EXHIBIT 4.6

                            VALERO ENERGY CORPORATION


                       2003 EMPLOYEE STOCK INCENTIVE PLAN



                       Approved by Compensation Committee
                            of the Board of Directors
                 of Valero Energy Corporation on April 23, 2003

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                                TABLE OF CONTENTS                           PAGE


SECTION 1.   Purpose...........................................................1

SECTION 2.   Definitions.......................................................1
     (a)     "Affiliate........................................................1
     (b)     Award.............................................................1
     (c)     Award Agreement...................................................1
     (d)     Board.............................................................1
     (e)     Cause.............................................................1
     (f)     Change of Control.................................................1
     (g)     Code..............................................................1
     (h)     Committee.........................................................1
     (i)     Company...........................................................1
     (j)     Employee..........................................................1
     (k)     Exchange Act......................................................2
     (l)     Exercisable Award.................................................2
     (m)     Exercise Notice...................................................2
     (n)     Fair Market Value.................................................2
     (o)     Notice Date.......................................................2
     (p)     Option............................................................2
     (q)     Other Stock-Based Award...........................................2
     (r)     Participant.......................................................2
     (s)     Performance Award.................................................2
     (t)     Person............................................................2
     (u)     Preference Share Purchase Right...................................2
     (v)     Reorganization Event..............................................2
     (w)     Restricted Stock..................................................2
     (x)     Rights Agreement..................................................2
     (y)     SAR or stock appreciation right...................................2
     (z)     SEC...............................................................3
     (aa)    Settlement Date...................................................3
     (bb)    Share" or "Shares.................................................3
     (cc)    Stock Compensation................................................3
     (dd)    Tax Payment.......................................................3

SECTION 3.   Administration....................................................3

SECTION 4.   Shares and Other Property Available For Awards....................4
      (a)    Shares Available..................................................4
      (b)    Sources of Shares Deliverable Under Awards........................4
      (c)    Adjustments.......................................................4
      (d)    Share Counting....................................................5


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SECTION 5.   Eligibility.......................................................6

SECTION 6.   Awards............................................................6
      (a)    Options...........................................................6
      (b)    Stock Appreciation Rights.........................................6
      (c)    Restricted Stock..................................................6
      (d)    Performance Awards................................................7
      (e)    Stock Compensation................................................7
      (f)    Other Stock-Based Awards..........................................7
      (g)    Exercise of Option or SAR Awards..................................8
      (h)    General...........................................................9

SECTION 7.   Amendment and Termination........................................11
      (a)    Amendments to the Plan...........................................11
      (b)    Amendments to Awards.............................................11
      (c)    Unusual or Nonrecurring Events...................................11

SECTION 8.   Change Of Control................................................12
      (a)    Effect...........................................................12
      (b)    Defined..........................................................12
      (c)    Actions of Committee.............................................13

SECTION 9.   General Provisions...............................................13
      (a)    No Rights to Awards..............................................13
      (b)    Delegation.......................................................13
      (c)    Withholding......................................................13
      (d)    No Limit on Other Compensation Arrangements......................14
      (e)    No Right to Employment...........................................14
      (f)    Governing Law....................................................14
      (g)    Severability.....................................................14
      (h)    NYSE Listing and Other Laws and Regulations......................14
      (i)    No Trust or Fund Created.........................................14
      (j)    No Fractional Shares.............................................14
      (k)    Headings.........................................................15
      (l)    Construction.....................................................15

SECTION 10.  Effective Date of the Plan.......................................15

SECTION 11.  Term of the Plan.................................................15



                                       -ii-
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                       2003 EMPLOYEE STOCK INCENTIVE PLAN
SECTION 1.  Purpose.

     The purpose of this 2003 Employee  Stock  Incentive Plan (the "Plan") is to
promote the interests of the Company and its  stockholders by (i) attracting and
retaining  employees of the Company and its affiliates;  (ii)  motivating  these
employees  by using  performance-related  incentives  to  achieve  longer  range
performance  goals;  and (iii)  enabling  these  employees to participate in the
long-term growth and financial success of the Company.

SECTION 2.  Definitions.

     As used in the Plan, the following  terms shall have the meanings set forth
below:

     (a) "Affiliate" shall mean (i) any entity that,  directly or through one or
more  intermediaries,  is controlled by the Company and (ii) any entity in which
the Company has a significant equity interest, as determined by the Committee.

     (b) "Award" shall mean any Option,  Stock  Appreciation  Right,  Restricted
Stock, Performance Award, Stock Compensation Award or Other Stock-Based Award.

     (c) "Award Agreement" shall mean any written agreement,  contract, or other
instrument  or  document  evidencing  any  Award,  which may,  but need not,  be
executed or acknowledged by a Participant.

     (d) "Board" shall mean the Board of Directors of the Company.

     (e) "Cause" shall mean the (i) conviction of the  Participant by a state or
federal court of a felony  involving  moral  turpitude,  (ii)  conviction of the
Participant by a state or federal court of embezzlement or  misappropriation  of
funds of the Company,  (iii)  negligence or misconduct of the Participant  which
causes material loss, damage or injury to the Company,  any of its Affiliates or
their respective  employees,  or (iv)  Participant's  failure to  satisfactorily
perform the material stated duties of Participant's position with the Company or
any of its Affiliates.

     (f) "Change of Control" is defined in Section 8(b) of the Plan.

     (g) "Code"  shall mean the Internal  Revenue Code of 1986,  as amended from
time to time.

