Document:

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                                                                     EXHIBIT 4.5

                            VALERO ENERGY CORPORATION

                                       and

                BANK ONE TRUST COMPANY, N.A., as Collateral Agent

                                       and

            BANK ONE TRUST COMPANY, N.A., as Securities Intermediary

                                       and

                THE BANK OF NEW YORK, as Purchase Contract Agent

                                PLEDGE AGREEMENT

                            Dated as of June 28, 2000

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                                TABLE OF CONTENTS

<TABLE>

<S>     <C>          <C>                                                                           <C>
Section 1.  Definitions.............................................................................1

Section 2.  Pledge..................................................................................5
        Section 2.1  Pledge.........................................................................5
        Section 2.2  Control; Financing Statement...................................................5
        Section 2.3  Termination....................................................................5

Section 3.  Distributions on Pledged Collateral.....................................................6
        Section 3.1  Income Distributions...........................................................6
        Section 3.2  Principal Payments Following Termination Event.................................6
        Section 3.3  Principal Payments Prior To or On Purchase Contract Settlement Date............6
        Section 3.4  Payments to Purchase Contract Agent............................................7
        Section 3.5  Assets Not Properly Released...................................................7

Section 4.  Control.................................................................................7
        Section 4.1  Establishment of Collateral Account............................................7
        Section 4.2  Treatment as Financial Assets..................................................8
        Section 4.3  Sole Control by Collateral Agent...............................................8
        Section 4.4  Securities Intermediary's Location.............................................8
        Section 4.5  No Other Claims................................................................8
        Section 4.6  Investment and Release.........................................................8
        Section 4.7  Statements and Confirmations...................................................9
        Section 4.8  Tax Allocations................................................................9
        Section 4.9  No Other Agreements............................................................9
        Section 4.10 Powers Coupled With An Interest................................................9

Section 5.  Initial Deposit; Establishment of Treasury PEPS Units and
            Reestablishment of PEPS Units...........................................................9
        Section 5.1  Initial Deposit of Trust Preferred Securities..................................9
        Section 5.2  Establishment of Treasury PEPS Units...........................................9
        Section 5.3  Reestablishment of PEPS Units.................................................11
        Section 5.4  Termination Event.............................................................13
        Section 5.5  Cash Settlement...............................................................14
        Section 5.6  Early Settlement..............................................................15
        Section 5.7  Application of Proceeds in Settlement of Purchase Contracts...................16
        Section 5.8  Tax Event Redemption..........................................................17

Section 6.  Voting Rights - Trust Preferred Securities and Pledged Senior Deferrable Notes.........17

Section 7.  Rights and Remedies....................................................................18
        Section 7.1  Rights and Remedies of the Collateral Agent...................................18
        Section 7.2  Substitution of Senior Deferrable Notes.......................................19
        Section 7.3  Tax Event Redemption..........................................................19
        Section 7.4  Substitutions.................................................................20
</TABLE>

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<TABLE>
<S>    <C>           <C>                                                                           <C>
Section 8.   Representations and Warranties; Covenants.............................................20
        Section 8.1  Representations and Warranties................................................20
        Section 8.2  Covenants.....................................................................21

Section 9.  The Collateral Agent and the Securities Intermediary...................................21
        Section 9.1  Appointment, Powers and Immunities............................................21
        Section 9.2  Instructions of the Company...................................................22
        Section 9.3  Reliance by Collateral Agent and Securities Intermediary......................23
        Section 9.4  Rights in Other Capacities....................................................23
        Section 9.5  Non-Reliance on Collateral Agent and Securities Intermediary..................23
        Section 9.6  Compensation and Indemnity....................................................23
        Section 9.7  Failure to Act................................................................24
        Section 9.8  Resignation of Collateral Agent and Securities Intermediary...................25
        Section 9.9  Right to Appoint Agent or Advisor.............................................26
        Section 9.10 Survival......................................................................26
        Section 9.11 Exculpation...................................................................27

Section 10.  Amendment.............................................................................27
        Section 10.1  Amendment Without Consent of Holders.........................................27
        Section 10.2  Amendment With Consent of Holders............................................27
        Section 10.3  Execution of Amendments......................................................28
        Section 10.4  Effect of Amendments.........................................................28
        Section 10.5  Reference to Amendments......................................................29

