not more than 60 days notice of such redemption.



  Tax Event Redemption



     If a tax event (as defined below) occurs and is continuing, we will have
the right to redeem the debt securities in whole (but not in part) and thereby
cause a mandatory redemption of the trust securities in whole (but not in part)
at the redemption price within 90 days following the occurrence of such tax
event. In the event a tax event has occurred and is continuing and we do not
elect to redeem the debt securities (thereby causing a mandatory redemption of
the trust preferred securities) or to liquidate the trust (causing the debt
securities to be distributed to holders of the trust securities), the trust
preferred securities will remain outstanding.



     "Tax event" means the receipt by us and the trust of an opinion of counsel,
rendered by a law firm having a recognized national 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 such proposed change, pronouncement, action or decision is
announced on or after the date on which the trust preferred securities are
issued and sold, there is more than an insubstantial increase in the risk that:



     - 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 debt securities;



     - interest payable by us on the debt securities is not, or within 90 days
       of the date of such opinion, will not be, deductible by us, in whole or
       in part, for United States federal income tax purposes; or



     - 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.



  Distribution of Debt Securities



     Unless otherwise specified in the applicable prospectus supplement, we will
have the right to dissolve the trust at any time and, after satisfaction of any
liabilities to creditors of the trust as provided by applicable law, to cause
the debt securities to be distributed pro rata to the holders of the trust
securities in liquidation of the trust.



     After the date fixed for any distribution of debt securities:



     - the trust preferred securities will no longer be deemed to be
       outstanding, and



     - any certificates representing the preferred securities will be deemed to
       represent debt securities in a principal amount equal to the liquidation
       amount of the trust preferred securities, bearing accrued and unpaid
       interest in an amount equal to the accumulated and unpaid distributions
       on the trust


                                       14
<PAGE>   38


       preferred securities, until such certificates are presented to the
       regular trustees or their agent for transfer or reissuance



     There can be no assurance as to the market prices for the trust preferred
securities or for the debt securities that may be distributed in exchange for
trust preferred securities upon dissolution or liquidation of the trust.
Accordingly, the trust preferred securities that an investor may purchase, or
the debt securities that such investor may receive upon dissolution or
liquidation of the trust, may trade at a discount to the price that such
investor paid to purchase the trust preferred securities offered hereby.



REDEMPTION PROCEDURES



     Any trust preferred securities being redeemed will be redeemed by the trust
at the applicable redemption price with the proceeds received by the trust from
our contemporaneous redemption of the debt securities. Redemptions of trust
preferred securities will be made and the applicable redemption price will be
payable only to the extent that the trust has funds on hand available for the
payment of such redemption price.



     If the trust notifies the holders of the trust preferred securities of a
redemption and if the trust preferred securities to be redeemed are issued in
global form, then on the applicable redemption date, the property trustee will
deposit irrevocably with the depositary for the trust preferred securities funds
sufficient to pay the applicable redemption price, to the extent funds are
available. In addition, the property trustee will give the depositary
irrevocable instructions and authority to pay the redemption price to the
beneficial owners of the trust preferred securities. If the trust preferred
securities are not issued in global form, the property trustee will give the
paying agent irrevocable instructions and authority to pay the redemption price
to the holders of the trust preferred securities upon surrender of their
certificates evidencing the trust preferred securities. The property trustee
will pay the applicable redemption price to the holders of the trust preferred
securities by check mailed to their respective addresses appearing on the
register of the trust on the redemption date. Notwithstanding the foregoing,
distributions payable on or prior to a redemption date for the trust preferred
securities will be payable to the holders of the trust preferred securities on
the relevant record dates for the related distribution dates. If a notice of
redemption has been given and funds have been deposited as required, then upon
the date of such deposit, all of the rights of the holders of the trust
preferred securities to be redeemed will cease, except for the right of such
holders to receive the redemption price (without interest thereon), and the
trust preferred securities will cease to be outstanding. If the redemption date
is not a business day, then payment of the applicable redemption price will be
made on the next business day (and without any interest or other payment in
respect of any such delay). If, however, the next business day falls in the next
calendar year, then payment of the redemption price will be made on the business
day immediately preceding the redemption date.



     If any payments for the redemption of any trust preferred securities are
improperly withheld or refused and not paid either by the trust or by us
pursuant to the guarantee relating to the trust preferred securities, then
distributions on the trust preferred securities will continue to accumulate at
the then applicable rate, from the redemption date originally established by the
trust until the date upon which such redemption payments actually are paid, in
which case the actual payment date will be the date fixed for redemption for
purposes of calculating the applicable redemption price.



     Subject to applicable law (including, without limitation, U.S. federal
securities laws), we or our subsidiaries may purchase at any time and from time
to time outstanding preferred securities by tender, in the open market or by
private agreement.



     Any notice of the redemption of trust securities or the distribution of
debt securities in exchange for trust securities will be mailed to each holder
of trust preferred securities being so redeemed at least 30 days but not more
than 60 days before the applicable redemption date, at such holder's registered
address. Unless we default in the payment of the redemption price on the debt
securities, interest will cease to accrue on the debt securities or portions
thereof (and distributions will cease to accumulate on the trust preferred
securities or portions thereof) called for redemption on and after the
redemption date.


                                       15
<PAGE>   39


SUBORDINATION OF TRUST COMMON SECURITIES



     The payment of distributions on, and any payment upon redemption of, the
trust preferred securities and trust common securities, as applicable, will be
made pro rata based on their respective liquidation amounts. If, however, an
event of default under the indenture (which is also a "trust enforcement event"
under the declaration of trust) has occurred and continues on any distribution
date or redemption date, then the amounts payable on such date will not be made
on any of the trust common securities, and no other payment on account of the
redemption, liquidation or other acquisition of any trust common securities will
be made until all accumulated and unpaid distributions or redemption payments,
as the case may be, on all of the outstanding trust 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
first will be applied to the payment in full in cash of all distributions on, or
the redemption price of, the trust preferred securities then due and payable.
The trust will not issue any securities or other interests in the assets of the
trust other than the trust preferred securities and the trust common securities.



     In the event that a trust enforcement event has occurred and is continuing
with respect to the trust preferred securities, then we, as sole holder of the
trust common securities, will be deemed to have waived any right to act with
respect to any such trust enforcement event until the effect of such trust
enforcement event with respect to the trust preferred securities has been cured,
waived or otherwise eliminated. Until such trust enforcement event has been so
cured, waived or otherwise eliminated, the property trustee will act solely on
behalf of the holders of the trust preferred securities and not on behalf of us,
as holder of the trust common securities, and only the holders of the trust
preferred securities will have the right to direct the property trustee to act
on their behalf.



DISSOLUTION OF THE TRUST AND DISTRIBUTIONS UPON DISSOLUTION



     Unless otherwise specified in the applicable prospectus supplement,
pursuant to the declaration of trust, the trust will automatically dissolve upon
the expiration of its term or, if earlier, shall dissolve on the first to occur
of:



     - certain events of bankruptcy, dissolution or liquidation of Valero



     - the written direction to the property trustee from us at any time to
       dissolve the trust and to distribute the debt securities in exchange for
       the trust securities



     - redemption of all of the trust preferred securities



     - the direction of the property trustee after a tax event pursuant to which
       all the debt securities have been distributed in exchange for the trust
       securities



     - the entry of an order for the dissolution of the trust, and



     - the consent of the regular trustees and Valero to the dissolution of the
       trust prior to the issuance of the trust securities



     If an early dissolution occurs as described in the first, second, fourth
and fifth clauses above, the trust will be liquidated by the trustees as
expeditiously as the trustees determine to be possible by distributing, after
satisfaction of liabilities to creditors of the trust as provided by applicable
law, to the holders of the trust securities in exchange therefor debt
securities, unless such distribution is determined by the property trustee not
to be practical, in which event the holders of the trust securities will be
entitled to receive out of the assets of the trust distributions in cash or
other immediately available funds to the extent such funds are available for
distribution after satisfaction of the trust's liabilities to any creditors. The
amount of each liquidation distribution will be equal to the stated liquidation
amount plus accumulated and unpaid distributions thereon to the date of payment.
If, however, debt securities are to be distributed in connection with such
liquidation, then the holders of the trust securities will receive debt
securities in an aggregate principal amount equal to the stated liquidation
amount of the trust securities, with an interest rate identical to the
distribution rate of, and accrued and unpaid interest equal to accumulated and
unpaid distributions on, such trust securities.


                                       16
<PAGE>   40


     If the liquidation distribution can be paid only in part because the trust
has insufficient assets available to pay the aggregate amount in full, then the
amounts payable directly by the trust on the trust securities will be paid on a
pro rata basis. We, as sole holder of the trust common securities, will be
entitled to receive liquidation distributions on a pro rata basis with the
holders of the trust preferred securities, except that if an event of default
under the indenture has occurred and is continuing, then the trust preferred
securities will have a preference over the trust common securities with regard
to such liquidation distributions.



TRUST ENFORCEMENT EVENTS; NOTICE



     Under the declaration of trust, the occurrence and continuation of any
event of default under the indenture is a trust enforcement event with respect
to the trust securities issued under the declaration. If a trust enforcement
event has occurred and is continuing, the trust preferred securities will have a
preference over the trust common securities upon dissolution of the trust, as
described above.



     The property trustee will transmit by mail, first class postage prepaid,
notice of each trust enforcement event to the holders of the trust securities
within 90 days of the occurrence of the trust enforcement event, unless the
property trustee in good faith determines that the withholding of such notice is
in the holders' interests. We and the regular trustees are required to file
annually with the property trustee a certificate as to whether or not we are in
compliance with all the conditions and covenants applicable to us under the
declaration of trust as well as any reports that may be required to be filed
under the Trust Indenture Act.



REMOVAL OF TRUSTEES



     The holder of the trust common securities may remove any trustee with or
without cause at any time. The removal of a property trustee, however, will not
be effective until a successor trustee possessing the qualifications to act as a
property trustee has accepted an appointment as property trustee in accordance
with the provisions of the declaration of trust.



MERGER OR CONSOLIDATION OF TRUSTEES



     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
which it may be consolidated, or any entity resulting from any merger,
conversion or consolidation to which such trustee may be a party, or any entity
succeeding to all or substantially all the corporate trust business of such
trustee, will be the successor of such trustee under the declaration of trust,
provided that such entity is otherwise qualified and eligible.



MERGERS, CONSOLIDATIONS OR AMALGAMATIONS



     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 below. At our request and with the consent of a majority of the
regular trustees, and without the consent of the holders of the trust 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 under the laws of any state. Such consolidation, conversion,
amalgamation, merger, replacement, conveyance, transfer or lease will be
subject, however, to the following limitations:



     - if the trust is not the successor entity, then the successor entity
       either must:



      - expressly assume all of the trust's obligations with respect to the
        trust securities, or



      - substitute for the trust securities other securities having
        substantially the same terms as the trust securities, so long as these
        substitute securities rank the same as the trust securities with respect
        to distributions and payments upon liquidation, redemption and otherwise


                                       17
<PAGE>   41


     - we must expressly appoint a trustee of a successor entity possessing the
       same powers and duties as the property trustee as the holder of the debt
       securities



     - the trust preferred securities or any substitute securities must be
       listed, or any substitute securities must be listed upon notification of
       issuance, on any national securities exchange or with any other
       organization on which the trust preferred securities are then listed or
       quoted



     - such consolidation, conversion, amalgamation, merger, replacement,
       conveyance, transfer or lease must not cause the trust preferred
       securities (including any substitute securities) to be downgraded by any
       nationally recognized statistical rating organization



     - such consolidation, conversion, amalgamation, merger, replacement,
       conveyance, transfer or lease must not adversely affect the rights,
       preferences and privileges of the holders of the trust preferred
       securities (including any substitute securities) in any material respect



     - such successor entity must have a purpose substantially identical to that
       of the trust



     - prior to such consolidation, conversion, amalgamation, merger,
       replacement, conveyance, transfer or lease, we must have received an
       opinion of independent counsel to the trust experienced in such matters
       to the effect that:



        - such consolidation, conversion, amalgamation, merger, replacement,
          conveyance, transfer or lease does not adversely affect the rights,
          preferences and privileges of the holders of the trust securities
          (including any substitute securities) in any material respect



        - 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



        - following such consolidation, conversion, amalgamation, merger,
          replacement, conveyance, transfer or lease, the trust (or the
          successor entity) will continue to be classified as a grantor trust
          for United States federal income tax purposes



     - we or any permitted successor or assignee must own all of the trust
       common securities and must guarantee the obligations of such successor
       entity under the substitute securities, at least to the extent provided
       by the guarantee related to the trust preferred securities, and



     - such successor entity must expressly assume all of the obligations of the
       trust



Notwithstanding the foregoing, unless holders of 100% in aggregate liquidation
amount of the trust securities give their consent, the trust will not
consolidate with, convert into, amalgamate or merge with or into, or 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,
amalgamate, merge with or into, or replace it, if such consolidation,
conversion, amalgamation, merger, replacement, conveyance, transfer or lease
would cause the trust or the successor entity to be classified as other than a
grantor trust for United States federal income tax purposes or would cause each
holder of trust securities not to be treated as owning an undivided beneficial
ownership interest in the debt securities.



VOTING RIGHTS



     Except as provided below and as otherwise required by the declaration of
trust, the Delaware Business Trust Act, the Trust Indenture Act and other
applicable law, the holders of the trust securities will have no voting rights.



     Subject to the requirement of the property trustee obtaining a tax opinion
in certain circumstances set forth in the last sentence of this paragraph, the
holders of not less than a majority in aggregate liquidation amount of the trust
preferred securities, voting separately as a class, have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the property trustee, or to


                                       18
<PAGE>   42


direct the exercise of any trust or power conferred upon the property trustee
under the declaration of trust. This includes the right to direct the property
trustee, as holder of the debt securities, to:



     - exercise the remedies available to it under the indenture



     - consent to any amendment or modification of the indenture or the debt
       securities where such consent will be required, or



     - waive any past default and its consequences that is waiveable under the
       indenture; provided that if an event of default under the indenture has
       occurred and is continuing, then the holders of not less than 25% of the
       aggregate liquidation amount of the trust preferred securities may direct
       the property trustee to declare the principal of and interest on the debt
       securities due and payable; and 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 debt
       securities 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



The property trustee will notify all holders of the trust preferred securities
of any notice of any event of default under the indenture that it has received
from us. The notice will state that the 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 will have no
obligation to take any of the actions described in the first and second bullets
above unless it first obtains an opinion of independent tax counsel experienced
in such matters to the effect that, as a result of such action, the trust will
not fail to be classified as a grantor trust for United States federal income
tax purposes and that each holder of trust securities will be treated as owning
an undivided beneficial ownership interest in the debt securities.



     In the event the consent of the property trustee, as the holder of the debt
securities, is required under the indenture with respect to any amendment or
modification of the indenture, the property trustee will request the direction
of the holders of the trust securities with respect to such amendment or
modification and will vote with respect to such amendment or modification as
directed by the holders of a majority in stated liquidation amount of the trust
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 debt securities, 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 trust
securities. The property trustee will not take any action in accordance with the
directions of the holders of the trust 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 of trust
securities will be treated as owning an undivided beneficial ownership interest
in the debt securities.



     A waiver of an event of default under the indenture with respect to the
debt securities will constitute a waiver of the corresponding trust enforcement
event.



     Any required approval or direction of holders of trust preferred securities
may be given at a separate meeting of holders of preferred securities convened
for such purpose, at a meeting of all of the holders of preferred securities or
pursuant to written consent. The regular trustees will cause a notice of any
meeting at which holders of trust preferred securities are entitled to vote to
be mailed to each holder of record of trust preferred securities. Each notice
will include a statement setting forth:



     - the date of the meeting



     - a description of any resolution proposed for adoption at the meeting on
       which the holders are entitled to vote, and



     - instructions for the delivery of proxies


                                       19
<PAGE>   43


     No vote or consent of the holders of trust preferred securities will be
required for the trust to redeem and cancel trust preferred securities or
distribute debt securities in accordance with the declaration of trust and the
terms of the trust securities.



     Notwithstanding that holders of trust preferred securities are entitled to
vote or consent under any of the circumstances described above, any of the trust
preferred securities that are owned at such time by us, the trustees or any
entity directly or indirectly controlled by, or under direct or indirect common
control with, us or any trustee will not be entitled to vote or consent and
will, for purposes of such vote or consent, be treated as if such trust
preferred securities were not outstanding.



     Except during the continuance of an event of default under the indenture,
the holders of the trust preferred securities will have no rights to appoint or
remove the trustees, who may be appointed, removed or replaced solely by us as
the holder of all of the common trust securities. If an event of default has
occurred and is continuing, the property trustee and the Delaware trustee may be
removed and replaced by the holders of a majority in liquidation amount of the
trust preferred securities.



AMENDMENT OF THE DECLARATION



     The declaration of trust may generally be amended on written agreement by
us and a majority of the regular trustees. If any proposed amendment provides
for:



     - any action that would adversely affect the powers, preferences or special
       rights of the trust securities, whether by way of amendment to the
       declaration of trust, other than as described below, or otherwise or



     - the dissolution, winding-up or termination of the trust other than
       pursuant to the terms of the declaration of trust



then the amendment will not be effective except with the approval of at least 66
2/3% of outstanding trust securities. If, however, any amendment referred to in
the first bullet point above would adversely affect only the trust preferred
securities or the trust common securities, then only the affected class will be
entitled to vote on the amendment and the amendment will not be effective except
with the approval of 66 2/3% of the affected class outstanding.



     If any proposed amendment provides for:



     - changing the amount or timing of any distribution of the trust securities
       or otherwise adversely affects the amount of any distribution required to
       be made in respect of the trust securities as of a specified date or



     - restricting the right of a holder of trust securities to institute suit
       for the enforcement of such payment on or after such specified date



then the amendment will not be effective except with the approval of each holder
of trust securities affected.



     Notwithstanding the provisions described in the prior paragraph, no
amendment may be made to the declaration of trust:



     - unless the property trustee has received



     - an officers' certificate from each of Valero and the trust that such
       amendment is permitted by, and conforms to, the terms of the declaration
       of trust, and



     - in the case of an amendment that affects the rights, powers, duties,
       obligations or immunities of the property trustee, an opinion of counsel
       that such amendment is permitted by, and conforms to, the terms of the
       declaration of trust


                                       20
<PAGE>   44


     Moreover, no amendment may be made to the extent the result of such
amendment would be to:



     - cause the trust to be classified other than as a grantor trust for
       purposes of United States federal income tax purposes



     - reduce or otherwise adversely affect the rights or powers of the property
       trustee in contravention of the Trust Indenture Act, or



     - cause the trust to be deemed to be an "investment company" required to be
       registered under the Investment Company Act of 1940



     The amendment provision of the declaration of trust may not be amended
without the consent of all of the holders of the trust securities. No amendment
that adversely affects the rights, powers and privileges of the property trustee
or the Delaware trustee may be made without the consent of the property trustee
or the Delaware trustee, respectively. The rights of the holders of the common
securities under the declaration of trust to increase or decrease the number of,
and to appoint, or remove trustees may not be amended without the consent of the
holders of the common securities.



     The declaration of trust may be amended without the consent of the holders
of the trust securities to:



     - cure any ambiguity



     - correct or supplement any provision in the declaration of trust that may
       be defective or inconsistent with any other provision of the declaration
       of trust



     - add to the covenants, restrictions or obligations of Valero



     - conform to changes in, or a change in interpretation or application by
       any legislative body, court, government agency or regulatory authority of
       regulations relating to whether the trust is required to register as an
       investment company under the Investment Company Act of 1940



     - modify, eliminate or add to any provisions of the declaration of trust to
       ensure that (a) the trust will be classified for United States federal
       income tax purposes as a grantor trust at all times that any trust
       securities are outstanding or (b) the trust will not be required to
       register as an "investment company" under the Investment Company Act of
       1940; provided, in each case, that the rights, privileges or preferences
       of any holder of trust securities are not adversely affected, and



     - facilitate the tendering, remarketing and settlement of the trust
       preferred securities as contemplated in the declaration of trust



GLOBAL PREFERRED SECURITIES



     Unless otherwise specified in the applicable prospectus supplement, the
trust preferred securities may be issued in whole or in part in global form that
will be deposited with, or on behalf of, a depositary identified in the
applicable prospectus supplement. Global trust preferred securities may be
issued only in fully registered form and in either temporary or permanent form.
Unless and until a global trust preferred security is exchanged in whole or in
part for the individual trust preferred securities represented thereby, the
depositary holding the global trust preferred security may transfer the global
trust preferred security only to its nominee or successor depositary (or vice
versa) and only as a whole. Unless otherwise indicated in the applicable
prospectus supplement for the trust preferred securities, the depositary for the
global trust preferred securities will be The Depository Trust Company. The laws
of some jurisdictions require that certain purchasers of securities take
physical delivery of such securities in certificated form. Such limits and laws
may impair the ability to transfer beneficial interests in global trust
preferred securities.



     The specific terms of the depositary arrangement for the trust preferred
securities will be described in the applicable prospectus supplement. We expect
that the applicable depositary or its nominee, upon receipt of any payment of
liquidation amount, premium or distributions in respect of a permanent global
trust preferred security representing any of the trust preferred securities,
immediately will credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the

                                       21
<PAGE>   45


aggregate principal amount of such global trust preferred security as shown on
the records of the depositary or its nominee. We also expect that payments by
participants to beneficial owners will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in "street name." Such payments will be
the responsibility of such participants.



     Unless otherwise specified in the applicable prospectus supplement, if at
any time the depositary is unwilling, unable or ineligible to continue as a
depositary for the trust preferred securities, the trust will appoint a
successor depositary with respect to the trust 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 trust preferred securities be represented by one or more
global trust securities will no longer be effective, and a regular trustee on
behalf of the trust will execute, and the property trustee will authenticate and
deliver, trust preferred securities in definitive registered form, in any
authorized denominations, in an aggregate stated liquidation amount equal to the
principal amount of the global trust preferred securities representing the trust
preferred securities in exchange for such global trust preferred securities. In
addition, the trust may at any time and in its sole discretion, subject to any
limitations described in the applicable prospectus supplement, determine not to
have any trust preferred securities represented by one or more global trust
preferred securities, and, in such event, a regular trustee on behalf of the
trust will execute and the property trustee will authenticate and deliver trust
preferred securities in definitive registered form, in an aggregate stated
liquidation amount equal to the principal amount of the global trust preferred
securities representing such trust preferred securities, in exchange for such
global trust preferred securities.



PAYMENT AND PAYING AGENCY



     Payments in respect of the trust preferred securities will be made to the
applicable depositary, which will credit the relevant participants' accounts on
the applicable distribution dates or, if the trust preferred securities are not
held by a depositary, such payments will be made by check mailed to the address
of the holder of the trust preferred security that appear on the trust's
security register. Unless otherwise specified in the applicable prospectus
supplement, the paying agent for the trust preferred securities initially will
be the property trustee. The paying agent will be permitted to resign as paying
agent upon 30 days' written notice to the property trustee and us.



REGISTRAR AND TRANSFER AGENT



     Unless otherwise specified in the applicable prospectus supplement, the
property trustee will act as registrar and transfer agent for the trust
preferred securities.



     Registration of transfers of trust preferred securities will be made
without charge by or on behalf of the trust, but the trust may require payment
of any tax or other governmental charges that may be imposed in connection with
any transfer or exchange of trust preferred securities.



INFORMATION CONCERNING THE PROPERTY TRUSTEE



     The property trustee will 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 the declaration of trust. The property trustee will be
under no obligation to exercise any rights or powers vested in it by the
declaration of trust at the request of a holder of trust securities, unless the
holder provides the property trustee security and indemnity, reasonably
satisfactory to the property trustee, against the costs and expenses and
liabilities that might be incurred.


                                       22
<PAGE>   46


            DESCRIPTION OF THE TRUST PREFERRED SECURITIES GUARANTEE



     Valero will fully and unconditionally guarantee payments on the trust
preferred securities as described in this section. The guarantee covers the
following payments:



     - periodic cash distributions on the trust preferred securities out of
       funds held by the property trustee of the trust


     - payments on liquidation of each trust


     - payments on redemption of trust preferred securities of each trust



The Bank of New York, as guarantee trustee, will hold the guarantee for the
benefit of the holders of trust preferred securities.



     We have summarized selected provisions of the guarantee below. This summary
is not complete. For a complete description, we encourage you to read the
guarantee, the form of which we have filed with the SEC. Please read "Where You
Can Find More Information."


     Valero will irrevocably and unconditionally agree to pay you in full the
following amounts to the extent not paid by the trust:


     - any accumulated and unpaid distributions and any additional amounts with
       respect to the trust preferred securities and any redemption price for
       trust preferred securities called for redemption by the trust, if and to
       the extent that Valero has made corresponding payments on the debt
       securities to the property trustee of the trust


     - payments upon the dissolution, winding-up or termination of the trust
       equal to the lesser of:


      - the liquidation amount plus all accumulated and unpaid distributions and
        additional amounts on the trust preferred securities to the extent the
        trust has funds legally available for those payments and



      - the amount of assets of the trust remaining legally available for
        distribution to the holders of trust preferred securities in liquidation
        of the trust


     Valero will not be required to make these liquidation payments if:


     - the trust distributes the debt securities to the holders of trust
       preferred securities in exchange for their trust preferred securities or



     - the trust redeems the trust preferred securities in full upon the
       maturity or redemption of the debt securities



     Valero may satisfy its obligation to make a guarantee payment either by
making payment directly to the holders of trust preferred securities or to the
guarantee trustee for remittance to the holders or by causing the applicable
trust to make the payment to them.



     Each guarantee is a guarantee from the time of issuance of the applicable
series of trust preferred securities. THE GUARANTEE ONLY COVERS, HOWEVER,
DISTRIBUTIONS AND OTHER PAYMENTS ON TRUST PREFERRED SECURITIES IF AND TO THE
EXTENT THAT VALERO HAS MADE CORRESPONDING PAYMENTS ON THE DEBT SECURITIES TO THE
APPLICABLE PROPERTY TRUSTEE. IF VALERO DOES NOT MAKE THOSE CORRESPONDING
PAYMENTS ON THE DEBT SECURITIES, THE TRUST WILL NOT HAVE FUNDS AVAILABLE FOR
PAYMENTS AND VALERO WILL HAVE NO OBLIGATION TO MAKE A GUARANTEE PAYMENT.



     Valero's obligations under the declaration of trust for each trust, the
guarantee, the debt securities and the associated indenture taken together will
provide a full and unconditional guarantee of payments due on the trust
preferred securities. We will describe the specific terms of the guarantee in a
prospectus supplement.


                                       23
<PAGE>   47

COVENANTS OF VALERO


     In each guarantee, Valero will agree that, as long as any trust preferred
securities issued by the applicable trust are outstanding, Valero will not make
the payments and distributions described below if:


     - it is in default on its guarantee payments or other payment obligations
       under the related guarantee

     - any event of default under the applicable declaration of trust has
       occurred and is continuing or

     - Valero has elected to defer payments of interest on the related debt
       securities by extending the interest payment period and that deferral
       period is continuing

In these circumstances, Valero will agree that it will not:


     - 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



     - make any payment of principal, interest or premium, if any, on or repay,
       repurchase or redeem any debt securities that rank equally with or junior
       in interest to the debt securities or make any guarantee payments with
       respect to any guarantee by Valero of the debt of any subsidiary of
       Valero if such guarantee ranks equally with or junior in interest to the
       debt securities



     However, even during such circumstances, Valero may:



     - purchase or acquire its capital stock in connection with the satisfaction
       by it of its obligations under any employee benefit plans or pursuant to
       any contract or security outstanding on the first day of any extension
       period requiring it to purchase its capital stock



     - reclassify its capital stock or exchange or convert one class or series
       of its capital stock for another class or series of its capital stock



     - purchase fractional interests in shares of its capital stock pursuant to
       the conversion or exchange provisions of such capital stock or the
       security being converted or exchanged



     - declare dividends or distributions in its capital stock



     - redeem or repurchase any rights pursuant to a rights agreement, and



     - make payments under the guarantee related to the trust preferred
       securities



In addition, as long as trust preferred securities issued by any trust are
outstanding, Valero will agree that it will:


     - remain the sole direct or indirect owner of all the outstanding common
       securities of that trust, except as permitted by the applicable
       declaration of trust


     - permit the trust common securities of that trust to be transferred only
       as permitted by the declaration of trust



     - use reasonable efforts to cause that trust to continue to be treated as a
       grantor trust for United States federal income tax purposes, except in
       connection with a distribution of debt securities to the holders of trust
       preferred securities as provided in the declaration of trust, in which
       case the trust would be dissolved


AMENDMENTS AND ASSIGNMENT


     Valero and the guarantee trustee may amend each guarantee without the
consent of any holder of trust preferred securities if the amendment does not
adversely affect the rights of the holders in any material respect. In all other
cases, Valero and the guarantee trustee may amend each guarantee only with the
prior approval of the holders of at least a majority of outstanding trust
preferred securities issued by the applicable trust.


                                       24
<PAGE>   48

     Valero may assign its obligations under the guarantees only in connection
with a consolidation, merger or asset sale involving Valero permitted under the
indenture governing the debt securities.

TERMINATION OF THE GUARANTEE

     A guarantee will terminate upon:


     - full payment of the redemption price of all trust preferred securities of
       the applicable trust



     - distribution of the related debt securities, or any securities into which
       those debt securities are convertible, to the holders of the trust
       preferred securities and trust common securities of that trust in
       exchange for all the securities issued by that trust or


     - full payment of the amounts payable upon liquidation of that trust


Each guarantee will, however, continue to be effective or will be reinstated if
any holder of trust preferred securities must repay any amounts paid on those
trust preferred securities or under the guarantee.


STATUS OF THE GUARANTEE


     Valero's obligations under each guarantee will be unsecured and effectively
junior to all debt and preferred stock of its subsidiaries. BY YOUR ACCEPTANCE
OF THE TRUST PREFERRED SECURITIES, YOU AGREE TO ANY SUBORDINATION PROVISIONS AND
OTHER TERMS OF THE RELATED GUARANTEE. We will specify in a prospectus supplement
the ranking of each guarantee with respect to Valero's capital stock and other
liabilities, including other guarantees.



     Each guarantee will be deposited with the guarantee trustee to be held for
your benefit. The guarantee trustee will have the right to enforce the guarantee
on your behalf. In most cases, the holders of a majority of outstanding trust
preferred securities issued by the applicable trust will have the right to
direct the time, method and place of:


     - conducting any proceeding for any remedy available to the applicable
       guarantee trustee or

     - exercising any trust or other power conferred upon that guarantee trustee
       under the applicable guarantee

     Each guarantee will constitute a guarantee of payment and not merely of
collection. This means that the guarantee trustee may institute a legal
proceeding directly against Valero to enforce the payment rights under the
guarantee without first instituting a legal proceeding against any other person
or entity.

     If the guarantee trustee fails to enforce the guarantee or Valero fails to
make a guarantee payment, you may institute a legal proceeding directly against
Valero to enforce your rights under that guarantee without first instituting a
legal proceeding against the applicable trust, the guarantee trustee or any
other person or entity.

PERIODIC REPORTS UNDER GUARANTEE

     Valero will be required to provide annually to the guarantee trustee a
statement as to its performance of its obligations and its compliance with all
conditions under the guarantees.

DUTIES OF GUARANTEE TRUSTEE


     The guarantee trustee normally will perform only those duties specifically
set forth in the applicable guarantee. The guarantees do not contain any implied
covenants. If a default occurs on a guarantee, the guarantee trustee will be
required to use the same degree of care and skill in exercise of its powers
under the guarantee as a prudent person would exercise or use under the
circumstances in the conduct of his own affairs. The guarantee trustee will
exercise any of its rights or powers under the guarantee at the request or
direction of holders of the applicable series of trust preferred securities only
if it is offered security and indemnity satisfactory to it.


                                       25
<PAGE>   49

GOVERNING LAW

     New York law will govern the guarantees.


                       DESCRIPTION OF THE DEBT SECURITIES



     Valero may issue to a trust or as part of a stock purchase unit from time
to time one or more series of senior debt securities under an indenture dated as
of December 12, 1997 between us and The Bank of New York, a New York banking
corporation, as indenture trustee. Valero may issue to a trust or as part of a
stock purchase unit from time to time one or more series of subordinated debt
securities under an indenture to be entered into between us and The Bank of New
York, as indenture trustee. We will provide information about the senior or
subordinated debt securities in a prospectus supplement. Valero will issue only
one series of debt securities to each trust. The indenture for the senior debt
securities and the indenture for the subordinated debt securities will be
substantially identical, except for the provisions relating to subordination and
restrictive covenants. We sometimes refer to the senior indenture and the
subordinated indenture as the "indentures."



     We have summarized selected provisions of the indentures and the debt
securities below. This summary is not complete. For a complete description, we
encourage you to read the indentures, which we have filed with the SEC. Please
read "Where You Can Find More Information."



RANKING



     The senior debt securities will constitute senior debt and will rank
equally with all of our unsecured and unsubordinated debt. The subordinated debt
securities will be subordinated to, and thus have a junior position to, the
senior debt securities and all of our other senior debt. Neither indenture
limits the amount of debt securities that can be issued under that indenture or
the amount of additional indebtedness Valero or any of its subsidiaries may
incur. We may issue debt securities under either indenture from time to time in
one or more series, each in an amount we authorize prior to issuance. The
indenture trustee will authenticate and deliver debt securities executed and
delivered to it by us as set forth in the applicable indenture.



     Valero is organized as a holding company that owns subsidiary companies.
Its subsidiary companies conduct substantially all of its business. The holding
company structure results in two principal risks:



     - Valero's subsidiaries may be restricted by contractual provisions or
       applicable laws from providing it the cash that it needs to pay parent
       company debt service obligations, including payments on the debt
       securities



     - In any liquidation, reorganization or insolvency proceeding involving
       Valero, your claim as a holder of trust preferred securities, which
       represents in effect an interest in debt securities, or as a holder of
       debt securities as part of a stock purchase unit, will be effectively
       junior to the claims of holders of any indebtedness or preferred stock of
       our subsidiaries



SUBSEQUENT DISTRIBUTION TO HOLDERS OF TRUST SECURITIES



     If Valero issues debt securities to a trust in connection with the issuance
of trust preferred and trust common securities by that trust, those debt
securities subsequently may be distributed to the holders of the trust preferred
and trust common securities either:



     - upon the dissolution of the trust or



     - upon the occurrence of events that we will describe in the prospectus
       supplement


                                       26
<PAGE>   50


TERMS



     The prospectus supplement relating to any series of debt securities we are
offering will include specific terms relating to that offering. These terms will
include some or all of the following:



     - whether the debt securities are senior or subordinated debt securities



     - the title of the debt securities



     - any limit on the total principal amount of the debt securities



     - the date or dates on which the principal of the debt securities will be
       payable



     - any interest rate, or the method of determining the interest rate, on the
       debt securities, the date from which interest will accrue, interest
       payment dates and record dates



     - any right to extend or defer the interest payment periods and the
       duration of the extension



     - if other than as set forth in this prospectus, the place or places where
       payments on the debt securities will be payable



     - any optional redemption provisions



     - any sinking fund or other provisions that would obligate us to redeem or
       purchase the debt securities



     - any provisions for the remarketing of the debt securities



     - any changes or additions to the events of default or covenants



     - whether we will issue the debt securities in individual certificates to
       each holder in registered or bearer form, or in the form of temporary or
       permanent global securities held by a depositary on behalf of holders



     - the denominations in which we will issue the debt securities, if other
       than denominations of an integral multiple of $1,000



     - the terms of any right to convert debt securities into shares of our
       common stock or other securities or property



     - whether payments on the debt securities will be payable in foreign
       currency or currency units (including composite currencies) or another
       form



     - any provisions that would determine the amount of principal, premium, if
       any, or interest, if any, on the debt securities by references to an
       index or pursuant to a formula



     - the portion of the principal amount of the debt securities that will be
       payable if the maturity is accelerated, if other than the entire
       principal amount



     - any other terms of the debt securities not inconsistent with the relevant
       indentures



     We may sell the debt securities at a discount, which may be substantial,
below their stated principal amount. These debt securities may bear no interest
or interest at a rate that at the time of issuance is below market rates. We
will describe in the prospectus supplement any material United States federal
income tax consequences applicable to those securities.



     If we sell any of the debt securities for any foreign currency or currency
unit or if payments on the debt securities are payable in any foreign currency
or currency unit, we will describe in the prospectus supplement the
restrictions, elections, tax consequences, specific terms and other information
relating to those debt securities and the foreign currency or currency unit.