     (h) "Committee" shall mean the Committee  appointed to administer the Plan,
as further described in Section 3 of the Plan.

     (i) "Company" shall mean Valero Energy Corporation, a Delaware corporation,
formerly known as "Valero Refining and Marketing Company".

     (j)  "Employee"  shall mean any employee of the Company or of any Affiliate
other than  officers and directors  within the meaning of Section  16(a)-1(f) of
the Exchange Act.

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     (k)  "Exchange  Act" shall mean the  Securities  Exchange  Act of 1934,  as
amended.

     (l) "Exercisable Award" is defined in Section 6(h)(vii)(A).

     (m) "Exercise Notice" is defined in Section 6(g)(i) of the Plan.

     (n) "Fair  Market  Value"  shall  mean the  average of the "high" and "low"
reported sales price per Share (as reported in the NYSE - Composite Transactions
listing) as of the relevant measuring date, or if there are no sales on the NYSE
on that measuring date, then as of the next day on which there were sales.

     (o) "Notice Date" is defined in Section 6(g)(i) of the Plan.

     (p) "Option"  shall mean an option  granted  under Section 6(a) of the Plan
that is not  intended to be an  Incentive  Stock  Option,  within the meaning of
Section 422 of the Code or any successor provision thereto.

     (q) "Other  Stock-Based  Award" shall mean any right  granted under Section
6(f) of the Plan.

     (r) "Participant" shall mean any Employee granted an Award under the Plan.

     (s) "Performance  Award" shall mean any right granted under Section 6(d) of
the Plan.

     (t)  "Person"  shall  mean  any   individual,   corporation,   partnership,
association, joint-stock company, trust, unincorporated organization, government
or political subdivision thereof or other entity.

     (u)  "Preference  Share  Purchase  Right"  shall  mean  one of  the  rights
distributed  pursuant to the Rights  Agreement  to  purchase  1/100 share of the
Junior Participating Preferred Stock, Series I, of Valero.

     (v) "Reorganization Event" is defined in Section 4(c) of the Plan.

     (w)  "Restricted  Stock"  shall  mean  any  Share,  prior  to the  lapse of
restrictions thereon, granted under Section 6(c) of the Plan.

     (x) "Rights  Agreement" shall mean the Rights  Agreement,  dated as of June
18, 1997, between the Company and Computershare  Investor  Services,  L.L.C., as
Rights  Agent  (successor  Rights Agent to Harris  Trust and Savings  Bank),  as
amended.

     (y) "SAR" or "stock  appreciation  right" is further  described  in Section
6(b) of the Plan and shall mean the right,  subject  to the  provisions  of this
Plan, to receive a payment in cash equal to the difference between the specified
exercise price of the SAR and the Fair Market Value of one Share.

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     (z) "SEC" shall mean the Securities and Exchange Commission.

     (aa) "Settlement Date" is defined in Section 6(g)(i) of the Plan.

     (bb) "Share" or "Shares" shall mean the common stock of the Company,  $0.01
par value,  and other  securities  or  property  that may become the  subject of
Awards or become subject to Awards  pursuant to an adjustment made under Section
4(c) of the Plan.

     (cc) "Stock  Compensation"  shall mean any right granted under Section 6(e)
of the Plan.

     (dd) "Tax Payment" is defined in Section 6(g)(ii) of the Plan.

SECTION 3.  Administration.

     The Plan shall be administered by a committee of the Board appointed by the
Board to act for purposes of  administering  this Plan.  Subject to the terms of
the Plan and  applicable  law,  and in  addition  to other  express  powers  and
authorizations  conferred on the Committee by the Plan, the Committee shall have
authority to:

     (a) designate Participants;

     (b) determine the type or types of Awards to be granted to an Employee;

     (c)  determine  the number of Shares to be covered  by, or with  respect to
which  payments,  rights,  or other  matters are to be  calculated in connection
with, Awards;

     (d)  determine  the terms and  conditions  of any Award and any  subsequent
amendments thereto;

     (e)  determine  to what extent and under what  circumstances  Awards may be
settled or exercised in cash,  Shares,  other securities,  other Awards or other
property,  or canceled,  forfeited,  or suspended,  and the method or methods by
which Awards may be settled, exercised, canceled, forfeited, or suspended;

     (f)  provide  for the  acceleration  of any  time  period  relating  to the
vesting, exercise or realization of any Award so that the Award may be exercised
or realized in full on or before a date fixed by the  Committee;  the  Committee
may, in its  discretion,  include other  provisions and limitations in any Award
Agreement as the Committee may deem  equitable and in the best  interests of the
Company;

     (g)  interpret  and  administer  the Plan and any  instrument  or agreement
relating to the Plan, including Award Agreements;

     (h) establish,  amend, suspend, or waive any rules or regulations regarding
the Plan,  and appoint any agent the Committee  shall deem  appropriate  for the
proper administration of the Plan; and

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          (i) make any other  determination  and take any other  action that the
     Committee deems necessary or desirable for the  administration of the Plan.
     Unless  otherwise   expressly  provided  in  the  Plan,  all  designations,
     determinations,  interpretations,  and other  decisions with respect to the
     Plan or any Award shall be within the sole discretion of the Committee, may
     be made at any time, and shall be final,  conclusive,  and binding upon all
     Persons, including the Company, any Affiliate, any Participant,  any holder
     or  beneficiary  of any  Award,  any  stockholder  of the  Company  and any
     Employee.

SECTION 4. Shares and Other Property Available For Awards.