Section 11.  Miscellaneous.........................................................................29
        Section 11.1  No Waiver....................................................................29
        Section 11.2  Governing Law................................................................29
        Section 11.3  Notices......................................................................29
        Section 11.4  Successors and Assigns.......................................................30
        Section 11.5  Counterparts.................................................................30
        Section 11.6  Severability.................................................................30
        Section 11.7  Expenses, etc. ..............................................................30
        Section 11.8  Security Interest Absolute...................................................31
        Section 11.9  Notice of Tax Event, Tax Event Redemption and Termination Event..............31
</TABLE>

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<TABLE>
<S>         <C>                                                                                   <C>
EXHIBIT A   INSTRUCTION FROM PURCHASE CONTRACT AGENT TO COLLATERAL
              AGENT (Establishment of Treasury PEPS Units)........................................A-1

EXHIBIT B   INSTRUCTION FROM COLLATERAL AGENT TO SECURITIES
              INTERMEDIARY (Establishment of Treasury PEPS Units).................................B-1

EXHIBIT C   INSTRUCTION FROM PURCHASE CONTRACT AGENT TO COLLATERAL
              AGENT (Reestablishment of PEPS Units )..............................................C-1

EXHIBIT D   INSTRUCTION FROM COLLATERAL AGENT TO SECURITIES
              INTERMEDIARY (Reestablishment of PEPS Units)........................................D-1

EXHIBIT E   NOTICE OF CASH SETTLEMENT FROM SECURITIES INTERMEDIARY
              TO PURCHASE CONTRACT AGENT (Cash Settlement Amounts)................................E-1
</TABLE>

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                                PLEDGE AGREEMENT

         PLEDGE AGREEMENT, dated as of June 28, 2000, among Valero Energy
Corporation, a Delaware corporation (the "COMPANY"), Bank One Trust Company,
N.A., a national banking association, as collateral agent (in such capacity,
together with its successors in such capacity, the "COLLATERAL AGENT"), Bank One
Trust Company, N.A. a national banking association, as securities intermediary
with respect to the Collateral Account (in such capacity, together with its
successors in such capacity, the "SECURITIES INTERMEDIARY"), and The Bank of New
York, as purchase contract agent and as attorney-in-fact of the Holders from
time to time of the Securities under the Purchase Contract Agreement (in such
capacity, together with its successors in such capacity, the "PURCHASE CONTRACT
AGENT").

                                    RECITALS

         The Company and the Purchase Contract Agent are parties to the Purchase
Contract Agreement dated as of the date hereof (as modified and supplemented and
in effect from time to time, the "PURCHASE CONTRACT AGREEMENT"), pursuant to
which there may be issued up to 6,000,000 Premium Equity Participating Security
Units--PEPS(SM) Units (the "SECURITIES") (including 900,000 Securities relating
to the over-allotment option granted to the underwriters pursuant to the
Underwriting Agreement).

         Each PEPS Unit, at issuance, consists of a unit comprised of (a) a
stock purchase contract (the "PURCHASE CONTRACT") under which the Holder will
purchase from the Company on the Purchase Contract Settlement Date, for an
amount equal to $25 (the "STATED AMOUNT"), a number of shares of Valero Energy
Corporation, Inc. common stock, par value $0.01 ("COMMON STOCK"), equal to the
Settlement Rate, and (b) beneficial ownership of a Trust Preferred Security (a
"PREFERRED SECURITY") issued by VEC Trust I (the "TRUST"), having a liquidation
amount equal to the Stated Amount and maturing on August 18, 2005.

         Pursuant to the terms of the Purchase Contract Agreement and the
Purchase Contracts, the Holders of the Securities have irrevocably authorized
the Purchase Contract Agent, as attorney-in-fact of such Holders, among other
things, to execute and deliver this Agreement on behalf of such Holders and to
grant the pledge provided herein of the Collateral Account to secure the
Obligations.

         Accordingly, the Company, the Collateral Agent, the Securities
Intermediary and the Purchase Contract Agent, on its own behalf and as
attorney-in-fact of the Holders from time to time of the Securities, agree as
follows:

SECTION 1. DEFINITIONS.