                                       27
<PAGE>   51


CONSOLIDATION, MERGER AND SALE



     Valero has agreed that we will consolidate with or merge into any entity or
transfer or dispose of all or substantially all of our assets to any entity only
if:



     - Valero is the continuing corporation, or



     - if Valero is not the continuing corporation, the successor is organized
       and existing under the laws of any United States jurisdiction and assumes
       all of Valero's obligations under the indenture and the debt securities,
       and



     - in either case, immediately after giving effect to the transaction, no
       default or event of default would occur and be continuing



EVENTS OF DEFAULT



     Unless we inform you otherwise in the prospectus supplement, the following
are events of default under the indentures with respect to a series of debt
securities:



     - our failure to pay interest on any debt security of that series for 30
       days



     - our failure to pay principal of or any premium on any debt security of
       that series when due



     - our failure to make any sinking fund payment for any debt security of
       that series when due



     - our failure to perform any of our other covenants or breach of any of our
       other warranties in that indenture, other than a covenant or warranty
       included in the indenture solely for the benefit of another series of
       debt securities, and that failure continues for 60 days after written
       notice is given or received as provided in the indentures



     - certain bankruptcy, insolvency or reorganization events involving Valero
       Energy Corporation



     - our failure to pay at final maturity, after the expiration of any
       applicable grace periods, or upon the declaration of acceleration of
       payment of, any of our indebtedness for borrowed money in excess of $25
       million, if such indebtedness is not discharged, or such acceleration is
       not annulled, within 10 days after written notice is given as provided in
       the indentures



     - any other event of default we may provide for that series



     If an event of default for any series of debt securities occurs and is
continuing, the indenture trustee or the holders of at least 25% in principal
amount of the outstanding debt securities of the series affected by the default
may declare the principal amount of all the debt securities of that series to be
due and payable immediately. The holders of a majority in principal amount of
the outstanding debt securities of that series may in some cases rescind and
annul that acceleration. If required by the declaration of trust, any rescission
may be subject to the consent of the holders of the trust preferred securities
and the trust common securities.



     In most cases, the indenture trustee will be under no obligation to
exercise any of its rights or powers under the indentures at the request or
direction of any of the holders, unless the holders have offered to the
indenture trustee reasonable indemnity. Subject to this provision for
indemnification, the holders of a majority in aggregate principal amount of the
outstanding debt securities of any series may direct the time, method and place
of:



     - conducting any proceeding for any remedy available to the indenture
       trustee



     - exercising any trust or power conferred on the indenture trustee, with
       respect to the debt securities of that series



     Each indenture requires us to furnish to the indenture trustee annually a
statement as to our performance of certain of our obligations under the
indenture and as to any default in performance.


                                       28
<PAGE>   52


     An event of default under the applicable indenture for a series of debt
securities will constitute a trust enforcement event under the declaration of
trust for the applicable series of trust preferred securities. A holder of trust
preferred securities may directly institute a proceeding against Valero for
enforcement of payment to that holder of its pro rata share of principal,
premium, interest or any additional amounts if:



     - an event of default under the applicable declaration of trust has
       occurred and is continuing and



     - that event of default is attributable to Valero's failure to pay
       principal, any premium, interest or additional amounts on the applicable
       series of debt securities when due



Except as described in the preceding sentences or in the prospectus supplement,
the holders of trust preferred securities will not be able to exercise directly
any other remedy available to the holders of the applicable series of debt
securities.



MODIFICATION AND WAIVER



     We may modify or amend each of the indentures without the consent of any
holders of the debt securities in certain circumstances, including to:



     - evidence the assumption of our obligations under the indenture and the
       debt securities by a successor



     - add further covenants for the protection of the holders



     - cure any ambiguity or correct any inconsistency in the indenture, so long
       as such action will not adversely affect the interests of the holders



     - establish the form or terms of debt securities of any series



     - evidence the acceptance of appointment by a successor indenture trustee



     We may modify or amend each indenture with the consent of the holders of a
majority in principal amount of the outstanding debt securities of each series
issued under the indenture affected by the modification or amendment. Without
the consent of the holder of each outstanding debt security affected, however,
no modification may:



     - change the stated maturity of the principal of, or any installment of
       interest on, any debt security



     - reduce the principal amount of, the interest on, or the premium payable
       on, any debt security



     - reduce the amount of principal of discounted debt securities payable upon
       acceleration of maturity



     - change the place of payment or the currency in which any debt security is
       payable



     - impair the right to institute suit for the enforcement of any payment on
       any debt security



     - reduce quorum or voting rights



     The holders of a majority in aggregate principal amount of the outstanding
debt securities of each series may waive past defaults by us under the
indentures with respect to the debt securities of that series only. Those
holders may not, however, waive any default in any payment on any debt security
of that series or compliance with a provision that cannot be modified or amended
without the consent of each holder affected.


                                       29
<PAGE>   53


DISCHARGE



     We will be discharged from all obligations of any series of debt
securities, except for certain surviving obligations to register the transfer or
exchange of the debt securities and any right by the holders to receive
additional amounts under the indentures if:



     - all debt securities of the series previously authenticated and delivered
       under the relevant indenture have been delivered to the indenture trustee
       for cancellation or



     - all debt securities of that series have become due and payable or will
       become due and payable within one year, at maturity or by redemption, and
       we deposit with the indenture trustee, in trust, sufficient money to pay
       the entire indebtedness of all the debt securities of the series on the
       dates the payments are due in accordance with the terms of the debt
       securities



     To exercise the right of deposit described above, we must deliver to the
indenture trustee an opinion of counsel and an officers' certificate stating
that all conditions precedent to the satisfaction and discharge of the relevant
indenture have been complied with.



FORM, EXCHANGE, REGISTRATION AND TRANSFER



     Unless we inform you otherwise in the prospectus supplement, we will issue
the debt securities only in fully registered form, without coupons, in
denominations of $1,000 and integral multiples.



     Debt securities will be exchangeable for other debt securities of the same
series, the same total principal amount and the same terms in such authorized
denominations as may be requested. Holders may present debt securities for
registration of transfer at the office of the security registrar or any transfer
agent we designate. The security registrar or transfer agent will effect the
transfer or exchange when it is satisfied with the documents of title and
identity of the person making the request. We will not charge a service charge
for any transfer or exchange of the debt securities. We may, however, require
payment of any tax or other governmental charge payable for the registration of
the transfer or exchange.



     We will appoint the indenture trustee under each indenture as security
registrar for the debt securities issued under that indenture. We are required
to maintain an office or agency for transfers and exchanges in each place of
payment. We may at any time designate additional transfer agents for any series
of debt securities.



     We will not be required:



     - to issue, register the transfer of or exchange debt securities of a
       series during a period beginning 15 business days prior to the day of
       mailing of a notice of redemption of debt securities of that series
       selected for redemption and ending on the close of business on the day of
       mailing of the relevant notice or



     - to register the transfer of or exchange any debt security, or portion of
       any debt security, called for redemption, except the unredeemed portion
       of any debt security we are redeeming in part



PAYMENT AND PAYING AGENTS



     Unless we inform you otherwise in the prospectus supplement, principal and
interest will be payable, and the debt securities will be transferable and
exchangeable, at the office or offices of the applicable indenture trustee or
any paying agent we designate. At our option, we will pay interest on the debt
securities by check mailed to the holder's registered address or by wire
transfer for global debt securities. Unless we inform you otherwise in a
prospectus supplement, we will make interest payments to the persons in whose
name the debt securities are registered at the close of business on the record
date for each interest payment date.



     In most cases, the indenture trustee and paying agent will repay to us upon
written request any funds held by them for payments on the debt securities that
remain unclaimed for two years after the date upon


                                       30
<PAGE>   54


which that payment has become due. After payment to us, holders entitled to the
money must look to us for payment.



BOOK-ENTRY AND SETTLEMENT



     Valero may issue the debt securities of a series in the form of one or more
global debt securities that would be deposited with a depositary or its nominee
identified in the prospectus supplement. The prospectus supplement will
describe:



     - any circumstances under which beneficial owners may exchange their
       interests in a global debt security for certificated debt securities of
       the same series with the same total principal amount and the same terms



     - the manner in which Valero will pay principal of and any premium and
       interest on a global debt security



     - the terms of any depositary arrangement and the rights and limitations of
       owners of beneficial interests in any global debt security



NOTICES



     Notices to holders will be given by mail to the addresses of such holders
as they appear in the security register.



GOVERNING LAW



     New York law will govern each indenture and the debt securities.



THE TRUSTEE



     The Bank of New York is the indenture trustee under the senior indenture.
Its address is 101 Barclay Street, Floor 21 West, New York, New York 10286.
Pursuant to the senior indenture, The Bank of New York serves as indenture
trustee with regard to approximately $450,000,000 aggregate principal amount of
our senior unsecured notes and receives customary fees for its services. The
Bank of New York also will serve as indenture trustee under the subordinated
indenture. Please read "About This Prospectus."



     The holders of a majority in principal amount of the outstanding debt
securities of any series issued under each indenture will have the right to
direct the time, method and place of conducting any proceeding for exercising
any remedy available to the indenture trustee, subject to certain exceptions. If
an event of default occurs and is continuing, the indenture trustee will be
required in the exercise of its powers to use the degree of care and skill of a
prudent person in the conduct of his own affairs. The indenture trustee will be
obligated to exercise any of its rights or powers under the relevant indenture
at the request of any holders of debt securities of any series issued under that
indenture only after those holders have offered the trustee indemnity reasonably
satisfactory to it. The indenture trustee may resign at any time or the holders
of a majority in principal amount of the debt securities may remove the trustee.
If the indenture trustee resigns, is removed or becomes incapable of acting as
trustee or if a vacancy occurs in the office of the trustee for any reason, we
will appoint a successor indenture trustee in accordance with the provisions of
the applicable indenture.



     If the indenture trustee becomes one of our creditors, it will be subject
to limitations in the indenture on its rights to obtain payment of claims or to
realize on certain property received for any claim, as security or otherwise.
The indenture trustee may engage in other transactions with us. If, however, it
acquires any conflicting interest, it must eliminate that conflict or resign as
required under the indenture.


                                       31
<PAGE>   55


SUBORDINATION UNDER THE SUBORDINATED INDENTURE



     Under the subordinated indenture, payment of the principal, interest and
any premium on the subordinated debt securities will generally be subordinated
and junior in right of payment to the prior payment in full of all senior debt.
Unless we inform you otherwise in the prospectus supplement, we may not make any
payment of principal of, interest on, or any premium on, the subordinated debt
securities if:



     - we fail to pay the principal, interest, premium or any other amounts on
       any senior debt when due or



     - we default in performing any other covenant (a "covenant default") in any
       senior debt that we have designated if the covenant default allows the
       holders of that senior debt to accelerate the maturity of the senior debt
       they hold



     Unless we inform you otherwise in the prospectus supplement, a covenant
default will prevent us from paying the subordinated debt securities only for up
to 179 days after holders of the senior debt give the indenture trustee for the
subordinated debt securities notice of the covenant default.



     The subordination does not affect our obligation, which is absolute and
unconditional, to pay, when due, the principal of and any premium and interest
on the subordinated debt securities. In addition, the subordination does not
prevent the occurrence of any default under the subordinated indenture.



     The subordinated indenture will not limit the amount of senior debt that we
may incur. As a result of the subordination of the subordinated debt securities,
if we became insolvent, holders of subordinated debt securities may receive less
on a proportionate basis than other creditors.



     Unless we inform you otherwise in the prospectus supplement, "senior debt"
will mean all indebtedness, including guarantees, of Valero, unless the
indebtedness states that it is not senior to the subordinated debt securities or
our other junior debt.



RESTRICTIVE COVENANTS IN THE SENIOR INDENTURE



     We have agreed to two principal restrictions on our activities for the
benefit of holders of the senior debt securities. Unless waived or amended, the
restrictive covenants summarized below will apply to a series of debt securities
issued under the senior indenture as long as any of those debt securities is
outstanding, unless the prospectus supplement for the series states otherwise.
We have used in this summary description terms that we have defined below under
"-- Glossary."



     Limitations on Liens



     We have agreed that when any senior debt securities are outstanding neither
we nor any of our subsidiaries will create or assume any liens upon any of our
receivables or other assets or any asset, stock or indebtedness of any of our
subsidiaries unless such senior debt securities are secured equally and ratably
with or prior to the debt secured by the lien. This covenant has exceptions that
permit:



     - subject to certain limitations, any lien created to secure all or part of
       the purchase price of any property or to secure a loan made to finance
       the acquisition of the property described in such lien



     - subject to certain limitations, any lien existing on any property at the
       time of its acquisition or created not later than 12 months thereafter



     - subject to certain limitations, any lien created in connection with the
       operation or use of any property acquired or constructed by us and
       created within 12 months after the acquisition, construction or
       commencement of full operations on the property



     - any mechanic's or materialmen's lien or any lien related to workmen's
       compensation or other insurance


                                       32
<PAGE>   56


     - any lien arising by reason of deposits with or the giving of any form of
       security to any governmental agency, including for taxes and other
       governmental charges



     - liens for taxes or charges which are not delinquent or are being
       contested in good faith



     - any judgment lien the execution of which has been stayed or which has
       been adequately appealed and secured



     - any lien incidental to the conduct of our business which was not incurred
       in connection with the borrowing of money or the obtaining of advances or
       credit and which does not materially interfere with the conduct of our
       business



     - any intercompany lien



     - liens incurred in connection with the borrowing of funds, if such funds
       are used within 120 days to repay indebtedness of at least an equal
       amount secured by a lien on our property having a fair market value at
       least equal to the fair market value of the property securing the new
       lien



     - any lien created to secure indebtedness and letter of credit
       reimbursement obligations incurred in connection with the extension of
       working capital financing



     - any lien existing on the date of the indenture



     - subject to an aggregate limit of $60 million, any lien on cash, cash
       equivalents, options or futures positions and other account holdings
       securing derivative obligations or otherwise incurred in connection with
       margin accounts with brokerage or commodities firms



     - subject to an aggregate limit of 10% of our consolidated net tangible
       assets, any liens not otherwise permitted by any of the other exceptions
       set forth in the indenture



     Limitations on Sale/Leaseback Transactions



     We have agreed that neither we nor our subsidiaries would enter into any
sale/leaseback transactions with regard to any principal property, providing for
the leasing back to us or a subsidiary by a third party for a period of more
than three years of any asset which has been or is to be sold or transferred by
us or such subsidiary to such third party or to any other person. This covenant
has exceptions that permit transactions of this nature under the following
circumstances:



     - we would be entitled, pursuant to the "Limitations on Liens" covenant
       described above, to incur indebtedness secured by a lien on the property
       to be leased, without equally and ratably securing the senior debt
       securities then outstanding or



     - within 120 days of the effective date of such sale/leaseback transaction,
       we apply an amount equal to the value of such transaction:



      - to the voluntary retirement of funded debt or



      - to the purchase of another principal property



     In addition, subject to a limit (on an aggregated basis with indebtedness
secured by liens permitted by the limitations on liens covenant described above)
of 10% of our consolidated net tangible assets, we can enter into sale/leaseback
transactions not otherwise permitted by the express provisions of the indenture.



     Glossary



     We define the following terms in the senior indenture. We use them here
with the same definitions. Generally accepted accounting principles should be
used to determine all items in this section, unless otherwise indicated.


                                       33
<PAGE>   57


     "Consolidated net tangible assets" means the total amount of assets shown
on a consolidated balance sheet of us and our subsidiaries (excluding goodwill
and other intangible assets), less all current liabilities (excluding notes
payable and current maturities of long-term debt).



     "Funded debt" means generally any indebtedness for money borrowed, created,
issued, incurred, assumed or guaranteed which would be classified as long-term
debt.



     "Principal Property" means any of our or our subsidiaries' refineries or
refinery-related assets, distribution facilities or other real property which
has a net book value exceeding 2.5% of consolidated net tangible assets, but not
including any property which in our opinion is not material to our and our
subsidiaries' total business conducted as an entirety or any portion of a
particular property that is similarly found not to be material to the use or
operation of such property.



     "Subsidiary" means any entity of which at the time of determination we or
one or more of our subsidiaries owns or controls directly or indirectly more
than 50% of the shares of voting stock or the outstanding partnership or similar
interests and any limited partnership of which we or any one of our subsidiaries
are a general partner.



             RELATIONSHIP AMONG THE TRUST PREFERRED SECURITIES, THE


                       DEBT SECURITIES AND THE GUARANTEE



     To the extent set forth in the guarantee and to the extent funds are
available, we will irrevocably guarantee the payment of distributions and other
amounts due on the trust securities. If and to the extent we do not make
payments on the debt securities, the trust will not have sufficient funds to pay
distributions or other amounts due on the trust securities. The guarantee does
not cover any payment of distributions or other amounts due on the trust
securities unless the trust has sufficient funds for the payment of such
distributions or other amounts. In such event, a holder of trust securities may
institute a legal proceeding directly against us to enforce payment of such
distributions or other amounts to such holder after the respective due dates.
Taken together, our obligations under the declaration of trust for each trust,
the debt securities, the indenture and the guarantee provide a full and
unconditional guarantee of payments of distributions and other amounts due on
the trust securities. No single document standing alone or operating in
conjunction with fewer than all of the other documents constitutes such
guarantee. It is only the combined operation of these documents that provides a
full and unconditional guarantee of the trust's obligations under the trust
securities.



SUFFICIENCY OF PAYMENTS



     As long as payments of interest and other amounts are made when due on the
debt securities, such payments will be sufficient to cover distributions and
payments due on the trust securities because of the following factors:



     - the aggregate principal amount of the debt securities will be equal to
       the sum of the aggregate stated liquidation amount of the trust
       securities



     - the interest rate and the interest and other payment dates on the debt
       securities will match the distribution rate and distribution and other
       payment dates for the trust securities



     - we, as issuer of the debt securities, will pay, and the trust will not be
       obligated to pay, directly or indirectly, any costs, expenses, debts and
       obligations of the trust (other than with respect to the trust
       securities), and



     - the declaration of trust further provides that the trust will not engage
       in any activity that is not consistent with the limited purposes of the
       trust



     Notwithstanding anything to the contrary in the indenture, we have the
right to set-off any payment we are otherwise required to make thereunder
against and to the extent we have already made, or are concurrently on the date
of such payment making, a related payment under the guarantee.


                                       34
<PAGE>   58


ENFORCEMENT RIGHTS OF HOLDERS OF PREFERRED SECURITIES



     The declaration of trust provides that if we fail to make interest or other
payments on the debt securities when due (taking account of any extension
period), the holders of the trust preferred securities may direct the property
trustee to enforce its rights under the applicable indenture. If the property
trustee fails to enforce its rights under the indenture in respect of an event
of default under the indenture, any holder of record of trust preferred
securities may, to the fullest extent permitted by applicable law, institute a
legal proceeding against us to enforce the property trustee's rights under the
indenture without first instituting any legal proceeding against the property
trustee or any other person or entity. Notwithstanding the foregoing, if a trust
enforcement event has occurred and is continuing and such event is attributable
to our failure to pay interest, premium or principal on the debt securities on
the date such interest, premium or principal is otherwise payable, then a holder
of trust preferred securities may institute a direct action against us for
payment of such holder's pro rata share. If a holder brings such a direct
action, we will be entitled to that holder's rights under the applicable
declaration of trust to the extent of any payment made by us to that holder.



     If we fail to make payments under the guarantee, a holder of trust
preferred securities may institute a proceeding directly against us for
enforcement of the guarantee for such payments.



LIMITED PURPOSE OF TRUST



     The trust preferred securities evidence undivided beneficial ownership
interests in the trust, and the trust exists for the sole purpose of issuing and
selling the trust securities and using the proceeds to purchase our debt
securities. A principal difference between the rights of a holder of trust
preferred securities and a holder of debt securities is that a holder of debt
securities is entitled to receive from us the principal amount of and interest
accrued on the debt securities held, while a holder of trust preferred
securities is entitled to receive distributions and other payments from the
trust (or from us under the guarantee) only if and to the extent the trust has
funds available for the payment of such distributions and other payments.



RIGHTS UPON DISSOLUTION



     Upon any voluntary or involuntary dissolution, winding-up or liquidation of
the trust involving the redemption or repayment of the debt securities, the
holders of the trust securities will be entitled to receive, out of assets held
by the trust, subject to the rights of creditors of the trust, if any, the
liquidation distribution in cash. Because we are the guarantor under the
guarantee and, as issuer of the debt securities, we have agreed to pay for all
costs, expenses and liabilities of the trust (other than the trust's obligations
to the holders of the trust securities), the positions of a holder of trust
securities and a holder of debt securities relative to other creditors and to
our stockholders in the event of liquidation or bankruptcy of Valero would be
substantially the same.


                                       35
<PAGE>   59


                    DESCRIPTION OF STOCK PURCHASE CONTRACTS


                            AND STOCK PURCHASE UNITS



     We may issue stock purchase contracts, including contracts obligating
holders to purchase from us, and us to sell to the holders, a specified number
of shares of common stock at a future date or dates, which we refer to herein as
"stock purchase contracts." The price per share of common stock and the number
of shares of common stock may be fixed at the time the stock purchase contracts
are issued or may be determined by reference to a specific formula set forth in
the stock purchase contracts. The stock purchase contracts may be issued
separately or as part of units consisting of a stock purchase contract and debt
securities, trust preferred securities or debt obligations of third parties,
including U.S. treasury securities, securing the holders' obligations to
purchase the common stock under the stock purchase contracts, which we refer to
herein as "stock purchase units." The stock purchase contracts may require
holders to secure their obligations thereunder in a specified manner. The stock
purchase contracts also may require us to make periodic payments to the holders
of the stock purchase units or vice versa, and such payments may be unsecured or
refunded on some basis.



     The applicable prospectus supplement will describe the terms of the stock
purchase contracts or stock purchase units. The description in the prospectus
supplement will not necessarily be complete, and reference will be made to the
stock purchase contracts, and, if applicable, collateral or depositary
arrangements, relating to the stock purchase contracts or stock purchase units.
Material United States federal income tax considerations applicable to the stock
purchase units and the stock purchase contracts will also be discussed in the
applicable prospectus supplement.



                          DESCRIPTION OF CAPITAL STOCK



     Our authorized capital stock consists of:



     - 150,000,000 shares of common stock, par value $.01 per share



     - 20,000,000 shares of preferred stock, par value $.01 per share, issuable
       in series



     We have summarized selected aspects of our capital stock below. The summary
is not complete. For a complete description, you should refer to our restated
certificate of incorporation, restated by-laws and the Rights Agreement, dated
as of July 17, 1997 between us and Harris Trust and Savings Bank, as rights
agent, all of which are exhibits to the registration statement of which this
prospectus is part.



COMMON STOCK



     Each share of common stock is entitled to participate equally in dividends
as and when declared by our board of directors. The payment of dividends on our
common stock may be limited by obligations we may have to holders of any
preferred stock. For information regarding restrictions on payments of
dividends, see the prospectus supplement applicable to any issuance of common
stock.



     Common stockholders are entitled to one vote for each share held on all
matters submitted to them. The common stock does not have cumulative voting
rights, meaning that holders of a majority of the shares of common stock voting
for the election of directors can elect all the directors if they choose to do
so.



     If we liquidate or dissolve our business, the holders of common stock will
share ratably in the distribution of assets available for distribution to
stockholders after creditors are paid and preferred stockholders receive their
distributions. The shares of common stock have no preemptive rights and are not
convertible, redeemable or assessable or entitled to the benefits of any sinking
fund.



     All issued and outstanding shares of common stock are fully paid and
nonassessable. Any shares of common stock we offer under this prospectus will be
fully paid and nonassessable.



     The common stock is listed on the New York Stock Exchange and trades under
the symbol "VLO."


                                       36
<PAGE>   60


PREFERRED STOCK



     Our board of directors can, without action by stockholders, issue one or
more series of preferred stock. The board can determine for each series the
number of shares, designation, relative voting rights, dividend rates,
liquidation and other rights, preferences and limitations. In some cases, the
issuance of preferred stock could delay or discourage a change in control of us.



     We have summarized material provisions of the preferred stock in this
section. This summary is not complete. We will file the form of the preferred
stock with the SEC before we issue any of it, and you should read it for
provisions that may be important to you.



     The prospectus supplement relating to any series of preferred stock we are
offering will include specific terms relating to the offering. These terms will
include some or all of the following:



     - the title of the preferred stock



     - the maximum number of shares of the series



     - the dividend rate or the method of calculating the dividend, the date
       from which dividends will accrue and whether dividends will be cumulative



     - any liquidation preference



     - any redemption provisions



     - any sinking fund or other provisions that would obligate us to redeem or
       purchase the preferred stock



     - any terms for the conversion or exchange of the preferred stock for other
       securities of us or any other entity



     - any voting rights



     - any other preferences and relative, participating, optional or other
       special rights or any qualifications, limitations or restrictions on the
       rights of the shares



     Any shares of preferred stock we issue will be fully paid and
nonassessable.



     Our board of directors has reserved for issuance pursuant to our
Stockholder Rights Plan described below a total of 1,500,000 shares of Junior
Participating Preferred Stock, Series I. We have not issued any shares of
preferred stock at the date of this prospectus.



ANTI-TAKEOVER PROVISIONS



     The provisions of Delaware law and our restated certificate of
incorporation and our restated by-laws summarized below may have an
anti-takeover effect and may delay, defer or prevent a tender offer or takeover
attempt that a stockholder might consider in his or her best interest, including
those attempts that might result in a premium over the market price for the
common stock.



Staggered Board of Directors



     Our board of directors is divided into three classes that are elected for
staggered three-year terms. The classification of the board of directors has the
effect of requiring at least two annual stockholder meetings, instead of one, to
effect a change in control of the board of directors. Holders of 60% of the
shares of common stock entitled to vote in the election of directors may remove
a director for cause, but stockholders may not remove any director without
cause.



Fair Price Provision



     Our restated certificate of incorporation contains a fair price provision.
Mergers, consolidations and other business combinations involving us and an
"interested stockholder" require the approval of holders of


                                       37
<PAGE>   61


at least 66 2/3% of our outstanding voting stock not owned by the interested
stockholder. Interested stockholders include the holder of 15% or more of our
outstanding voting stock. The 66 2/3% voting requirement does not apply,
however, if the "continuing directors," as defined in our restated certificate
of incorporation, approve the business combination, or the business combination
meets other specified conditions.



Liability of Our Directors



     As permitted by the Delaware corporations statute, we have included in our
restated certificate of incorporation a provision that limits our directors'
liability for monetary damages for breach of their fiduciary duty of care to us
and our stockholders. The provision does not affect the liability of a director:



     - for any breach of his/her duty of loyalty to us or our stockholders



     - for acts or omissions not in good faith or which involve intentional
       misconduct or a knowing violation of law



     - for the declaration or payment of unlawful dividends or unlawful stock
       repurchases or redemptions or



     - for any transaction from which the director derived an improper personal
       benefit



     This provision also does not affect a director's responsibilities under any
other laws, such as the federal securities laws or state or federal
environmental laws.



Stockholder Proposals and Director Nominations



     Our stockholders can submit stockholder proposals and nominate candidates
for our board of directors if the stockholders follow advance notice procedures
described in our restated by-laws.



     Generally, stockholders must submit a written notice between 60 and 90 days
before the first anniversary of the date of our previous year's annual
stockholders' meeting. To nominate directors, the notice must include the name
and address of the stockholder, the class and number of shares owned by the
stockholder, information about the nominee required by the SEC and a description
of any arrangements or understandings with respect to the election of directors
that exist between the stockholder and any other person. To make stockholder
proposals, the notice must include a description of the proposal, the reasons
for bringing the proposal before the meeting, the name and address of the
stockholder, the class and number of shares owned by the stockholder and any
material interest of the stockholder in the proposal.



     In each case, if we have changed the date of the annual meeting to more
than 30 days before or 60 days after the anniversary date of our previous year's
annual stockholders' meeting, stockholders must submit the notice between 60 and
90 days prior to such annual meeting or no later than 10 days after the day we
make public the date of the annual meeting.



     Director nominations and stockholder proposals that are late or that do not
include all required information may be rejected. This could prevent
stockholders from bringing certain matters before an annual meeting, including
making nominations for directors.



Delaware Anti-takeover Statute



     We are a Delaware corporation and are subject to Section 203 of the
Delaware General Corporation Law. In general, Section 203 prevents us from
engaging in a business combination with an "interested stockholder" (generally,
a person owning 15% or more of our outstanding voting stock) for three years
following the time that person becomes a 15% stockholder unless one of the
following is satisfied:



     - before that person became a 15% stockholder, our board of directors
       approved the transaction in which the stockholder became a 15%
       stockholder or approved the business combination


                                       38
<PAGE>   62


     - upon completion of the transaction that resulted in the stockholder's
       becoming a 15% stockholder, the stockholder owns at least 85% of our
       voting stock outstanding at the time the transaction began (excluding
       stock held by directors who are also officers and by employee stock plans
       that do not provide employees with the right to determine confidentially
       whether shares held subject to the plan will be tendered in a tender or
       exchange offer) or



     - after the transaction in which that person became a 15% stockholder, the
       business combination is approved by our board of directors and authorized
       at a stockholders' meeting by at least two-thirds of the outstanding
       voting stock not owned by the 15% stockholder



     Under Section 203, these restrictions also do not apply to certain business
combinations proposed by a 15% stockholder following the disclosure of an
extraordinary transaction with a person who was not a 15% stockholder during the
previous three years or who became a 15% stockholder with the approval of a
majority of our directors. This exception applies only if the extraordinary
transaction is approved or not opposed by a majority of our directors who were
directors before any person became a 15% stockholder in the previous three
years, or the successors of these directors.



Other Provisions



     Our restated certificate of incorporation also provides that:



     - stockholders may act only at an annual or special meeting and not by
       written consent



     - an 80% vote of the outstanding voting stock is required for the
       stockholders to amend our restated by-laws and



     - an 80% vote of the outstanding voting stock is required to amend our
       restated certificate of incorporation with respect to certain matters,
       including those described in the first two bullet points above



TRANSFER AGENT AND REGISTRAR



     Harris Trust and Savings Bank, Chicago, Illinois, is our transfer agent and
registrar.



STOCKHOLDER RIGHTS PLAN



     We have a stockholder rights plan under which one preferred share purchase
right is attached to each outstanding share of our common stock. The rights
become exercisable under specified circumstances, including any person or group
(an "acquiring person") becoming the beneficial owner of 15% or more of our
outstanding common stock, subject to specified exceptions. Each right entitles
the registered holder to purchase from us one one-hundredth of a share of Junior
Participating Preferred Stock, Series I, at an exercise price of $100, subject
to adjustment under specified circumstances. If events specified in the
stockholder rights plan occur, each holder of rights other than the acquiring
person can exercise their rights. When a holder exercises a right, the holder
will be entitled to receive common stock valued at twice the exercise price of
the right. In some cases, the holder will receive cash, property or other
securities instead of common stock. We may redeem the rights for $0.01 per right
at any time prior to the tenth day after a person or group becomes an acquiring
person. The stockholder rights plan and the rights expire in June 2007.


                                       39
<PAGE>   63


                              PLAN OF DISTRIBUTION



     We and the trusts may sell the offered securities in and outside the United
States (a) through underwriters or dealers, (b) directly to purchasers,
including our affiliates, (c) through agents or (d) through a combination of any
of these methods. The prospectus supplement will include the following
information:


     - the terms of the offering

     - the names of any underwriters or agents

     - the name or names of any managing underwriter or underwriters


     - the purchase price of the securities



     - the net proceeds from the sale of the securities


     - any delayed delivery arrangements

     - any underwriting discounts, commissions and other items constituting
       underwriters' compensation

     - any initial public offering price

     - any discounts or concessions allowed or reallowed or paid to dealers

     - any commissions paid to agents

SALE THROUGH UNDERWRITERS OR DEALERS


     If underwriters are used in the sale, the underwriters will acquire the
securities for their own account. The underwriters may resell the securities
from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. Underwriters may offer securities to the public either
through underwriting syndicates represented by one or more managing underwriters
or directly by one or more firms acting as underwriters. Unless we inform you
otherwise in the prospectus supplement, the obligations of the underwriters to
purchase the securities will be subject to certain conditions, and the
underwriters will be obligated to purchase all the offered securities if they
purchase any of them. The underwriters may change from time to time any initial
public offering price and any discounts or concessions allowed or reallowed or
paid to dealers.


     During and after an offering through underwriters, the underwriters may
purchase and sell the securities in the open market. These transactions may
include overallotment and stabilizing transactions and purchases to cover
syndicate short positions created in connection with the offering. The
underwriters may also impose a penalty bid, which means that selling concessions
allowed to syndicate members or other broker-dealers for the offered securities
sold for their account may be reclaimed by the syndicate if the offered
securities are repurchased by the syndicate in stabilizing or covering
transactions. These activities may stabilize, maintain or otherwise affect the
market price of the offered securities, which may be higher than the price that
might otherwise prevail in the open market. If commenced, the underwriters may
discontinue these activities at any time.


     If dealers are used in the sale of securities, we or the trusts will sell
the securities to them as principals. They may then resell those securities to
the public at varying prices determined by the dealers at the time of resale. We
will include in the prospectus supplement the names of the dealers and the terms
of the transaction.


DIRECT SALES AND SALES THROUGH AGENTS


     We and the trusts may sell the securities directly. In this case, no
underwriters or agents would be involved. We and the trusts may also sell the
securities through agents designated from time to time. In the prospectus
supplement, we will name any agent involved in the offer or sale of the offered
securities, and we will describe any commissions payable to the agent. Unless we
inform you otherwise in the


                                       40
<PAGE>   64

prospectus supplement, any agent will agree to use its reasonable best efforts
to solicit purchases for the period of its appointment.


     We and the trusts may sell the securities directly to institutional
investors or others who may be deemed to be underwriters within the meaning of
the Securities Act of 1933 with respect to any sale of those securities. We will
describe the terms of any such sales in the prospectus supplement.


DELAYED DELIVERY CONTRACTS


     If we so indicate in the prospectus supplement, we and the trusts may
authorize agents, underwriters or dealers to solicit offers from certain types
of institutions to purchase securities from us or the trusts at the public
offering price under delayed delivery contracts. These contracts would provide
for payment and delivery on a specified date in the future. The contracts would
be subject only to those conditions described in the prospectus supplement. The
prospectus supplement will describe the commission payable for solicitation of
those contracts.


GENERAL INFORMATION

     We may have agreements with the agents, dealers and underwriters to
indemnify them against certain civil liabilities, including liabilities under
the Securities Act of 1933, or to contribute with respect to payments that the
agents, dealers or underwriters may be required to make. Agents, dealers and
underwriters may be customers of, engage in transactions with or perform
services for us in the ordinary course of their businesses.


                                 LEGAL MATTERS



     Richards, Layton & Finger, P.A., our special Delaware counsel and special
Delaware counsel to the trusts, will issue opinions about the legality of the
trust preferred securities, the enforceability of the applicable declaration of
trust and the creation of the trusts for us. Mr. Jay D. Browning, Esq., Managing
Attorney, Corporate Law and Secretary of Valero, will issue opinions about the
legality of Valero's guarantees, debt securities, common stock, stock purchase
contracts and stock purchase units for us. Mr. Browning is our employee and at
May 1, 2000, beneficially owned 1,419 shares of our common stock (including
shares held under employee benefit plans) and held options under our employee
stock option plans to purchase an additional 28,412 shares of our common stock.
None of such shares or options were granted in connection with the offering of
the securities. Any underwriters will be advised about other issues relating to
any offering by their own legal counsel.



                                    EXPERTS



     Our audited consolidated financial statements incorporated by reference in
this prospectus from our annual report on Form 10-K for the year ended December
31, 1999 have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
incorporated in this prospectus by reference in reliance upon the authority of
said firm as experts in accounting and auditing in giving said report.



                      WHERE YOU CAN FIND MORE INFORMATION


     We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You can read and copy any materials we file with the
SEC at the SEC's public reference room at 450 Fifth Street, N.W., Washington,
D.C. 20549. You can obtain information about the operation of the SEC's public
reference room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a
web site that contains information we file electronically with the SEC, which
you can access over the Internet at http://www.sec.gov. You can obtain
information about us at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.

                                       41
<PAGE>   65

     This prospectus is part of a registration statement we have filed with the
SEC relating to the securities we may offer. As permitted by SEC rules, this
prospectus does not contain all of the information we have included in the
registration statement and the accompanying exhibits and schedules we file with
the SEC. You may refer to the registration statement, the exhibits and schedules
for more information about us and our securities. The registration statement,
exhibits and schedules are available at the SEC's public reference room or
through its web site.


                    INFORMATION WE INCORPORATE BY REFERENCE


     We are incorporating by reference information we file with the SEC, which
means that we are disclosing important information to you by referring you to
those documents. The information we incorporate by reference is an important
part of this prospectus, and information that we file later with the SEC
automatically will update and supersede this information. We incorporate by
reference the documents listed below and any future filings we make with the SEC
under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
until we sell all the securities:

     - our annual report on Form 10-K for the year ended December 31, 1999


     - our quarterly report on Form 10-Q for the quarterly period ended March
       31, 2000


     - the description of our common stock contained in our registration
       statement on Form 8-A, as may be amended from time to time to update that
       description

     - the description of the rights associated with our common stock contained
       in our registration statement on Form 8-A, as may be amended from time to
       time to update that description

     - our current report on Form 8-K dated March 17, 2000 and filed with the
       SEC on March 20, 2000


     You may request a copy of these filings (other than an exhibit to those
filings unless we have specifically incorporated that exhibit by reference into
the filing), at no cost, by writing or telephoning us at the following address:


     Valero Energy Corporation
     One Valero Place
     San Antonio, Texas 78212
     Attention: Investor Relations
     Telephone: (210) 370-2139

                                       42
<PAGE>   66

                                    PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

     The following table sets forth all expenses payable by Valero Energy
Corporation (the "Company") in connection with the issuance and distribution of
the securities being registered. All the amounts shown are estimates, except the
registration fee.


<TABLE>
<S>                                                        <C>
Registration Fee........................................   $  264,000
Printing and Engraving Expenses.........................      225,000
Legal Fees and Expenses.................................      300,000
Accounting Fees and Expenses............................      335,000
Fees and Expenses of Trustee and Counsel................       53,000
Rating Agency Fees......................................      511,250
Miscellaneous...........................................       20,000
                                                           ----------
          Total.........................................   $1,708,250
                                                           ==========
</TABLE>



ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.