     (a) Shares  Available.  Subject to  adjustment as provided in Section 4(c),
the number of Shares with respect to which Awards may be granted  under the Plan
shall be 5,000,000.

     (b)  Sources of Shares  Deliverable  Under  Awards.  Any  Shares  delivered
pursuant  to an Award  may  consist,  in whole or in  part,  of  authorized  and
unissued Shares,  Shares held by the Company in its treasury or Shares purchased
by the Company on the open market or otherwise.

     (c) Adjustments.

          (i) If all or any portion of an Award vests or is exercised subsequent
     to any stock dividend,  rights  distribution,  split-up,  recapitalization,
     combination or exchange of shares,  merger,  consolidation,  acquisition of
     property or stock, spin-off or separation,  reorganization,  liquidation or
     other  similar  event (any one of which  being  hereafter  referred to as a
     "Reorganization Event"), as a result of which shares or other securities of
     any class or rights shall be issued in respect of  outstanding  Shares,  or
     Shares  shall be changed  into the same or a different  number of shares of
     the same or  another  class or  classes  or other  securities,  the  person
     exercising or otherwise entitled to such Award shall receive, except as may
     be otherwise determined by the Committee:

               (A) for the  aggregate  price  payable  upon such  exercise of an
          Option, or upon vesting of an Award (other than an Option) denominated
          in Shares (1) the  aggregate  number  and class of  shares,  rights or
          other securities for which a recognized market exists,  and (2) a cash
          amount equal to the fair market value (as reasonably determined by the
          Committee)  on such  exercise  or vesting  date of any other  property
          (other than regular cash dividend payments) and of any shares,  rights
          or other securities for which no recognized  market exists,  which, if
          Shares (as  authorized  at the date of the granting of such Award) had
          been  acquired  at the  date of  granting  of the  Award  for the same
          aggregate price (on the basis of the price per share, if any, provided
          in the Award) and had not been  disposed  of,  such  person or persons
          would be holding at the time of such  exercise  or vesting as a result
          of such acquisition and any such Reorganization Event, and

               (B) a cash  amount  upon the  exercise  of any SARs  equal to the
          difference  between  the  aggregate  grant  price of such SARs and the
          aggregate  of (1) the fair market  value on the  exercise  date of any
          whole shares, rights or other securities for which a recognized market
          exists, and (2) the fair market value (as reasonably determined by the
          Committee) on such date of any other property (other than regular cash
          dividend payments) which the holder of a number of Shares equal to the
          number of such SARs, if such Shares had been  purchased at the date of
          granting of such SARs and not otherwise  disposed of, would be holding
          at the time of exercise of such SARs as a result of such  purchase and
          any such Reorganization Event;

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provided,   however,  that  no  fractional  Share,  fractional  right  or  other
fractional  security shall be issued upon any such exercise or vesting,  and the
aggregate  price paid shall be  appropriately  reduced to reflect any fractional
Share,  fractional right or other fractional  security not issued;  and provided
further, however, that if the exercise or vesting of any Award subsequent to any
Reorganization  Event  would,  pursuant to clause (A) of this  Section  4(c)(i),
require the delivery of shares,  rights or other  securities that the Company is
not then  authorized  to issue or that in the  sole  judgment  of the  Committee
cannot be issued  without  undue  effort or expense,  the person  exercising  or
vesting in such Award shall  receive,  in lieu of such  shares,  rights or other
securities,  a cash  payment  equal to the Fair Market  Value on the exercise or
vesting date, as the case may be, as reasonably determined by the Committee,  of
such shares, rights or other securities. For purposes of applying the provisions
of this Plan, the Preference  Share Purchase Rights  distributed to stockholders
of the Company pursuant to the Rights Agreement shall be deemed not to have been
distributed until the Distribution Date (as defined in the Rights Agreement).

          (ii) In the event of any  change in the  number of Shares  outstanding
     resulting from a  Reorganization  Event,  the aggregate number and class of
     Shares  remaining  available  to be  awarded  under this Plan shall be that
     number and class which a person,  to whom an Award had been granted for all
     of the available  Shares under this Plan on the date preceding such change,
     would be entitled to receive as provided in Section 4(c)(i).

          (iii) Upon the occurrence of any  Reorganization  Event, the Committee
     shall be entitled  (but shall not be required) to determine  that new Award
     Agreements shall be entered into with Participants reflecting such event.

     (d) Share  Counting.  For purposes of determining at any time the number of
Shares that  remain  available  for grant under this Plan,  the number of Shares
then authorized  pursuant to Section 4 of the Plan shall be (i) decreased by the
"gross" number of Shares issued pursuant to exercised Awards,  (ii) decreased by
the  "gross"  number of Shares  issuable  pursuant  to  outstanding  unexercised
Awards, and (iii) increased by the number of Shares to which a Participant shall
have forfeited, voluntarily surrendered or otherwise permanently lost his or her
right to  exercise  or vest in an Award  under  any  provision  of this  Plan or
otherwise.  As used herein,  the "gross"  number of Shares refers to the maximum
number of Shares  that may be issued upon the  exercise of an Award.  Should the
exercise  price of an Award under the Plan be paid with Shares or should  Shares
otherwise  issuable under the Plan be withheld by the Company in satisfaction of
the withholding  taxes incurred in connection with the exercise or vesting of an
Award,  then the number of Shares available for issuance under the Plan shall be
reduced by the net number of Shares issued to the holder of such option.  In the
event that  property  other than Shares is tendered  for payment of the exercise
price,  the  number of Shares  available  for  issuance  under the Plan shall be
reduced by the gross  number of Shares for which the Award is exercised or which
vest under the stock  issuance,  and not the net number of Shares  issued to the
holder of such option.