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

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

         (b) the words "HEREIN," "HEREOF" and "HEREUNDER" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section, Exhibit or other subdivision;

         (c) the following terms which are defined in the UCC shall have the
meanings set forth therein: "CERTIFICATED SECURITY," "CONTROL," "FINANCIAL
ASSET," "ENTITLEMENT ORDER," "SECURITIES ACCOUNT" and "SECURITY ENTITLEMENT;"

         (d) the following terms have the meanings assigned to them in the
Purchase Contract Agreement: "ACT," "BANKRUPTCY CODE," "BOARD RESOLUTION,"
"BUSINESS DAY," "CASH SETTLEMENT," "CERTIFICATE," "EARLY SETTLEMENT," "EARLY
SETTLEMENT AMOUNT," "EARLY SETTLEMENT DATE," "HOLDER," "OFFICERS' CERTIFICATE,"
"OPINION OF COUNSEL," "OUTSTANDING SECURITIES," "PEPS UNIT," "PURCHASE
CONTRACT," "PURCHASE CONTRACT SETTLEMENT DATE," "PURCHASE PRICE," "REMARKETING
AGENT," "REMARKETING AGREEMENT," "SENIOR DEFERRABLE NOTES," "SETTLEMENT RATE,"
"TERMINATION EVENT," "TREASURY PEPS UNIT," and "UNDERWRITING AGREEMENT;"

         (e) the following terms have the meanings assigned to them in the
Amended and Restated Declaration of Trust of VEC Trust I, of even date herewith
(the "DECLARATION"): "APPLICABLE OWNERSHIP INTEREST," "APPLICABLE PRINCIPAL
AMOUNT," "FAILED REMARKETING," "INDENTURE," "INDENTURE TRUSTEE," "PRIMARY
TREASURY DEALER," "PROPERTY TRUSTEE," "QUOTATION AGENT," "REDEMPTION AMOUNT,"
"REDEMPTION PRICE," "TAX EVENT," "TAX EVENT REDEMPTION," "TAX EVENT REDEMPTION
DATE," and "TREASURY PORTFOLIO;" and

         (f) the following terms have the meanings given to them in this Section
1(f):

                  "AGREEMENT" means this Pledge Agreement, as the same may be
         amended, modified or supplemented from time to time.

                  "CASH" means any coin or currency of the United States as at
         the time shall be legal tender for payment of public and private debts.

                  "COLLATERAL ACCOUNT" means the collective reference to:

                  (1) the securities account of Bank One Trust Company, N.A., as
         Collateral Agent, maintained by the Securities Intermediary and
         designated "Bank One Trust Company, N.A., as Collateral Agent of Valero
         Energy Corporation, as pledgee of The Bank of New York, as the Purchase
         Contract Agent on behalf of and as attorney-in-fact for the Holders";

                  (2) all investment property and other financial assets from
         time to time credited to the Collateral Account, including, without
         limitation, (A) the Preferred Securities and security entitlements
         relating thereto which are a component of the PEPS Units from time to
         time, (B) the Applicable Ownership Interests (as specified in Clause
         (A) of the

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         definition of such term) of the Holders with respect to the Treasury
         Portfolio which are a component of the PEPS Units from time to time;
         (C) the Senior Deferrable Notes and security entitlements relating
         thereto which are a component of the PEPS Units from time to time, (D)
         any Treasury Securities and security entitlements relating thereto
         delivered from time to time upon establishment of Treasury PEPS Units
         in accordance with Section 5.2 hereof and (E) payments made by Holders
         pursuant to Section 5.5 hereof;

                  (3) all Proceeds of any of the foregoing (whether such
         Proceeds arise before or after the commencement of any proceeding under
         any applicable bankruptcy, insolvency or other similar law, by or
         against the pledgor or with respect to the pledgor); and

                  (4) all powers and rights now owned or hereafter acquired
         under or with respect to the Collateral Account

         ((2), (3) and (4), being collectively referred to as the "COLLATERAL").

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

         "OBLIGATIONS" means, with respect to each Holder, the collective
reference to all obligations and liabilities of such Holder under such Holder's
Purchase Contract, the Purchase Contract Agreement, and this Agreement or any
other document made, delivered or given in connection herewith or therewith, in
each case whether on account of principal, interest (including, without
limitation, interest accruing before and after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to such Holder, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding), fees, indemnities, costs,
expenses or otherwise (including, without limitation, all fees and disbursements
of counsel to the Company or the Collateral Agent or the Securities Intermediary
that are required to be paid by the Holder pursuant to the terms of any of the
foregoing agreements).