     The Company's Restated Certificate of Incorporation contains a provision
that eliminates the personal liability of a director to the Company and its
stockholders for monetary damages for breach of fiduciary duty as a director to
the extent currently allowed under the Delaware General Corporation Law. If a
director were to breach such duty in performing his duties as a director,
neither the Company nor its stockholders could recover monetary damages from the
director, and the only course of action available to the Company's stockholders
would be equitable remedies, such as an action to enjoin or rescind a
transaction involving a breach of fiduciary duty. To the extent certain claims
against directors are limited to equitable remedies, the provision in the
Company's Restated Certificate of Incorporation may reduce the likelihood of
derivative litigation and may discourage stockholders or management from
initiating litigation against directors for breach of their fiduciary duty.
Additionally, equitable remedies may not be effective in many situations. If a
stockholder's only remedy is to enjoin the completion of the Board of Directors'
action, this remedy would be ineffective if the stockholder does not become
aware of a transaction or event until after it has been completed. In such a
situation, it is possible that the stockholders and the Company would have no
effective remedy against the directors. Under the Company's Restated Certificate
of Incorporation, liability for monetary damages remains for (i) any breach of
the duty of loyalty to the Company or its stockholders, (ii) acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) payment of an improper dividend or improper repurchase or
redemption of the Company's stock under Section 174 of the Delaware General
Corporation Law, or (iv) any transaction from which the director derived an
improper personal benefit.

     Under Article V of the Restated Certificate of Incorporation and Article
VIII of the Company's Restated By-laws as currently in effect and an
indemnification agreement with the Company's officers and directors (the
"Indemnification Agreement"), each person who is or was a director or officer of
the Company or a subsidiary of the Company, or who serves or served any other
enterprise or organization at the request of the Company or a subsidiary of the
Company, shall be indemnified by the Company to the full extent permitted by the
Delaware General Corporation Law.

     Under such law, to the extent that such person is successful on the merits
in defense of a suit or proceeding brought against him by reason of the fact
that he is or was a director or officer of the Company, or serves or served any
other enterprise or organization at the request of the Company, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred in connection with such action.

                                      II-1
<PAGE>   67

     Under such law, if unsuccessful in defense of a third-party civil suit or a
criminal suit, or if such suit is settled, such a person shall be indemnified
against both (a) expenses, including attorneys' fees, and (b) judgments, fines
and amounts paid in settlement if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Company, and, with respect to any criminal action, had no reasonable cause to
believe his conduct was unlawful.

     If unsuccessful in defense of a suit brought by or in the right of the
Company, or if such a suit is settled, such a person shall be indemnified under
such law only against expenses (including attorneys' fees) actually and
reasonably incurred in the defense or settlement of such suit if he acted in
good faith and in a manner he reasonably believed to be in, or not opposed to,
the best interests of the Company, except that if such person is adjudged to be
liable in such a suit for negligence or misconduct in the performance of his
duty to the Company, he cannot be made whole for expenses unless the court
determines that he is fairly and reasonably entitled to indemnity for such
expenses.

     The Indemnification Agreement provides directors and officers with specific
contractual assurance that indemnification and advancement of expenses will be
available to them regardless of any amendments to or revocation of the
indemnification provisions of the Company's Restated By-laws. The
Indemnification Agreement provides for indemnification of directors and officers
against both stockholder derivative claims and third-party claims. Sections
145(a) and 145(b) of the Delaware General Corporation Law, which grant
corporations the power to indemnify directors and officers, specifically
authorize lesser indemnification in connection with derivative claims than in
connection with third-party claims. The distinction is that Section 145(a),
concerning third-party claims, authorizes expenses and judgments and amounts
paid in settlement (as is provided in the Indemnification Agreement), while
Section 145(b), concerning derivative suits, generally authorizes only
indemnification of expenses. However, Section 145(f) expressly provides that the
indemnification and advancement of expenses provided by or granted pursuant to
the subsections of Section 145 shall not be exclusive of any other rights to
which those seeking indemnification or advancement of expenses may be entitled
under any agreement. No Delaware case directly answers the question whether
Delaware's public policy would support this aspect of the Indemnification
Agreement under the authority of Section 145(f), or would cause its invalidation
because it does not conform to the distinctions contained in Sections 145(a) and
145(b).

     Delaware corporations also are authorized to obtain insurance to protect
officers and directors from certain liabilities, including liabilities against
which the corporation cannot indemnify its directors and officers. The Company
currently has in effect a directors' and officers' liability insurance policy.

                                      II-2
<PAGE>   68

ITEM 16. EXHIBITS*


<TABLE>
<C>                      <S>
         4.1             Amended and Restated Certificate of Incorporation of Valero
                         Energy Corporation, formerly known as Valero Refining and
                         Marketing Company, (filed as Exhibit 3.1 to the Company's
                         Registration Statement on Form S-1 (Registration No.
                         333-27013) and incorporated herein by reference)
         4.2             Amended and Restated By-Laws of Valero Energy Corporation
                         (filed as Exhibit 3.3 to the Company's Annual Report on Form
                         10-K for the fiscal year ended December 31, 1999 (SEC file
                         no. 1-13175) and incorporated herein by reference)
         4.3             Rights Agreement, dated as of July 17, 1997, between Valero
                         Refining and Marketing Company and Harris Trust and Savings
                         Bank, as Rights Agent (filed as Exhibit 4.1 to the Company's
                         Registration Statement on Form S-8 (Registration No.
                         333-31709) and incorporated herein by reference)
         4.4             Indenture, between Valero Energy Corporation and Bank of New
                         York, dated as of December 12, 1997 (the "Senior Indenture")
                         (filed as Exhibit 3.4 to the Company's Registration
                         Statement on Form S-3 (Registration No. 333-56599) and
                         incorporated herein by reference)
       **4.5             Form of Indenture related to subordinated debt securities
                         (the "Subordinated Indenture")
        +4.8.1           Declaration of Trust of VEC Trust I
        +4.8.2           Declaration of Trust of VEC Trust II
       **4.9             Form of Amended and Restated Declaration of Trust
        +4.10.1          Certificate of Trust of VEC Trust I
        +4.10.2          Certificate of Trust of VEC Trust II
       **4.11            Form of Preferred Security (included in Exhibit 4.9)
       **4.12            Form of Valero Energy Corporation Guarantee Agreement
       **4.13            Form of Purchase Contract Agreement
       **4.14            Form of Pledge Agreement
       **5.1             Opinion of Jay D. Browning, Esq.
       **5.2.1           Opinion of Richards, Layton & Finger, P.A. relating to VEC
                         Trust I
       **5.2.2           Opinion of Richards, Layton & Finger, P.A. relating to VEC
                         Trust II
      **12.1             Computation of ratio of earnings to fixed charges
      **23.1             Consent of Arthur Andersen LLP
      **23.2             Consent of Jay D. Browning (contained in Exhibit 5.1)
      **23.3             Consent of Richards, Layton & Finger, P.A. (included in
                         Exhibits 5.2.1 and 5.2.2)
       +24.1             Powers of Attorney
       +25.1             Statement of Eligibility and Qualification under the Trust
                         Indenture Act of 1939 of The Bank of New York, as trustee
                         under the Senior Indenture, on Form T-1
       +25.2             Statement of Eligibility and Qualification under the Trust
                         Indenture Act of 1939 of The Bank of New York, as trustee
                         under the Subordinated Indenture, on Form T-1
       +25.5.1           Statement of Eligibility and Qualification under the Trust
                         Indenture Act of 1939 of The Bank of New York, as property
                         trustee, relating to VEC Trust I, on Form T-1
</TABLE>


                                      II-3
<PAGE>   69

<TABLE>
<C>                      <S>
       +25.5.2           Statement of Eligibility and Qualification under the Trust
                         Indenture Act of 1939 of The Bank of New York, as property
                         trustee, relating to the VEC Trust II, on Form T-1
       +25.6.1           Statement of Eligibility and Qualification under the Trust
                         Indenture Act of 1939 of The Bank of New York, as guarantee
                         trustee, relating to VEC Trust I, on Form T-1
       +25.6.2           Statement of Eligibility and Qualification under the Trust
                         Indenture Act of 1939 of The Bank of New York, as guarantee
                         trustee, relating to VEC Trust II, on Form T-1
</TABLE>


- ---------------


*  The Company will file as an exhibit to a Current Report on Form 8-K (i) any
   underwriting agreement, including any remarketing agreement, relating to
   securities offered hereby, (ii) the instruments setting forth the terms of
   any debt securities, preferred stock or warrants and (iii) any required
   opinion of counsel to the Company as to certain tax matters relative to
   securities offered hereby.



** Filed herewith.



+  Previously filed.


ITEM 17. UNDERTAKINGS.

     (a) The undersigned registrants hereby undertake:

          (1) To file, during any period in which offers or sales are being
     made, a post-effective amendment to the Registration Statement:

             (i) To include any prospectus required by Section 10(a)(3) of the
        Securities Act;

             (ii) To reflect in the prospectus any facts or events arising after
        the effective date of the Registration Statement (or the most recent
        post-effective amendment thereof) which, individually or in the
        aggregate, represent a fundamental change in the information set forth
        in the Registration Statement. Notwithstanding the foregoing, any
        increase or decrease in volume of securities offered (if the total
        dollar value of securities offered would not exceed that which was
        registered) and any deviation from the low or high end of the estimated
        maximum offering range may be reflected in the form of prospectus filed
        with the Commission pursuant to Rule 424(b) of the Securities Act if, in
        the aggregate, the changes in volume and price represent no more than a
        20% change in the maximum aggregate offering price set forth in the
        "Calculation of Registration Fee" table in the effective Registration
        Statement; and

             (iii) To include any material information with respect to the plan
        of distribution not previously disclosed in the Registration Statement
        or any material change to such information in the Registration
        Statement;

provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8 and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to section 13 or section 15(d)
of the Exchange Act that are incorporated by reference in the Registration
Statement.

        (2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

        (3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.

     (b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act of 1934 (and, where applicable, each filing of an employee benefit plan's

                                      II-4
<PAGE>   70

annual report pursuant to Section 15(d) of the Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

     (c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.

     (d) The undersigned Registrant hereby undertakes that:

        (1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act of 1933 shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

        (2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

                                      II-5
<PAGE>   71

                                   SIGNATURES


     Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Antonio, State of Texas, on May 24, 2000.


                                            VALERO ENERGY CORPORATION


                                            By:     /s/ JOHN D. GIBBONS

                                              ----------------------------------

                                                John D. Gibbons


                                                Vice President and Chief
                                                Financial Officer



     Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.



<TABLE>
<CAPTION>
                      SIGNATURE                                      TITLE                    DATE
                      ---------                                      -----                    ----
<C>                                                      <S>                              <C>

                          *                              Director, Chairman of the        May 24, 2000
- -----------------------------------------------------      Board, President and Chief
                 William E. Greehey                        Executive Officer
                                                           (Principal Executive
                                                           Officer)

                 /s/ JOHN D. GIBBONS                     Chief Financial Officer          May 24, 2000
- -----------------------------------------------------      (Principal Financial and
                   John D. Gibbons                         Accounting Officer)

                          *                              Director                         May 24, 2000
- -----------------------------------------------------
                 Ronald K. Calgaard

                          *                              Director                         May 24, 2000
- -----------------------------------------------------
                  Donald M. Carlton

                          *                              Director                         May 24, 2000
- -----------------------------------------------------
                   Jerry D. Choate

                          *                              Director                         May 24, 2000
- -----------------------------------------------------
                  Robert G. Dettmer

                          *                              Director                         May 24, 2000
- -----------------------------------------------------
                  Ruben M. Escobedo

                          *                              Director                         May 24, 2000
- -----------------------------------------------------
                 Lowell H. Lebermann

                                                         Director
- -----------------------------------------------------
                Susan Kaufman Purcell
</TABLE>



*By:     /s/ JAY D. BROWNING

     -------------------------------

             Jay D. Browning


            Attorney-in-fact


                                      II-6
<PAGE>   72

                                   SIGNATURES


     Pursuant to the requirements of the Securities Act of 1933, VEC Trust I
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement or amendment to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of San Antonio, State of Texas, on May 24, 2000.


                                            VEC TRUST I

                                            By: VALERO ENERGY CORPORATION,
                                                as Sponsor


                                            By:     /s/ JAY D. BROWNING

                                              ----------------------------------
                                                Jay D. Browning
                                                Secretary

                                      II-7
<PAGE>   73

                                   SIGNATURES


     Pursuant to the requirements of the Securities Act of 1933, VEC Trust II
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement or amendment to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of San Antonio, State of Texas, on May 24, 2000.


                                            VEC TRUST II

                                            By: VALERO ENERGY CORPORATION,
                                                as Sponsor


                                            By:     /s/ JAY D. BROWNING

                                              ----------------------------------
                                                Jay D. Browning
                                                Secretary

                                      II-8
<PAGE>   74

                               INDEX TO EXHIBITS*


<TABLE>
<C>                      <S>

         4.1             Amended and Restated Certificate of Incorporation of Valero
                         Energy Corporation, formerly known as Valero Refining and
                         Marketing Company, (filed as Exhibit 3.1 to the Company's
                         Registration Statement on Form S-1 (Registration No.
                         333-27013) and incorporated herein by reference)
         4.2             Amended and Restated By-Laws of Valero Energy Corporation
                         (filed as Exhibit 3.3 to the Company's Annual Report on Form
                         10-K for the fiscal year ended December 31, 1999 (SEC file
                         no. 1-13175) and incorporated herein by reference)
         4.3             Rights Agreement, dated as of July 17, 1997, between Valero
                         Refining and Marketing Company and Harris Trust and Savings
                         Bank, as Rights Agent (filed as Exhibit 4.1 to the Company's
                         Registration Statement on Form S-8 (Registration No.
                         333-31709) and incorporated herein by reference)
         4.4             Indenture, between Valero Energy Corporation and Bank of New
                         York, dated as of December 12, 1997 (the "Senior Indenture")
                         (filed as Exhibit 3.4 to the Company's Registration
                         Statement on Form S-3 (Registration No. 333-56599) and
                         incorporated herein by reference)
       **4.5             Form of Indenture related to subordinated debt securities
                         (the "Subordinated Indenture")
        +4.8.1           Declaration of Trust of VEC Trust I
        +4.8.2           Declaration of Trust of VEC Trust II
       **4.9             Form of Amended and Restated Declaration of Trust
        +4.10.1          Certificate of Trust of VEC Trust I
        +4.10.2          Certificate of Trust of VEC Trust II
       **4.11            Form of Preferred Security (included in Exhibit 4.9)
       **4.12            Form of Valero Energy Corporation Guarantee Agreement
       **4.13            Form of Purchase Contract Agreement
       **4.14            Form of Pledge Agreement
       **5.1             Opinion of Jay D. Browning, Esq.
       **5.2.1           Opinion of Richards, Layton & Finger, P.A. relating to VEC
                         Trust I
       **5.2.2           Opinion of Richards, Layton & Finger, P.A. relating to VEC
                         Trust II
      **12.1             Computation of ratio of earnings to fixed charges
      **23.1             Consent of Arthur Andersen LLP
      **23.2             Consent of Jay D. Browning (contained in Exhibit 5.1)
      **23.3             Consent of Richards, Layton & Finger, P.A. (included in
                         Exhibits 5.2.1 and 5.2.2)
       +24.1             Powers of Attorney
       +25.1             Statement of Eligibility and Qualification under the Trust
                         Indenture Act of 1939 of The Bank of New York, as trustee
                         under the Senior Indenture, on Form T-1
       +25.2             Statement of Eligibility and Qualification under the Trust
                         Indenture Act of 1939 of The Bank of New York, as trustee
                         under the Subordinated Indenture, on Form T-1
       +25.5.1           Statement of Eligibility and Qualification under the Trust
                         Indenture Act of 1939 of The Bank of New York, as property
                         trustee, relating to VEC Trust I, on Form T-1
</TABLE>

<PAGE>   75

<TABLE>
<C>                      <S>
       +25.5.2           Statement of Eligibility and Qualification under the Trust
                         Indenture Act of 1939 of The Bank of New York, as property
                         trustee, relating to the VEC Trust II, on Form T-1
       +25.6.1           Statement of Eligibility and Qualification under the Trust
                         Indenture Act of 1939 of The Bank of New York, as guarantee
                         trustee, relating to VEC Trust I, on Form T-1
       +25.6.2           Statement of Eligibility and Qualification under the Trust
                         Indenture Act of 1939 of The Bank of New York, as guarantee
                         trustee, relating to VEC Trust II, on Form T-1
</TABLE>


- ---------------


*  The Company will file as an exhibit to a Current Report on Form 8-K (i) any
   underwriting agreement, including any remarketing agreement, relating to
   securities offered hereby, (ii) the instruments setting forth the terms of
   any debt securities, preferred stock or warrants and (iii) any required
   opinion of counsel to the Company as to certain tax matters relative to
   securities offered hereby.



** Filed herewith.



+  Previously filed.


<PAGE>   1
                                                                     EXHIBIT 4.5


                                     FORM OF

                SUBORDINATED INDENTURE, VEC AND BANK OF NEW YORK

                            VALERO ENERGY CORPORATION

                                       AND

                        THE BANK OF NEW YORK, as Trustee

                                    Indenture

                          Dated as of ________________


                          Subordinated Debt Securities


                            VALERO ENERGY CORPORATION


<PAGE>   2


         Reconciliation and tie between Trust Indenture Act of 1939 and

                    Indenture, dated as of _________________

<TABLE>
<CAPTION>
Trust Indenture Act Section                        Indenture Section
<S>                                                <C>
Sec. 310(a)(1)...................................................608
        (a)(2)...................................................608
        (a)(3)........................................Not Applicable
        (a)(4) .......................................Not Applicable
        (a)(5)...................................................608
Sec. 311(a)......................................................609
        (b)......................................................605
Sec. 312(a).................................................605, 703
        (b).................................................701, 702
        (c)......................................................702
Sec. 313(a)...................................................703(a)
        (b)(1)........................................Not Applicable
        (b)(2)................................................703(b)
        (c)...................................................703(c)
        (d)...................................................703(c)
Sec. 314(a)(1)...................................................704
        (a)(2)...................................................704
        (a)(3)...................................................704
        (a)(4)..................................................1005
        (b)...........................................Not Applicable
        (c)(1)...................................................102
        (c)(2)...................................................102
        (c)(3)........................................Not Applicable
        (d)...........................................Not Applicable
        (e)......................................................102
Sec. 315(a)...................................................601(a)
        (b)......................................................602
        (c)...................................................601(b)
        (d)...................................................601(c)
        (d)(1).....................................601(a)(1), (c)(1)
        (d)(2).............................................601(c)(2)
        (d)(3).............................................601(c)(3)
        (e)......................................................514
Sec. 316(a)(1)(A)...........................................502, 512
        (a)(1)(B)................................................513
        (a)(2)........................................Not Applicable
        (b)......................................................508
        (c)...........................................Not Applicable
Sec. 317(a)(1)...................................................503
        (a)(2)...................................................504
        (b).....................................................1003
Sec. 318(a)......................................................108
</TABLE>

- ------------------

Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.


<PAGE>   3


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                      Page
<S>                                                                                                   <C>
PARTIES .................................................................................................1


RECITALS ................................................................................................1


ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION......................................1

SECTION 101. Definitions.................................................................................1
SECTION 102. Compliance Certificates and Opinions........................................................9
SECTION 103. Form of Documents Delivered to Trustee......................................................9
SECTION 104. Acts of Holders............................................................................10
SECTION 105. Notices etc. to Trustee and Company........................................................12
SECTION 106. Notice to Holders of Securities; Waiver....................................................12
SECTION 107. Language of Notices, etc...................................................................13
SECTION 108. Conflict with Trust Indenture Act..........................................................13
SECTION 109. Effect of Headings and Table of Contents...................................................13
SECTION 110. Successors and Assigns.....................................................................13
SECTION 111. Separability Clause........................................................................14
SECTION 112. Benefits of Indenture......................................................................14
SECTION 113. Governing Law..............................................................................14
SECTION 114. Legal Holidays.............................................................................14

ARTICLE TWO SECURITY FORMS..............................................................................14

SECTION 201. Forms Generally............................................................................14
SECTION 202. Form of Trustee's Certificate of Authentication............................................15

ARTICLE THREE THE SECURITIES............................................................................15

SECTION 301. Amount Unlimited; Issuable in Series.......................................................15
SECTION 302. Denominations..............................................................................18
SECTION 303. Execution, Authentication, Delivery and Dating.............................................18
SECTION 304. Temporary Securities.......................................................................19
SECTION 305. Registration, Transfer and Exchange........................................................20
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities...........................................23
SECTION 307. Payment of Interest; Interest Rights Preserved.............................................24
SECTION 308. Persons Deemed Owners......................................................................25
SECTION 309. Cancellation...............................................................................26
SECTION 310. Computation of Interest....................................................................26
SECTION 311. Cusip Numbers..............................................................................26

ARTICLE FOUR SATISFACTION AND DISCHARGE.................................................................26

SECTION 401. Satisfaction and Discharge of Indenture....................................................26
SECTION 402. Application of Trust Money.................................................................28

ARTICLE FIVE REMEDIES...................................................................................28

SECTION 501. Events of Default..........................................................................28
SECTION 502. Acceleration of Maturity; Rescission and Annulment.........................................29
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee............................30
</TABLE>


                                       i
<PAGE>   4


<TABLE>
<S>                                                                                                   <C>
SECTION 504. Trustee May File Proofs of Claim...........................................................31
SECTION 505. Trustee May Enforce Claims Without Possession of Securities or Coupons.....................32
SECTION 506. Application of Money Collected.............................................................32
SECTION 507. Limitation on Suits........................................................................32
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and Interest..................33
SECTION 509. Restoration of Rights and Remedies.........................................................33
SECTION 510. Rights and Remedies Cumulative.............................................................33
SECTION 511. Delay or Omission Not Waiver...............................................................34
SECTION 512. Control by Holders of Securities...........................................................34
SECTION 513. Waiver of Past Defaults....................................................................34
SECTION 514. Undertaking for Costs......................................................................34
SECTION 515. Waiver of Stay, Extension or Usury Laws....................................................35

ARTICLE SIX THE TRUSTEE.................................................................................35

SECTION 601. Certain Duties and Responsibilities........................................................35
SECTION 602. Notice of Defaults.........................................................................37
SECTION 603. Certain Rights of Trustee..................................................................37
SECTION 604. Not Responsible for Recitals or Issuance of Securities.....................................37
SECTION 605. May Hold Securities........................................................................38
SECTION 606. Money Held in Trust........................................................................38
SECTION 607. Compensation and Reimbursement.............................................................38
SECTION 608. Corporate Trustee Required; Eligibility....................................................39
SECTION 609. Resignation and Removal; Appointment of Successor..........................................39
SECTION 610. Acceptance of Appointment by Successor.....................................................40
SECTION 611. Merger, Conversion, Consolidation or Succession to Business................................41
SECTION 612. Appointment of Authenticating Agent........................................................42

ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY.........................................43

SECTION 701. Company to Furnish Trustee Names and Addresses of Holders..................................43
SECTION 702. Preservation of Information; Communications to Holders.....................................44
SECTION 703. Reports by Trustee.........................................................................44
SECTION 704. Reports by Company.........................................................................44

ARTICLE EIGHT CONSOLIDATION, MERGER, SALE, LEASE OR CONVEYANCE..........................................45

SECTION 801. Consolidations and Mergers of Company and Sales, Leases and
             Conveyances Permitted Subject to Certain Conditions........................................45
SECTION 802. Rights and Duties of Successor Corporation.................................................46
SECTION 803. Officers' Certificate and Opinion of Counsel...............................................46

ARTICLE NINE SUPPLEMENTAL INDENTURES....................................................................46

SECTION 901. Supplemental Indentures without Consent of Holders.........................................46
SECTION 902. Supplemental Indentures with Consent of Holders............................................47
SECTION 903. Execution of Supplemental Indentures.......................................................48
SECTION 904. Effect of Supplemental Indentures..........................................................48
SECTION 905. Conformity with Trust Indenture Act........................................................49
SECTION 906. Reference in Securities to Supplemental Indentures.........................................49
</TABLE>


                                       ii
<PAGE>   5


<TABLE>
<S>                                                                                                   <C>
ARTICLE TEN COVENANTS...................................................................................49

SECTION 1001. Payment of Principal, Premium, if any, and Interest.......................................49
SECTION 1002. Maintenance of Office or Agency...........................................................49
SECTION 1003. Money for Securities Payments to be Held in Trust.........................................50
SECTION 1004. Additional Amounts........................................................................52
SECTION 1005. Statement as to Compliance................................................................52
SECTION 1006. Waiver of Certain Covenants...............................................................53

ARTICLE ELEVEN SUBORDINATION............................................................................53

SECTION 1101. Securities Subordinated to Senior Indebtedness............................................53
SECTION 1102. No Payment on Securities in Certain Circumstances.........................................53
SECTION 1103. Securities Subordinated to Prior Payment of All Senior
              Indebtedness on Dissolution, Liquidation or Reorganization................................54
SECTION 1104. Subrogation to Rights of Holders of Senior Indebtedness...................................55
SECTION 1105. Obligations of the Company Unconditional..................................................56
SECTION 1106. Trustee Entitled to Assume Payments Not Prohibited in Absence of Notice...................56
SECTION 1107. Application by Trustee of Amounts Deposited with It.......................................57
SECTION 1108. Subordination Rights Not Impaired by Acts or Omissions of the Company
              or Holders of Senior Indebtedness.........................................................57
SECTION 1109. Trustee to Effectuate Subordination of Securities.........................................57
SECTION 1110. Right of Trustee to Hold Senior Indebtedness..............................................58
SECTION 1111. Article Eleven Not to Prevent Events of Default...........................................58
SECTION 1112. No Fiduciary Duty of Trustee to Holders of Senior Indebtedness............................58
SECTION 1113. Article Applicable to Paying Agent........................................................58

ARTICLE TWELVE REDEMPTION OF SECURITIES.................................................................59

SECTION 1201. Applicability of Article..................................................................59
SECTION 1202. Election to Redeem; Notice to Trustee.....................................................59
SECTION 1203. Selection by Trustee of Securities to be Redeemed.........................................59
SECTION 1204. Notice of Redemption......................................................................59
SECTION 1205. Deposit of Redemption Price...............................................................60
SECTION 1206. Securities Payable on Redemption Date.....................................................61
SECTION 1207. Securities Redeemed in Part...............................................................61

ARTICLE THIRTEEN SINKING FUNDS..........................................................................62

SECTION 1301. Applicability of Article..................................................................62
SECTION 1302. Satisfaction of Sinking Fund Payments with Securities.....................................62
SECTION 1303. Redemption of Securities for Sinking Fund.................................................63

ARTICLE FOURTEEN REPAYMENT AT THE OPTION OF HOLDERS.....................................................63

SECTION 1401. Applicability of Article..................................................................63

ARTICLE FIFTEEN MEETINGS OF HOLDERS OF SECURITIES.......................................................63

SECTION 1501. Purposes for Which Meetings May Be Called.................................................63
SECTION 1502. Call, Notice and Place of Meetings........................................................64
SECTION 1503. Persons Entitled to Vote at Meetings......................................................64
SECTION 1504. Quorum; Action............................................................................64
SECTION 1505. Determination of Voting Rights; Conduct and Adjournment of Meetings.......................65
</TABLE>


                                      iii
<PAGE>   6


<TABLE>
<S>                                                                                                   <C>
SECTION 1506. Counting Votes and Recording Action of Meetings...........................................66

ARTICLE SIXTEEN MISCELLANEOUS PROVISIONS................................................................66

SECTION 1601. Securities in Foreign Currencies..........................................................66
</TABLE>



                                       iv
<PAGE>   7


     INDENTURE, dated as of ___________________, between VALERO ENERGY
CORPORATION, a Delaware corporation (hereinafter called the "Company"), having
its principal office at 7990 West IH 10, San Antonio, Texas 78230-4715, and THE
BANK OF NEW YORK, a New York banking corporation, as Trustee (hereinafter called
the "Trustee") having its Corporate Trust Office at 101 Barclay Street, Floor 21
West, New York, New York 10286.

                             RECITALS OF THE COMPANY

     The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its debentures, notes
or other evidences of indebtedness (hereinafter called the "Securities"),
unlimited as to principal amount, to bear such rates of interest, to mature at
such time or times, to be issued in one or more series and to have such other
provisions as shall be fixed as hereinafter provided.

     The Company has duly authorized the execution and delivery of this
Indenture and all things necessary to make this Indenture a valid agreement of
the Company, in accordance with its terms, have been done.

     NOW, THEREFORE, in consideration of the premises and the sum of one dollar
duly paid by the Company to the Trustee, the receipt of which is hereby
acknowledged, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders, as follows:

     NOW, THEREFORE, THIS INDENTURE WITNESSETH:

     For and in consideration of the premises and the purchase of the Securities
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Securities or of series thereof, as
follows

                                  ARTICLE ONE

             DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

     SECTION 101. Definitions.

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

          (1) terms defined in this Article have the meanings assigned to them
in this Article, and include the plural as well as the singular;

          (2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;

          (3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles and, except as otherwise herein expressly provided, the term
"generally accepted accounting principles" with respect to any computation
required or permitted hereunder shall mean such accounting principles as are
generally accepted at the date of such computation; and


                                       1
<PAGE>   8


          (4) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.

     Certain terms, used principally in Article Six, are defined in that
Article.

     "Act" when used with respect to any Holder has the meaning specified in
Section 104.

     "Additional Amounts" means any additional amounts which are required by a
Security or pursuant to a Board Resolution, under circumstances specified
therein, to be paid by the Company in respect of certain matters, including,
without limitation, taxes imposed on certain Holders, and which are owing to
such Holders.

     "Affiliate" has the same meaning as given to that term in Rule 405 under
the Securities Act of 1933, as amended, or any successor rule thereunder.

     "Authenticating Agent" means any Person authorized by the Trustee pursuant
to Section 612 to act on behalf of the Trustee to authenticate Securities of one
or more series.

     "Authorized Newspaper" means a newspaper, in an official language of the
country of publication or in the English language, customarily published on each
Business Day, whether or not published on Saturdays, Sundays or holidays, and of
general circulation in the place in connection with which the term is used or in
the financial community of such place. Where successive publications are
required to be made in Authorized Newspapers, the successive publications may be
made in the same or in different newspapers in the same city meeting the
foregoing requirements and in each case on any Business Day.

     "Bearer Security" means any Security in the form established pursuant to
Section 201 which is payable to bearer.

     "Board of Directors" means either the Board of Directors of the Company or
the Executive Committee thereof.

     "Board Resolution" means a copy of a resolution 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 Trustee.

     "Business Day" means any day other than a day on which banking institutions
in The City of New York or in the City of San Antonio, Texas are authorized or
required by law to close, except as may otherwise be provided in the form of
Securities of any particular series pursuant to the provisions of this
Indenture.

     "Capital Stock" means, with respect to any corporation, any and all shares,
interests, rights to purchase (other than convertible or exchangeable
Indebtedness), warrants, options, participations or other equivalents of or
interests (however designated) in stock issued by that corporation.

     "Capitalized Lease Obligation" of any Person means any obligation of such
Person to pay rent or other amounts under a lease of property, real or personal,
that is required to be capitalized


                                       2
<PAGE>   9


for financial reporting purposes in accordance with GAAP; and the amount of such
obligation shall be the capitalized amount thereof determined in accordance with
GAAP.

     "Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934, or if at
any time after the execution of this instrument such Commission is not existing
and performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties on such date.

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

     "Company Request" and "Company Order" mean, respectively, a written request
or order signed in the name of the Company by the Chairman of the Board, the
President, a Vice President or by the Treasurer, and by an Assistant Treasurer,
the Secretary or an Assistant Secretary of the Company, and delivered to the
Trustee.

     "Consolidated Net Tangible Assets" means the total amount of assets shown
on a consolidated balance sheet of the Company and its Subsidiaries, prepared in
accordance with generally accepted accounting principles, less (i) all current
liabilities (except current maturities of long-term debt and notes payable) and
(ii) goodwill and other intangible assets included on such balance sheet.

     "Controlled Subsidiary" means any corporation more than 80% of the
outstanding Voting Stock, except for qualifying shares, of which shall at the
time be owned directly or indirectly by the Company.

     "Corporate Trust Office" means the office of the Trustee at which at any
particular time its corporate trust business shall be administered, which office
is located at 101 Barclay Street, Floor 21 West, New York, New York 10286.

     "Corporation" includes corporations, associations, companies and business
trusts.

     "Coupon" means any interest coupon appertaining to a Bearer Security.

     "Defaulted Interest" has the meaning specified in Section 307.

     "Designated Senior Indebtedness," unless otherwise provided with respect to
the Securities of a series as contemplated by Section 301, means any Senior
Indebtedness that (i) in the instrument evidencing the same or the assumption or
guarantee thereof (or related documents to which the Company is a party) is
expressly designated as "Designated Senior Indebtedness" for purposes of this
Indenture and (ii) satisfies such other conditions as may be provided with
respect to the Securities of such series; provided that such instruments or
documents may place limitations and conditions on the right of such Senior
Indebtedness to exercise the rights of Designated Senior Indebtedness.

     "Disqualified Capital Stock" means, when used with respect to the
Securities of any series, (a) except as set forth in (b), with respect to any
Person, Capital Stock of such Person that, by its terms or by the terms of any
security into which it is convertible, exercisable or


                                       3
<PAGE>   10


exchangeable, is, or upon the happening of an event or the passage of time would
be, required to be redeemed or repurchased (including at the option of the
holder thereof) by such Person or any Subsidiary of such Person, in whole or in
part, on or prior to the last Stated Maturity of the Securities of such series,
and (b) with respect to any Subsidiary of such Person (including with respect to
any Subsidiary of the Company), any Capital Stock other than any common stock
with no preference, privileges, or redemption or repayment provisions.

     "Dollars" or "$" or any similar reference shall mean the currency of the
United States, except as may otherwise be provided in the form of Securities of
any particular series pursuant to the provisions of this Indenture.

     "Event of Default" has the meaning specified in Section 501.

     "Funded Debt" means any indebtedness for money borrowed, created, issued,
incurred, assumed or guaranteed which would, in accordance with generally
accepted accounting principles, be classified as long-term debt, but in any
event including all indebtedness for money borrowed, whether secured or
unsecured, maturing more than one year, or extendible at the option of the
obligor to a date more than one year, after the date of determination thereof
(excluding any amount thereof included in current liabilities).

     "GAAP" means generally accepted accounting principles in the United States
set forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States, as in effect from time to time.

     "Holder", when used with respect to any Security, means in the case of a
Registered Security, the Person in whose name the Security is registered in the
Security Register and in the case of a Bearer Security, the bearer thereof and,
when used with respect to any coupon, means the bearer thereof.

     "Indebtedness" of any Person means, without duplication, (i) all
indebtedness of such Person for borrowed money (whether or not the recourse of
the lender is to the whole of the assets of such Person or only to a portion
thereof), (ii) all obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (iii) all obligations of such Person in
respect of letters of credit or other similar instruments (or reimbursement
obligations with respect thereto), other than standby letters of credit,
performance bonds and other obligations issued by or for the account of such
Person in the ordinary course of business, to the extent not drawn or, to the
extent drawn, if such drawing is reimbursed not later than the third Business
Day following demand for reimbursement, (iv) all obligations of such Person to
pay the deferred and unpaid purchase price of property or services, except trade
payables and accrued expenses incurred in the ordinary course of business, (v)
all Capitalized Lease Obligations of such Person, (vi) all Indebtedness of
others secured by a lien on any asset of such Person, whether or not such
Indebtedness is assumed by such Person (provided that if the obligations so
secured have not been assumed in full by such Person or are not otherwise such
Person's legal liability in full, then such obligations shall be deemed to be in
an amount equal to the greater of (a) the lesser of (1) the full amount of such
obligations and (2) the fair market value of such assets, as determined in


                                       4
<PAGE>   11


good faith by the Board of Directors of such Person, which determination shall
be evidenced by a Board Resolution, and (b) the amount of obligations as have
been assumed by such Person or which are otherwise such Person's legal
liability), and (vii) all Indebtedness of others (other than endorsements in the
ordinary course of business) guaranteed by such Person to the extent of such
guarantee.

     "Indenture" means this instrument as it may from time to time be
supplemented or amended by one or more indentures supplemental hereto entered
into pursuant to the applicable provisions hereof, and shall include each
Officers' Certificate delivered to the Trustee pursuant to Section 303.

     "Interest", when used with respect to an Original Issue Discount Security
which by its terms bears interest only after Maturity, means interest payable
after Maturity, and, when used with respect to a Security which provides for the
payment of Additional Amounts pursuant to Section 1004, includes such Additional
Amounts.

     "Interest Payment Date" means the Stated Maturity of an installment of
interest on the applicable Securities.

     "Junior security" of a Person means, when used with respect to the
Securities of any series, any Qualified Capital Stock of such Person or any
Indebtedness of such Person that is subordinated in right of payment to the
Securities of such series and has no scheduled installment of principal due, by
redemption, sinking fund payment or otherwise, on or prior to the last Stated
Maturity of the Securities of such series.

     "Maturity" when used with respect to any Security means the date on which
the principal of such Security or an installment of principal becomes due and
payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, notice of redemption, request for redemption or
otherwise.