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SECTION 5. Eligibility.

     Any  Employee  shall be  eligible to be  designated  a  Participant  by the
Committee.

SECTION 6. Awards.

     (a) Options.  In determining that an eligible  Employee shall be granted an
Option,  the Committee shall  determine,  subject to the provisions of the Plan,
the number of Shares to be covered by each Option,  the exercise  price therefor
and the conditions and limitations applicable to the exercise of the Option. The
exercise price per Share  purchasable under an Option shall be determined by the
Committee at the time each Option is granted;  provided, that the exercise price
per Share shall not be less than 100% of Fair  Market  Value on the date of such
grant,  and once  established,  the exercise  price under an Option shall not be
reduced.

     (b) Stock  Appreciation  Rights.  Subject to the provisions of the Plan, in
determining that an eligible Employee shall be awarded SARs, the Committee shall
determine the number of Shares to be covered by each SAR Award,  the grant price
thereof and the conditions and limitations  applicable to the exercise  thereof.
SAR Awards shall be payable in cash or in stock, as determined by the Committee,
and may be granted in tandem with another  Award,  in addition to another Award,
or freestanding  and unrelated to another Award.  SARs granted in tandem with or
in addition to another Award may be granted either at the same time as the other
Award or at a later time.

          (i) Grant  Price.  The grant price  (strike  price) of an SAR shall be
     determined by the  Committee,  provided,  that the grant price shall not be
     less than 100% of Fair Market  Value on the date of such grant,  and,  once
     established, the grant price shall not be reduced.

          (ii) Other Terms and Conditions.  Subject to the terms of the Plan and
     any applicable Award Agreement,  the Committee shall determine, at or after
     the grant of an SAR, the term, methods of exercise, and any other terms and
     conditions of any SAR.

     (c) Restricted Stock. Subject to the provisions of the Plan, in determining
that an eligible Employee shall be awarded Restricted Stock, the Committee shall
determine  the  number of  Shares  of  Restricted  Stock to be  granted  to each
Participant,  the  duration of the  restriction  period  during  which,  and the
conditions  under which,  the Restricted  Stock may be forfeited to the Company,
and the other terms and conditions of the Awards.

          (i)  Dividends.  Unless  otherwise  determined  by  the  Committee,  a
     Restricted  Stock Award shall  provide for the payment of dividends  during
     its  restriction  period.  Dividends  paid on Restricted  Stock may be paid
     directly to the Participant,  may be subject to risk of forfeiture,  or may
     be subject to transfer  restrictions  during any period  established by the
     Committee, all as determined by the Committee in its discretion.

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          (ii) Registration. Any Restricted Stock may be evidenced in any manner
     deemed appropriate by the Committee,  including book-entry  registration or
     the issuance of stock certificates. If any stock certificate is issued with
     respect to Restricted  Stock,  the  certificate  shall be registered in the
     name of the Participant and may bear an appropriate legend referring to the
     terms, conditions, and restrictions applicable to the Restricted Stock. The
     Participant shall be entitled to exercise all voting rights with respect to
     the Restricted Stock during the restriction period.

          (iii) Forfeiture.  Except as otherwise  determined by the Committee or
     the  Chief  Executive  Officer,  subject  to  Section  6(h)(vii)(D),   upon
     termination of a Participant's  employment with the Company for any reason,
     the provisions of Section  6(h)(vii)(B) and (C) shall apply with respect to
     Restricted Stock granted hereunder.

          (iv) Issuance of Shares.  Unrestricted Shares, evidenced in any manner
     as the Committee shall deem appropriate,  shall be nonforfeitable and shall
     be issued to the  Participant  promptly after the  applicable  restrictions
     have lapsed or otherwise terminated or been satisfied.

     (d) Performance Awards. The Committee shall have authority to determine the
Employees who may receive a Performance  Award,  which shall consist of a right,
denominated  or payable in cash,  Shares,  other  securities  or other  property
(including  Restricted  Stock),  and that shall  confer on the  holder  thereof,
rights  valued  at an amount  determined  by the  Committee  and  payable  to or
exercisable by the holder thereof,  in whole or in part, upon the achievement of
prescribed  performance  goals  during  prescribed  performance  periods  as the
Committee shall establish. Performance Awards shall be based upon achievement of
a  specified  performance  goal  or  goals  established  by the  Committee.  The
Committee, in its sole discretion, may provide for a reduction in the value of a
Performance Award during the performance  period and prior to certification that
the  established  performance  goal(s) has been met.  When  earned,  Performance
Awards may be paid in a lump sum or in  installments  following the close of the
performance  period  or,  in  accordance  with  procedures  established  by  the
Committee, on a deferred basis.

     (e) Stock Compensation. The Committee shall have authority to pay in Shares
all or any portion of the amounts payable under any compensation  program of the
Company.  The  number and type of Shares to be  distributed  in lieu of the cash
compensation applicable to any Award, as well as the terms and conditions of any
bonus awards, shall be determined by the Committee.