     "Mortgages" means mortgages, liens, pledges, security interests or other
encumbrances.

     "Officers' Certificate" means a certificate signed by the Chairman of the
Board, the President, a Vice President or the Treasurer, and by an Assistant
Treasurer, the Secretary or an Assistant Secretary of the Company, and delivered
to the Trustee.

     "Opinion of Counsel" means a written opinion of counsel, who may (except as
otherwise expressly provided in this Indenture) be an employee of or counsel for
the Company, or other counsel acceptable to the Trustee.

     "Original Issue Discount Security" means a Security issued pursuant to this
Indenture which provides for declaration of an amount less than the principal
thereof to be due and payable upon acceleration pursuant to Section 502.

     "Outstanding" when used with respect to Securities means, as of the date of
determination, all Securities theretofore authenticated and delivered under this
Indenture, except:

          (i) Securities theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;


                                       5
<PAGE>   12


          (ii) Securities for whose payment or redemption money in the necessary
amount has been theretofore deposited with the Trustee or any Paying Agent
(other than the Company) in trust or set aside and segregated in trust by the
Company (if the Company shall act as its own Paying Agent) for the Holders of
such Securities and any coupons thereto appertaining, provided that, if such
Securities are to be redeemed, notice of such redemption has been duly given
pursuant to this Indenture or provision therefor satisfactory to the Trustee has
been made; and

          (iii) Securities which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Securities have been authenticated and
delivered pursuant to this Indenture, other than any such Securities in respect
of which there shall have been presented to the Trustee proof satisfactory to it
that such Securities are held by a bona fide purchaser in whose hands such
Securities are valid obligations of the Company;

provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder or are present at
a meeting of Holders of Securities for quorum purposes, the principal amount of
an Original Issue Discount Security that may be counted in making such
determination and that shall be deemed to be Outstanding for such purposes shall
be equal to the amount of the principal thereof that could be declared to be due
and payable pursuant to the terms of such Original Issue Discount Security at
the time the taking of such action by the Holders of such requisite principal
amount is evidenced to the Trustee as provided in Section 104(a), and, provided
further, that Securities owned beneficially by the Company or any other obligor
upon the Securities or any Affiliate of the Company or such other obligor, other
than Securities purchased in connection with the distribution or trading
thereof, shall be disregarded and deemed not to be Outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only
Securities which the Trustee knows to be so owned shall be so disregarded.
Securities so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and that the pledgee
is not the Company or any other obligor upon the Securities or any Affiliate of
the Company or such other obligor.

     "Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Securities on behalf of
the Company.

     "Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.

     "Payment Default" has the meaning specified in Section 501.

     "Payment Notice" has the meaning specified in Section 1102.

     "Place of Payment" when used with respect to the Securities of any series,
means the place or places where the principal of (and premium, if any) and
interest on the Securities of that series are payable as specified as provided
pursuant to Section 301.


                                       6
<PAGE>   13


     "Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
lost, destroyed, mutilated or stolen Security or a Security to which a
mutilated, destroyed, lost or stolen coupon appertains shall be deemed to
evidence the same debt as the lost, destroyed, mutilated or stolen Security or
the Security to which a mutilated, destroyed, lost or stolen coupon appertains.

     "Qualified Capital Stock" means any Capital Stock of the Company that is
not Disqualified Capital Stock.

     "Redemption Date" when used with respect to any Security to be redeemed
means the date fixed for such redemption by or pursuant to this Indenture.

     "Redemption Price" when used with respect to any Security to be redeemed
means the price at which it is to be redeemed as determined pursuant to the
provisions of this Indenture.

     "Registered Security" means any Security established pursuant to Section
201 which is registered in the Security Register.

     "Regular Record Date" for the interest payable on a Registered Security on
any Interest Payment Date means the date, if any, specified in such Security as
the "Regular Record Date".

     "Responsible Officer" when used with respect to the Trustee means the
chairman or vice-chairman of the board of directors, the chairman or vice
chairman of the executive committee of the board of directors, the president,
any vice president (whether or not designated by a number or a word or words
added before or after the title "vice president"), the secretary, any assistant
secretary, the treasurer, any assistant treasurer, the cashier, any assistant
cashier, any trust officer or assistant trust officer, or any other officer of
the Trustee customarily performing functions similar to those performed by any
of the above designated officers and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.

     "Security" or "Securities" means any Security or Securities, as the case
may be, authenticated and delivered under this Indenture.

     "Security Register" and "Security Registrar" have the respective meanings
specified in Section 305.

     "Senior Indebtedness" of the Company, unless otherwise provided with
respect to the Securities of a series as contemplated by Section 301, means (i)
all Indebtedness of the Company, whether currently outstanding or hereafter
issued, unless, by the terms of the instrument creating or evidencing such
Indebtedness, it is provided that such Indebtedness is not superior in right of
payment to the Securities or to other Indebtedness which is pari passu with or
subordinated to the Securities, and (ii) any modifications, refunding,
deferrals, renewals or extensions of any such Indebtedness or securities, notes
or other evidences of Indebtedness issued in exchange for such Indebtedness;
provided that in no event shall "Senior Indebtedness" include (a) Indebtedness
of the Company owed or owing to any Subsidiary of the Company or


                                       7
<PAGE>   14


any officer, director or employee of the Company or any Subsidiary of the
Company, (b) Indebtedness to trade creditors or (c) any liability for taxes owed
or owing by the Company.

     "Senior Payment Default" has the meaning specified in Section 1102.

     "Special Record Date" for the payment of any Defaulted Interest on the
Registered Securities of any series means a date fixed by the Trustee pursuant
to Section 307.

     "Stated Maturity" when used with respect to any Security or any installment
of principal thereof or interest thereon means the date specified in such
Security or a coupon representing such installment of interest as the fixed date
on which the principal of such Security or such installment of principal or
interest is due and payable.

     "Subsidiary" means (i) any corporation of which at the time of
determination the Company and/or one or more Subsidiaries owns or controls
directly or indirectly more than 50% of the shares of Voting Stock, (ii) any
general partnership, joint venture, business trust or similar entity, of which
at the time of determination the Company and/or one or more Subsidiaries owns or
controls directly or indirectly more than 50% or the outstanding partnership or
similar interests and (iii) any limited partnership of which the Company or any
of its Subsidiaries is a general partner. "Wholly-owned", when used with
reference to a Subsidiary, means a Subsidiary of which all of the outstanding
capital stock (except for qualifying shares) or partnership or similar
interests, as applicable, is owned by the Company or by one or more wholly-owned
Subsidiaries.

     "Trustee" means the Person named as the "Trustee" in the first paragraph of
this instrument until a successor Trustee shall have become such with respect to
one or more series of Securities pursuant to the applicable provisions of this
Indenture, and thereafter "Trustee" shall mean each Person who is then a Trustee
hereunder, and if at any time there is more than one such Person, "Trustee" as
used with respect to the Securities of any series shall mean the Trustee with
respect to the Securities of that series.

     "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended,
and any reference herein to the Trust Indenture Act or a particular provision
thereof shall mean such Act or provision, as the case may be, as amended or
replaced from time to time or as supplemented from time to time by rules or
regulations adopted by the Commission under or in furtherance of the purposes of
such Act or provision, as the case may be.

     "United States" means the United States of America (including the States
and the District of Columbia), its territories and possessions and other areas
subject to its jurisdiction.

     "United States Alien" means any Person who, for United States Federal
income tax purposes, is a foreign corporation, a non-resident alien individual,
a non-resident alien fiduciary of a foreign estate or trust, or a foreign
partnership one or more of the members of which is, for United States Federal
income tax purposes, a foreign corporation, a non-resident alien individual or a
nonresident alien fiduciary of a foreign estate or trust.

     "U.S. Depository" or "Depository" means, with respect to the Securities of
any series issuable or issued in whole or in part in the form of one or more
global Securities, the Person designated as U.S. Depository by the Company
pursuant to Section 301, which must be a


                                       8
<PAGE>   15


clearing agency registered under the Securities Exchange Act of 1934, as
amended, and, if so provided pursuant to Section 301 with respect to the
Securities of any series, any successor to such Person. If at any time there is
more than one such Person, "U.S. Depository" shall mean, with respect to any
series of Securities, the qualifying entity which has been appointed with
respect to the Securities of that series.

     "Vice President" when used with respect to the Company shall mean any Vice
President of the Company whether or not designated by a number or a word or
words added before or after the title "Vice President".

     "Voting Stock" means stock of the class or classes having general voting
power under ordinary circumstances to elect at least a majority of the board of
directors, managers or trustees of such corporation provided that, for the
purposes hereof, stock, which carries only the right to vote conditionally on
the happening of an event shall not be considered voting stock whether or not
such event shall have happened.

     SECTION 102. Compliance Certificates and Opinions.

     Upon any application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company shall furnish to the
Trustee an Officers' Certificate stating that all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been
complied with and 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 Indenture
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 Indenture shall include:

          (1) a statement that each individual signing such certificate or
opinion has read such condition or covenant and the definitions herein relating
thereto;

          (2) 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;

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

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

     SECTION 103. Form of Documents Delivered to Trustee.

     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


                                       9
<PAGE>   16


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 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 Indenture, they may, but need not, be consolidated and
form one instrument.

     SECTION 104. Acts of Holders.

          (a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture 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. If, but only if, Securities of a series are issuable as
Bearer Securities, any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Holders of Securities of such series may, alternatively, be embodied in and
evidenced by the record of Holders of Securities of such series voting in favor
thereof, either in person or by proxies duly appointed in writing, at any
meeting of Holders of Securities of such series duly called and held in
accordance with the provisions of Article Fifteen, or a combination of such
instruments and any such record. Except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments or record
or both are delivered to the Trustee and, where it is hereby expressly required,
to the Company. Such instrument or instruments and any such record (and the
action embodied therein and evidenced thereby) are herein sometimes referred to
as the "Act" of the Holders signing such instrument or instruments and so voting
at any such meeting. Proof of execution of any such instrument or of a writing
appointing any such agent, or of the holding by any Person of a Security, shall
be sufficient for any purpose of this Indenture and (subject to Section 601)
conclusive in favor of the Trustee and the Company and any agent of the Trustee
or the Company, if made in the manner provided in this Section. The record of
any meeting of Holders of Securities shall be proved in the manner provided in
Section 1506.

          Without limiting the generality of this Section 104, unless otherwise
established in or pursuant to a Board Resolution or set forth or determined in
an Officers' Certificate, or established in one or more indentures supplemental
hereto, pursuant to Section 301, a Holder, including a U.S. Depository that is a
Holder of a global Security, may make, give or take, by a proxy, or proxies,
duly appointed in writing, any request, demand, authorization, direction,
notice, consent, waiver or other action provided in this Indenture to be made,
given or taken by Holders, and a U.S. Depository that is a Holder of a global
Security may provide its proxy or


                                       10
<PAGE>   17


proxies to the beneficial owners of interests in any such global Security
through such U.S. Depository's standing instructions and customary practices.

          The Company shall fix a record date for the purpose of determining the
Persons who are beneficial owners of interest in any permanent global Security
held by a U.S. Depository entitled under the procedures of such U.S. Depository
to make, give or take, by a proxy or proxies duly appointed in writing, any
request, demand, authorization, direction, notice, consent, waiver or other
action provided in this Indenture to be made, given or taken by Holders. If such
a record date is fixed, the Holders on such record date or their duly appointed
proxy or proxies, and only such Persons shall be entitled to make, give or take
such request, demand, authorization, direction, notice, consent, waiver or other
action, whether or not such Holders remain Holders after such record date. No
such request, demand, authorization, direction, notice, consent, waiver or other
action shall be valid or effective if made, given or taken more than 90 days
after such record date.

          (b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any reasonable manner which the Trustee
deems sufficient and in accordance with such reasonable rules as the Trustee may
determine; and the Trustee may in any instance require further proof with
respect to any of the matters referred to in this Section.

          (c) The ownership of Registered Securities and the principal amount
and serial numbers of Registered Securities held by any Person, and the date of
holding the same, shall be proved by the Security Register.

          (d) The principal amount and serial numbers of Bearer Securities held
by any Person, and the date of holding the same, may be proved by the production
of such Bearer Securities or by a certificate executed, as depositary, by any
trust company, bank, banker or other depositary reasonably acceptable to the
Company, wherever situated, if such certificate shall be deemed by the Trustee
to be satisfactory, showing that at the date therein mentioned such Person had
on deposit with such depositary, or exhibited to it, the Bearer Securities
therein described; or such facts may be proved by the certificate or affidavit
of the Person holding such Bearer Securities, if such certificate or affidavit
is deemed by the Trustee to be satisfactory. The Trustee and the Company may
assume that such ownership of any Bearer Security continues until (1) another
certificate or affidavit bearing a later date issued in respect of the same
Bearer Security is produced, or (2) such Bearer Security is produced to the
Trustee by some other Person, or (3) such Bearer Security is surrendered in
exchange for a Registered Security, or (4) such Bearer Security is no longer
Outstanding. The principal amount and serial numbers of Bearer Securities held
by the Person so executing such instrument or writing and the date of holding
the same may also be proved in any other manner which the Trustee deems
sufficient.

          (e) If the Company shall solicit from the Holders of any Registered
Securities any request, demand, authorization, direction, notice, consent,
waiver or other Act, the Company may, at its option, by Board Resolution, fix in
advance a record date for the determination of Holders of Registered Securities
entitled to give such request, demand, authorization, direction, notice,
consent, waiver or other Act, but the Company shall have no obligation to do so.
If such a record date is fixed, such request, demand, authorization, direction,
notice, consent, waiver or other Act may be given before or after such record
date, but only the Holders of Registered Securities of record at the close of
business on such record date shall be deemed to be Holders


                                       11
<PAGE>   18


for the purposes of determining whether Holders of the requisite proportion of
Outstanding Securities have authorized or agreed or consented to such request,
demand, authorization, direction, notice, consent, waiver or other Act, and for
that purpose the Outstanding Securities shall be computed as of such record
date; provided that no such authorization, agreement or consent by the Holders
of Registered Securities on such record date shall be deemed effective unless it
shall become effective pursuant to the provisions of this Indenture not later
than six months after the record date.

          (f) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Security shall bind every future
Holder of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done or suffered to be done by the Trustee, any Security
Registrar, any Paying Agent or the Company in reliance thereon, whether or not
notation of such action is made upon such Security.

     SECTION 105. Notices etc. to Trustee and Company.

     Any request, demand, authorization, direction, notice, consent, waiver or
Act of Holders or other document provided or permitted by this Indenture to be
made upon, given or furnished to, or filed with,

          (1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing to or
with the Trustee at its Corporate Trust Office, or

          (2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if in
writing and mailed, postage prepaid, via certified mail, return receipt
requested, to the Company addressed to the attention of its Treasurer at the
address of its principal office specified in the first paragraph of this
instrument or at any other address previously furnished in writing to the
Trustee by the Company.

     SECTION 106. Notice to Holders of Securities; Waiver.

     Except as otherwise expressly provided herein or in the form of Securities
of any particular series pursuant to the provisions of this Indenture, where
this Indenture provides for notice to Holders of Securities of any event,

          (1) such notice shall be sufficiently given to Holders of Registered
Securities if in writing and mailed, first-class postage prepaid, to each Holder
of a Registered Security affected by such event, at his address as it appears in
the Security Register, not later than the latest date, and not earlier than the
earliest date, prescribed for the giving of such Notice; and

          (2) such notice shall be sufficiently given to Holders of Bearer
Securities, if any, if published in an Authorized Newspaper in The City of New
York and, if the Securities of such series are then listed on any stock exchange
outside the United States, in an Authorized Newspaper in such city as the
Company shall advise the Trustee that such stock exchange so requires, on a
Business Day at least twice, the first such publication to be not earlier than
the earliest date and not later than the latest date prescribed for the giving
of such notice.


                                       12
<PAGE>   19


     In any case where notice to Holders of Registered Securities is given by
mail, neither the failure to mail such notice, nor any defect in any notice so
mailed, to any particular Holder of a Registered Security shall affect the
sufficiency of such notice with respect to other Holders of Registered
Securities or the sufficiency of any notice to Holders of Bearer Securities
given as provided herein. 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
Trustee shall constitute a sufficient notification for every purpose hereunder.

     In case by reason of the suspension of publication of any Authorized
Newspaper or Authorized Newspapers or by reason of any other cause it shall be
impracticable to publish any notice to Holders of Bearer Securities as provided
above, then such notification to Holders of Bearer Securities as shall be given
with the approval of the Trustee shall constitute sufficient notice to such
Holders for every purpose hereunder. Neither failure to give notice by
publication to Holders of Bearer Securities as provided above, nor any defect in
any notice so published, shall affect the sufficiency of any notice mailed to
Holders of Registered Securities as provided above.

     Where this Indenture 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 equivalent of such notice. Waivers
of notice by Holders of Securities shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.

     SECTION 107. Language of Notices, etc.

     Any request, demand, authorization, direction, notice, consent, election or
waiver required or permitted under this Indenture shall be in the English
language, except that, if the Company so elects, any published notice may be in
an official language of the country of publication.

     SECTION 108. 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 Indenture by any of
the provisions of the Trust Indenture Act, such required provisions shall
control.

     SECTION 109. 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 110. Successors and Assigns.

     All covenants and agreements in this Indenture by the parties hereto shall
bind the successors and assigns of such parties, whether so expressed or not.


                                       13
<PAGE>   20


     SECTION 111. Separability Clause.

     In case any provision in this Indenture or in the Securities or coupons
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 112. Benefits of Indenture.

     Nothing in this Indenture or in the Securities or coupons, express or
implied, shall give to any Person, other than the parties hereto, any holders of
Senior Indebtedness, any Security Registrar, any Paying Agent and their
successors hereunder and the Holders of Securities or coupons, any benefit or
any legal or equitable right, remedy or claim under this Indenture.

     SECTION 113. Governing Law.

     This Indenture and the Securities and coupons shall be governed by and
controlled in accordance with the laws of the State of New York without regard
to the conflicts of laws provisions thereof.

     SECTION 114. Legal Holidays.

     In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day at any Place of Payment,
then (notwithstanding any other provision of this Indenture or the Securities or
coupons other than a provision in the Securities which specifically states that
such provision shall apply in lieu of this Section) payment of interest or any
Additional Amounts or principal (and premium, if any) need not be made at such
Place of Payment on such date, but may be made on the next succeeding Business
Day, except that if such next succeeding Business Day is in the next succeeding
calendar year, then on the immediately preceding Business Day, at such Place of
Payment with the same force and effect as if made on the Interest Payment Date
or Redemption Date, or at the Stated Maturity, and no interest shall accrue on
the amount so payable for the period from and after such Interest Payment Date,
Redemption Date or Stated Maturity, as the case may be.

                                  ARTICLE TWO

                                 SECURITY FORMS

     SECTION 201. Forms Generally.

     The Registered Securities, if any, of each series and the Bearer
Securities, if any, of each series, related coupons, if any, and temporary
global Securities, if any, shall be in the form established by or pursuant to a
Board Resolution or in one or more indentures supplemental hereto, shall have
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture or any indenture supplemental hereto and
may have such letters, numbers or other marks of identification and such legends
or endorsements placed thereon as may, consistently herewith, be determined by
the officers executing such Securities, as evidenced by their execution of such
Securities.


                                       14
<PAGE>   21


     Unless otherwise provided as contemplated by Section 301 with respect to
any series of Securities, the Securities of each series shall be issuable in
registered form without coupons. If so provided as contemplated by Section 301,
the Securities of a series also shall be issuable in bearer form, with or
without interest coupons attached.

     The definitive Securities and coupons shall be printed, lithographed or
engraved or produced by any combination of these methods on a steel engraved
border or steel engraved borders or may be produced in any other manner, all as
determined by the officers executing such Securities, as conclusively evidenced
by their execution of such Securities or coupons.

     SECTION 202. Form of Trustee's Certificate of Authentication.

     This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.

                                             THE BANK OF NEW YORK,
                                               as Trustee

Dated:                                       By:
      --------------------                      --------------------------------
                                                  Authorized Signatory


                                 ARTICLE THREE

                                 THE SECURITIES

     SECTION 301. Amount Unlimited; Issuable in Series.

     The aggregate principal amount of Securities which may be authenticated and
delivered under this Indenture is unlimited.

     The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution, and set forth in an Officers'
Certificate, or established in one or more indentures supplemental hereto:

          (1) the title of the Securities and the series in which such
Securities shall be included;

          (2) any limit upon the aggregate principal amount of the Securities of
such title or the Securities of such series which may be authenticated and
delivered under this Indenture (except for Securities authenticated and
delivered upon registration of transfer of, or in exchange for, or in lieu of,
other Securities of the series pursuant to Section 304, 305, 306, 906 or 1207);

          (3) whether Securities of the series are to be issuable as Registered
Securities, Bearer Securities (with or without coupons) or both; any
restrictions applicable to the offer, sale or delivery of Bearer Securities and
the terms upon which Bearer Securities of the series may be exchanged for
Registered Securities of the series and vice versa; and whether any Securities
of the series are to be issuable initially in global form and, if so, (i)
whether beneficial owners of


                                       15
<PAGE>   22


interests in any such global Security may exchange such interests for Securities
of such series and of like tenor of any authorized form and denomination and the
circumstances under which any such exchanges may occur, if other than in the
manner specified in Section 305 and (ii) the name of the depository or the U.S.
Depository, as the case may be, with respect to any global Security;

          (4) the date as of which any Bearer Securities of the series and any
temporary global Security representing Outstanding Securities of the series
shall be dated if other than the date of original issuance of the first Security
of the series to be issued;

          (5) if Securities of the series are to be issuable as Bearer
Securities, whether interest in respect of any portion of a temporary Bearer
Security in global form (representing all of the Outstanding Bearer Securities
of the series) payable in respect of an Interest Payment Date prior to the
exchange of such temporary Bearer Security for definitive Securities of the
series shall be paid to any clearing organization with respect to the portion of
such temporary Bearer Security held for its account and, in such event, the
terms and conditions (including any certification requirements) upon which any
such interest payment received by a clearing organization will be credited to
the Persons entitled to interest payable on such Interest Payment Date;

          (6) the date or dates on which the principal of such Securities is
payable;

          (7) the rate or rates at which such Securities shall bear interest, if
any, or any method by which such rate or rates shall be determined, the date or
dates from which such interest shall accrue, the Interest Payment Dates on which
such interest shall be payable and the Regular Record Date for the interest
payable on Registered Securities on any Interest Payment Date, whether and under
what circumstances Additional Amounts on such securities shall be payable in
respect of specified taxes, assessments or other governmental charges withheld
or deducted and, if so, whether the Company has the option to redeem the
affected Securities rather than pay such Additional Amounts, and the basis upon
which interest shall be calculated if other than that of a 360 day year of
twelve 30-day months;

          (8) the place or places, if any, in addition to or other than the
Borough of Manhattan, The City of New York, where the principal of (and premium,
if any) and interest on or Additional Amounts, if any, payable in respect of
such Securities shall be payable;

          (9) the period or periods within which, the price or prices at which
and the terms and conditions upon which such Securities may be redeemed, in
whole or in part, at the option of the Company;

          (10) the obligation, if any, of the Company to redeem or purchase such
Securities pursuant to any sinking fund or analogous provisions or at the option
of a Holder thereof and the period or periods within which, the price or prices
at which and the terms and conditions upon which such Securities shall be
redeemed or purchased, in whole or in part, pursuant to such obligation, and any
provisions for the remarketing of such Securities;

          (11) the denominations in which Registered Securities of the series,
if any, shall be issuable if other than denominations of $1,000 and any integral
multiple thereof, and the


                                       16
<PAGE>   23


denominations in which Bearer Securities of the series, if any, shall be
issuable if other than the denomination of $5,000;

          (12) if other than the principal amount thereof, the portion of the
principal amount of such Securities which shall be payable upon declaration of
acceleration of the Maturity thereof pursuant to Section 502;

          (13) if other than such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public or
private debts, the coin or currency, including composite currencies, in which
payment of the principal of (and premium, if any) and interest, if any, on, and
Additional Amounts in respect of such Securities shall be payable;

          (14) if the principal of (and premium, if any) or interest, if any,
on, and Additional Amounts in respect of, such Securities are to be payable, at
the election of the Company or a Holder thereof, in a coin or currency,
including composite currencies, other than that in which the Securities are
stated to be payable, the period or periods within which, and the terms and
conditions upon which, such election may be made;

          (15) if the amount of payments of principal of (and premium, if any)
or interest, if any, on, and Additional Amounts in respect of, such Securities
may be determined with reference to an index, formula or other method or based
on a coin or currency other than that in which the Securities are stated to be
payable, the manner in which such amounts shall be determined;

          (16) the right, if any, of the Company to defer payments of interest
by extending the interest payment periods and specify the duration of such
extension, the Interest Payment Dates on which such interest shall be payable
and whether and under what circumstances additional interest on amounts deferred
shall be payable;

          (17) the limitation, if any, on the Company's right to pay dividends
on, make distributions with respect to, or redeem, purchase or acquire, or make
a liquidation payment with respect to, any of its capital stock or comparable
equity interest;

          (18) if the Securities of such series are to be issuable in definitive
form (whether upon original issue or upon exchange of a temporary Security of
such series) only upon receipt of certain certificates or other documents or
satisfaction of other conditions, then the form and terms of such certificates,
documents or conditions; and

          (19) any other terms of such Securities (which terms shall not be
inconsistent with the provisions of this Indenture).

     All Securities of any one series and the coupons appertaining to Bearer
Securities of such series, if any, shall be substantially identical except as to
denomination and the rate or rates of interest, if any, and Stated Maturity, the
date from which interest, if any, shall accrue and except as may otherwise be
provided in or pursuant to such Board Resolution and set forth in such Officers'
Certificate or in any such indenture supplemental hereto. All Securities of any
one series need not be issued at the same time, and unless otherwise provided, a
series may be reopened for issuances of additional Securities of such series.


                                       17
<PAGE>   24


     If any of the terms of the Securities of any series are established by
action taken pursuant to a Board Resolution, a copy of an appropriate record of
such action shall be certified by the Secretary or an Assistant Secretary of the
Company and delivered to the Trustee at or prior to the delivery of the
Officers' Certificate setting forth the terms of such series.

     The Securities shall be subordinated in right of payment to Senior
Indebtedness as provided in Article Eleven.

     SECTION 302. Denominations.

     Unless other denominations and amounts may from time to time be fixed by or
pursuant to a Board Resolution, the Registered Securities of each series, if
any, shall be issuable in registered form without coupons in denominations of
$1,000 and any integral multiple thereof and the Bearer Securities of each
series, if any, shall be issuable in the denomination of $5,000, or in such
other denominations and amounts as may from time to time be fixed by or pursuant
to a Board Resolution.

     SECTION 303. Execution, Authentication, Delivery and Dating.

     The Securities shall be executed on behalf of the Company by its Chairman
of the Board, President, Vice President serving as Chief Financial Officer or
its Treasurer and attested by its Secretary or one of its Assistant Secretaries.
The signature of any of these officers on the Securities may be manual or
facsimile. Coupons shall bear the facsimile signature of the Treasurer or any
Assistant Treasurer of the Company.

     Securities and coupons 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 Securities or
did not hold such offices at the date of such Securities.

     At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Securities of any series, together with any
coupons appertaining thereto, executed by the Company to the Trustee for
authentication, together with the Board Resolution and Officers' Certificate or
supplemental indenture with respect to such Securities referred to in Section
301 and a Company Order for the authentication and delivery of such Securities,
and the Trustee in accordance with the Company Order and subject to the
provisions hereof shall authenticate and make available for delivery such
Securities. In authenticating such Securities, and accepting the additional
responsibilities under this Indenture in relation to such Securities, the
Trustee shall be entitled to receive, and (subject to Section 601) shall be
fully protected in relying upon, an Opinion of Counsel stating,

          (a) the form and terms of such Securities and coupons, if any, have
been established in conformity with the provisions of this Indenture;

          (b) that all conditions precedent to the authentication and delivery
of such Securities, together with the coupons, if any, appertaining thereto,
have been complied with and that such Securities and coupons, when authenticated
and delivered by the Trustee and issued by the Company in the manner and subject
to any conditions specified in such Opinion of Counsel, will constitute valid
and legally binding obligations of the Company, enforceable in accordance


                                       18
<PAGE>   25


with their terms, subject to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting the enforcement of
creditors' rights and to general equity principles,

          (c) that all laws and requirements in respect of the execution and
delivery by the Company of such Securities and coupons, if any, have been
complied with; and

          (d) as to such other matters as the Trustee may reasonably request.

     The Trustee shall not be required to authenticate such Securities if the
issue of such Securities pursuant to this Indenture will affect the Trustee's
own rights, duties or immunities under the Securities and this Indenture or
otherwise in a manner which is not reasonably acceptable to the Trustee or if
the Trustee being advised by counsel determines that such action may not
lawfully be taken.

     Each Registered Security shall be dated the date of its authentication.
Each Bearer Security and any temporary Bearer Security in global form shall be
dated as of the date specified as contemplated by Section 301.

     No Security or coupon appertaining thereto shall be entitled to any benefit
under this Indenture or be valid or obligatory for any purpose, unless there
appears on such Security a certificate of authentication substantially in the
form provided for in Section 202 or 612 executed by or on behalf of the Trustee
by the manual signature of one of its authorized signers, and such certificate
upon any Security shall be conclusive evidence, and the only evidence, that such
Security has been duly authenticated and delivered hereunder. Except as
permitted by Section 306 or 307, the Trustee shall not authenticate and deliver
any Bearer Security unless all appurtenant coupons for interest then matured
have been detached and cancelled.

     SECTION 304. Temporary Securities.

     Pending the preparation of definitive Securities of any series, the Company
may execute and deliver to the Trustee, and upon Company Order the Trustee shall
authenticate and make available for delivery in the manner provided in Section
303, temporary Securities of such series which are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Securities in lieu of which they
are issued, in registered form, or, if authorized, in bearer form with one or
more coupons or without coupons, and with such appropriate insertions,
omissions, substitutions and other variations as the officers executing such
Securities may determine, as evidenced by their execution of such Securities. In
the case of Bearer Securities of any series, such temporary Securities may be in
global form, representing all of the Outstanding Bearer Securities of such
series.

     Except in the case of temporary Securities in global form, which shall be
exchanged in accordance with the provisions thereof, if temporary Securities of
any series are issued, the Company will cause definitive Securities of that
series to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities of such series shall be
exchangeable for definitive Securities of such series containing identical terms
and provisions upon surrender of the temporary Securities of such series at an
office or agency of the Company


                                       19
<PAGE>   26


maintained for such purpose pursuant to Section 1002, without charge to the
Holder. Upon surrender for cancellation of any one or more temporary Securities
of any series (accompanied by any unmatured coupons appertaining thereto) the
Company shall execute and the Trustee shall authenticate and make available for
delivery in exchange therefor a like principal amount of definitive Securities
of authorized denominations of the same series containing identical terms and
provisions; provided, however, that no definitive Bearer Security, except as
provided pursuant to Section 301, shall be delivered in exchange for a temporary
Registered Security; and provided, further, that a definitive Bearer Security
shall be delivered in exchange for a temporary Bearer Security only in
compliance with the conditions set forth therein. Unless otherwise specified as
contemplated by Section 301 with respect to a temporary global Security, until
so exchanged the temporary Securities of any series shall in all respects be
entitled to the same benefits under this Indenture as definitive Securities of
such series.

     SECTION 305. Registration, Transfer and Exchange.

     With respect to the Registered Securities of each series, if any, the
Company shall cause to be kept at an office or agency of the Company maintained
pursuant to Section 1002, a register (herein sometimes referred to as the
"Security Register") in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of the Registered
Securities of each series and of transfers of the Registered Securities of each
series. Such office or agency shall be the "Security Registrar" for the
Registered Securities, if any, of each series of Securities. In the event that
the Trustee shall not be the Security Registrar, it shall have the right to
examine the Security Register at all reasonable times.

     Upon surrender for registration of transfer of any Registered Security of
any series at any office or agency of the Company maintained for that series
pursuant to Section 1002, the Company shall execute, and the Trustee shall
authenticate and make available for delivery, in the name of the designated
transferee or transferees, one or more new Registered Securities of the same
series, of any authorized denominations, of a like aggregate principal amount
bearing a number not contemporaneously outstanding and containing identical
terms and provisions.

     At the option of the Holder, Registered Securities of any series may be
exchanged for other Registered Securities of the same series containing
identical terms and provisions, in any authorized denominations, and of a like
aggregate principal amount, upon surrender of the Securities to be exchanged at
any such office or agency. Whenever any Registered Securities are so surrendered
for exchange, the Company shall execute, and the Trustee shall authenticate and
make available for delivery, the Registered Securities which the holder making
the exchange is entitled to receive.

     At the option of the Holder, Bearer Securities of any series may be
exchanged for Registered Securities of the same series containing identical
terms and provisions, of any authorized denominations and aggregate principal
amount, upon surrender of the Bearer Securities to be exchanged at any such
office or agency, with all unmatured coupons and all matured coupons in default
thereto appertaining. If the Holder of a Bearer Security is unable to produce
any such unmatured coupon or coupons or matured coupon or coupons in default,
such exchange may be effected if the Bearer Securities are accompanied by
payment in funds acceptable to the Company and the Trustee in an amount equal to
the face amount of such missing coupon or coupons, or the surrender of such
missing coupon or coupons may be waived


                                       20
<PAGE>   27


by the Company and the Trustee if there is furnished to them such security or
indemnity as they may require to save each of them and any Paying Agent
harmless. If thereafter the Holder of such Security shall surrender to any
Paying Agent any such missing coupon in respect of which such a payment shall
have been made, such Holder shall be entitled to receive the amount of such
payment; provided, however, that, except as otherwise provided in Section 1002,
interest represented by coupons shall be payable only upon presentation and
surrender of those coupons at an office or agency located outside the United
States. Notwithstanding the foregoing, in case a Bearer Security of any series
is surrendered at any such office or agency in exchange for a Registered
Security of the same series and like tenor after the close of business at such
office or agency on (i) any Regular Record Date and before the opening of
business at such office or agency on the relevant Interest Payment Date, or (ii)
any Special Record Date and before the opening of business at such office or
agency on the related date for payment of Defaulted Interest, such Bearer
Security shall be surrendered without the coupon relating to such Interest
Payment Date or proposed date of payment, as the case may be (or, if such coupon
is so surrendered with such Bearer Security, such coupon shall be returned to
the person so surrendering the Bearer Security), and interest or Defaulted
Interest, as the case may be, will not be payable on such Interest Payment Date
or proposed date for payment, as the case may be, in respect of the Registered
Security issued in exchange for such Bearer Security, but will be payable only
to the Holder of such coupon when due in accordance with the provisions of this
Indenture.

     If expressly provided with respect to the Securities of any series, at the
option of the Holder, Registered Securities of such series may be exchanged for
Bearer Securities upon such terms and conditions as may be provided with respect
to such series.

     Whenever any Securities are so surrendered for exchange, the Company shall
execute, and the Trustee shall authenticate and deliver, the Securities which
the Holder making the exchange is entitled to receive.

     Notwithstanding the foregoing, except as otherwise specified as
contemplated by Section 301, any global Security shall be exchangeable only if
(i) the Securities Depository is at any time unwilling or unable to continue as
Securities Depository and a successor depository is not appointed by the Company
within 60 days, (ii) the Company executes and delivers to the Trustee a Company
Order to the effect that such global Security shall be so exchangeable, or (iii)
an Event of Default has occurred and is continuing with respect to the
Securities. If the beneficial owners of interests in a global Security are
entitled to exchange such interests for Securities of such series and of like
tenor and principal amount of any authorized form and denomination, as specified
as contemplated by Section 301, then without unnecessary delay but in any event
not later than the earliest date on which such interests may be so exchanged,
the Company shall deliver to the Trustee definitive Securities of that series in
aggregate principal amount equal to the principal amount of such global
Security, executed by the Company. On or after the earliest date on which such
interests may be so exchanged, such global Securities shall be surrendered from
time to time by the U.S. Depository or such other depository as shall be
specified in the Company Order with respect thereto, and in accordance with
instructions given to the Trustee and the U.S. Depository or such depository, as
the case may be (which instructions shall be in writing but need not comply with
Section 102 or be accompanied by an Opinion of Counsel), as shall be specified
in the Company Order with respect thereto to the Trustee, as the Company's agent
for such purpose, to be exchanged, in whole or in part, for definitive
Securities of the same


                                       21
<PAGE>   28


series without charge. The Trustee shall authenticate and make available for
delivery, in exchange for each portion of such surrendered global Security, a
like aggregate principal amount of definitive Securities of the same series of
authorized denominations and of like tenor as the portion of such global
Security to be exchanged which (unless the Securities of the series are not
issuable both as Bearer Securities and as Registered Securities, in which case
the definitive Securities exchanged for the global Security shall be issuable
only in the form in which the Securities are issuable, as specified as
contemplated by Section 301) shall be in the form of Bearer Securities or
Registered Securities, or any combination thereof, as shall be specified by the
beneficial owner thereof; provided, however, that no such exchanges may occur
during a period beginning at the opening of business 15 days before any
selection of Securities of that series to be redeemed and ending on the relevant
Redemption Date; and provided, further, that (unless otherwise specified as
contemplated by Section 301) no Bearer Security delivered in exchange for a
portion of a global Security shall be mailed or otherwise delivered to any
location in the United States. Promptly following any such exchange in part,
such global Security shall be returned by the Trustee to such depository or the
U.S. Depository, as the case may be, or such other depository or U.S. Depository
referred to above in accordance with the instructions of the Company referred to
above. If a Registered Security is issued in exchange for any portion of a
global Security after the close of business at the office or agency where such
exchange occurs on (i) any Regular Record Date and before the opening of
business at such office or agency on the relevant Interest Payment Date, or (ii)
any Special Record Date and before the opening of business at such office or
agency on the related proposed date for payment of interest or Defaulted
Interest, as the case may be, interest will not be payable on such Interest
Payment Date or proposed date for payment, as the case may be, in respect of
such Registered Security, but will be payable on such Interest Payment Date or
proposed date for payment, as the case may be, only to the Person to whom
interest in respect of such portion of such global Security is payable in
accordance with the provisions of this Indenture.