     (f) Other Stock-Based  Awards.  The Committee is hereby authorized to grant
to eligible  Employees an "Other  Stock-Based  Award,"  which shall consist of a
right

          (i) that is not an Award or right described in Section 6(a), (b), (c),
     (d), or (e) above, and

          (ii) that is  denominated or payable in, valued in whole or in part by
     reference  to, or  otherwise  based on or  related  to,  Shares  (including
     securities  convertible into Shares),  as are deemed by the Committee to be
     consistent with the purposes of the Plan.  Subject to the terms of the Plan
     and any applicable Award Agreement, the Committee shall determine the terms
     and conditions of any Other Stock-Based Award.

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     (g) Exercise of Option or SAR Awards.

          (i) Notice.  Unless otherwise prescribed by the Committee,  Awards may
     be exercised only by written notice of exercise (the "Exercise Notice"), in
     the form  prescribed  by the  Committee,  delivered  to the  Company to the
     Financial  Benefit Plan  Administration  Manager or other Company  official
     administering the Plan, and signed by the Participant or the representative
     or transferee  thereof.  The date on which the Exercise Notice is delivered
     to the  Company  shall be the  "Notice  Date." The  Exercise  Notice  shall
     specify a date (the "Settlement  Date"),  not less than three business days
     nor more than ten business days  following the Notice Date,  upon which the
     Shares or other rights shall be issued or  transferred  to the  Participant
     (or other person  entitled to exercise the Award) and the Award's  exercise
     price shall be paid to the Company.

          (ii) Payment.  Unless  otherwise  prescribed by the Committee,  on the
     Settlement Date, the person exercising an Award shall tender to the Company
     full payment for the Shares or other rights with respect to which the Award
     is exercised, together with an additional amount equal to the amount of any
     taxes  required to be  collected  or withheld by the Company in  connection
     with the exercise of the Award (the "Tax Payment").

          (iii) Tax Payment Election.  Subject to the approval of the Committee,
     and to any rules and  limitations  as the  Committee  may  adopt,  a person
     exercising  an  Award  may  make  the Tax  Payment  in  whole or in part by
     electing,  at or before the time of  exercise  of the Award,  either (A) to
     have the Company withhold from the number of Shares otherwise deliverable a
     number of Shares whose Fair Market Value equals the Tax Payment,  or (B) to
     deliver  certificates  for other Shares owned by the person  exercising the
     Award,  endorsed in blank with appropriate  signature  guarantee,  having a
     Fair  Market  Value  equal  to the  amount  otherwise  to be  collected  or
     withheld.

          (iv)  Payment  with Stock.  Subject to approval  by the  Committee,  a
     person exercising an Award for the receipt of Shares may pay for the Shares
     by tendering to the Company other Shares legally and beneficially  owned by
     that person at the time of the  exercise of the Award.  The  certificate(s)
     representing  any Shares  tendered in payment of an Award's  exercise price
     must be  accompanied  by a  stock  power  duly  executed  with  appropriate
     signature guarantees. The Committee may, in its sole discretion, refuse any
     tender of Shares.  If the  person  elects to  rescind  his or her  Exercise
     Notice,  the person  may again  (subject  to the other  terms of this Plan)
     deliver an Exercise  Notice with  respect to the Award at any time prior to
     its expiration date.

          (v) Valuation. Any calculation with respect to a Participant's income,
     required  tax  withholding  or  other  matters  required  to be made by the
     Company  upon the  exercise of an Award shall be made using the Fair Market
     Value of the Shares on the Notice Date,  whether or not the Exercise Notice
     is  delivered  to the Company  before or after the close of trading on that
     date, unless otherwise specified by the Committee.

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          (vi) Rights as  Stockholder  . Except as  provided in Section  6(c) of
     this  Plan,  until the  issuance  of the stock  certificate(s)  for  Shares
     purchased  hereunder (as evidenced by the appropriate entry on the books of
     the Company or any authorized  transfer agent of the Company),  no right to
     vote or  receive  dividends  or any other  rights as a  stockholder  of the
     Company  shall  exist with  respect  to such  Shares,  notwithstanding  the
     exercise of any Award.  No adjustment  will be made for a dividend or other
     rights  for  which  the  record  date  is  prior  to  the  date  the  stock
     certificates  evidencing  such  Shares  are  issued,  except  as  otherwise
     provided in this Plan.

     (h) General.

          (i) Grants. Awards may be granted, in the discretion of the Committee,
     either alone or in addition to, in tandem with, or in substitution  for any
     other Award  granted  under the Plan or any award  granted  under any other
     plan of the Company or any  Affiliate.  Awards granted in addition to or in
     tandem  with  other  Awards or awards  granted  under any other plan of the
     Company or any Affiliate may be granted  either at the same time as or at a
     different  time from the grant of other  Awards or  awards.  The  Committee
     shall not have the authority to reprice an Award once granted, or to cancel
     and reissue an Award at a lower price.

          (ii) Forms of Payment by Company. Subject to the terms of the Plan and
     of any applicable Award Agreement,  payments or transfers to be made by the
     Company or an Affiliate upon the grant, exercise or payment of an Award may
     be made in any  form as the  Committee  shall  determine,  including  cash,
     Shares,  other  securities,   other  Awards  or  other  property,   or  any
     combination thereof, and shall be made in a single payment.