     All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.

     Every Registered Security presented or surrendered for registration of
transfer, or for exchange or redemption shall (if so required by the Company or
the Security Registrar for such series of Security presented) be duly endorsed,
or be accompanied by a written instrument of transfer in form satisfactory to
the Company and such Security Registrar duly executed, by the Holder thereof or
his attorney duly authorized in writing.

     No service charge shall be made for any registration of transfer or
exchange, or redemption of Securities, but the Company 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 Securities, other
than exchanges pursuant to Section 304, 906 or 1206 not involving any transfer.

     The Company shall not be required (i) to issue, register the transfer of or
exchange any Securities of any series during a period beginning at the opening
of business 15 days before the day of the mailing of a notice of redemption of
Securities of that series selected for redemption under Section 1203 and ending
at the close of business on the day of such mailing, or (ii) to register the
transfer of or exchange any Registered Security so selected for redemption in
whole


                                       22
<PAGE>   29


or in part, except, in the case of any Security to be redeemed in part, the
portion thereof not to be redeemed, or (iii) to exchange any Bearer Security so
selected for redemption except that such a Bearer Security may be exchanged for
a Registered Security of that series, provided that such Registered Security
shall be immediately surrendered for redemption with written instruction for
payment consistent with the provisions of this Indenture.

     SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.

     If any mutilated Security or a Security with a mutilated coupon
appertaining to it is surrendered to the Trustee, the Company shall execute and
the Trustee shall authenticate and make available for delivery in exchange
therefor a new Security of the same series containing identical terms and of
like principal amount and bearing a number not contemporaneously outstanding,
with coupons corresponding to the coupons, if any, appertaining to the
surrendered Securities.

     If there be delivered to the Company and to the Trustee (i) evidence to
their satisfaction of the destruction, loss or theft of any Security or coupon,
and (ii) such security or indemnity as may be required by them to save each of
them and any agent of either of them harmless, then, in the absence of notice to
the Company or the Trustee that such Security or coupon has been acquired by a
bona fide purchaser, the Company shall execute and upon its request the Trustee
shall authenticate and make available for delivery, in lieu of any such
destroyed, lost or stolen Security or in exchange for the Security to which a
destroyed, lost or stolen coupon appertains (with all appurtenant coupons not
destroyed, lost or stolen), a new Security of the same series containing
identical terms and of like principal amount and bearing a number not
contemporaneously outstanding, with coupons corresponding to the coupons, if
any, appertaining to such destroyed, lost or stolen Security or to the Security
to which such destroyed, lost or stolen coupon appertains.

     In case any such mutilated, destroyed, lost or stolen Security or coupon
has become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Security, pay such Security or coupon; provided,
however, that payment of principal of (and premium, if any) and any interest on
Bearer Securities shall, except as otherwise provided in Section 1002, be
payable only at an office or agency located outside the United States and,
unless otherwise specified as contemplated by Section 301, any interest on
Bearer Securities shall be payable only upon presentation and surrender of the
coupons appertaining thereto.

     Upon the issuance of any new Security under this Section, the Company may
require the payment 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 Trustee and its counsel) connected therewith.

     Every new Security of any series, with its coupons, if any, issued pursuant
to this Section in lieu of any destroyed, lost or stolen Security, or in
exchange for a Security to which a destroyed, lost or stolen coupon appertains,
shall constitute an original additional contractual obligation of the Company,
whether or not the destroyed, lost or stolen Security and its coupons, if any,
or the destroyed, lost or stolen coupon shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Securities of that series and their
coupons, if any, duly issued hereunder.


                                       23
<PAGE>   30


     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 Securities or coupons.

     SECTION 307. Payment of Interest; Interest Rights Preserved.

     Interest on any Registered Security which is payable, and is punctually
paid or duly provided for, on any Interest Payment Date shall, if so provided in
such Security, be paid to the Person in whose name that Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest. In case a Bearer Security of any series is
surrendered in exchange for a Registered Security of such series after the close
of business (at an office or agency in a Place of Payment for such series) on
any Regular Record Date and before the opening of business (at such office or
agency) on the next succeeding Interest Payment Date, such Bearer Security shall
be surrendered without the coupon relating to such Interest Payment Date and
interest will not be payable on such Interest Payment Date in respect of the
Registered Security issued in exchange for such Bearer Security, but will be
payable only to the Holder of such coupon when due in accordance with the
provisions of this Indenture.

     Any interest on any Registered Security of any series which is payable, but
is not punctually paid or duly provided for, on any Interest Payment Date for
such Registered Security (herein called "Defaulted Interest") shall forthwith
cease to be payable to the Holder on the relevant Regular Record Date by virtue
of having been such Holder, and such Defaulted Interest may be paid by the
Company, at its election in each case, as provided in Clause (1) or (2) below:

          (1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Registered Securities affected (or their
respective Predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which shall be
fixed in the following manner. The Company shall notify the Trustee in writing
of the amount of Defaulted Interest proposed to be paid on each such Registered
Security and the date of the proposed payment, and at the same time the Company
shall deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date of
the proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this Clause
provided. Thereupon the Trustee shall fix a Special Record Date for the payment
of such Defaulted Interest which shall be not more than 15 days and not less
than 10 days prior to the date of the proposed payment and not less than 10 days
after the receipt by the Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Company of such Special Record Date and, in
the name and at the expense of the Company, shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor to be
mailed, first-class postage prepaid, to each Holder of such Registered
Securities at his address as it appears in the Security Register not less than
10 days prior to such Special Record Date. The Trustee may in the name and at
the expense of the Company, cause a similar notice to be published at least once
in a newspaper, customarily published in the English language on each Business
Day and of general circulation in the Borough of Manhattan, The City of New
York, but such publication shall not be a condition precedent to the
establishment of such Special Record Date. Notice of the proposed payment of
such Defaulted Interest and the Special Record


                                       24
<PAGE>   31


Date therefor having been mailed as aforesaid, such Defaulted Interest shall be
paid to the Persons in whose names such Registered Securities (or their
respective Predecessor Securities) are registered at the close of business on
such Special Record Date and shall no longer be payable pursuant to the
following Clause (2). In case a Bearer Security of any series is surrendered at
the office or agency in a Place of Payment for such series in exchange for a
Registered Security of such series after the close of business at such office or
agency on any Special Record Date and before the opening of business at such
office or agency on the related proposed date for payment of Defaulted Interest,
such Bearer Security shall be surrendered without the coupon relating to such
proposed date of payment and Defaulted Interest will not be payable on such
proposed date of payment in respect of the Registered Security issued in
exchange for such Bearer Security, but will be payable only to the Holder of
such coupon when due in accordance with the provisions of this Indenture.

          (2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which such Securities may be listed, and upon such notice as may be
required by such exchange, if, after notice given by the Company to the Trustee
of the proposed payment pursuant to this Clause, such payment shall be deemed
practicable by the Trustee.

     At the option of the Company, interest on Registered Securities of any
series that bear interest may be paid by mailing a check to the address of the
person entitled thereto as such address shall appear in the Security Register.

     Subject to the foregoing provisions of this Section and Section 305, each
Security delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to interest
accrued and unpaid, and to accrue interest, which were carried by such other
Security.

     SECTION 308. Persons Deemed Owners.

     Prior to due presentment of a Registered Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Registered Security is registered as the
owner of such Registered Security for the purpose of receiving payment of
principal of (and premium, if any), and (subject to Sections 305 and 307)
interest on and Additional Amounts with respect to, such Registered Security and
for all other purposes whatsoever, whether or not such Registered Security be
overdue, and neither the Company, the Trustee nor any agent of the Company or
the Trustee shall be affected by notice to the contrary.

     The Company, the Trustee and any agent of the Company or the Trustee may
treat the bearer of any Bearer Security and the bearer of any coupon as the
absolute owner of such Security or coupon for the purpose of receiving payment
thereof or on account thereof and for all other purposes whatsoever, whether or
not such Security or coupon be overdue, and neither the Company, the Trustee nor
any agent of the Company or the Trustee shall be affected by notice to the
contrary.


                                       25
<PAGE>   32


     SECTION 309. Cancellation.

     All Securities and coupons surrendered for payment, redemption,
registration of transfer or exchange or for credit against any sinking fund
payment shall, if surrendered to any Person other than the Trustee, be delivered
to the Trustee, and any such Securities and coupons and Securities and coupons
surrendered directly to the Trustee for any such purpose shall be promptly
cancelled by it. The Company may at any time deliver to the Trustee for
cancellation any Securities previously authenticated and delivered hereunder
which the Company may have acquired in any manner whatsoever, and all Securities
so delivered shall be promptly cancelled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities cancelled as provided
in this Section, except as expressly permitted by this Indenture. All cancelled
Securities and coupons held by the Trustee shall be returned by the Trustee to
the Company.

     SECTION 310. Computation of Interest.

     Except as otherwise specified as contemplated by Section 301 for Securities
of any series, or as set forth in any supplemental indenture, interest on the
Securities of each series shall be computed on the basis of a 360 day year of
twelve 30-day months or, for any period shorter than a full three months, on the
basis of the actual number of days elapsed in such period.

     SECTION 311. Cusip Numbers.

     The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; provided that any such notice may
state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be affected
by any defect in or omission of such numbers. The Company will promptly notify
the Trustee of any change in the "CUSIP" numbers.

                                  ARTICLE FOUR

                           SATISFACTION AND DISCHARGE

     SECTION 401. Satisfaction and Discharge of Indenture.

     Upon the direction of the Company by a Company Order this Indenture shall
cease to be of further effect (except as to any surviving rights of registration
of transfer or exchange of Securities herein expressly provided for and any
right to receive Additional Amounts, as provided in Section 1004), and the
Trustee, on demand of and at the expense of the Company, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture, when

          (1) either

               (A) all Securities theretofore authenticated and delivered and
all coupons appertaining thereto (other than (i) coupons appertaining to Bearer
Securities


                                       26
<PAGE>   33


surrendered for exchange for Registered Securities and maturing after such
exchange, whose surrender is not required or has been waived as provided in
Section 305, (ii) Securities and coupons which have been destroyed, lost or
stolen and which have been replaced or paid as provided in Section 306, (iii)
coupons appertaining to Securities called for redemption and maturing after the
relevant Redemption Date, whose surrender has been waived as provided in Section
1206, and (iv) Securities and coupons for whose payment money has theretofore
been deposited in trust or segregated and held in trust by the Company and
thereafter repaid to the Company or discharged from such trust, as provided in
Section 1003) have been delivered to the Trustee for cancellation; or

               (B) all such Securities and, in the case of (i) or (ii) below,
any such coupons appertaining thereto not theretofore delivered to the Trustee
for cancellation

                    (i) have become due and payable, or

                    (ii) will become due and payable at their Stated Maturity
within one year, or

                    (iii) if redeemable at the option of the Company, are to be
called for redemption within one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption by the Trustee in the name, and
at the expense, of the Company, and the Company, in the case of (i), (ii) or
(iii) above, has deposited or caused to be deposited with the Trustee as trust
funds in trust for the purpose an amount sufficient to pay and discharge the
entire indebtedness on such Securities and coupons not theretofore delivered to
the Trustee for cancellation, for principal (and premium, if any) and interest,
and any Additional Amounts with respect thereto, to the date of such deposit (in
the case of Securities which have become due and payable) or to the Stated
Maturity or Redemption Date, as the case may be;

          (2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and

          (3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture have
been complied with.

     In the event there are Securities of two or more series hereunder, the
Trustee shall be required to execute an instrument acknowledging satisfaction
and discharge of this Indenture only if requested to do so with respect to
Securities of all series as to which it is Trustee and if the other conditions
thereto are met. In the event there are two or more Trustees hereunder, then the
effectiveness of any such instrument shall be conditioned upon receipt of such
instrument from all Trustees hereunder.

     Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.


                                       27
<PAGE>   34


     SECTION 402. Application of Trust Money.

     Subject to the provisions of the last paragraph of Section 1003, all money
deposited with the Trustee pursuant to Section 401 shall be held in trust and
applied by it, in accordance with the provisions of the Securities, the coupons
and this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and any interest and Additional Amounts for whose payment such money has
been deposited with the Trustee; but such money need not be segregated from
other funds except to the extent required by law. Money and securities held in
trust are not subject to Article Eleven.

                                  ARTICLE FIVE

                                    REMEDIES

     SECTION 501. Events of Default.

     "Event of Default", wherever used herein with respect to Securities of any
series, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):

          (1) default in the payment of any interest upon or any Additional
Amounts payable in respect of any Security of that series when such interest or
Additional Amounts becomes due and payable, and continuance of such default for
a period of 30 days; provided, however, that a valid extension of an interest
payment period by the Company in accordance with the terms of the Securities of
such series shall not constitute a default in the payment of interest for this
purpose; or

          (2) default in the payment of the principal of (and premium, if any,
on) any Security of that series when it becomes due and payable at Maturity; or

          (3) default in the deposit of any sinking fund payment, when and as
due by the terms of a Security of that series; or

          (4) default in the performance, or breach, of any covenant or warranty
of the Company in this Indenture (other than a covenant or warranty a default in
whose performance or whose breach is elsewhere in this Section specifically
dealt with or which has been expressly included in this Indenture solely for the
benefit of series of Securities other than that series), and continuance of such
default or breach for a period of 60 days after there has been given, by
registered or certified mail, to the Company by the Trustee or to the Company
and the Trustee by the Holders of at least 25% in principal amount of the
Outstanding Securities of that series a written notice specifying such default
or breach and requiring it to be remedied and stating that such notice is a
"Notice of Default" hereunder; or

          (5) a court having jurisdiction in the premises shall enter a decree
or order for relief in respect of the Company in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or appointing a receiver, liquidator,


                                       28
<PAGE>   35


assignee, custodian, trustee, sequestrator (or similar official) of the Company
or for any substantial part of its property, or ordering the winding-up or
liquidation of its affairs, and such decree or order shall remain unstayed and
in effect for a period of 60 consecutive days; or

          (6) the Company shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or shall
consent to the entry of an order for relief in an involuntary case under any
such law, or shall consent to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator (or similar
official) of the Company or for any substantial part of its property, or shall
make any general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due or shall take any corporate action
in furtherance of any of the foregoing; or

          (7) a default occurs under any bond, mortgage, indenture (including
this Indenture) or instrument under which there may be issued, or by which there
may be secured or evidenced, any indebtedness for money borrowed of the Company
or any Subsidiary, whether such indebtedness now exists or shall hereafter be
created, which default (a) is caused by a failure to pay principal on such
indebtedness prior to the expiration of the grace period provided in such
indebtedness (a "Payment Default") or (b) results in the acceleration of such
indebtedness prior to its express maturity, and in each case, the principal
amount of any such indebtedness together with the principal amount of any other
such indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $25 million or more, without such
acceleration having been rescinded, stayed or annulled, or such indebtedness
having been discharged or, in the case of indebtedness contested in good faith
by the Company, a bond, letter of credit, escrow deposit or other cash
equivalent in an amount sufficient to discharge such indebtedness having been
set aside by the Company, within a period of 10 days after there has been given,
by registered or certified mail, to the Company by the Trustee or to the Company
and the Trustee by the Holders of at least 25% in principal amount of the
Outstanding Securities a written notice specifying such default and requiring
the Company to cause such acceleration to be rescinded or annulled or to cause
such indebtedness to be discharged and stating that such notice is a "Notice of
Default" hereunder; or

          (8) any other Event of Default provided with respect to Securities of
that series.

     SECTION 502. Acceleration of Maturity; Rescission and Annulment.

     If an Event of Default with respect to Securities of any series at the time
Outstanding occurs and is continuing, then and in every such case the Trustee or
the Holders of not less than 25% in principal amount of the Outstanding
Securities of that series may declare the principal of all the Securities of
that series, or such lesser amount as may be provided for in the Securities of
that series, to be due and payable immediately, by a notice in writing to the
Company (and to the Trustee if given by the Holders), and upon any such
declaration such principal or such lesser amount shall become immediately due
and payable.

     At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in


                                       29
<PAGE>   36


principal amount of the Outstanding Securities of that series, by written notice
to the Company and the Trustee, may rescind and annul such declaration and its
consequences if

          (1) the Company has paid or deposited with the Trustee a sum
sufficient to pay

               (A) all overdue installments of interest on and any Additional
Amounts payable in respect of all Securities of that series,

               (B) the principal of (and premium, if any, on) any Securities of
that series which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate or rates borne by or provided for
in such Securities,

               (C) to the extent that payment of such interest is lawful,
interest upon overdue installments of interest and Additional Amounts at the
rate or rates borne by or provided for in such Securities, and

               (D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel;

     and

          (2) all Events of Default with respect to Securities of that series,
other than the non-payment of the principal of Securities of that series which
has become due solely by such declaration of acceleration, have been cured or
waived as provided in Section 513.

No such rescission shall affect any subsequent default or impair any right
consequent thereon.

     SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee.

     The Company covenants that if

          (1) default is made in the payment of any installment of interest on
or any Additional Amounts payable in respect of any Security when such interest
or Additional Amounts shall have become due and payable and such default
continues for a period of 30 days, or

          (2) default is made in the payment of the principal of (or premium, if
any, on) any Security at its Maturity

the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities and coupons, the whole amount then due and payable on
such Securities and coupons for principal (and premium, if any) and interest and
Additional Amounts, if any, with interest upon the overdue principal (and
premium, if any) and, to the extent that payment of such interest shall be
legally enforceable, upon overdue installments of interest or any Additional
Amounts, at the rate or rates borne by or provided for in such Securities, and,
in addition thereto, such further amount as shall be sufficient to cover the
costs and expenses of collection, including the


                                       30
<PAGE>   37


reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.

     If the Company fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, and may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Company or any other obligor upon such Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon such Securities, wherever
situated.

     If an Event of Default with respect to Securities of any series occurs and
is continuing, the Trustee may in its discretion proceed to protect and enforce
its rights and the rights of the Holders of Securities of such series and any
related coupons by such appropriate judicial proceedings as the Trustee shall
deem most effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid of
the exercise of any power granted herein, or to enforce any other proper remedy.

     SECTION 504. Trustee May File Proofs of Claim.

     In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal or interest) shall be entitled
and empowered, by intervention in such proceeding or otherwise,

          (i) to file and prove a claim for the whole amount, or such lesser
amount as may be provided for in the Securities of that series, of principal
(and premium, if any) and interest and any Additional Amounts owing and unpaid
in respect of the Securities and to file such other papers or documents as may
be necessary or advisable in order to have the claims of the Trustee (including
any claim for the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents or counsel) and of the Holders allowed in such
judicial proceeding, and

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

and any receiver, assignee, trustee, liquidator, sequestrator (or other similar
official) in any such judicial proceeding is hereby authorized by each Holder of
Securities and coupons to make such payments to the Trustee and, in the event
that the Trustee shall consent to the making of such payments directly to the
Holders of Securities and coupons, to pay to the Trustee any amount due to it
for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel and any other amounts due the Trustee under
Section 607.

     Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder of a Security
or coupon any plan of reorganization,


                                       31
<PAGE>   38


arrangement, adjustment or composition affecting the Securities or coupons or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Holder of a Security or coupon in any such proceeding.

     SECTION 505. Trustee May Enforce Claims Without Possession of Securities or
Coupons.

     All rights of action and claims under this Indenture or any of the
Securities or coupons may be prosecuted and enforced by the Trustee without the
possession of any of the Securities or coupons or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery or judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the Holders of the Securities and
coupons in respect of which such judgment has been recovered.

     SECTION 506. Application of Money Collected.

     Any money collected by the Trustee pursuant to this Article shall be
applied, subject to Article Eleven, in the following order, at the date or dates
fixed by the Trustee and, in case of the distribution of such money on account
of principal (and premium, if any), interest or any Additional Amounts, upon
presentation of the Securities or coupons, or both, as the case may be, and the
notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:

          FIRST: To the payment of all amounts due the Trustee and its agents
and counsel under Section 607;

          SECOND: To the payment of the amounts then due and unpaid upon the
Securities and coupons for principal (and premium, if any) and interest and any
Additional Amounts payable in respect of which or for the benefit of which such
money has been collected, ratably, without preference or priority of any kind,
according to the aggregate amounts due and payable on such Securities and
coupons for principal (and premium, if any), interest and Additional Amounts,
respectively;

          THIRD: The balance, if any, to the Company.

     SECTION 507. Limitation on Suits.

     No Holder of any Security of any series or any related coupons shall have
any right to institute any proceeding, judicial or otherwise, with respect to
this Indenture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless

          (1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default with respect to the Securities of that series;

          (2) the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;


                                       32
<PAGE>   39


          (3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;

          (4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and

          (5) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Outstanding Securities of that series;

it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other such
Holders or Holders of any other series, or to obtain or to seek to obtain
priority or preference over any other Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and ratable
benefit of all such Holders.

     SECTION 508. Unconditional Right of Holders to Receive Principal, Premium
and Interest.

     Notwithstanding any other provision in this Indenture, the Holder of any
Security or coupon shall have the right, which is absolute and unconditional, to
receive payment of the principal of (and premium, if any) and (subject to
Sections 305 and 307) interest on and any Additional Amounts in respect of such
Security or payment of such coupon on the respective Stated Maturity or
Maturities expressed in such Security or coupon (or, in the case of redemption,
on the Redemption Date) and to institute suit for the enforcement of any such
payment, and such right shall not be impaired without the consent of such
Holder.

     SECTION 509. Restoration of Rights and Remedies.

     If the Trustee or any Holder of a Security or coupon has instituted any
proceeding to enforce any right or remedy under this Indenture and such
proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Trustee or to such Holder, then and in every such
case the Company, the Trustee and the Holders of Securities and coupons shall,
subject to any determination in such proceeding, be restored severally and
respectively to their former positions hereunder, and thereafter all rights and
remedies of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.

     SECTION 510. Rights and Remedies Cumulative.

     Except as otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Securities or coupons in the last paragraph
of Section 306, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders of Securities or coupons 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 of employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.


                                       33
<PAGE>   40


     SECTION 511. Delay or Omission Not Waiver.

     No delay or omission of the Trustee or of any Holder of any Security or
coupon to exercise any right or remedy accruing upon any Event of Default shall
impair any such right or remedy or constitute a waiver of any such Event of
Default or an acquiescence therein. Every right and remedy given by this Article
or by law to the Trustee or to the Holders of Securities or coupons may be
exercised from time to time, and as often as may be deemed expedient, by the
Trustee or by the Holders of Securities or coupons, as the case may be.

     SECTION 512. Control by Holders of Securities.

     The Holders of a majority in principal amount of the Outstanding Securities
of any series shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee with respect to the Securities of
such series, provided that

          (1) such direction shall not be in conflict with any rule of law or
with this Indenture,

          (2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction, and

          (3) such direction is not unduly prejudicial to the rights of other
Holders of Securities of such series.

     SECTION 513. Waiver of Past Defaults.

     The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series may on behalf of the Holders of all the
Securities of such series and any related coupons waive any past default
hereunder with respect to such series and its consequences, except a default

          (1) in the payment of the principal of (and premium, if any) or
interest on or Additional Amounts payable in respect of any Security of such
series, or

          (2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of each
Outstanding Security of such series affected.

     Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon.

     SECTION 514. Undertaking for Costs.

     All parties to this Indenture agree, and each Holder of any Security or
coupon by his acceptance thereof 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 Indenture, or in any suit against the Trustee for any action
taken, suffered or omitted by it as Trustee, the filing by any party


                                       34
<PAGE>   41


litigant in such suit, other than the Trustee, 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 expenses, against any party
litigant in such suit, including the Trustee, having due regard to the merits
and good faith of the claims or defenses made by such party litigant, but the
provisions of this Section shall not apply to any suit instituted by the
Company, the Trustee or by any Holder, or group of Holders, holding in the
aggregate more than 10% in principal amount of the Outstanding Securities of any
series, or to any suit instituted by any Holder of any Security or coupon for
the enforcement of the payment of the principal of (and premium, if any) or
interest on or any Additional Amounts in respect of any Security or the payment
of any coupon on or after the respective Stated Maturities expressed in such
Security (or, in the case of redemption, on or after the Redemption Date) or
interest on any overdue principal of any Security.

     SECTION 515. Waiver of Stay, Extension or Usury 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, extension or usury law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; 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 Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.

                                  ARTICLE SIX

                                   THE TRUSTEE

     SECTION 601. Certain Duties and Responsibilities.

          (a) Except during the continuance of an Event of Default,

               (1) the Trustee undertakes to perform such duties, and only such
duties, as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the Trustee
or any predecessor Trustee; and

               (2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions (whether in their
original or facsimile form) furnished to the Trustee and conforming to the
requirements of this Indenture; but in the case of any such certificates or
opinions which by any provisions hereof are specifically required to be
furnished to the Trustee, the Trustee shall be under a duty to examine the same
to determine whether or not they conform to the requirements of this Indenture
(but need not confirm or investigate the accuracy of any facts or mathematical
calculations stated therein).

          (b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.


                                       35
<PAGE>   42


          (c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own 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 Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts;

               (3) the 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 in principal amount of the Outstanding
Securities of any series, relating to the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred upon the Trustee, under this Indenture with respect to the
Securities of such series; and

               (4) no provision of this Indenture shall require the Trustee 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 it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.

          (d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.

     SECTION 602. Notice of Defaults.

     Within 90 days after the occurrence of any default hereunder with respect
to the Securities of any series, the Trustee shall transmit by mail to all
Holders of Securities of such series entitled to receive reports pursuant to
Section 703(c), notice of such default hereunder known to the Trustee, unless
such default shall have been cured or waived, provided, however, that, except in
the case of a default in the payment of the principal of (and premium, if any)
or interest on, or any Additional Amounts with respect to, any Security of such
series or in the payment of any sinking fund installment with respect to
Securities of such series, the 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 Trustee in good
faith determine that the withholding of such notice is in the interests of the
Holders of Securities and coupons of such series; and provided, further, that in
the case of any default of the character specified in Section 501(4) with
respect to Securities of such series, no such notice to Holders shall be given
until at least 30 days after the occurrence thereof. For the purpose of this
Section, the term "default" means any event which is, or after notice or lapse
of time or both would become, an Event of Default with respect to Securities of
such series.


                                       36
<PAGE>   43


     SECTION 603. Certain Rights of Trustee.

     Except as otherwise provided in Section 601:

          (a) the 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, or other paper or document reasonably believed by it to be
genuine and to have been signed or presented by the proper party or parties;

          (b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order (other than
delivery of any Security to the Trustee for authentication and delivery pursuant
to Section 303 which shall be sufficiently evidenced as provided therein) and
any resolution of the Board of Directors shall be sufficiently evidenced by a
Board Resolution;

          (c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
conclusively rely upon an Officers' Certificate;

          (d) the Trustee 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;

          (e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders of Securities of any series or any related coupons pursuant
to this Indenture, unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which might be incurred by it in compliance with such request or direction;

          (f) the 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 or
other paper or document, but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may see 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 Company, personally or by agent or attorney at the sole cost of the
Issuer;

          (g) the 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 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.

     SECTION 604. Not Responsible for Recitals or Issuance of Securities.

     The recitals contained herein and in the Securities, except the Trustee's
certificate of authentication, and in any coupons shall be taken as the
statements of the Company, and the


                                       37
<PAGE>   44


Trustee or any Authenticating Agent assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Securities or coupons. The Trustee or
any Authenticating Agent shall not be accountable for the use or application by
the Company of Securities or the proceeds thereof.

     SECTION 605. May Hold Securities.

     The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and coupons and, subject
to Sections 310(b) and 311 of the Trust Indenture Act, may otherwise deal with
the Company with the same rights it would have if it were not Trustee,
Authenticating Agent, Paying Agent, Security Registrar or such other agent.

     SECTION 606. Money Held in Trust.

     Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed with the Company.

     SECTION 607. Compensation and Reimbursement.

     The Company agrees

          (1) to pay to the Trustee from time to time such compensation as the
parties shall agree to in writing from time to time for all services rendered by
it hereunder (which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust);

          (2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all expenses, disbursements and advances incurred
or made by the Trustee in accordance with any provision of this Indenture
(including the reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursements or advance as may be
attributable to its negligence or bad faith; and

          (3) to indemnify each of the Trustee, any predecessor Trustee and
their respective agents for, and to hold them harmless against, any and all
loss, liability, claim, damage or expense (including taxes other than taxes
based on the income of the Trustee) incurred without negligence, bad faith or
intentional misconduct on their part, arising out of or in connection with the
acceptance or administration of the trust or trusts hereunder, including the
costs and expenses of defending themselves against any claim or liability in
connection with the exercise or performance of any of their powers or duties
hereunder.

     As security for the performance of the obligations of the Company under
this Section the Trustee shall have a lien prior to the Securities of any series
upon all property and funds held or collected by the Trustee as such, except
funds held in trust for the payment of principal of (or premium, if any) or
interest on Securities.


                                       38
<PAGE>   45


     SECTION 608. Corporate Trustee Required; Eligibility.

     There shall at all times be a Trustee hereunder that is a corporation (or
other person permitted to so act) by the Commission permitted by the Trust
Indenture Act to act as trustee under an indenture qualified under the Trust
Indenture Act and that has a combined capital and surplus (computed in
accordance with Section 310(a)(2) of the Trust Indenture Act) of at least
$50,000,000. If at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section or Section 310(a)(5) of the Trust Indenture
Act, it shall resign immediately in the manner and with the effect hereinafter
specified in this Article.

     SECTION 609. Resignation and Removal; Appointment of Successor.

          (a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 610.

          (b) The Trustee may resign at any time with respect to the Securities
of one or more series giving written notice thereof to the Company. If the
instrument of acceptance by a successor Trustee required by Section 610 shall
not have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may at the expense of the Company
petition any court of competent jurisdiction for the appointment of a successor
Trustee with respect to such series.

          (c) The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of a majority in principal amount
of the Outstanding Securities of such series, delivered to the Trustee and to
the Company. If the instrument of acceptance by a successor Trustee required by
Section 610 shall not have been delivered to the Trustee within 30 days after
the giving of such notice of removal, the resigning Trustee may at the expense
of the Company petition any court of competent jurisdiction for the appointment
of a successor Trustee with respect to such series.

          (d) If at any time:

               (1) the Trustee shall fail to comply with the obligations imposed
upon it under Section 310(b) of the Trust Indenture Act with respect to
Securities of any series after written request therefor by the Company or by any
Holder of a Security who has been a bona fide Holder of a Security for at least
six months, or

               (2) the Trustee shall cease to be eligible under Section 608 and
shall fail to resign after written request therefor by the Company or by any
such Holder of a Security, or

               (3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of the
Trustee 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
Trustee with respect to all Securities or the Securities of such series, or (ii)
subject to Section 315(e) of the


                                       39
<PAGE>   46


Trust Indenture Act, any Holder of a Security who has been a bona fide Holder of
a Security of any series 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 Trustee with respect to all Securities of such series and the
appointment of a successor Trustee or Trustees.

          (e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, with
respect to the Securities of one or more series, the Company, by a Board
Resolution, shall promptly appoint a successor Trustee or Trustees with respect
to the Securities of that or those series (it being understood that any such
successor Trustee may be appointed with respect to the Securities of one or more
or all of such series and that at any time there shall be only one Trustee with
respect to the Securities of any particular series) and shall comply with the
applicable requirements of Section 610. If, within one year after such
resignation, removal or incapability, or the occurrence of such vacancy, a
successor Trustee with respect to the Securities of any series shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series delivered to the Company and the retiring
Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance
of such appointment in accordance with the applicable requirements of Section
610, become the successor Trustee with respect to the Securities of such series
and to that extent supersede the successor Trustee appointed by the Company. If
no successor Trustee with respect to the Securities of any series shall have
been so appointed by the Company or the Holders of Securities and accepted
appointment in the manner required by Section 610, any Holder of a Security who
has been a bona fide Holder of a Security of such series for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the appointment of a successor Trustee with
respect to the Securities of such series.

          (f) The Company shall give notice of each resignation and each removal
of the Trustee with respect to the Securities of any series and each appointment
of a successor Trustee with respect to the Securities of any series by mailing
written notice of such event by first-class mail, postage prepaid, to the
Holders of Registered Securities, if any, of such series as their names and
addresses appear in the Security Register and, if Securities of such series are
issued as Bearer Securities, by publishing notice of such event once in an
Authorized Newspaper in each Place of Payment located outside the United States.
Each notice shall include the name of the successor Trustee with respect to the
Securities of such series and the address of its Corporate Trust Office.

     SECTION 610. Acceptance of Appointment by Successor.

          (a) In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on the request
of the Company or the successor Trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder.


                                       40
<PAGE>   47


          (b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates, (2)
if the retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the retiring Trustee with
respect to the Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the retiring Trustee, and
(3) shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that nothing herein or
in such supplemental indenture shall constitute such Trustees co-trustees of the
same trust, that each such Trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such Trustee and that no Trustee shall be responsible for any notice
given to, or received by, or any act or failure to act on the part of any other
Trustee hereunder, and upon the execution and delivery of such supplemental
indenture the resignation or removal of the retiring Trustee shall become
effective to the extent provided therein, such retiring Trustee shall with
respect to the Securities of that or those series to which the appointment of
such successor Trustee relates have no further responsibility for the exercise
of rights and powers or for the performance of the duties and obligations vested
in the Trustee under this Indenture other than as hereinafter expressly set
forth, and each such successor Trustee without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee with respect to the Securities of that or those series
to which the appointment of such successor Trustee relates; but, on request of
the Company or any successor Trustee, such retiring Trustee shall duly assign,
transfer and deliver to such successor Trustee, to the extent contemplated by
such supplemental indenture, the property and money held by such retiring
Trustee hereunder with respect to the Securities of that or those series to
which the appointment of such successor Trustee relates.

          (c) Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts referred
to in paragraph (a) or (b) of this Section, as the case may be.

          (d) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under this Article.

     SECTION 611. Merger, Conversion, Consolidation or Succession to Business.

     Any corporation into which the Trustee 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 Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case


                                       41
<PAGE>   48


any Securities shall have been authenticated, but not delivered, by the Trustee
then in office, any successor by merger, conversion or consolidation to such
authenticating Trustee may adopt such authentication and deliver the Securities
so authenticated with the same effect as if such successor Trustee had itself
authenticated such Securities.

     SECTION 612. Appointment of Authenticating Agent.

     The Trustee may appoint an Authenticating Agent or Agents with respect to
one or more series of Securities which shall be authorized to act on behalf of
the Trustee to authenticate Securities of such series issued upon original issue
or exchange, registration of transfer or partial redemption thereof or pursuant
to Section 306, and Securities so authenticated shall be entitled to the
benefits of this Indenture and shall be valid and obligatory for all purposes as
if authenticated by the Trustee hereunder. Wherever reference is made in this
Indenture to the authentication and delivery of Securities by the Trustee or the
Trustee's certificate of authentication, such reference shall be deemed to
include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times 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 act as Authenticating
Agent, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by Federal or State authority. If such
Authenticating Agent 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
Authenticating Agent 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 an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.

     Any corporation into which an Authenticating 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 such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.

     An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall (i) mail written notice
of such appointment by first-class mail, postage prepaid, to all Holders of
Registered Securities, if any, of the series with respect to which such
Authenticating Agent will serve, as their names and addresses appear in the
Security Register, and (ii) if Securities of the series are issued as Bearer
Securities, publish notice of such appointment at least once in an Authorized
Newspaper in the place where such successor


                                       42
<PAGE>   49


Authenticating Agent has its principal office if such office is located outside
the United States. Any successor Authenticating Agent upon acceptance of its
appointment hereunder shall become vested with all the rights, powers and duties
of its predecessor hereunder, with like effect as if originally named as an
Authenticating Agent. No successor Authenticating Agent shall be appointed
unless eligible under the provisions of this Section.

     The Trustee agrees to pay each Authenticating Agent from time to time
reasonable compensation for its services under this Section, and the Trustee
shall be entitled to be reimbursed for such payments, subject to the provisions
of Section 607.

     The provisions of Sections 308, 604 and 605 shall be applicable to each
Authenticating Agent.

     If an appointment with respect to one or more series is made pursuant to
this Section, the Securities of such series may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternate
certificate of authentication in the following form.

     This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.

                                                  THE BANK OF NEW YORK,
                                                       as Trustee


     Dated:                                       By:
           ---------------------                     ---------------------------
                                                       As Authenticating Agent


                                                  By:
                                                     ---------------------------
                                                       Authorized Signatory



     If all of the Securities of any series may not be originally issued at one
time, and if the Trustee does not have an office capable of authenticating
Securities upon original issuance located in a Place of Payment where the
Company wishes to have Securities of such series authenticated upon original
issuance, the Trustee, if so requested in writing (which writing need not comply
with Section 102) by the Company, shall appoint in accordance with this Section
612 an Authenticating Agent having an office in a Place of Payment designated by
the Company with respect to such series of Securities.

                                 ARTICLE SEVEN

                HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY

     SECTION 701. Company to Furnish Trustee Names and Addresses of Holders.

     The Company will furnish or cause to be furnished to the Trustee


                                       43
<PAGE>   50


          (a) semi-annually, not later than fifteen days after the Regular
Record Date for interest for each series of Securities, a list, in such form as
the Trustee may reasonably require, of the names and addresses of the Holders of
Registered Securities of such series as of such Regular Record Date, or if there
is no Regular Record Date for interest for such series of Securities,
semi-annually, upon such dates as are set forth in the Board Resolution or
indenture supplemental hereto authorizing such series, and

          (b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of similar
form and content as of a date not more than 15 days prior to the time such list
is furnished, provided, however, that, so long as the Trustee is the Security
Registrar, no such list shall be required to be furnished.

     SECTION 702. Preservation of Information; Communications to Holders.

     The Trustee shall comply with the obligations imposed upon it pursuant to
Section 312 of the Trust Indenture Act.

     Every Holder of Securities or coupons, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company, the Trustee,
any Paying Agent or any Security Registrar shall be held accountable by reason
of the disclosure of any information as to the names and addresses of the
Holders of Securities in accordance with Section 312 of the Trust Indenture Act,
regardless of the source from which such information was derived, and that the
Trustee shall not be held accountable by reason of mailing any material pursuant
to a request made under Section 312(b) of the Trust Indenture Act.

     SECTION 703. Reports by Trustee.

          (a) Within 60 days after __________ of each year commencing with the
first __________ following the first issuance of Securities pursuant to Section
301, if required by Section 313(a) of the Trust Indenture Act, the Trustee shall
transmit, pursuant to Section 313(c) of the Trust Indenture Act, a brief report
dated as of such __________ with respect to any of the events specified in said
Section 313(a) which may have occurred since the later of the immediately
preceding __________ and the date of this Indenture.

          (b) The Trustee shall transmit the reports required by Section 313(b)
of the Trust Indenture Act at the times specified therein.

          (c) Reports pursuant to this Section shall be transmitted in the
manner and to the Persons required by Sections 313(c) and 313(d) of the Trust
Indenture Act. The Company will notify the Trustee when any series of Securities
are listed on any securities exchange.

     SECTION 704. Reports by Company.

     The Company shall:

          (1) file with the Trustee, within 30 days after the Company is
required to file the same with the Commission, copies of the annual reports and
of the information, documents


                                       44
<PAGE>   51


and other reports (or copies of such portions of any of the foregoing as the
Commission may from time to time by rules and regulations prescribe) which the
Company may be required to file with the Commission pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934; or, if the Company is not
required to file information, documents or reports pursuant to either of said
sections, then it shall file with the Commission, in accordance with rules and
regulations prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports which may be
required pursuant to Section 13 of the Securities Exchange Act of 1934 in
respect of a security listed and registered on a national securities exchange as
may be prescribed from time to time in such rules and regulations and shall file
a copy thereof with the Trustee within 30 days after such supplementary and
periodic information, documents and reports would have been required to be filed
with the Commission;

          (2) file with the Trustee and the Commission, in accordance with rules
and regulations prescribed from time to time by the Commission, such additional
information, documents and reports with respect to compliance by the Company
with the conditions and covenants of this Indenture as may be required from time
to time by such rules and regulations; and

          (3) transmit within 30 days after the filing thereof with the Trustee,
in the manner and to the extent provided in Section 703(c) with respect to
reports pursuant to Section 703(a), such summaries of any information, documents
and reports required to be filed by the Company pursuant to paragraphs (1) and
(2) of this Section as may be required by rules and regulations prescribed from
time to time by the Commission.

          (4) Delivery of such reports, information and documents to the Trustee
is for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).

                                 ARTICLE EIGHT

                CONSOLIDATION, MERGER, SALE, LEASE OR CONVEYANCE

     SECTION 801. Consolidations and Mergers of Company and Sales, Leases and
Conveyances Permitted Subject to Certain Conditions.

     The Company may consolidate with, or sell, lease or convey all or
substantially all of its assets to, or merge with or into any other corporation,
provided that in any such case, (i) either the Company shall be the continuing
corporation, or the successor corporation shall be a corporation organized and
existing under the laws of the United States of America or a State thereof and
such successor corporation shall expressly assume the due and punctual payment
of the principal of (and premium, if any), any interest on, and any Additional
Amounts payable pursuant to Section 1004 with respect to, all the Securities,
according to their tenor, and the due and punctual performance and observance of
all of the covenants and conditions of this Indenture to be performed by the
Company by supplemental indenture satisfactory to the Trustee, executed and
delivered to a Responsible Officer of the Trustee by such corporation, and (ii)
the Company or such successor corporation, as the case may be, shall not,
immediately after such merger or


                                       45
<PAGE>   52


consolidation, or such sale, lease or conveyance, be in default in the
performance of any such covenant or condition.

     SECTION 802. Rights and Duties of Successor Corporation.

     In case of any such consolidation, merger, sale, lease or conveyance and
upon any such assumption by the successor corporation, 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 party of the first part, and the
predecessor corporation, except in the event of a lease, shall be relieved of
any further obligation under this Indenture and the Securities and coupons. Such
successor corporation thereupon may cause to be signed, and may issue either in
its own name or in the name of the Company, any or all of the Securities and
coupons issuable hereunder which theretofore shall not have been signed by the
Company and delivered to the Trustee; and, upon the order of such successor
corporation, instead of the Company, and subject to all the terms, conditions
and limitations in this Indenture prescribed, the Trustee shall authenticate and
shall deliver any Securities and coupons which previously shall have been signed
and delivered by the officers of the Company to the Trustee for authentication,
and any Securities or coupons which such successor corporation thereafter shall
cause to be signed and delivered to the Trustee for that purpose. All the
Securities and coupons so issued shall in all respects have the same legal rank
and benefit under this Indenture as the Securities and coupons theretofore or
thereafter issued in accordance with the terms of this Indenture as though all
of such Securities and coupons had been issued at the date of the execution
hereof.

     In case of any such consolidation, merger, sale, lease or conveyance, such
changes in phraseology and form (but not in substance) may be made in the
Securities and coupons thereafter to be issued as may be appropriate.

     SECTION 803. Officers' Certificate and Opinion of Counsel.

     The Trustee, subject to the provisions of Sections 601 and 603, may receive
an Officers' Certificate and an Opinion of Counsel as conclusive evidence that
any such consolidation, merger, sale, lease or conveyance, and any such
assumption, complies with the provisions of this Article.

                                  ARTICLE NINE

                             SUPPLEMENTAL INDENTURES

     SECTION 901. Supplemental Indentures without Consent of Holders.

     Without the consent of any Holders of Securities or coupons, the Company,
when authorized by a Board Resolution, and the Trustee, at any time and from
time to time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:

          (1) to evidence the succession of another corporation to the Company,
and the assumption by any such successor of the covenants of the Company herein
and in the Securities contained; or


                                       46
<PAGE>   53


          (2) to add to the covenants of the Company, for the benefit of the
Holders of all or any series of Securities (and if such covenants are to be for
the benefit of less than all series of Securities, stating that such covenants
are expressly being included solely for the benefit of such series) or to
surrender any right or power herein conferred upon the Company; or

          (3) to add to or change any of the provisions of this Indenture to
provide that Bearer Securities may be registrable as to principal, to change or
eliminate any restrictions on the payment of principal (or premium, if any) on
Registered Securities or of principal (or premium, if any) or any interest on
Bearer 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 interests of the Holders
of Securities of any series or any related coupons in any material respect; or

          (4) to establish the form of terms of Securities of any series as
permitted by Sections 201 and 301; or

          (5) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one or more
series and to add to or change any of the provisions of this Indenture as shall
be necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, pursuant to the requirements of Section 610
(b); or

          (6) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision herein,
or to make any other provisions with respect to matters or questions arising
under this Indenture which shall not be inconsistent with the provisions of this
Indenture which shall not adversely affect the interest of the Holders of
Securities of any series or any related coupons in any material respect; or

          (7) to add to, delete from or revise the conditions, limitations and
restrictions on the authorized amount, terms or purposes of issue,
authentication and delivery of Securities, as herein set forth.

     SECTION 902. Supplemental Indentures with Consent of Holders.

     With the consent of the Holders of not less than a majority in aggregate
principal amount of the Outstanding Securities of each series affected by such
supplemental indenture, by Act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by a Board Resolution, and the Trustee may
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders of Securities of such series under this Indenture; provided, however,
that no such supplemental indenture shall, without the consent of the Holder of
each Outstanding Security affected thereby,

          (1) change the Stated Maturity of the principal of, or any installment
of interest on, any Security, or reduce the principal amount thereof or the rate
of interest thereon or any Additional Amounts payable in respect thereof, or any
premium payable upon the redemption thereof, or change the obligation of the
Company to pay Additional Amounts pursuant to Section 1004 (except as
contemplated by Section 801(i) and permitted by Section


                                       47
<PAGE>   54


901(1)), or reduce the amount of the principal of an Original Issue Discount
Security that would be due and payable upon a declaration of acceleration of the
Maturity thereof pursuant to Section 502, or change any Place of Payment where,
or the coin or currency in which, any Security or any premium or the interest
thereon is payable, or impair the right to institute suit for the enforcement of
any such payment on or after the Stated Maturity thereof (or, in the case of
redemption, on or after the Redemption Date), or

          (2) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences) provided for in this Indenture, or
reduce the requirements of Section 1504 for quorum or voting, or

          (3) modify the provisions of this Indenture with respect to the
subordination of any Security in a manner adverse to the Holder thereof; or

          (4) modify any of the provisions of this Section, or Section 513,
except to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the consent of
the Holder of each Outstanding Security affected thereby.

     An amendment under this Section may not make any change that adversely
affects the rights under Article Eleven of any holder of an issue of Senior
Indebtedness unless the holders of the issue pursuant to its terms consent to
the change.

     A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of the Holders of Securities of such series with respect to such covenant
or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.

     It shall not be necessary for any Act of Holders of Securities under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.

     SECTION 903. Execution of Supplemental Indentures.

     In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.

     SECTION 904. Effect of Supplemental Indentures.

     Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this


                                       48
<PAGE>   55


Indenture for all purposes; and every Holder of Securities theretofore or
thereafter authenticated and delivered hereunder and of any coupons appertaining
thereto shall be bound thereby.

     SECTION 905. Conformity with Trust Indenture Act.

     Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.

     SECTION 906. Reference in Securities to Supplemental Indentures.

     Securities of any series authenticated and delivered after the execution of
any supplemental indenture pursuant to this Article may, and shall if required
by the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities of any series so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities of such series.

                                  ARTICLE TEN

                                    COVENANTS

     SECTION 1001. Payment of Principal, Premium, if any, and Interest.

     The Company covenants and agrees for the benefit of the Holders of each
series of Securities that it will duly and punctually pay the principal of (and
premium, if any), interest on and any Additional Amounts payable in respect of
the Securities of that series in accordance with the terms of such series of
Securities, any coupons appertaining thereto and this Indenture. Any interest
due on and any Additional Amounts payable in respect of Bearer Securities on or
before Maturity, other than Additional Amounts, if any, payable as provided in
Section 1004 in respect of principal of (or premium, if any, on) such a
Security, shall be payable only upon presentation and surrender of the several
coupons for such interest installments as are evidenced thereby as they
severally mature.

     SECTION 1002. Maintenance of Office or Agency.

     The Company will maintain in each Place of Payment for any series of
Securities an office or agency where Securities of that series (but not Bearer
Securities, except as otherwise provided below, unless such Place of Payment is
located outside the United States) may be presented or surrendered for payment,
where Securities of that series may be surrendered for registration of transfer
or exchange and where notices and demands to or upon the Company in respect of
the Securities of that series and this Indenture may be served. If Securities of
a series are issuable as Bearer Securities, the Company will maintain, subject
to any laws or regulations applicable thereto, an office or agency in a Place of
Payment for such series which is located outside the United States where
Securities of such series and the related coupons may be presented and
surrendered for payment (including payment of any Additional Amounts payable on
Securities of such series pursuant to Section 1004); provided, however, that if
the Securities of such series are listed on The Stock Exchange of the United
Kingdom and the Republic of Ireland or the Luxembourg Stock Exchange or any
other stock exchange located outside the


                                       49
<PAGE>   56


United States and such stock exchange shall so require, the Company will
maintain a Paying Agent in London, Luxembourg or any other required city located
outside the United States, as the case may be, so long as the Securities of such
series are listed on such exchange. The Company will give prompt written notice
to a Responsible Officer of the Trustee 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 Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the Corporate Trust Office of the Trustee, except that
Bearer Securities of that series and the related coupons may be presented and
surrendered for payment (including payment of any Additional Amounts payable on
Bearer Securities of that series pursuant to Section 1004) at the place
specified for the purpose pursuant to Section 301, and the Company hereby
appoints the Trustee as its agent to receive all such presentations, surrenders,
notices and demands.

     Except as otherwise provided in the form of Bearer Security of any
particular series pursuant to the provisions of this Indenture, no payment of
principal, premium or interest on Bearer Securities shall be made at any office
or agency of the Company in the United States or by check mailed to any address
in the United States or by transfer to an account maintained with a bank located
in the United States; provided, however, payment of principal of and any premium
and interest in U.S. dollars (including Additional Amounts payable in respect
thereof) on any Bearer Security may be made at the Corporate Trust Office of the
Trustee in the Borough of Manhattan, The City of New York if (but only if)
payment of the full amount of such principal, premium, interest or Additional
Amounts at all offices outside the United States maintained for the purpose by
the Company in accordance with this Indenture is illegal or effectively
precluded by exchange controls or other similar restrictions.

     The Company may also from time to time designate one or more other offices
or agencies where the Securities of one or more series 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 each Place of Payment for Securities of any series for such purposes. The
Company will give prompt written notice to the Trustee of any such designation
or rescission and of any change in the location of any such other office or
agency. Unless otherwise set forth in a Board Resolution or indenture
supplemental hereto with respect to a series of Securities, the Company hereby
designates as the Place of Payment for each series of Securities the Borough of
Manhattan, The City of New York, and initially appoints the Trustee at its
Corporate Trust Office as the Company's office or agency for each of such
purposes in such City.

     SECTION 1003. Money for Securities Payments to be Held in Trust.

     If the Company shall at any time act as its own Paying Agent with respect
to any series of Securities, it will, on or before each due date of the
principal of (and premium, if any), or interest on, any of the Securities of
that series, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal (and premium, if any) or interest
so becoming due until such sums shall be paid to such Persons or otherwise
disposed of as herein provided, and will promptly notify the Trustee of its
action or failure so to act.

     Whenever the Company shall have one or more Paying Agents for any series of
Securities, it will, on or prior to each due date of the principal of (and
premium, if any), or


                                       50
<PAGE>   57


interest on, any Securities of that series, deposit with a Paying Agent a sum
sufficient to pay the principal (and premium, if any) or interest so becoming
due, such sum to be held in trust for the benefit of the Persons entitled to
such principal, premium or interest, and (unless such Paying Agent is the
Trustee) the Company will promptly notify the Trustee of its action or failure
so to act.

     The Company will cause each Paying Agent for any series of Securities other
than the Trustee to execute and deliver to the Trustee an instrument in which
such Paying Agent shall agree with the Trustee, subject to the provisions of
this Section, that such Paying Agent will

          (1) hold all sums held by it for the payment of the principal of (and
premium, if any) or interest on Securities of that series in trust for the
benefit of the Persons entitled thereto until such sums shall be paid to such
Persons or otherwise disposed of as herein provided;

          (2) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities of that series) in the making of any payment
of principal (and premium, if any) or interest on the Securities of that series;
and

          (3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so held in
trust by such Paying Agent.

     The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or of any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying Agent, such sums to be held by the Trustee upon the
same trusts as those upon which such sums were held by the Company or such
Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such
Paying Agent shall be released from all further liability with respect to such
money.

     Except as otherwise provided in the form of Securities of any particular
series pursuant to the provisions of this Indenture, any money deposited with
the Trustee or any Paying Agent, or then held by the Company, in trust for the
payment of the principal of (and premium, if any) or interest on any Security of
any series and remaining unclaimed for two years after such principal (and
premium, if any) or interest has become due and payable shall be paid to the
Company on Company Request, or (if then held by the Company) shall be discharged
from such trust; and the Holder of such Security or any coupon appertaining
thereto shall thereafter, as an unsecured general creditor, look only to the
Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in an Authorized Newspaper in
each Place of Payment or to be mailed to Holders of Registered Securities, or
both, notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such publication
or mailing, any unclaimed balance of such money then remaining will be repaid to
the Company.


                                       51
<PAGE>   58


     SECTION 1004. Additional Amounts.

     If the Securities of a series provide for the payment of Additional
Amounts, the Company will pay to the Holder of any Security of any series or any
coupon appertaining thereto Additional Amounts as provided therein. Whenever in
this Indenture there is mentioned, in any context, the payment of the principal
of (or premium, if any) or interest on, or in respect of, any Security of any
series or any related coupon or the net proceeds received on the sale or
exchange of any Security of any series, such mention shall be deemed to include
mention of the payment of Additional Amounts provided for in this Section to the
extent that, in such context, Additional Amounts are, were or would be payable
in respect thereof pursuant to the provisions of this Section and express
mention of the payment of Additional Amounts (if applicable) in any provisions
hereof shall not be construed as excluding Additional Amounts in those
provisions hereof where such express mention is not made.

     If the Securities of a series provide for the payment of Additional
Amounts, at least 10 days prior to the first Interest Payment Date with respect
to that series of Securities (or if the Securities of that series will not bear
interest prior to Maturity, the first day on which a payment of principal (and
premium, if any) is made), and at least 10 days prior to each date of payment of
principal (and premium, if any) or interest if there has been any change with
respect to the matters set forth in the below-mentioned Officers' Certificate,
the Company will furnish the Trustee and the Company's principal Paying Agent or
Paying Agents, if other than the Trustee, with an Officers' Certificate
instructing the Trustee and such Paying Agent or Paying Agents whether such
payment of principal (and premium, if any) or interest on the Securities of that
series shall be made to Holders of Securities of that series or the related
coupons who are United States Aliens without withholding for or on account of
any tax, assessment or other governmental charge described in the Securities of
that Series. If any such withholding shall be required, then such Officers'
Certificate shall specify by country the amount, if any, required to be withheld
on such payments to such Holders of Securities or coupons and the Company will
pay to the Trustee or such Paying Agent the Additional Amounts required by this
Section. The Company covenants to indemnify the Trustee and any Paying Agent
for, and to hold them harmless against, any loss, liability or expense
reasonably incurred without negligence, bad faith or intentional misconduct on
their part arising out of or in connection with actions taken or omitted by any
of them in reliance on any Officers' Certificate furnished pursuant to this
Section.

     SECTION 1005. Statement as to Compliance.

     The Company will deliver to the Trustee, within 120 days after the end of
each fiscal year, a written statement, which need not comply with Section 102,
signed by the Chairman of the Board, the President or a Vice President and by
the Treasurer, an Assistant Treasurer, the Controller or an Assistant Controller
of the Company, stating, as to each signer thereof, that

     (a) a review of the activities of the Company during such year and of
performance under this Indenture has been made under his supervision, and

     (b) to the best of his knowledge, based on such review, (i) the Company has
fulfilled all of its obligations under this Indenture throughout such year, or,
if there has been a default in the fulfillment of any such obligation,
specifying each such default known to him and the nature and status thereof, and
(ii) no event has occurred and is continuing which is, or after notice or


                                       52
<PAGE>   59


lapse of time or both would become, an Event of Default, or, if such an event
has occurred and is continuing, specifying each such event known to him and the
nature and status thereof.

     SECTION 1006. Waiver of Certain Covenants.

     The Company may omit in any particular instance to comply with any term,
provision or condition set forth in Sections 1004 to 1005, inclusive, with
respect to the Securities of any series if before the time for such compliance
the Holders of at least a majority in principal amount of the Outstanding
Securities of such series shall, by Act of such Holders, either waive such
compliance in such instance or generally waive compliance with such term,
provision or condition, but no such waiver shall extend to or affect such term,
provision or condition except to the extent so expressly waived, and, until such
waiver shall become effective, the obligations of the Company and the duties of
the Trustee in respect of any such term, provision or condition shall remain in
full force and effect.

                                 ARTICLE ELEVEN

                                  SUBORDINATION

     SECTION 1101. Securities Subordinated to Senior Indebtedness.

     The Company and each Holder of a Security, by his acceptance thereof, agree
that (a) the payment of the principal of, premium (if any) and interest on and
any Additional Amounts with respect to each and all the Securities and (b) any
other payment in respect of the Securities, including on account of the
acquisition or redemption of Securities by the Company, is subordinated, to the
extent and in the manner provided in this Article, to the prior payment in full
of all Senior Indebtedness of the Company, whether outstanding at the date of
this Indenture or thereafter created, incurred, assumed or guaranteed, and that
these subordination provisions are for the benefit of the holders of Senior
Indebtedness.

     This Article shall constitute a continuing offer to all Persons who, in
reliance upon such provisions, become holders of, or continue to hold, Senior
Indebtedness, and such provisions are made for the benefit of the holders of
Senior Indebtedness, and such holders are made obligees hereunder and any one or
more of them may enforce such provisions.

     SECTION 1102. No Payment on Securities in Certain Circumstances.

     (a) No payment shall be made by or on behalf of the Company on account of
the principal of, premium (if any) or interest on or any Additional Amounts with
respect to the Securities of any series or to acquire any of such Securities
(including any repurchases of such Securities pursuant to the provisions thereof
at the option of the Holder of such Securities) for cash or property (other than
Junior securities of the Company), or on account of any redemption provisions of
such Securities, in the event of default in payment of any principal of, premium
(if any) or interest on any Senior Indebtedness of the Company when the same
becomes due and payable, whether at maturity or at a date fixed for prepayment
or by declaration of acceleration or otherwise (a "Senior Payment Default"),
unless and until such Senior Payment Default has been cured or waived or
otherwise has ceased to exist.


                                       53
<PAGE>   60


     (b) No payment shall be made by or on behalf of the Company on account of
the principal of, premium (if any) or interest on or any Additional Amounts with
respect to the Securities of any series or to acquire any of such Securities
(including any repurchases of such Securities pursuant to the provisions thereof
at the option of the Holder of such Securities) for cash or property (other than
Junior securities of the Company), or on account of the redemption provisions of
such Securities, in the event of any event of default (other than a Senior
Payment Default) with respect to any Designated Senior Indebtedness permitting
the holders of such Designated Senior Indebtedness (or a trustee or other
representative on behalf of the holders thereof) to declare such Designated
Senior Indebtedness due and payable prior to the date on which it would
otherwise have become due and payable, upon written notice thereof to the
Company and the Trustee by any holders of Designated Senior Indebtedness (or a
trustee or other representative on behalf of the holders thereof) (the "Payment
Notice"), unless and until such event of default shall have been cured or waived
or otherwise has ceased to exist; provided, that such payments may not be
prevented pursuant to this Section 1102(b) for more than 179 days after an
applicable Payment Notice has been received by the Trustee unless the Designated
Senior Indebtedness in respect of which such event of default exists has been
declared due and payable in its entirety, in which case no such payment may be
made until such acceleration has been rescinded or annulled or such Designated
Senior Indebtedness has been paid in full. No event of default that existed or
was continuing on the date of any Payment Notice (whether or not such event of
default is on the same issue of Designated Senior Indebtedness) may be made the
basis for the giving of a second Payment Notice, and only one such Payment
Notice may be given in any 365-day period.

     (c) In furtherance of the provisions of Section 1101, in the event that,
notwithstanding the foregoing provisions of this Section 1102, any payment or
distribution of assets of the Company (other than Junior securities of the
Company) shall be received by the Trustee or the Holders of Securities of any
series at a time when such payment or distribution was prohibited by the
provisions of this Section 1102, then, unless such payment or distribution is no
longer prohibited by this Section 1102, such payment or distribution (subject to
the provisions of Section 1107) shall be received and held in trust by the
Trustee or such Holder or Paying Agent for the benefit of the holders of Senior
Indebtedness of the Company, and shall be paid or delivered by the Trustee or
such Holders or such Paying Agent, as the case may be, to the holders of Senior
Indebtedness of the Company remaining unpaid or unprovided for or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior Indebtedness
of the Company may have been issued, ratably, according to the aggregate amounts
remaining unpaid on account of such Senior Indebtedness of the Company held or
represented by each, for application to the payment of all Senior Indebtedness
in full after giving effect to all concurrent payments and distributions to or
for the holders of such Senior Indebtedness.

     SECTION 1103. Securities Subordinated to Prior Payment of All Senior
Indebtedness on Dissolution, Liquidation or Reorganization.

     Upon any distribution of assets of the Company or upon any dissolution,
winding up, total or partial liquidation or reorganization of the Company,
whether voluntary or involuntary, in bankruptcy, insolvency, receivership or
similar proceeding or upon assignment for the benefit of creditors:


                                       54
<PAGE>   61


     (a) the holders of all Senior Indebtedness of the Company shall first be
entitled to receive payments in full before the Holders of Securities of any
series are entitled to receive any payment on account of the principal of,
premium (if any) or interest on or any Additional Amounts with respect to such
Securities (other than Junior securities of the Company);

     (b) any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities (other than Junior securities
of the Company), to which the Holders of Securities of any series or the Trustee
on behalf of such Holders would be entitled, except for the provisions of this
Article, shall be paid by the liquidating trustee or agent or other Person
making such a payment or distribution directly to the holders of such Senior
Indebtedness or their representative, ratably according to the respective
amounts of Senior Indebtedness held or represented by each, to the extent
necessary to make payment in full of all such Senior Indebtedness remaining
unpaid after giving effect to all concurrent payments and distributions to the
holders of such Senior Indebtedness; and

     (c) in the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities (other than Junior securities of the Company), shall be
received by the Trustee or the Holders of Securities of any series or any Paying
Agent (or, if the Company or any Affiliate of the Company is acting as its own
Paying Agent, money for any such payment or distribution shall be segregated or
held in trust) on account of the principal of, premium (if any) or interest on
or any Additional Amounts with respect to the Securities of such series before
all Senior Indebtedness of the Company is paid in full, such payment or
distribution (subject to the provisions of Section 1107) shall be received and
held in trust by the Trustee or such Holder or Paying Agent for the benefit of
the holders of such Senior Indebtedness, or their respective representatives,
ratably according to the respective amounts of such Senior Indebtedness held or
represented by each, to the extent necessary to make payment as provided herein
of all such Senior Indebtedness remaining unpaid after giving effect to all
concurrent payments and distributions and all provisions therefor to or for the
holders of such Senior Indebtedness, but only to the extent that as to any
holder of such Senior Indebtedness, as promptly as practical following notice
from the Trustee to the holders of such Senior Indebtedness that such prohibited
payment has been received by the Trustee, Holder(s) or Paying Agent (or has been
segregated as provided above), such holder (or a representative therefor)
notifies the Trustee of the amounts then due and owing on such Senior
Indebtedness, if any, held by such holder and only the amounts specified in such
notices to the Trustee shall be paid to the holders of such Senior Indebtedness.

     SECTION 1104. Subrogation to Rights of Holders of Senior Indebtedness.

     Subject to the payment in full of all Senior Indebtedness of the Company as
provided herein, the Holders of the Securities shall be subrogated (to the
extent of the payments or distributions made to the holders of such Senior
Indebtedness pursuant to the provisions of this Article) to the rights of the
holders of such Senior Indebtedness to receive payments or distributions of
assets of the Company applicable to the Senior Indebtedness until all amounts
owing on the Securities shall be paid in full. For the purpose of such
subrogation, no such payments or distributions to the holders of such Senior
Indebtedness by the Company, or by or on behalf of the Holders of the Securities
by virtue of this Article, which otherwise would have been made to such Holders
shall, as between the Company and such Holders, be deemed to be payment by the
Company or on account of such Senior Indebtedness, it being understood that the


                                       55
<PAGE>   62


provisions of this Article are and are intended solely for the purpose of
defining the relative rights of the Holders of the Securities, on the one hand,
and the holders of such Senior Indebtedness, on the other hand.

     If any payment or distribution to which the Holders of the Securities would
otherwise have been entitled but for the provisions of this Article shall have
been applied, pursuant to the provisions of this Article, to the payment of
amounts payable under Senior Indebtedness of the Company, then such Holders
shall be entitled to receive from the holders of such Senior Indebtedness any
payments or distributions received by such holders of Senior Indebtedness in
excess of the amount sufficient to pay all amounts payable under or in respect
of such Senior Indebtedness in full.

     SECTION 1105. Obligations of the Company Unconditional.

     Nothing contained in this Article or elsewhere in this Indenture or in the
Securities is intended to or shall impair, as between the Company and the
Holders of the Securities of any series, the obligation of the Company, which is
absolute and unconditional, to pay to such Holders the principal of, premium (if
any) and interest on and any Additional Amounts with respect to the Securities
of such series as and when the same shall become due and payable in accordance
with their terms, or is intended to or shall affect the relative rights of such
Holders and creditors of the Company other than the holders of the Senior
Indebtedness, nor shall anything herein or therein prevent the Trustee or any
Holder from exercising all remedies otherwise permitted by applicable law upon
default under this Indenture, subject to the rights, if any, under this Article,
of the holders of Senior Indebtedness in respect of cash, property or securities
of the Company received upon the exercise of any such remedy. Notwithstanding
anything to the contrary in this Article or elsewhere in this Indenture or in
the Securities, upon any distribution of assets of the Company referred to in
this Article, the Trustee, subject to the provisions of Sections 601 and 603,
and the Holders of the Securities shall be entitled to rely upon any order or
decree made by any court of competent jurisdiction in which such dissolution,
winding up, liquidation or reorganization proceedings are pending, or a
certificate of the liquidating trustee or agent or other Person making any
distribution to the Trustee or to such Holders for the purpose of ascertaining
the Persons entitled to participate in such distribution, the holders of the
Senior Indebtedness and other Indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article so long as such court has been
apprised of the provisions of, or the order, decree or certificate makes
reference to, the provisions of this Article.

     SECTION 1106. Trustee Entitled to Assume Payments Not Prohibited in Absence
of Notice.

     The Trustee shall not at any time be charged with knowledge of the
existence of any facts that would prohibit the making of any payment to or by
the Trustee unless and until a Responsible Officer of the Trustee or any Paying
Agent shall have received, no later than two Business Days prior to such
payment, written notice thereof from the Company or from one or more holders of
Senior Indebtedness or from any representative therefor and, prior to the
receipt of any such written notice, the Trustee, subject to the provisions of
Sections 601 and 603, shall be entitled in all respects conclusively to assume
that no such fact exists.


                                       56
<PAGE>   63


     SECTION 1107. Application by Trustee of Amounts Deposited with It.

     Amounts deposited in trust with the Trustee pursuant to and in accordance
with Article Four shall be for the sole benefit of Holders of the Securities of
the series for the benefit of which such amounts were deposited, and, to the
extent allocated for the payment of Securities of such series, shall not be
subject to the subordination provisions of this Article. Otherwise, any deposit
of assets with the Trustee or the Paying Agent (whether or not in trust) for the
payment of principal of, premium (if any) or interest on or any Additional
Amounts with respect to any Securities shall be subject to the provisions of
Sections 1101, 1102, 1103 and 1104; provided that if prior to two Business Days
preceding the date on which by the terms of this Indenture any such assets may
become distributable for any purpose (including without limitation, the payment
of either principal of, premium (if any) or interest on or any Additional
Amounts with respect to any Security), the Trustee or such Paying Agent shall
not have received with respect to such assets the written notice provided for in
Section 1106, then the Trustee or such Paying Agent shall have full power and
authority to receive such assets and to apply the same to the purpose for which
they were received, and shall not be affected by any notice to the contrary that
may be received by it on or after such date; and provided further that nothing
contained in this Article shall prevent the Company from making, or the Trustee
from receiving or applying, any payment in connection with the redemption of
Securities if the first publication of notice of such redemption (whether by
mail or otherwise in accordance with this Indenture) has been made, and the
Trustee has received such payment from the Company, prior to the occurrence of
any of the contingencies specified in Section 1102 or 1103.

     SECTION 1108. Subordination Rights Not Impaired by Acts or Omissions of the
Company or Holders of Senior Indebtedness.

     No right of any present or future holders of any Senior Indebtedness to
enforce subordination provisions contained in this Article shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any such holder,
or by any noncompliance by the Company with the terms of this Indenture,
regardless of any knowledge thereof that any such holder may have or be
otherwise charged with. The holders of Senior Indebtedness may extend, renew,
modify or amend the terms of the Senior Indebtedness or any security therefor
and release, sell or exchange such security and otherwise deal freely with the
Company, all without affecting the liabilities and obligations of the parties to
this Indenture or the Holders of the Securities.

     SECTION 1109. Trustee to Effectuate Subordination of Securities.

     Each Holder of a Security by his acceptance thereof authorizes and
expressly directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination provisions contained in
this Article and to protect the rights of the Holders of the Securities pursuant
to this Indenture, and appoints the Trustee his attorney-in-fact for such
purpose, including, in the event of any dissolution, winding up, liquidation or
reorganization of the Company (whether in bankruptcy, insolvency or receivership
proceedings or upon an assignment for the benefit of creditors of the Company),
the filing of a claim for the unpaid balance of his Securities in the form
required in said proceedings and cause said claim to be approved. If the Trustee
does not file a proper claim or proof of debt in the form required in such
proceeding prior to 30 days before the expiration of the time to file such claim
or claims,


                                       57
<PAGE>   64


then the holders of the Senior Indebtedness or their representative is hereby
authorized to have the right to file and is hereby authorized to file an
appropriate claim for and on behalf of the Holders of said Securities. Nothing
herein contained shall be deemed to authorize the Trustee or the holders of
Senior Indebtedness or their representative to authorize or consent to or accept
or adopt on behalf of any Holder of Securities any plan of reorganization,
arrangement, adjustment or composition affecting the Securities or the rights of
any Holder thereof, or to authorize the Trustee or the holders of Senior
Indebtedness or their representative to vote in respect of the claim of any
Holder of the Securities in any such proceeding.

     SECTION 1110. Right of Trustee to Hold Senior Indebtedness.

     The Trustee in its individual capacity shall be entitled to all of the
rights set forth in this Article in respect of any Senior Indebtedness at any
time held by it to the same extent as any other holder of Senior Indebtedness,
and nothing in this Indenture shall be construed to deprive the Trustee of any
of its rights as such holder.

     SECTION 1111. Article Eleven Not to Prevent Events of Default.

     The failure to make a payment on account of principal of or premium (if
any) or interest on the Securities by reason of any provision of this Article
shall not be construed as preventing the occurrence of a Default or an Event of
Default under Section 501 or in any way prevent the Holders of the Securities
from exercising any right hereunder other than the right to receive payment on
the Securities.

     SECTION 1112. No Fiduciary Duty of Trustee to Holders of Senior
Indebtedness.

     The Trustee shall not be deemed to owe any fiduciary duty to the holders of
Senior Indebtedness, and shall not be liable to any such holders (other than for
its willful misconduct or negligence) if it shall in good faith mistakenly pay
over or distribute to the Holders of the Securities or the Company or any other
Person, cash, property or securities to which any holders of Senior Indebtedness
shall be entitled by virtue of this Article or otherwise. Nothing in this
Section 1112 shall affect the obligation of any other such Person to hold such
payment for the benefit of, and to pay such payment over to, the holders of
Senior Indebtedness or their representative.

     SECTION 1113. Article Applicable to Paying Agent.

     In case at any time any Payment Paying other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article shall in such case (unless the context shall otherwise
require) be construed as extending to and including such Paying Agent within its
meaning as fully for all intents and purposes as if such Paying Agent were named
in this Article in addition to or in place of the Trustee; provided, however,
that this Section 1113 shall not apply to the Company or any Affiliate of the
Company if it or such Affiliate acts as Paying Agent.


                                       58
<PAGE>   65


                                 ARTICLE TWELVE

                            REDEMPTION OF SECURITIES

     SECTION 1201. Applicability of Article.

     Redemption of Securities of any series at the option of the Company as
permitted or required by the terms of such Securities shall be made in
accordance with the terms of such Securities and this Article.

     SECTION 1202. Election to Redeem; Notice to Trustee.

     The election of the Company to redeem any Securities shall be evidenced by
a Company Order. In case of any redemption at the election of the Company of
less than all of the Securities of any series with the same issue date, interest
rate and Stated Maturity, the Company shall, at least 60 days prior to the
Redemption Date fixed by the Company (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee of such Redemption Date and of
the principal amount of Securities of such series to be redeemed.

     SECTION 1203. Selection by Trustee of Securities to be Redeemed.

     If less than all the Securities of any series with the same issue date,
interest rate and Stated Maturity are to be redeemed, the particular Securities
to be redeemed shall be selected not more than 60 days prior to the Redemption
Date by the Trustee, from the Outstanding Securities of such series not
previously called for redemption, by such method as the Trustee shall deem fair
and appropriate and which may provide for the selection for redemption of
portions of the principal amount of Registered Securities of such series;
provided, however, that no such partial redemption shall reduce the portion of
the principal amount of a Registered Security of such series not redeemed to
less than the minimum denomination for a Security of that series established
pursuant to Section 302.