          (iii)  Nonassignability.  Without  prior  written  approval  from  the
     Committee,  no Award granted under this Plan shall be  transferable  by the
     Participant,  except  upon  Participant's  death and then the same shall be
     transferred to the  Participant's  beneficiary  designated under the Valero
     Energy  Corporation  Beneficiary  Designation  Form, or if there is no such
     designation, then the same shall be transferred pursuant to the will of the
     Participant  and if there is no will,  then pursuant to the applicable laws
     of descent and  distribution,  and no Participant or other person  claiming
     by,  through or under a Participant  shall have any right to sell,  assign,
     transfer,  pledge,  anticipate,  mortgage or otherwise encumber,  transfer,
     hypothecate  or  convey in  advance  of actual  receipt  any Award  payable
     hereunder,  or any part thereof, all of which are, and all rights in and to
     which   are,   hereby   expressly   declared   to  be   nonassignable   and
     nontransferable;  any such purported sale, assignment or conveyance without
     the Committee's  prior approval shall be void and of no force or effect. No
     Award shall, prior to actual payment or delivery,  be subject to seizure or
     sequestration for the payment of any debts, judgments,  alimony or separate
     maintenance owed by a Participant,  or other person claiming by, through or
     under a Participant, or be transferable by operation of law in the event of
     bankruptcy or insolvency.

          (iv) Term of Awards.  The term of each  Award  shall be for the period
     determined by the Committee,  provided, that, in no event shall the term of
     any Award exceed a period of 10 years.

                                       9
<PAGE>

          (v)  Share   Certificates.   All  certificates  for  Shares  or  other
     securities  of the  Company  or any  Affiliate  delivered  under  the  Plan
     pursuant to any Award or the exercise  thereof  shall be subject to (A) all
     stop  transfer  orders and other  restrictions  as the  Committee  may deem
     advisable   under  the  Plan,  (B)  the  rules,   regulations,   and  other
     requirements  of the SEC and any stock  exchange  upon  which the Shares or
     other  securities are then listed and (C) any  applicable  federal or state
     laws.  The  Committee  may cause a legend or legends to be put on any stock
     certificates to make appropriate reference to applicable restrictions.

          (vi)   Delivery  of  Shares  or  Other   Securities   and  Payment  of
     Consideration. No Shares or other securities shall be delivered pursuant to
     any Award until payment in full of any amount  required to be paid pursuant
     to the Plan or the applicable  Award  Agreement is received by the Company.
     Payment  may be made in any form or  method  prescribed  by the  Committee,
     including cash, Shares,  other securities,  other Awards or other property,
     or any combination thereof, provided that the combined value, as determined
     by the  Committee,  of all cash and cash  equivalents  and the Fair  Market
     Value of any Shares or other  property  tendered  to the  Company as of the
     date of such  tender,  is at least equal to the full amount  required to be
     paid.

          (vii) Termination of Employment.

                    (A) Except as otherwise  provided in the Plan,  or otherwise
               determined by the Committee and included in the applicable  Award
               Agreement,  an Option,  SAR or Other  Stock-Based Award having an
               exercise  provision  (each, an "Exercisable  Award") vests in and
               may be exercised by a Participant  only while the  Participant is
               and has  continually  been  since  the  date of the  grant of the
               Exercisable Award an Employee. If a Participant's employment with
               the Company is voluntarily  terminated by the Participant  (other
               than through retirement,  death or disability; see subsection (C)
               below),  or is  terminated  by the  Company  for Cause,  then any
               Exercisable  Award previously  granted to that Participant  under
               the Plan which remains  unexercised,  whether vested or unvested,
               shall  automatically  lapse  and be  forfeited  at the  close  of
               business  on  the  date  of  the  Participant's   termination  of
               employment.   If  a  Participant's  employment  is  involuntarily
               terminated by the Company other than for Cause,  (1) that portion
               of any Exercisable Award which has not vested on or prior to such
               date of termination shall  automatically  lapse and be forfeited,
               and (2) all vested but unexercised  Exercisable Awards previously
               granted to that  Participant  under the Plan shall  automatically
               lapse  and be  forfeited  at the  close of  business  on the last
               business  day of the  twelfth  month  following  the  date of the
               Participant's  termination,  unless an  Exercisable  Award sooner
               expires according to its original terms.

                    (B) Except as otherwise  provided in the Plan,  or otherwise
               determined by the Committee and included in the applicable  Award
               Agreement,  if a  Participant's  employment  with the  Company is
               voluntarily  terminated  by the  Participant  (other than through
               retirement, death or disability; see subsection (C) below), or is
               terminated  by the  Company  with  or  without  Cause,  then  any
               Restricted Stock or Performance Award previously  granted to that
               Participant   under  the  Plan  which  remains   unvested   shall
               automatically  lapse and be forfeited at the close of business on
               the date of the Participant's termination of employment.

                                       10
<PAGE>

                    (C) Except as otherwise  provided in the Plan,  or otherwise
               determined by the Committee and included in the applicable  Award
               Agreement, if a Participant's employment is terminated because of
               retirement,  death  or  disability  (with  the  determination  of
               disability  to  be  made  within  the  sole   discretion  of  the
               Committee),  any  Award  held  by the  Participant  shall  remain
               outstanding  and  vest or  become  exercisable  according  to the
               Award's original terms;  provided,  however,  that any Restricted
               Stock held by the  Participant  which remains  unvested as of the
               date of retirement,  death or disability  shall  immediately vest
               and become non-forfeitable as of such date.

                    (D)  The  Committee  or  the  Chief  Executive  Officer  may
               prescribe  new or additional  terms for the vesting,  exercise or
               realization of any Award; provided,  however, that no such action
               shall deprive a Participant  or  beneficiary,  without his or her
               consent, of the right to any benefit accrued to his or her credit
               at the time of such action.