     The Trustee shall promptly notify the Company and the Security Registrar
(if other than itself) in writing of the Securities selected for redemption and,
in the case of any Securities selected for partial redemption, the principal
amount thereof to be redeemed.

     For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to the redemption of Securities shall relate, in the
case of any Securities redeemed or to be redeemed only in part, to the portion
of the principal of such Securities which has been or is to be redeemed.

     SECTION 1204. Notice of Redemption.

     Notice of redemption shall be given in the manner provided in Section 106,
not less than 30 nor more than 60 days prior to the Redemption Date, unless a
shorter period is specified in the Securities to be redeemed, to the Holders of
Securities to be redeemed. Failure to give notice by mailing in the manner
herein provided to the Holder of any Registered Securities designated for
redemption as a whole or in part, or any defect in the notice to any such
Holder, shall not affect the validity of the proceedings for the redemption of
any other Securities or portion thereof.


                                       59
<PAGE>   66


     Any notice that is mailed to the Holder of any Registered Securities in the
manner herein provided shall be conclusively presumed to have been duly given,
whether or not such Holder receives the notice.

     All notices of redemption shall include the Cusip Number, if any, and shall
state:

          (1) the Redemption Date,

          (2) the Redemption Price,

          (3) if less than all Outstanding Securities of any series are to be
redeemed, the identification (and, in the case of partial redemption, the
principal amount) of the particular Securities to be redeemed,

          (4) in case any Registered Security is to be redeemed in part only,
the notice which relates to such Security shall state that on and after the
Redemption Date, upon surrender of such Security, the Holder of such Security
will receive, without charge, a new Registered Security or Registered Securities
of authorized denominations for the principal amount thereof remaining
unredeemed,

          (5) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security to be redeemed, and, if applicable, that
interest thereon shall cease to accrue on and after said date,

          (6) the place or places where such Securities, together in the case of
Bearer Securities with all coupons appertaining thereto, if any, maturing after
the Redemption Date, are to be surrendered for payment of the Redemption Price,
and

          (7) that the redemption is for a sinking fund, if such is the case.

     A notice of redemption published as contemplated by Section 106 need not
identify particular Registered Securities to be redeemed.

     Notice of redemption of Securities to be redeemed at the election of the
Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.

     SECTION 1205. Deposit of Redemption Price.

     On or prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money sufficient to pay the Redemption Price of, and (except if the Redemption
Date shall be an Interest Payment Date) accrued interest on and any Additional
Amounts with respect thereto, all the Securities or portions thereof which are
to be redeemed on that date.


                                       60
<PAGE>   67


     SECTION 1206. Securities Payable on Redemption Date.

     Notice of redemption having been given as aforesaid, the Securities so to
be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest and the coupons for such
interest appertaining to any Bearer Securities so to be redeemed, except to the
extent provided below, shall be void. Upon surrender of any such Security for
redemption in accordance with said notice, together with all coupons, if any,
appertaining thereto maturing after the Redemption Date, such Security shall be
paid by the Company at the Redemption Price, together with accrued interest (and
any Additional Amounts) to the Redemption Date; provided, however, that
installments of interest on Bearer Securities whose Stated Maturity is on or
prior to the Redemption Date shall be payable only upon presentation and
surrender of coupons for such interest (at an office or agency located outside
the United States except as otherwise provided in Section 1002), and provided,
further, that installments of interest on Registered Securities whose Stated
Maturity is on or prior to the Redemption Date shall be payable to the Holders
of such Securities, or one or more Predecessor Securities, registered as such at
the close of business on the relevant Record Dates according to their terms and
the provisions of Section 307.

     If any Bearer Security surrendered for redemption shall not be accompanied
by all appurtenant coupons maturing after the Redemption Date, such Security may
be paid after deducting from the Redemption Price an amount equal to the face
amount of all such missing coupons, or the surrender of such missing coupon or
coupons may be waived by the Company and the Trustee if there be furnished to
them such security or indemnity as they may require to save each of them and any
Paying Agent harmless. If thereafter the Holder of such Security shall surrender
to the Trustee or any Paying Agent any such missing coupon in respect of which a
deduction shall have been made from the Redemption Price, such Holder shall be
entitled to receive the amount so deducted; provided, however, that interest
(and any Additional Amounts) represented by coupons shall be payable only upon
presentation and surrender of those coupons at an office or agency located
outside of the United States except as otherwise provided in Section 1002.

     If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal (and premium, if any) shall, until paid,
bear interest from the Redemption Date at the rate prescribed therefor in the
Security.

     SECTION 1207. Securities Redeemed in Part.

     Any Registered Security which is to be redeemed only in part shall be
surrendered at any office or agency of the Company maintained for that purpose
pursuant to Section 1002 (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing) and the Company shall execute and the Trustee shall
authenticate and deliver to the Holder of such Security without service charge,
a new Registered Security or Securities of the same series, containing identical
terms and provisions, of any authorized denomination as requested by such Holder
in aggregate principal amount equal to and in exchange for the unredeemed
portion of the principal of the Security so surrendered. If a Security in global
form is so surrendered, the Company shall execute, and the Trustee shall


                                       61
<PAGE>   68


authenticate and deliver to the U.S. Depository or other depository for such
Security in global form as shall be specified in the Company Order with respect
thereto to the Trustee, without service charge, a new Security in global form in
a denomination equal to and in exchange for the unredeemed portion of the
principal of the Security in global form so surrendered.

                                ARTICLE THIRTEEN

                                  SINKING FUNDS

     SECTION 1301. Applicability of Article.

     The provisions of this Article shall be applicable to any sinking fund for
the retirement of Securities of a series, except as otherwise permitted or
required by any form of Security of such series issued pursuant to this
Indenture.

     The minimum amount of any sinking fund payment provided for by the terms of
Securities of any series is herein referred to as a "mandatory sinking fund
payment", and any payment in excess of such minimum amount provided for by the
terms of Securities of such series is herein referred to as an "optional sinking
fund payment". If provided for by the terms of Securities of any series, the
cash amount of any sinking fund payment may be subject to reduction as provided
in Section 1302. Each sinking fund payment shall be applied to the redemption of
Securities of any series as provided for by the terms of Securities of such
series.

     SECTION 1302. Satisfaction of Sinking Fund Payments with Securities.

     The Company may, in satisfaction of all or any part of any sinking fund
payment with respect to the Securities of such series to be made pursuant to the
terms of such Securities as provided for by the terms of such series, (1)
deliver Outstanding Securities of such series (other than any of such Securities
previously called for redemption or any of such Securities in respect of which
cash shall have been released to the Company), together in the case of any
Bearer Securities of such series with all unmatured coupons appertaining
thereto, and (2) apply as a credit Securities of such series which have been
redeemed either at the election of the Company pursuant to the terms of such
series of Securities or through the application of permitted optional sinking
fund payments pursuant to the terms of such Securities, provided that such
series of Securities have not been previously so credited. Such Securities shall
be received and credited for such purpose by the Trustee at the Redemption Price
specified in such Securities for redemption through operation of the sinking
fund and the amount of such sinking fund payment shall be reduced accordingly.
If as a result of the delivery or credit of Securities of any series in lieu of
cash payments pursuant to this Section 1302, the principal amount of Securities
of such series to be redeemed in order to exhaust the aforesaid cash payment
shall be less than $100,000, the Trustee need not call Securities of such series
for redemption, except upon Company Request, and such cash payment shall be held
by the Trustee or a Paying Agent and applied to the next succeeding sinking fund
payment, provided, however, that the Trustee or such Paying Agent shall at the
request of the Company from time to time pay over and deliver to the Company any
cash payment so being held by the Trustee or such Paying Agent upon delivery by
the Company to the Trustee of Securities of that series purchased by the Company
having an unpaid principal amount equal to the cash payment requested to be
released to the Company.


                                       62
<PAGE>   69


     SECTION 1303. Redemption of Securities for Sinking Fund.

     Not less than 60 days prior to each sinking fund payment date for any
series of Securities, the Company will deliver to the Trustee an Officers'
Certificate specifying the amount of the next ensuing mandatory sinking fund
payment for that series pursuant to the terms of that series, the portion
thereof, if any, which is to be satisfied by payment of cash and the portion
thereof, if any, which is to be satisfied by delivering and crediting of
Securities of that series pursuant to Section 1302, and the optional amount, if
any, to be added in cash to the next ensuing mandatory sinking fund payment, and
will also deliver to the Trustee any Securities to be so credited and not
theretofore delivered. If such Officers' Certificate shall specify an optional
amount to be added in cash to the next ensuing mandatory sinking fund payment,
the Company shall thereupon be obligated to pay the amount therein specified.
Not less than 30 days before each such sinking fund payment date the Trustee
shall select the Securities to be redeemed upon such sinking fund payment date
in the manner specified in Section 1203 and cause notice of the redemption
thereof to be given in the name of and at the expense of the Company in the
manner provided in Section 1204. Such notice having been duly given, the
redemption of such Securities shall be made upon the terms and in the manner
stated in Sections 1206 and 1207.

                                ARTICLE FOURTEEN

                       REPAYMENT AT THE OPTION OF HOLDERS

     SECTION 1401. Applicability of Article.

     Securities of any series which are repayable at the option of the Holders
thereof before their Stated Maturity shall be repaid in accordance with the
terms of the Securities of such series. The repayment of any principal amount of
Securities pursuant to such option of the Holder to require repayment of
Securities before their Stated Maturity, for purposes of Section 309, shall not
operate as a payment, redemption or satisfaction of the indebtedness represented
by such Securities unless and until the Company, at its option, shall deliver or
surrender the same to the Trustee with a directive that such Securities be
cancelled. Notwithstanding anything to the contrary contained in this Article
Fourteen, in connection with any repayment of Securities, the Company may
arrange for the purchase of any Securities by an agreement with one or more
investment bankers or other purchasers to purchase such Securities by paying to
the Holders of such Securities on or before the close of business on the
repayment date an amount not less than the repayment price payable by the
Company on repayment of such Securities, and the obligation of the Company to
pay the repayment price of such Securities shall be satisfied and discharged to
the extent such payment is so paid by such purchasers.

                                ARTICLE FIFTEEN

                        MEETINGS OF HOLDERS OF SECURITIES

     SECTION 1501. Purposes for Which Meetings May Be Called.

     If Securities of a series are issuable as Bearer Securities, a meeting of
Holders of Securities of such series may be called at any time and from time to
time pursuant to this Article to make, give or take any request, demand,
authorization, direction, notice, consent, waiver or


                                       63
<PAGE>   70


other action provided by this Indenture to be made, given or taken by Holders of
Securities of such series.

     SECTION 1502. Call, Notice and Place of Meetings.

          (a) The Trustee may at any time call a meeting of Holders of
Securities of any series for any purpose specified in Section 1501, to be held
at such time and at such place in the Borough of Manhattan, The City of New
York, or as the Trustee shall determine. Notice of every meeting of Holders of
Securities of any series, setting forth the time and the place of such meeting
and in general terms the action proposed to be taken at such meeting, shall be
given, in the manner provided in Section 106, not less than 21 nor more than 180
days prior to the date fixed for the meeting.

          (b) In case at any time the Company, pursuant to a Board Resolution,
or the Holders of at least 25% in principal amount of the Outstanding Securities
of any series shall have requested the Trustee to call a meeting of the Holders
of Securities of such series for any purpose specified in Section 1501, by
written request setting forth in reasonable detail the action proposed to be
taken at the meeting, and the Trustee shall not have the first publication of
the notice of such meeting within 21 days after receipt of such request or shall
not thereafter proceed to cause the meeting to be held as provided herein, then
the Company or the Holders of Securities of such series in the amount above
specified, as the case may be, may determine the time and the place in the
Borough of Manhattan, The City of New York, or in London for such meeting and
may call such meeting for such purposes by giving notice thereof as provided in
subsection (a) of this Section.

     SECTION 1503. Persons Entitled to Vote at Meetings.

     To be entitled to vote at any meeting of Holders of Securities of any
series, a Person shall be (1) a Holder of one or more Outstanding Securities of
such series, or (2) a Person appointed by an instrument in writing as proxy for
a Holder or Holders of one or more Outstanding Securities of such series by such
Holder or Holders. The only Persons who shall be entitled to be present or to
speak at any meeting of Holders of Securities of any series shall be the Persons
entitled to vote at such meeting and their counsel, any representatives of the
Trustee and its counsel and any representatives of the Company and its counsel.

     SECTION 1504. Quorum; Action.

     The Persons entitled to vote a majority in principal amount of the
Outstanding Securities of a series shall constitute a quorum for a meeting of
Holders of Securities of such series; provided, however, that if any action is
to be taken at such meeting with respect to a consent or waiver which this
Indenture expressly provides may be given by the Holders of a specified
percentage in aggregate principal amount of the Outstanding Securities of a
series that is less or greater than a majority in principal amount of the
Outstanding Securities of such series, then, with respect to such action (and
only such action) the Persons entitled to vote such lesser or greater percentage
in principal amount of the Outstanding Securities of such series shall
constitute a quorum. In the absence of a quorum within 30 minutes of the time
appointed for any such meeting, the meeting shall, if convened at the request of
Holders of Securities of such series, be dissolved. In any other case the
meeting may be adjourned for a period of not less than


                                       64
<PAGE>   71


10 days as determined by the chairman of the meeting prior to the adjournment of
such meeting. In the absence of a quorum at any such adjourned meeting, such
adjourned meeting may be further adjourned for a period of not less than 10 days
as determined by the chairman of the meeting prior to the adjournment of such
adjourned meeting. Notice of the reconvening of any adjourned meeting shall be
given as provided in Section 1502(a), except that such notice need be given only
once not less than five days prior to the date on which the meeting is scheduled
to be reconvened. Notice of the reconvening of an adjourned meeting shall state
expressly the percentage, as provided above, of the principal amount of the
Outstanding Securities of such series which shall constitute a quorum.

     Except as limited by the proviso to Section 902, any resolution presented
to a meeting or adjourned meeting duly reconvened at which a quorum is present
as aforesaid may be adopted only by the affirmative vote of the Holders of a
majority in principal amount of the Outstanding Securities of that series;
provided, however, that, except as limited by the proviso to Section 902, any
resolution with respect to any consent or waiver which this Indenture expressly
provides may be given by the Holders of not less than 66-2/3% in principal
amount of the Outstanding Securities of a series may be adopted at a meeting or
an adjourned meeting duly convened and at which a quorum is present as aforesaid
only by the affirmative vote of the Holders of 66-2/3% in principal amount of
the Outstanding Securities of that series; and provided, further, that, except
as limited by the proviso to Section 902, any resolution with respect to any
request, demand, authorization, direction, notice, consent, waiver or other
action which this Indenture expressly provides may be made, given or taken by
the Holders of a specified percentage, which is less than a majority, in
principal amount of the Outstanding Securities of a series may be adopted at a
meeting or an adjourned meeting duly reconvened and at which a quorum is present
as aforesaid by the affirmative vote of the Holders of such specified percentage
in principal amount of the Outstanding Securities of that series.

     Any resolution passed or decision taken at any meeting of Holders of
Securities of any series duly held in accordance with this Section shall be
binding on all the Holders of Securities of such series and the related coupons,
whether or not present or represented at the meeting.

     SECTION 1505. Determination of Voting Rights; Conduct and Adjournment of
Meetings.

          (a) Notwithstanding any other provisions of this Indenture, the
Trustee may make such reasonable regulations as it may deem advisable for any
meeting of Holders of Securities of such series in regard to proof of the
holding of Securities of such series and of the appointment of proxies and in
regard to the appointment and duties of inspectors of votes, the submission and
examination or proxies, certificates and other evidence of the right to vote,
and such other matters concerning the conduct of the meeting as it shall deem
appropriate. Except as otherwise permitted or required by any such regulations,
the holding of Securities shall be proved in the manner specified in Section 104
and the appointment of any proxy shall be proved in the manner specified in
Section 104 or by having the signature of the person executing the proxy
witnessed or guaranteed by any trust company, bank or banker authorized by
Section 104 to certify to the holding of Bearer Securities. Such regulations may
provide that written instruments appointing proxies, regular on their face, may
be presumed valid and genuine without the proof specified in Section 104 or
other proof.


                                       65
<PAGE>   72


          (b) The Trustee shall, by an instrument in writing, appoint a
temporary chairman of the meeting, unless the meeting shall have been called by
the Company or by Holders of Securities as provided in Section 1502(b), in which
case the Company or the Holders of Securities of the series calling the meeting,
as the case may be, shall in like manner appoint a temporary chairman. A
permanent chairman and a permanent secretary of the meeting shall be elected by
vote of the Persons entitled to vote a majority in principal amount of the
Outstanding Securities of such series represented at the meeting.

          (c) At any meeting each Holder of a Security of such series or proxy
shall be entitled to one vote for each $1,000 principal amount of Securities of
such series held or represented by him; provided, however, that no vote shall be
cast or counted at any meeting in respect of any Security challenged as not
Outstanding and ruled by the chairman of the meeting to be not Outstanding. The
chairman of the meeting shall have no right to vote, except as a Holder of a
Security of such series or proxy.

          (d) Any meeting of Holders of Securities of any series duly called
pursuant to Section 1502 at which a quorum is present may be adjourned from time
to time by Persons entitled to vote a majority in principal amount of the
Outstanding Securities of such series represented at the meeting; and the
meeting may be held as so adjourned without further notice.

     SECTION 1506. Counting Votes and Recording Action of Meetings.

     The vote upon any resolution submitted to any meeting of Holders of
Securities of any series shall be by written ballots on which shall be
subscribed the signatures of the Holders of Securities of such series or of
their representatives by proxy and the principal amounts and serial numbers of
the Outstanding Securities of such series held or represented by them. The
permanent chairman of the meeting shall appoint two inspectors of votes who
shall count all votes cast at the meeting for or against any resolution and who
shall make and file with the secretary of the meeting their verified written
reports in triplicate of all votes cast at the meeting. A record, at least in
triplicate, of the proceedings of each meeting of Holders of Securities of any
series shall be prepared by the secretary of the meeting and there shall be
attached to said record the original reports of the inspectors of votes on any
vote by ballot taken thereat and affidavits by one or more persons having
knowledge of the facts setting forth a copy of the notice of the meeting and
showing that said notice was given as provided in Section 1502 and, if
applicable, Section 1504. Each copy shall be signed and verified by the
affidavits of the permanent chairman and secretary of the meeting and one such
copy shall be delivered to the Company, and another to the Trustee to be
preserved by the Trustee, the latter to have attached thereto the ballots voted
at the meeting. Any record so signed and verified shall be conclusive evidence
of the matters therein stated.

                                ARTICLE SIXTEEN

                            MISCELLANEOUS PROVISIONS

     SECTION 1601. Securities in Foreign Currencies.

     Whenever this Indenture provides for (i) any action by, or the
determination of any of the rights of, Holders of Securities of any series in
which not all of such Securities are denominated


                                       66
<PAGE>   73


in the same currency, or (ii) any distribution to Holders of Securities, in the
absence of any provision to the contrary in the form of Security of any
particular series, any amount in respect of any Security denominated in a
currency other than United States dollars shall be treated for any such action
or distribution as that amount of United States dollars that could be obtained
for such amount on such reasonable basis of exchange and as of the record date
with respect to Registered Securities of such series (if any) for such action,
determination of rights or distribution (or, if there shall be no applicable
record date, such other date reasonably proximate to the date of such action,
determination of rights or distribution) as the Company may specify in a written
notice to the Trustee or, in the absence of such written notice, as the Trustee
may determine.

                                    * * * * *

     This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.

     IN WITNESS WHEREOF, the parties hereto have caused this Indenture, to be
duly executed as of the day and year first above written:

                                                 VALERO ENERGY CORPORATION


                                                 By:
                                                    ----------------------------
                                                    Name: John D. Gibbons
                                                    Title: Vice President,
                                                           Finance and Treasurer
     Attest:


     -------------------------------
     Secretary



                                                 THE BANK OF NEW YORK,
                                                 as Trustee


                                                 By:
                                                    ----------------------------
                                                    Name:
                                                    Title:


                                       67

<PAGE>   1
                                                                    EXHIBIT 4.9
















                                     AMENDED

                                       AND

                                    RESTATED

                              DECLARATION OF TRUST





















<PAGE>   2








<TABLE>
<CAPTION>
                                                    TABLE OF CONTENTS


<S>       <C>                                                                                                    <C>
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......................................................................................15
   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..........................................................23
   SECTION 3.11      DELAWARE TRUSTEE............................................................................25
   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      PROPERTY TRUSTEE MAY FILE PROOFS OF CLAIM...................................................28
   SECTION 3.17      REGISTRATION STATEMENT AND RELATED MATTERS..................................................29

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

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

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.............................................................31
   SECTION 5.4       EXCHANGES...................................................................................31

ARTICLE 6: THE TRUSTEES..........................................................................................32

   SECTION 6.1       NUMBER OF TRUSTEES..........................................................................32
   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....................................................................35
   SECTION 6.8       EFFECT OF VACANCIES.........................................................................35
</TABLE>



<PAGE>   3


<TABLE>

<S>                  <C>                                                                                        <C>
   SECTION 6.9       MEETINGS....................................................................................35
   SECTION 6.10      DELEGATION OF POWER BY THE REGULAR TRUSTEES.................................................36
   SECTION 6.11      MERGER, CONSOLIDATION, CONVERSION OR SUCCESSION TO BUSINESS.................................36

ARTICLE 7: TERMS OF THE SECURITIES...............................................................................36

   SECTION 7.1       GENERAL PROVISIONS REGARDING THE SECURITIES.................................................36
   SECTION 7.2       DISTRIBUTIONS...............................................................................39
   SECTION 7.3       REDEMPTION OF SECURITIES....................................................................41
   SECTION 7.4       REDEMPTION PROCEDURES.......................................................................41
   SECTION 7.5       VOTING RIGHTS OF THE PREFERRED SECURITIES...................................................43
   SECTION 7.6       VOTING RIGHTS OF THE COMMON SECURITIES......................................................45
   SECTION 7.7       PAYING AGENT................................................................................46
   SECTION 7.8       LISTING.....................................................................................46
   SECTION 7.9       TRANSFER OF THE SECURITIES..................................................................46
   SECTION 7.10      MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES...........................................47
   SECTION 7.11      DEEMED HOLDERS..............................................................................48
   SECTION 7.12      GLOBAL SECURITIES...........................................................................48
   SECTION 7.13      REMARKETING.................................................................................50

ARTICLE 8: DISSOLUTION AND TERMINATION OF THE TRUST..............................................................53

   SECTION 8.1       DISSOLUTION AND TERMINATION OF THE TRUST....................................................53
   SECTION 8.2       LIQUIDATION DISTRIBUTION UPON DISSOLUTION OF THE TRUST......................................53

ARTICLE 9: LIMITATION OF LIABILITY OF HOLDERS OF THE SECURITIES, THE DELAWARE TRUSTEE AND OTHERS.................55

   SECTION 9.1       LIABILITY...................................................................................55
   SECTION 9.2       EXCULPATION.................................................................................55
   SECTION 9.3       FIDUCIARY DUTY..............................................................................56
   SECTION 9.4       INDEMNIFICATION.............................................................................57
   SECTION 9.5       OUTSIDE BUSINESSES..........................................................................57

ARTICLE 10: ACCOUNTING...........................................................................................58

   SECTION 10.1      FISCAL YEAR.................................................................................58
   SECTION 10.2      CERTAIN ACCOUNTING MATTERS..................................................................58
   SECTION 10.3      BANKING.....................................................................................59
   SECTION 10.4      WITHHOLDING.................................................................................59

ARTICLE 11: AMENDMENTS AND MEETINGS..............................................................................59

   SECTION 11.1      AMENDMENTS..................................................................................59
   SECTION 11.2      MEETINGS OF THE HOLDERS OF THE SECURITIES; ACTION BY WRITTEN CONSENT........................61

ARTICLE 12: REPRESENTATIONS OF THE PROPERTY TRUSTEE AND THE DELAWARE TRUSTEE.....................................63

   SECTION 12.1      REPRESENTATIONS AND WARRANTIES OF THE PROPERTY TRUSTEE......................................63
   SECTION 12.2      REPRESENTATIONS AND WARRANTIES OF THE DELAWARE TRUSTEE......................................63

ARTICLE 13: MISCELLANEOUS........................................................................................64

   SECTION 13.1      NOTICES.....................................................................................64
   SECTION 13.2      GOVERNING LAW...............................................................................65
   SECTION 13.3      INTENTION OF THE PARTIES....................................................................65
   SECTION 13.4      HEADINGS....................................................................................65
   SECTION 13.5      SUCCESSORS AND ASSIGNS......................................................................65
   SECTION 13.6      PARTIAL ENFORCEABILITY......................................................................66
   SECTION 13.7      COUNTERPARTS................................................................................66
</TABLE>


                                       ii

<PAGE>   4




                    AMENDED AND RESTATED DECLARATION OF TRUST

         This Amended and Restated Declaration of Trust of VEC Trust I
("Declaration"), dated as of [insert closing date - 3.7(a)(xi)], 2000, by and
among Valero Energy Corporation, a Delaware corporation, as Sponsor, Jay D.
Browning, ______________, and ______________, 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;

<PAGE>   5

         (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 Remarketed
Securities 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".



                                       2
<PAGE>   6



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 ______________ 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 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).

              "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 or a day on which the principal office of the Indenture Trustee or the
Property Trustee is closed for business.


                                       3
<PAGE>   7

              "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
depository 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 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 ___________________________.

              "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
____________________________, 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) the Sponsor's Affiliates, (iii) the Trust or (iv) the Trust's
Affiliates and (B) any Holder.


                                       4
<PAGE>   8

              "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 a Depositary or its nominee.

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

              "Holder" shall mean any holder of Preferred Securities or Common
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 that is the holder of such Global Securities
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.


                                       5
<PAGE>   9


              "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 _____________,
2000, as supplemented by a supplemental indenture relating to the Senior
Deferrable Notes, dated as of ____________, 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:


                                       6
<PAGE>   10



              (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 (i) the holder of the unit will purchase
from the Company, for $_____ in cash, a certain number of shares of common
stock, par value $.01 per share, of the Company and (ii) the Senior Deferrable
Notes Issuer will pay such holder contract adjustment payments 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
___________, 2000 among the Company, the Collateral Agent, ___________________,
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).


                                       7
<PAGE>   11


              "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 ________________________.

              "Purchase Contract Agreement" shall mean the Purchase Contract
Agreement dated as of _____________, 2000 between the Company and
__________________, as Purchase Contract Agent.

              "Purchase Contract Settlement Date" shall mean _________________.

              "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.


                                       8
<PAGE>   12


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

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

              "Remarketing Date" shall mean the third Business Day preceding
_______________.

              "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


                                       9
<PAGE>   13


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 recognized national 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 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,


                                       10
<PAGE>   14


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 912833 FR6) with a principal amount at maturity equal
to $1,000 and maturing on November 15, 2002, 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.


                                       11
<PAGE>   15


              "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" means the Underwriting Agreement dated as
of __________, ____ among the Trust, the Sponsor and _______ and _________, 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.


                                       12
<PAGE>   16


         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 __________ 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.

         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.

         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.




                                       13
<PAGE>   17

         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


                                       14
<PAGE>   18


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 6.01(a)(1) and (2)(i) 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.



                                       15
<PAGE>   19


         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.


                                       16
<PAGE>   20



         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;


                                       17
<PAGE>   21



         (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


                                       18
<PAGE>   22


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;


                                       19
<PAGE>   23


               (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


                                       20
<PAGE>   24



          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.


                                       21
<PAGE>   25


         (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



                                      22
<PAGE>   26


                        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;

               (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:


                                       23
<PAGE>   27


               (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.


                                       24
<PAGE>   28


               (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.


                                       25
<PAGE>   29


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;


                                       26
<PAGE>   30


               (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.


                                       27
<PAGE>   31


         (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 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.


                                       28
<PAGE>   32


         SECTION 3.17 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,
___________, ___________ and ___________, 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 3.17 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 3.17 at any time on or after the Closing Date.


                                       29
<PAGE>   33


                             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 either of them against
any claim 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.


                                       30
<PAGE>   34



                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


                                       31
<PAGE>   35


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 Noes 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 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


                                       32
<PAGE>   36



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.


                                       33
<PAGE>   37



         (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, _________,
and _______________, 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


                                       34
<PAGE>   38


                    (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.

         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



                                       35
<PAGE>   39


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").


                                       36
<PAGE>   40


               (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 __________________ dollars ($_________)
          (subject to increase to not more than __________________ dollars
          ($_________) 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 $____ 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 __________________ dollars ($_________) (subject to increase
          to not more __________________ dollars ($_________) in the event of
          the exercise of any Over-allotment Option) and a liquidation amount
          with respect to the assets of the Trust of $____ 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,


                                       37
<PAGE>   41

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,

                                       38
<PAGE>   42

               (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 of 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 clearing agency 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 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 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
____% of the stated liquidation amount of $____ per Security until __________,
____, and at the Reset Rate thereafter. The amount of Distributions payable for
any period shall be computed (i) for any full quarterly distribution




                                       39
<PAGE>   43




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 ___________, ____, shall be cumulative
and shall be payable quarterly, in arrears, on __________, __________,
__________ and __________ of each year, commencing ____________, 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 ____% per annum through and
including ____________ 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.


                                       40
<PAGE>   44


         (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 __________________________, 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 __________________________, 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. 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.


                                       41
<PAGE>   45


         (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.


                                       42
<PAGE>   46


         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; and
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.

         (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


                                       43
<PAGE>   47


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.


                                       44
<PAGE>   48

         (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.


                                       45
<PAGE>   49


         (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 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.
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.


                                       46
<PAGE>   50


         (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


                                       47
<PAGE>   51


         (b) there shall be delivered to the Regular Trustees such security or
indemnity as may be required by them to keep each of the Sponsor and the Trust
harmless, then, in the absence of notice that such Certificate has been acquired
by a bona fide purchaser, any Regular Trustee shall execute 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


                                       48
<PAGE>   52

          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 ___________, 2000, as amended from time to time, 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."

         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


                                       49
<PAGE>   53

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 _____________, each Holder of Preferred Securities may
elect to have the Preferred Securities held by such Holder remarketed in the
Remarketing. Under Section [5.4] 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 _____________, 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 _____________.
Any such notice


                                       50
<PAGE>   54


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 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, but in no event shall the Reset Rate be
greater than the Two-Year Benchmark Treasury Rate plus ____%.

         (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.


                                       51
<PAGE>   55


         (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. Neither the
Trust, any Trustee, the Sponsor nor 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.

                                       52

<PAGE>   56


              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) upon the direction by the Property Trustee, following the
          occurrence and continuation of a Tax Event pursuant to which the Trust
          has been dissolved and all of the Senior Deferrable Notes have been
          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



                                       53
<PAGE>   57



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 Account.

         (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 Note, or
          if Section 8.2(d) applies receive a distribution, as the Property
          Trustee shall deem appropriate.

         (c) Except where Section 81(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 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


                                       54
<PAGE>   58


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:

               (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


                                       55
<PAGE>   59


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:


                                       56
<PAGE>   60


                  (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


                                       57
<PAGE>   61


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


                                       58
<PAGE>   62

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


                                       59
<PAGE>   63


     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 an
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.


                                       60
<PAGE>   64



         (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:


                                       61
<PAGE>   65



               (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.


                                       62
<PAGE>   66


              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;



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<PAGE>   67


         (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
                  San Antonio, Texas  78212
                  Attention:  _____________
                  Telephone No:  (210) 370-2000
                  Fax No:  _____________

         (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)
                  White Clay Center
                  Route 273
                  Newark, Delaware  19711
                  Attention:  _____________
                  Telephone No:
                  Fax No: ________________

         (c) if given to the Property Trustee, at its Corporate Trust Office
(telephone no. __________ and fax no. __________) (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);


                                       64
<PAGE>   68

         (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:  _____________
                  Telephone No:  (210) 370-2000
                  Fax No:  _____________

         (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.


                                       65
<PAGE>   69


         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.





                                       66
<PAGE>   70





         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

                              By:
                                 ----------------------------------------------
                                 Name:
                                      -----------------------------------------
                                 Title:
                                       ----------------------------------------

                              THE BANK OF NEW YORK,
                              as Property Trustee

                              By:
                                 ----------------------------------------------
                                 Name:
                                      -----------------------------------------
                                 Title:
                                       ----------------------------------------



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

                              By:
                                 ----------------------------------------------
                                 Name:
                                      -----------------------------------------
                                 Title:
                                       ----------------------------------------



                              -------------------------------------------------
                              Jay D. Browning, as Regular Trustee


                              -------------------------------------------------

                                             , as Regular Trustee
                              ---------------

                              -------------------------------------------------
                                             , as Regular Trustee
                              ---------------



                                       67
<PAGE>   71





                                    EXHIBIT A

         [IF THE PREFERRED SECURITY IS TO BE A GLOBAL SECURITY, INSERT THE
FOLLOWING: 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 _____________,
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.]

<TABLE>



<S>                                                            <C>
Certificate No. _______________                               Number of Preferred Securities: _______________

CUSIP No. ________________                                    Aggregate Liquidation Amount: $________________
</TABLE>



                   Certificate Evidencing Preferred Securities
                                       of
                                   VEC Trust I

                              Preferred Securities
                (liquidation amount $____ 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 $____ 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 ___________, 2000 (as the same may be amended from time
to time (the "Declaration"), among Valero Energy Corporation, as Sponsor, Jay D.
Browning, _____________ and _____________, as Regular Trustees, The Bank of New
York, as Property Trustee, The Bank of New York (Delaware), as Delaware




                                       A-1
<PAGE>   72


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 ____________, 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


                                    -------------------------------------------
                                    By:
                                       ----------------------------------------
                                       Regular Trustee

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


                                             THE BANK OF NEW YORK, as
                                             Property Trustee


                                    -------------------------------------------
                                    By:
                                       ----------------------------------------
                                    Title:
                                          -------------------------------------




                                      A-2


<PAGE>   73



                                    EXHIBIT B

           THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT AS PROVIDED IN
                       THE DECLARATION (AS DEFINED BELOW)


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

                    Certificate Evidencing Common Securities
                                       of
                                   VEC Trust I

                                Common Securities
                 (liquidation amount $____ per Common Security)

         VEC Trust I, a statutory business trust created under the laws of the
State of Delaware (the "Trust"), hereby certifies that _________________________
(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 $____ 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 ____________, 2000 (as the same may be amended from time to time,
the "Declaration"), among Valero Energy Corporation, as Sponsor, Jay D.
Browning, ____________ and _____________, 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.






                                      B-1


<PAGE>   74



         IN WITNESS WHEREOF, the Trust has executed this certificate this ______
day of ______________________, 1999.



                                      VEC TRUST I


                                      -----------------------------------------
                                      By:
                                         --------------------------------------
                                         Regular Trustee


























                                      B-2

<PAGE>   1
                                                                    EXHIBIT 4.12

================================================================================


                                     FORM OF


                            VALERO ENERGY CORPORATION


                               GUARANTEE AGREEMENT


                               VEC TRUST [I] [II]




                           ---------------------------


                         Dated as of             ,
                                     -------- ---  ----


                           ---------------------------



================================================================================

<PAGE>   2



                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                               PAGE
                                                                                                               ----
<S>               <C>                                                                                          <C>
                                                     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.......................................................................6
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
</TABLE>


                                        i

<PAGE>   3



<TABLE>
<S>               <C>                                                                                          <C>
                                                    ARTICLE VI
                                     LIMITATION OF TRANSACTIONS; SUBORDINATION

SECTION 6.01      Limitation of Transactions.....................................................................16
[SECTION 6.02     Subordination..................................................................................17

                                                    ARTICLE VII
                                                    TERMINATION

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

                                                   ARTICLE VIII
                                     LIMITATION OF LIABILITY; INDEMNIFICATION

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

                                                    ARTICLE IX
                                                   MISCELLANEOUS

SECTION 9.01      Successors and Assigns.........................................................................18
SECTION 9.02      Amendments.....................................................................................19
SECTION 9.03      Notices........................................................................................19
SECTION 9.04      Genders........................................................................................20
SECTION 9.05      Benefit........................................................................................20
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
</TABLE>


                                       ii

<PAGE>   4



                               GUARANTEE AGREEMENT

                  This GUARANTEE AGREEMENT, dated as of __________, ____, 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] [II], a Delaware statutory business trust (the
"Issuer").

                  WHEREAS, pursuant to an Amended and Restated Declaration of
Trust (the "Declaration"), dated as of ______________, ____ 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 $_____________ aggregate
liquidation amount of its _____% [Convertible] 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 $_____________ liquidation amount of Preferred Securities is being issued
as of the date hereof. Up to the remaining $______________ 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.



                                        1

<PAGE>   5



                  (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 Exhibit C to the Declaration.

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

                  "Debentures" means the series of [convertible] unsecured
[junior subordinated] [senior] debentures issued to the Property Trustee by the
Guarantor under the Indenture and entitled the "___% [Convertible] [Junior
Subordinated] [Senior] Debentures due _____."

                  "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 Exhibit B to the Declaration.

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



                                        2

<PAGE>   6



                  "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.

                  "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 Debentures
and (ii) upon a voluntary or involuntary dissolution, winding-up or termination
of the Issuer (other than in connection with the distribution of Debentures to
Holders in exchange for Preferred Securities or the redemption of the Preferred
Securities in full upon the maturity or redemption of the Debentures 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 national
banking association, 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 _________, ____
between the Guarantor and The Bank of New York, as trustee, as supplemented by
the ________ Supplemental Indenture thereto dated as of _______ __, ____ (the
"Supplemental Indenture"), pursuant to which the Debentures are to be issued to
the Property Trustee.



                                        3

<PAGE>   7



                  "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.

                  "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


                                        4

<PAGE>   8



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 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.



                                        5

<PAGE>   9



                  (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 May 15 of each year, commencing May 15,
____, 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


                                        6

<PAGE>   10



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.


                                        7

<PAGE>   11



                  (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


                                        8

<PAGE>   12



                  covenants or obligations shall be read into this Guarantee
                  Agreement against the Guarantee Trustee; and

                           (B) in the absence of bad faith 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;

                  (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 adequate indemnity 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 bad faith on its
         part, request and rely upon an Officers' Certificate, which, upon
         receipt of such request, shall be promptly delivered by the Guarantor;



                                        9

<PAGE>   13



                  (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 written 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
         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 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.



                                       10

<PAGE>   14



         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 bad faith. 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 bad faith 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.



                                       11

<PAGE>   15



                                   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


                                       12

<PAGE>   16



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, the resigning
Guarantee Trustee may 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 Debentures and the Guarantor shall not be obligated
hereunder to make any Guarantee Payment during any Extended Interest Payment
Period (as defined in the Supplemental Indenture) 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:



                                       13

<PAGE>   17



                  (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 Extended Interest
         Payment 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 Extended Interest Payment 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


                                       14

<PAGE>   18



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 Debentures 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.



                                       15

<PAGE>   19



                                   ARTICLE VI
                    LIMITATION OF TRANSACTIONS; SUBORDINATION

         SECTION 6.01 Limitation of Transactions.

                  So long as any Preferred Securities remain outstanding, the
Guarantor shall not (1) make any payment of principal, interest or premium, if
any, on or repay, repurchase or redeem any debt securities that rank junior to
the Debentures in the right of payment issued by the Guarantor, or (2) 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
Debentures in right of payment or (3) 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 (a) dividends or distributions in, or options, warrants or rights to
subscribe for or purchase, the Common Stock; (b) 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; (c) 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; (d) 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 (e) 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 Extended Interest Payment 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 Section [9.01] of 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
4.03 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 Debentures as
provided in the Declaration.



                                       16

<PAGE>   20



         [SECTION 6.02 Subordination.

                  This Guarantee Agreement will constitute an unsecured
obligation of the Guarantor and will rank (i) subordinate and junior in right of
payment to all other liabilities of the Guarantor and any guarantees of the
Guarantor relating to such liabilities, except in each case those made pari
passu or subordinate by their terms, and (ii) senior to all capital stock
[(other than the most senior preferred stock issued from time to time, if any,
by the Guarantor, which preferred stock will rank pari passu with this Guarantee
Agreement)] and to any guarantee now or hereafter entered into by the Guarantor
in respect of any of its capital stock [(other than the most senior preferred
stock issued by the guarantor)] now or hereafter issued by the Guarantor. The
Guarantor's obligations under this Guarantee Agreement will rank pari passu with
respect to obligations under other securities (other than capital stock) the
Guarantor may issue from time to time and other guarantee agreements which it
may enter into from time to time to the extent that (i) such agreements shall
provide for comparable guarantees by the Guarantor of payment on preferred
securities issued by other trusts, partnerships or other entities affiliated
with the Guarantor that are financing vehicles of the Guarantor and (ii) the
debentures or other evidences of indebtedness of the Guarantor relating to such
preferred securities are junior subordinated, unsecured indebtedness of the
Guarantor. The obligations of the Guarantor under this Guarantee Agreement shall
rank pari passu with the Guarantee Agreement, dated as of        , between the
Guarantor and the Guarantee Trustee.]

                                   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 Debentures [, or any securities in to
which such Debentures are convertible,] 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


                                       17

<PAGE>   21



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.



                                       18

<PAGE>   22



         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 [12.02] 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
                  7990 I.H. 10 West
                  San Antonio, Texas 78230
                  Attention: General Counsel

                  (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

                  ---------------------------

                  ---------------------------

                  ---------------------------
                  Attention:

                  (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.



                                       19

<PAGE>   23



         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.




                                       20

<PAGE>   24


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

                                          VALERO ENERGY CORPORATION


                                          By:
                                             -----------------------------------
                                             Name:
                                             Title:


                                          THE BANK OF NEW YORK
                                               as Guarantee Trustee


                                          By:
                                             -----------------------------------
                                             Name:
                                             Title:




                                       21

<PAGE>   1

                                                                   EXHIBIT 4.13

===============================================================================


                           VALERO ENERGY CORPORATION



                                      and



                       ________________________________ ,

                           as Purchase Contract Agent



                          PURCHASE CONTRACT AGREEMENT



                       Dated as of _______________, 2000




===============================================================================

<PAGE>   2

                               TABLE OF CONTENTS




<TABLE>
<S>                                                                                                              <C>
RECITALS          1


ARTICLE I.        Definitions and Other Provisions of General Applications........................................1


Section 1.1. Definitions..........................................................................................1


SECTION 1.2. COMPLIANCE CERTIFICATES AND OPINIONS................................................................10


SECTION 1.3. FORM OF DOCUMENTS DELIVERED TO PURCHASE CONTRACT AGENT..............................................11


SECTION 1.4. ACTS OF HOLDERS; RECORD DATES.......................................................................11


SECTION 1.5. NOTICES.............................................................................................12


SECTION 1.6. NOTICE TO HOLDERS; WAIVER...........................................................................14


SECTION 1.7. EFFECT OF HEADINGS AND TABLE OF CONTENTS............................................................14


SECTION 1.8. SUCCESSORS AND ASSIGNS..............................................................................14


SECTION 1.9. SEPARABILITY CLAUSE.................................................................................14


SECTION 1.10. BENEFITS OF AGREEMENT..............................................................................15


SECTION 1.11. GOVERNING LAW......................................................................................15


SECTION 1.12. LEGAL HOLIDAYS.....................................................................................15


SECTION 1.13. COUNTERPARTS.......................................................................................15


SECTION 1.14. INSPECTION OF AGREEMENT............................................................................15


SECTION 1.15. APPOINTMENT OF FINANCIAL INSTITUTION AS AGENT FOR THE COMPANY......................................15


ARTICLE II. CERTIFICATE FORMS....................................................................................16


SECTION 2.1. FORMS OF CERTIFICATES GENERALLY.....................................................................16


SECTION 2.2. FORM OF PURCHASE CONTRACT AGENT'S CERTIFICATE OF AUTHENTICATION.....................................17


ARTICLE III. The Securities......................................................................................17
</TABLE>



                                       i
<PAGE>   3

<TABLE>
<S>                                                                                                              <C>
SECTION 3.1. AMOUNT; FORM AND DENOMINATIONS......................................................................17


SECTION 3.2. RIGHTS AND OBLIGATIONS EVIDENCED BY THE CERTIFICATES................................................17


SECTION 3.3. EXECUTION, AUTHENTICATION, DELIVERY AND DATING......................................................18


SECTION 3.4. TEMPORARY CERTIFICATES..............................................................................19


SECTION 3.5. REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE.................................................19


SECTION 3.6. BOOK-ENTRY INTERESTS................................................................................21


SECTION 3.7. NOTICES TO HOLDERS..................................................................................21


SECTION 3.8. APPOINTMENT OF SUCCESSOR DEPOSITARY.................................................................21


SECTION 3.9. DEFINITIVE CERTIFICATES.............................................................................22


SECTION 3.10. MUTILATED, DESTROYED, LOST AND STOLEN CERTIFICATES.................................................22


SECTION 3.11. PERSONS DEEMED OWNERS..............................................................................23


SECTION 3.12. CANCELLATION.......................................................................................24


SECTION 3.13. CREATION OF TREASURY PEPS UNITS BY SUBSTITUTION OF TREASURY SECURITIES.............................24


SECTION 3.14. REESTABLISHMENT OF PEPS UNITS......................................................................26


SECTION 3.15. TRANSFER OF COLLATERAL UPON OCCURRENCE OF TERMINATION EVENT........................................27


SECTION 3.16. NO CONSENT TO ASSUMPTION...........................................................................28


ARTICLE IV. THE PREFERRED SECURITIES, SENIOR DEFERRABLE NOTES AND APPLICABLE OWNERSHIP INTEREST OF THE TREASURY
                      PORTFOLIO..................................................................................28


SECTION 4.1. INTEREST PAYMENTS; RIGHTS TO INTEREST PAYMENTS PRESERVED............................................28


SECTION 4.2. NOTICE AND VOTING...................................................................................29


SECTION 4.3. DISTRIBUTION OF SENIOR DEFERRABLE NOTES; TAX EVENT REDEMPTION.......................................30


ARTICLE V. THE PURCHASE CONTRACTS................................................................................31


SECTION 5.1. PURCHASE OF SHARES OF COMMON STOCK..................................................................31


SECTION 5.2. PURCHASE CONTRACT PAYMENTS..........................................................................33


SECTION 5.3. DEFERRAL OF PURCHASE CONTRACT PAYMENTS..............................................................34
</TABLE>



                                      ii
<PAGE>   4

<TABLE>
<S>                                                                                                           <C>
SECTION 5.4. PAYMENT OF PURCHASE PRICE...........................................................................34


SECTION 5.5. ISSUANCE OF SHARES OF COMMON STOCK..................................................................39


SECTION 5.6. ADJUSTMENT OF SETTLEMENT RATE.......................................................................39


SECTION 5.7. NOTICE OF ADJUSTMENTS AND CERTAIN OTHER EVENTS......................................................46


SECTION 5.8. TERMINATION EVENT; NOTICE...........................................................................47


SECTION 5.9. EARLY SETTLEMENT....................................................................................47


SECTION 5.10. INTENTIONALLY OMITTED..............................................................................49


SECTION 5.11. NO FRACTIONAL SHARES...............................................................................49


SECTION 5.12. CHARGES AND TAXES..................................................................................50


ARTICLE VI. REMEDIES.............................................................................................50


SECTION 6.1. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PURCHASE CONTRACT PAYMENTS AND TO PURCHASE SHARES
                      OF COMMON STOCK............................................................................50


SECTION 6.2. RESTORATION OF RIGHTS AND REMEDIES..................................................................50


SECTION 6.3. RIGHTS AND REMEDIES CUMULATIVE......................................................................50


SECTION 6.4. DELAY OR OMISSION NOT WAIVER........................................................................51


SECTION 6.5. UNDERTAKING FOR COSTS...............................................................................51


SECTION 6.6. WAIVER OF STAY OR EXTENSION LAWS....................................................................51


ARTICLE VII. THE PURCHASE CONTRACT AGENT.........................................................................52


SECTION 7.1. CERTAIN DUTIES AND RESPONSIBILITIES.................................................................52


SECTION 7.2. NOTICE OF DEFAULT...................................................................................52


SECTION 7.3. CERTAIN RIGHTS OF PURCHASE CONTRACT AGENT...........................................................53


SECTION 7.4. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES..............................................54


SECTION 7.5. MAY HOLD SECURITIES.................................................................................54


SECTION 7.6. MONEY HELD IN CUSTODY...............................................................................54


SECTION 7.7. COMPENSATION AND REIMBURSEMENT......................................................................54
</TABLE>



                                      iii
<PAGE>   5
<TABLE>

<S>                                                                                                             <C>
SECTION 7.8. CORPORATE PURCHASE CONTRACT AGENT REQUIRED; ELIGIBILITY.............................................55


SECTION 7.9. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR...................................................55


SECTION 7.10. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.............................................................56


SECTION 7.11. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS........................................57


SECTION 7.12. PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS.............................................57


SECTION 7.13. NO OBLIGATIONS OF PURCHASE CONTRACT AGENT..........................................................57


SECTION 7.14. TAX COMPLIANCE.....................................................................................58


ARTICLE VIII. SUPPLEMENTAL AGREEMENTS............................................................................59


SECTION 8.1. SUPPLEMENTAL AGREEMENTS WITHOUT CONSENT OF HOLDERS..................................................59


SECTION 8.2. SUPPLEMENTAL AGREEMENTS WITH CONSENT OF HOLDERS.....................................................59


SECTION 8.3. EXECUTION OF SUPPLEMENTAL AGREEMENTS................................................................60


SECTION 8.4. EFFECT OF SUPPLEMENTAL AGREEMENTS...................................................................61


SECTION 8.5. REFERENCE TO SUPPLEMENTAL AGREEMENTS................................................................61


ARTICLE IX.  MERGER, CONSOLIDATION, SHARE EXCHANGE, SALE OR CONVEYANCE...........................................61


SECTION 9.1. COVENANT NOT TO MERGE, CONSOLIDATE, ENTER INTO A SHARE EXCHANGE, SELL OR CONVEY PROPERTY EXCEPT
                      UNDER CERTAIN CONDITIONS...................................................................61


SECTION 9.2. RIGHTS AND DUTIES OF SUCCESSOR CORPORATION..........................................................62


SECTION 9.3. OFFICERS' CERTIFICATE AND OPINION OF COUNSEL GIVEN TO PURCHASE CONTRACT AGENT.......................62


ARTICLE X.   COVENANTS...........................................................................................62


SECTION 10.1. PERFORMANCE UNDER PURCHASE CONTRACTS...............................................................62


SECTION 10.2. MAINTENANCE OF OFFICE OR AGENCY....................................................................63


SECTION 10.3. COMPANY TO RESERVE COMMON STOCK....................................................................63


SECTION 10.4. COVENANTS AS TO COMMON STOCK.......................................................................63


SECTION 10.5. STATEMENTS OF OFFICERS OF THE COMPANY AS TO DEFAULT................................................63
</TABLE>




                                      iv
<PAGE>   6
<TABLE>
<S>                                                                                                           <C>
SECTION 10.6. ERISA..............................................................................................64


EXHIBIT A         FACE OF PEPS UNITS CERTIFICATE..............................................................A - 1


EXHIBIT B         FACE OF TREASURY PEPS CERTIFICATE...........................................................B - 1


EXHIBIT C         INSTRUCTION TO PURCHASE CONTRACT AGENT......................................................C - 1


EXHIBIT D         NOTICE FROM PURCHASE CONTRACT AGENT TO HOLDERS..............................................D - 1


EXHIBIT E         NOTICE TO SETTLE BY CASH....................................................................E - 1


EXHIBIT F         NOTICE FROM PURCHASE CONTRACT AGENT TO COLLATERAL AGENT AND INDENTURE TRUSTEE...............F - 1
</TABLE>



                                       v
<PAGE>   7

         PURCHASE CONTRACT AGREEMENT, dated as of ______________, 2000, between
VALERO ENERGY CORPORATION, a Delaware corporation (the "COMPANY"), and
_________________________, a [national banking association], acting as purchase
contract agent for the Holders of Securities 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 I

                        DEFINITIONS AND OTHER PROVISIONS
                             OF GENERAL APPLICATIONS

SECTION 1.1.      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, 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
1.1(e):



<PAGE>   8

         "ACT" has the meaning, with respect to any Holder, set forth in Section
1.4.

         "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 5.1.

         "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 3.6.

         "BUSINESS DAY" means any day other than a Saturday or Sunday or a day
on which banking institutions in New York City 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 5.4(a)(i).




                                       2
<PAGE>   9

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

         "CLOSING PRICE" has the meaning set forth in Section 5.1.

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

         "COLLATERAL" has the meaning set forth in Section 1 of the Pledge
Agreement.

         "COLLATERAL ACCOUNT" has the meaning set forth in Section 1 of the
Pledge Agreement.

         "COLLATERAL AGENT" means ________________________________, 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 5.6(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 ______________________, Attention: __________________________.

         "COUPON RATE" means the percentage rate per annum at which each Senior
Deferrable Note will bear interest initially and, on and after
_________________, 200__, the Reset Rate.

         "CURRENT MARKET PRICE" has the meaning set forth in Section 5.6(a)(8).

         "DECLARATION" means the Amended and Restated Declaration of Trust of
VEC Trust I, dated as of _____________, 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 3.6, 3.7, 3.8 and 3.9.

         "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.



                                       3
<PAGE>   10

         "DTC" means The Depository Trust Company.

         "EARLY SETTLEMENT" has the meaning set forth in Section 5.9(a).

         "EARLY SETTLEMENT AMOUNT" has the meaning set forth in Section 5.9(a).

         "EARLY SETTLEMENT DATE" has the meaning set forth in Section 5.9(a).

         "EARLY SETTLEMENT RATE" has the meaning set forth in Section 5.9(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 1.4(e).

         "EXPIRATION TIME" has the meaning set forth in Section 5.6(a)(6).

         "FAILED REMARKETING" has the meaning set forth in Section 5.4(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 _________________,
2000, 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 ______________, 2000, pursuant to which the
Senior Deferrable Notes will be issued.

         "INDENTURE TRUSTEE" means _____________________, a [national banking
association], 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



                                       4
<PAGE>   11

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 5.6(b).

         "NYSE" has the meaning set forth in Section 5.1.

         "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



                                       5
<PAGE>   12

                  (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 ______________, ______________,
______________ and ______________, commencing _________________.


         "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 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.




                                       6
<PAGE>   13

         "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
_______________, 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 $___, representing preferred
undivided beneficial interests in the assets of the Trust.

         "PROCEEDS" has the meaning set forth in Section 1 of the Pledge
Agreement.

         "PROPERTY TRUSTEE" means __________________, as 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 (i) sell, and the
Holder of such Security to



                                       7
<PAGE>   14

purchase, shares of Common Stock and (ii) pay the Holder Purchase Contract
Payments 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 PAYMENTS" means the payments payable by the Company
on the Payment Dates in respect of each Purchase Contract, equal to _____% per
annum of the Stated Amount.

         "PURCHASE CONTRACT SETTLEMENT DATE" means ____________________.

         "PURCHASE CONTRACT SETTLEMENT FUND" has the meaning set forth in
Section 5.5.

         "PURCHASE PRICE" has the meaning set forth in Section 5.1.

         "PURCHASED SHARES" has the meaning set forth in Section 5.6(a)(6).

         "RECORD DATE" for the interest and Purchase Contract Payments 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 5.1.

         "REMARKETING AGENT" has the meaning set forth in Section 5.4(b).

         "REMARKETING AGREEMENT" means the Remarketing Agreement, dated as of
_________________, 2000, between the Company and the Remarketing Agent.

         "REORGANIZATION EVENT" has the meaning set forth in Section 5.6(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 its corporate trust matters.

         "SECURITIES INTERMEDIARY" means ___________________, 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.



                                       8
<PAGE>   15

         "SECURITY REGISTER" and "SECURITIES REGISTRAR" have the respective
meanings set forth in Section 3.5.

         "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 5.1.

         "STATED AMOUNT" means $___.

         "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
5.1.

         "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 5.1.


                                       9
<PAGE>   16

          "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. _______) which mature on _______________.

         "TRUST" means VEC Trust I, a statutory business that formed under the
laws of the State of Delaware, or any successor thereto by merger or
consolidation.

         "UNDERWRITING AGREEMENT" means the Underwriting Agreement, dated
_______________, 2000, between the Company, __________________ and
___________________________________________________.

         "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 1.2.      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;



                                       10
<PAGE>   17

                  (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 1.3.      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 1.4.      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 7.1) 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.



                                       11
<PAGE>   18

         (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 1.6.

         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 1.6, 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 1.5.      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



                                       12
<PAGE>   19

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:

                  -----------------------------------

                  -----------------------------------

                  -----------------------------------

                  -----------------------------------

                  Telecopier No.:
                                 --------------------
                  Attention:
                            -------------------------

         If to the Company:

                  Valero Energy Corporation
                  One Valero Energy Place
                  San Antonio, Texas 78212
                  Telecopier No.:
                                 --------------------
                  Attention:
                            -------------------------

         If to the Collateral Agent:

                  -----------------------------------

                  -----------------------------------

                  -----------------------------------

                  -----------------------------------

                  Telecopier No.:
                                 --------------------
                  Attention:
                            -------------------------

         If to the Property Trustee:

                  -----------------------------------

                  -----------------------------------

                  -----------------------------------

                  -----------------------------------

                  Telecopier No.:
                                 --------------------
                  Attention:
                            -------------------------



                                       13
<PAGE>   20

         If to the Indenture Trustee:

                  -----------------------------------

                  -----------------------------------

                  -----------------------------------

                  -----------------------------------

                  Telecopier No.:
                                 --------------------
                  Attention:
                            -------------------------


SECTION 1.6.      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 1.7.      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 1.8.      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 1.9.      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.



                                       14
<PAGE>   21

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 Contract
Payments shall not be made, Purchase Contracts shall not be performed and Early
Settlement shall not be effected on such date, but such payments shall be made,
Purchase Contracts 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 Payment Date,
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 Payment Date, 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




                                       15
<PAGE>   22

hereof. Any such appointment shall not relieve the Company in any way from its
obligations hereunder.

                                   ARTICLE II

                               CERTIFICATE FORMS

SECTION 2.1.      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



                                       16
<PAGE>   23

         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 2.2.      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 III

                                 THE SECURITIES

SECTION 3.1.      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 __________ (subject to increase up to a maximum of ________ 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 3.4, 3.5, 3.10, 3.13, 3.14, 5.9
or 8.5.

         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 3.2.      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



                                       17
<PAGE>   24

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 3.3.      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.



                                       18
<PAGE>   25

         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 3.4.      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 3.5.      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.




                                       19
<PAGE>   26

         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 3.6 and 8.5 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.



                                       20
<PAGE>   27

SECTION 3.6.      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 3.9. 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 3.9:

                  (i) the provisions of this Section 3.6 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 making Purchase Contract
         Payments and 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 3.6
         conflict with any other provisions of this Agreement, the provisions of
         this Section 3.6 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 3.7.      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 3.8.      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.




                                       21
<PAGE>   28

SECTION 3.9.      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 3.8; 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 Purchase Contract
Agent on behalf of the Company with respect to such Securities 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



                                       22
<PAGE>   29

                  (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, receiving Purchase
Contract Payments, 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, or Purchase Contract Payments payable in respect of
the Purchase Contracts 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.




                                       23
<PAGE>   30

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 destroyed by the Purchase Contract Agent unless
otherwise directed by Issuer Order.

         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
________________, 200_. 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



                                       24
<PAGE>   31

                           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 3.3 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.



                                       25
<PAGE>   32

         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 ________________, 200_, 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 3.3 evidencing the same number of Purchase Contracts as
         were evidenced by the cancelled Treasury PEPS Units.



                                       26
<PAGE>   33

         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




                                       27
<PAGE>   34


                  (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 IV

   THE PREFERRED SECURITIES, SENIOR DEFERRABLE NOTES AND APPLICABLE OWNERSHIP
                       INTEREST OF THE TREASURY PORTFOLIO

SECTION 4.1.      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 5.4
hereof, or with respect to which Early Settlement of the underlying Purchase
Contract is properly effected pursuant to Section 5.9 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,



                                       28
<PAGE>   35

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 4.2.      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 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


                                       29
<PAGE>   36

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 4.3.      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



                                       30
<PAGE>   37

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 V

                             THE PURCHASE CONTRACTS

SECTION 5.1.      PURCHASE OF SHARES OF COMMON STOCK.

         Each Purchase Contract shall, unless a Cash Settlement has occurred in
accordance with Section 5.4 hereof or an Early Settlement has occurred in
accordance with Section 5.9 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 5.11) 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 $_______ (the "THRESHOLD APPRECIATION PRICE"),
         _______ shares of Common Stock per Purchase Contract;

                  (ii) if the Applicable Market Value is less than the Threshold
         Appreciation Price but greater than $_______ (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, _______ shares of Common Stock per Purchase
         Contract,

in each case subject to adjustment as provided in Section 5.6 (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:



                                       31
<PAGE>   38

                  (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



                                       32
<PAGE>   39

         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 5.4 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 5.2.      PURCHASE CONTRACT PAYMENTS.

         The Company shall pay, on each Payment Date, the Purchase Contract
Payments payable in respect of each Purchase Contract to the Person in whose
name a Certificate is registered at the close of business on the Record Date
next preceding such Payment Date. The Purchase Contract Payments will be
payable at the office of the Purchase Contract Agent in [New York City]
maintained for that purpose or, at the option of the Company, by check mailed
to the address of the Person entitled thereto at such Person's address as it
appears on the Security Register. If any date on which Purchase Contract
Payments are to be made is not a Business Day, then payment of the Purchase
Contract Payments payable on such date will be made on the next day that is a
Business Day (and without any interest in respect of any such delay), except
that, if such Business Day is in the next calendar year, such payment will be
made on the preceding Business Day.

         Upon the occurrence of a Termination Event, the Company's obligation
to pay Purchase Contract Payments (including any accrued or deferred Purchase
Contract Payments) shall cease.

         Each Certificate delivered under this Agreement upon registration of
transfer of or in exchange for or in lieu of (including as a result of a
Collateral Substitution or the reestablishment of PEPS Units) any other
Certificate shall carry the right to accrued and unpaid or deferred Purchase
Contract Payments and the right to accrue Purchase Contract Payments, which
rights were carried by the Purchase Contracts underlying such other
Certificates.



                                       33
<PAGE>   40

         Subject to Section 5.9, in the case of any Security with respect to
which Early Settlement of the underlying Purchase Contract is effected on an
Early Settlement Date that is after any Record Date and prior to or on the next
succeeding Payment Date, Purchase Contract Payments otherwise payable on such
Payment Date shall be payable on such Payment Date notwithstanding such Early
Settlement, and such Purchase Contract Payments shall be paid to the Person in
whose name the Certificate evidencing such Security is registered at the close
of business on such Record Date. Except as otherwise expressly provided in the
immediately preceding sentence, in the case of any Security with respect to
which Early Settlement of the underlying Purchase Contract is effected on an
Early Settlement Date, Purchase Contract Payments that would otherwise be
payable after the Early Settlement Date with respect to such Purchase Contract
shall not be payable.

SECTION 5.3.      DEFERRAL OF PURCHASE CONTRACT PAYMENTS.

         The Company has the right to defer payment of all or part of the
Purchase Contract Payments in respect of each Purchase Contract until no later
than the Purchase Contract Settlement Date. If the Company so elects to defer
Purchase Contract Payments, the Company shall pay additional Purchase Contract
Payments on such deferred installments of Purchase Contract Payments at a rate
equal to _______% per annum, compounding quarterly, until such deferred
installments are paid. If a Holder effects an Early Settlement or if a
Termination Event shall occur, such Holder will have no right to receive any
accrued deferred Purchase Contract Payments.

SECTION 5.4.      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 5.9, 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 ________________, 200_. 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 (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 ________________, 200_, 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




                                       34
<PAGE>   41

         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 (a)(i) above, or does notify the Purchase Contract Agent
         as provided in paragraph (a)(i) above of his intention to pay the
         Purchase Price in cash, but fails to make such payment as required by
         paragraph (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 (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 5.4(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
(a)(i) above, or who have so notified the Purchase Contract Agent but failed to
make such payment as required by paragraph (a)(ii) above, the Company shall
engage ________________ (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 5.4(a)(iv), shall notify the Remarketing Agent, promptly
after 11:00 a.m. (New York City time) on the fifth Business Day immediately
preceding ________________, 200_, 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 ________________, 200_, use
reasonable efforts to remarket such Preferred Securities or Senior Deferrable
Notes on such date at a price equal to at least 100.25%



                                       35
<PAGE>   42

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, $____________ 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"). Any proceeds remaining after satisfaction of the Purchase
Contract and payment of the Remarketing Fee shall be payable to the Holder of
such PEPS Unit.

         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 at least 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 cannot Remarket the
Preferred Securities or the Senior Deferrable Notes, as the case may be, after
such increase 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 (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 New York City, 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 (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 5.9, 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



                                       36
<PAGE>   43

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
________________, 200_. 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 (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 ________________, 200_, 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 (d)(i) above, or does notify the Purchase
         Contract Agent as provided in paragraph (d)(i) above of his intention
         to pay the Purchase Price in cash, but fails to make such payment as
         required by paragraph (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


                                       37
<PAGE>   44

         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 ________________ 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 ________________,
         200_, 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).



                                       38
<PAGE>   45

         (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 5.5.      ISSUANCE OF SHARES OF COMMON STOCK.

         Unless a Termination Event or an Early Settlement shall have occurred,
subject to Section 5.6(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
5.11 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 5.6.      ADJUSTMENT OF SETTLEMENT RATE.

         (a) Adjustments for Dividends, Distributions, Stock Splits, Etc.



                                       39
<PAGE>   46

                  (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 include shares held in the
         treasury of the Company and shall include any shares issuable in
         respect of any scrip certificates issued in lieu of fractions of
         shares of Common Stock.

                  (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) (except pursuant to the
         [Company's Dividend Reinvestment and Common Stock Purchase Plan])
         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
         (except pursuant to the [Company's Dividend Reinvestment and Common
         Stock Purchase Plan]) 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



                                       40
<PAGE>   47

         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 5.6(a), any dividend or distribution paid exclusively in cash
         and any dividend or distribution referred to in paragraph (1) of this
         Section 5.6(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
         5.6(a) shall not be applicable.

                  (5) In case the Company shall, by dividend or otherwise,
         distribute to all holders of its Common Stock cash (excluding:

                    (x) 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 $___________ (the "REGULAR
               DIVIDEND"), and


                                       41
<PAGE>   48

                    (y) 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 5.6(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 Regular Dividend. If
         an adjustment is required to be made as set forth in this Section
         5.6(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) of (I) 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



                                       42
<PAGE>   49

         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 5.6(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



                                       43
<PAGE>   50

                    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 5.6(a), an adjustment shall also be made to the
         Applicable Market Value solely to determine which of clauses (a), (b)
         or (c) of the definition of Settlement Rate in Section 5.1 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 5.6(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), (7) or (10) of this Section
         5.6(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 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



                                       44
<PAGE>   51

               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 5.6(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



                                       45
<PAGE>   52

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 (other than a merger or consolidation in which the Company
is the continuing corporation) where more than [30]% of the purchase price with
respect to each share of Common Stock is payable in cash on the closing date of
such consolidation or merger, then a Holder of a Security, may settle his
Purchase Contract for cash as described in Section 5.4(a)(i) or 5.4(d)(i)
hereof, as applicable, during the one week period beginning on the twenty-first
Trading Day after the closing date of such merger (the "EARLY SETTLEMENT WEEK")
at the then applicable Settlement Rate. For the purposes of this Section, the
twenty-fourth 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 that 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 5.6
shall be made by the Company or its agent and the Purchase Contract Agent shall
have no responsibility with respect thereto.

SECTION 5.7.      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 5.6 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 5.6 (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


                                       46
<PAGE>   53

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 5.8.      TERMINATION EVENT; NOTICE.

         The Purchase Contracts and all obligations and rights of the Company
and the Holders thereunder, including, without limitation, the rights of the
Holders to receive and the obligation of the Company to pay any Purchase
Contract Payments (including any deferred or accrued and unpaid Purchase
Contract Payments), if the Company shall have such obligation, 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 5.4 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 5.9.      EARLY SETTLEMENT.

         (a) Subject to and upon compliance with the provisions of this Section
5.9, 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:

                    (i) 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, plus

                    (ii) if such delivery is made with respect to any Purchase
               Contracts during the period from the close of business on any
               Record Date next preceding any Payment Date to the opening of
               business on such Payment Date, an amount equal to the sum of (x)
               the Purchase Contract Payments payable on such Payment



                                       47
<PAGE>   54

          Date with respect to such Purchase Contracts plus (y) in the case of a
          PEPS Units Certificate, the distributions on the related Preferred
          Securities or Senior Deferrable Notes payable on such Payment Date.

Except as provided in the immediately preceding sentence and subject to the
penultimate paragraph of Section 5.2, no payment shall be made upon Early
Settlement of any Purchase Contract on account of any Purchase Contract
Payments accrued on such Purchase Contract or 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 _______ [INSERT NUMBER OF SHARES DELIVERABLE IF APPLICABLE MARKET VALUE
IS GREATER THAN OR EQUAL TO THRESHOLD APPRECIATION PRICE] 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 5.11; 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):



                                       48
<PAGE>   55

                    (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 5.11.

         (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 ________________, 200_, 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 5.10.     INTENTIONALLY OMITTED.

SECTION 5.11.     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 5.11
in a timely manner.



                                       49
<PAGE>   56

SECTION 5.12.     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 VI

                                    REMEDIES

SECTION 6.1.      UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PURCHASE CONTRACT
                  PAYMENTS AND TO PURCHASE SHARES OF COMMON STOCK.

         Each Holder of a Security shall have the right, which is absolute and
unconditional, (1) subject to the payment by such Holder of Purchase Contract
Payments pursuant to Section 5.9(a), to receive each Purchase Contract Payment
with respect to the Purchase Contract constituting a part of such Security on
the respective Payment Date for such Security, provided, however, that a Holder
will have no right to receive any accrued deferred Purchase Contract Payments
if he effects an Early Settlement or if a Termination Event shall occur and (2)
to purchase shares of Common Stock pursuant to such Purchase Contract and, in
each such case, to institute suit for the enforcement of any such Purchase
Contract Payment and right to purchase shares of Common Stock, and such rights
shall not be impaired without the consent of such Holder.

SECTION 6.2.      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 6.3.      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



                                       50
<PAGE>   57

otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.

SECTION 6.4.      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 6.5.      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, 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 Company, 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, interest on any Senior Deferrable Notes or Purchase
Contract Payments on any Purchase Contract 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 6.6.      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.



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<PAGE>   58

                                  ARTICLE VII

                          THE PURCHASE CONTRACT AGENT


SECTION 7.1.      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 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.

         (b) No provision of this Agreement or the Pledge Agreement shall be
construed to relieve the Purchase Contract Agent from liability for its own
negligent action, its own 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 adequate indemnity is not provided to it.

         (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 7.2.      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


                                       52
<PAGE>   59
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 7.3.      CERTAIN RIGHTS OF PURCHASE CONTRACT AGENT.

         Subject to the provisions of Section 7.1:

                  (1) the Purchase Contract Agent may rely and shall be
         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, rely upon an Officers' Certificate of the
         Company;

                  (4) the Purchase Contract Agent may consult with counsel and
         the written 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, debenture, note, other evidence of
         indebtedness or other paper or document, but the Purchase Contract
         Agent, in its discretion, 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

                  (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.



                                       53
<PAGE>   60

SECTION 7.4.      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 7.5.      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 7.6.      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 7.7.      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 negligence or bad faith; 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 negligence or
         bad faith on its part, arising out of or in connection with the
         acceptance or administration of its duties hereunder, including the
         costs and expenses of



                                       54
<PAGE>   61

         defending itself against any claim or liability in connection with the
         exercise or performance of any of its powers or duties hereunder.

SECTION 7.8.      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 7.9.      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 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;



                                       55
<PAGE>   62

                  (2) the Purchase Contract Agent shall cease to be eligible
         under Section 7.8 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 may, on behalf of itself and all others similarly situated,
petition 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.



                                       56
<PAGE>   63

         (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 (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



                                       57
<PAGE>   64

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 negligence or willful misconduct on the
part of the Purchase Contract Agent.

SECTION 7.14.     TAX COMPLIANCE. - [DPW TAX DEP'T TO REVIEW]

         (a) The Company 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 rely on any
such direction in accordance with the provisions of Section 7.1(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.


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<PAGE>   65


                                  ARTICLE VIII

                            SUPPLEMENTAL AGREEMENTS

SECTION 8.1.      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 5.6(b); or

                  (5) except as provided for in Section 5.6, 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 8.2.      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




                                       59
<PAGE>   66

         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) reduce any Purchase Contract Payments or change any place
         where, or the coin or currency in which, any Purchase Contract Payment
         is payable;

                  (4) impair the right to institute suit for the enforcement of
         any Purchase Contract;

                  (5) 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, change the Purchase Contract Settlement Date or otherwise
         adversely affect the Holder's rights under any Purchase Contract; or

                  (6) 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 (6) 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 8.3.      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 7.1) 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.



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<PAGE>   67

SECTION 8.4.      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 8.5.      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 IX

            MERGER, CONSOLIDATION, SHARE EXCHANGE, SALE OR CONVEYANCE

SECTION 9.1.     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.



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SECTION 9.2.      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 9.1, 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 9.3.      OFFICERS' CERTIFICATE AND OPINION OF COUNSEL GIVEN TO PURCHASE
                  CONTRACT AGENT.

         The Purchase Contract Agent, subject to Sections 7.1 and 7.3, 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 X

                                   COVENANTS

SECTION 10.1.     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.



                                       62
<PAGE>   69

SECTION 10.2.     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 10.3.     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 10.4.     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 10.5.     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



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<PAGE>   70

Company shall be in default, specifying all such defaults and the nature and
status thereof of which they may have knowledge.

SECTION 10.6.     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]


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<PAGE>   71
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



                                             By:
                                                --------------------------------
                                                Name:
                                                Title:



                                             -----------------------------------
                                             as Purchase Contract Agent



                                             By:
                                                --------------------------------
                                                Name:
                                                Title:



                                       65
<PAGE>   72




                                                                       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.                                                       Cusip No.
    --------                                                       ------------
Number of PEPS Units
                     --------

                            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


                                      A-1

<PAGE>   73

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 ____________, ____________,
____________, and ____________ of each year, commencing ____________, 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.



                                      A-2
<PAGE>   74

         Each Purchase Contract evidenced here