               (viii)  Award  Agreements.  Awards  shall be  evidenced  by Award
          Agreements  having terms and  conditions,  not  inconsistent  with the
          Plan, as prescribed by the  Committee.  Award  Agreements  need not be
          uniform.

SECTION 7. Amendment and Termination.

     Except to the extent  prohibited  by  applicable  law and unless  otherwise
expressly provided in an Award Agreement or in the Plan:

     (a) Amendments to the Plan.  The Committee or the Board may amend,  suspend
or terminate the Plan without the consent of any stockholder, Participant, other
holder or beneficiary of an Award, or other Person.

     (b) Amendments to Awards.  The Committee may waive any conditions or rights
under,  amend any terms of,  or alter any Award  theretofore  granted;  provided
that,  no  change  in  any  Award  shall  reduce  the  benefit  accruing  to any
Participant without the consent of the Participant.

     (c) Unusual or Nonrecurring  Events.  The Committee is hereby authorized to
make adjustments in the terms, conditions, and criteria of Awards in recognition
of unusual or  nonrecurring  events  (including the events  described in Section
4(c) of the  Plan)  affecting  the  Company,  any  Affiliate,  or the  financial
statements  of the Company or any  Affiliate,  or in  recognition  of changes in
applicable laws, regulations,  or accounting principles,  whenever the Committee
determines that such adjustments are appropriate in order to prevent dilution or
enlargement of the benefits or potential  benefits intended to be made available
under the Plan.

                                       11
<PAGE>

SECTION 8. Change Of Control.

     (a)  Effect.  If a Change of  Control  shall  occur,  each  Award held by a
Participant pursuant to the Plan shall remain in full force and effect until the
earlier of (i) the expiration  date of the Award,  or (ii) 90 days following the
Participant's date of termination of employment with the Company.

     (b) Defined. A Change of Control shall be deemed to occur when:

          (i)  the   stockholders  of  the  Company  approve  any  agreement  or
     transaction  pursuant to which:  (A) the Company will merge or  consolidate
     with any other Person (other than a wholly owned subsidiary of the Company)
     and will not be the surviving entity (or in which the Company survives only
     as the  subsidiary  of another  entity);  (B) the Company  will sell all or
     substantially  all of its assets to any other  Person  (other than a wholly
     owned subsidiary of the Company);  or (C) the Company will be liquidated or
     dissolved; or

          (ii) any "person" or "group" (as these terms are used in Section 13(d)
     and 14(d) of the Exchange  Act) other than the Company,  any  subsidiary of
     the Company,  any employee benefit plan of the Company or its subsidiaries,
     or any entity  holding Shares for or pursuant to the terms of such employee
     benefit plans, is or becomes an "Acquiring Person" as defined in the Rights
     Agreement (or any successor  rights  agreement) (or, if no Rights Agreement
     is then in effect,  such  person or group  acquires or holds such number of
     shares as,  under the terms and  conditions  of the most recent such rights
     agreement to be in force and effect, would have caused such person or group
     to be an "Acquiring Person" thereunder); or

          (iii)  any  "person"  or  "group"  shall  commence  a tender  offer or
     exchange offer for 15% or more of the Shares then  outstanding,  or for any
     number or amount of Shares which,  if the tender or exchange  offer were to
     be fully  subscribed  and all Shares for which the tender or exchange offer
     is made were to be  purchased  or  exchanged  pursuant to the offer,  would
     result in the acquiring person or group directly or indirectly beneficially
     owning 50% or more of the Shares then outstanding; or

          (iv)  individuals  who,  as of any date,  constitute  the  Board  (the
     "Incumbent Board") thereafter cease for any reason to constitute at least a
     majority of the Board;  provided,  however,  that any individual becoming a
     director  whose  election,  or  nomination  for  election by the  Company's
     stockholders,  was  approved  by a  vote  of at  least  a  majority  of the
     directors then comprising the Incumbent Board shall be considered as though
     such individual were a member of the Incumbent  Board,  but excluding,  for
     this purpose, any such individual whose initial assumption of office occurs
     as a result of an actual or threatened election contest with respect to the
     election or removal of directors or other actual or threatened solicitation
     of proxies or  consents by or on behalf of a person or group other than the
     Board; or

          (v) the occurrence of the Distribution  Date (as defined in the Rights
     Agreement); or

                                       12
<PAGE>

          (vi) any  other  event  determined  by the Board or the  Committee  to
     constitute a "Change of Control" hereunder.

     (c) Actions of  Committee.  In addition to the  Committee's  authority  set
forth in Section 7(c) of the Plan, in order to maintain the Participants' rights
in the event of any Change of Control, the Committee,  as constituted before the
Change of Control,  is hereby  authorized,  and has sole  discretion,  as to any
Award, either at the time the Award is made hereunder or any time thereafter, to
take any one or more of the following actions:

          (i) provide for the  acceleration of any time periods  relating to the
     vesting,  exercise  or  realization  of the  Award so that the Award may be
     exercised or realized in full on or before a date fixed by the Committee;

          (ii)  provide for the  purchase of any Award,  upon the  Participant's
     request,  for an amount of cash  equal to the  amount  that could have been
     attained upon the exercise of the Award or realization of the Participant's
     rights in the Award had the Award been currently exercisable or payable;

          (iii) adjust any outstanding  Award as the Committee deems appropriate
     to reflect the Change of Control; or

          (iv)  cause  any  outstanding  Award  to be  assumed,  or  new  rights
     substituted  therefor,  by the acquiring or surviving corporation after the
     Change of  Control.  The  Committee  may in its  discretion  include  other
     provisions and  limitations in any Award Agreement as it may deem equitable
     and in the best interests of the Company.

SECTION 9. General Provisions.

     (a) No Rights to Awards.  No  Employee,  Participant  or other Person shall
have any claim to be granted any Award.  The  Committee is not required to treat
uniformly the Employees,  Participants,  or holders or  beneficiaries  of Awards
when making grants of Awards under the Plan.  The terms and conditions of Awards
are not required to be the same with respect to each recipient.

     (b)  Delegation.  Subject to the terms of the Plan and applicable  law, the
Committee may delegate to one or more officers or managers of the Company or any
Affiliate,  or to a committee  of such  officers  or  managers,  the  authority,
subject to the terms and  limitations the Committee  shall  determine,  to grant
Awards  or to  cancel,  modify or waive  rights  with  respect  to, or to amend,
suspend, or terminate Awards.

     (c)  Withholding.  The Company or any  Affiliate  is hereby  authorized  to
withhold  from any Award,  from any payment due or transfer made under any Award
or  under  the  Plan or  from  any  compensation  or  other  amount  owing  to a
Participant the amount (in cash, Shares, other securities, other Awards or other
property) of any  applicable  withholding  taxes with  respect to an Award,  its
exercise, the lapse of restrictions thereon,  payment or transfer under an Award
or under the Plan, and to take any other action  necessary in the opinion of the
Company to satisfy all obligations for the payment of the taxes.

                                       13
<PAGE>

     (d) No Limit on Other Compensation  Arrangements.  Nothing contained in the
Plan shall prevent the Company or any  Affiliate  from adopting or continuing in
effect any other compensation arrangements.

     (e) No Right to Employment. The grant of an Award shall not be construed as
creating a contract of employment or giving Participant the right to be retained
in the  employ of the  Company  or any  Affiliate.  Further,  the  Company or an
Affiliate may at any time dismiss a Participant from  employment,  free from any
liability or any claim under the Plan,  unless otherwise  expressly  provided in
the Plan or in any Award Agreement.

     (f) Governing Law. The validity,  construction,  and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in accordance
with the laws of the State of Texas and applicable federal law.

     (g)  Severability.  If any provision of the Plan or any Award is or becomes
or is deemed to be invalid,  illegal, or unenforceable in any jurisdiction as to
any Person or Award,  or would  disqualify  the Plan or any Award  under any law
deemed applicable by the Committee,  such provision shall be construed or deemed
amended to conform to  applicable  laws,  or if it cannot be construed or deemed
amended without, in the determination of the Committee,  materially altering the
intent of the Plan or the Award,  such  provision  shall be  stricken as to such
jurisdiction,  Person or Award and the  remainder of the Plan and any such Award
shall remain in full force and effect.

     (h) NYSE Listing and Other Laws and Regulations.  Notwithstanding  anything
to the contrary  contained in this Plan, in any Award, or any Award Agreement or
other  agreement  entered into under this Plan, the grant or making of any Award
shall be  conditional  and shall be granted or awarded  subject to acceptance of
the  Shares  deliverable  pursuant  to the Award for  listing  on the NYSE.  The
Committee  may refuse to issue or  transfer  any  Shares or other  consideration
under  an Award  if,  acting  in its sole  discretion,  it  determines  that the
issuance  or  transfer of the Shares or other  consideration  might  violate any
applicable law or regulation, violate any regulation for admission or trading on
the NYSE, or entitle the Company to recover any  consideration or proceeds under
Section 16 of the  Exchange  Act,  and any payment  tendered to the Company by a
Participant, other holder or beneficiary in connection with the exercise of such
Award shall be promptly refunded.

     (i) No Trust or Fund  Created.  Neither the Plan nor any Award shall create
or be construed to create a trust or separate  fund of any kind or any fiduciary
relationship between the Company or any Affiliate and a Participant or any other
Person.  To the extent that any Person acquires a right to receive payments from
the  Company or any  Affiliate  pursuant  to an Award,  such  right  shall be no
greater than the right of any unsecured  general  creditor of the Company or any
Affiliate.

     (j) No Fractional Shares. No fractional Shares shall be issued or delivered
pursuant to the Plan or any Award,  and the Committee  shall  determine  whether
cash, other  securities,  or other property shall be paid or transferred in lieu
of any  fractional  Shares or whether  fractional  Shares or any rights  thereto
shall be canceled, terminated, or otherwise eliminated.

                                       14
<PAGE>

     (k)  Headings.  Headings are given to the Sections and  subsections  of the
Plan solely as a convenience to facilitate reference.  The headings shall not be
deemed in any way material or relevant to the construction or  interpretation of
the Plan or any provision thereof.

     (l)  Construction.  Use of the  term  "including"  in this  Plan  shall  be
construed to mean "including but not limited to."

SECTION 10. Effective Date of the Plan.

     The Plan shall be effective  April 23, 2003,  following its approval by the
Compensation Committee of the Board.

SECTION 11. Term of the Plan.

     The Plan  shall  expire  on  April  23,  2013.  However,  unless  otherwise
expressly  provided in the Plan or in an applicable Award  Agreement,  any Award
made prior to, and  outstanding  on such date,  shall remain valid in accordance
with its terms and  conditions,  and the authority of the Board or the Committee
to amend,  suspend,  or terminate  any such Award or to waive any  conditions or
rights under any such Award in  accordance  with the Plan,  shall extend  beyond
such date.


                                       15
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