         "PERMITTED INVESTMENTS" means any one of the following which shall
mature not later than the next succeeding Business Day:

(1) any evidence of indebtedness with an original maturity of 365 days or less
issued, or directly and fully guaranteed or insured, by the United States of
America or any agency or instrumentality thereof (provided that the full faith
and credit of the United States of America is pledged in support of the timely
payment thereof or such indebtedness constitutes a general obligation of it);
(2) deposits, certificates of deposit or acceptances with an original maturity
of 365 days or less of any institution which is a member of the Federal Reserve
System having combined capital and surplus and undivided profits of not less
than $200.0 million at the time of deposit (and which may include the Collateral
Agent); (3) investments with an original maturity of 365 days or less of any
Person that is fully and unconditionally guaranteed by a bank referred to in
clause (2); (4) repurchase agreements and reverse repurchase agreements relating
to marketable direct obligations issued or unconditionally guaranteed by the
United States Government or issued by any agency thereof and backed as to timely
payment by the full faith and credit of the United

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States Government; (5) investments in commercial paper, other than commercial
paper issued by the Company or its affiliates, of any corporation incorporated
under the laws of the United States or any State thereof, which commercial paper
has a rating at the time of purchase at least equal to "A-1" by Standard &
Poor's Ratings Services ("S&P") or at least equal to "P-1" by Moody's Investors
Service, Inc. ("MOODY'S"); and (6) investments in money market funds (including,
but not limited to, money market funds managed by the Collateral Agent or an
affiliate of the Collateral Agent) registered under the Investment Company Act
of 1940, as amended, rated in the highest applicable rating category by S&P or
Moody's.

         "PERSON" means any legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint-stock company, limited
liability company, trust, unincorporated organization or government or any
agency or political subdivision thereof.

         "PLEDGE" means the lien and security interest created by this
Agreement.

         "PLEDGED PREFERRED SECURITIES" means the Preferred Securities and
security entitlements with respect thereto from time to time credited to the
Collateral Account and not then released from the Pledge.

         "PLEDGED SENIOR DEFERRABLE NOTES" means Senior Deferrable Notes and
security entitlements with respect thereto from time to time credited to the
Collateral Account and not then released from the Pledge.

         "PLEDGED TREASURY SECURITIES" means Treasury Securities and security
entitlements with respect thereto from time to time credited to the Collateral
Account and not then released from the Pledge.

         "PROCEEDS" has the meaning ascribed thereto in the UCC and includes,
without limitation, all interest, dividends, cash, instruments, securities,
financial assets (as defined in Section 8-102(a)(9) of the UCC) and other
property received, receivable or otherwise distributed upon the sale, exchange,
collection or disposition of any financial assets from time to time held in the
Collateral Account.

         "PURCHASE CONTRACT AGENT" has the meaning specified in the paragraph
preceding the recitals of this Agreement.

         "TRADES" means the Treasury/Reserve Automated Debt Entry System
maintained by the Federal Reserve Bank of New York pursuant to the TRADES
Regulations.

         "TRADES REGULATIONS" means the regulations of the United States
Department of the Treasury, published at 31 C.F.R. Part 357, an amended from
time to time. Unless otherwise defined herein, all terms defined in the TRADES
Regulations are used herein as therein defined.

         "TRANSFER" means in the case of certificated securities in registered
form, delivery as provided in Section 8-301(a) of the UCC, indorsed to the
transferee or in blank by an effective endorsement; in the case of Treasury
Securities, registration of the transferee as the owner of such Treasury
Securities on TRADES; and in the case of security entitlements, including,

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without limitation, security entitlements with respect to Treasury Securities, a
securities intermediary indicating by book entry that such security entitlement
has been credited to the transferee's securities account.

         "TREASURY SECURITIES" means zero-coupon U.S. treasury securities (Cusip
No. 912820BG1) which mature on August 15, 2003.

         "UCC" means the Uniform Commercial Code as in effect in the State of
New York from time to time.

         "VALUE" means, with respect to any item of Collateral on any date, as
to (1) Cash, the face amount thereof and (2) Treasury Securities, the aggregate
principal amount thereof at maturity and (3) the Preferred Securities, the
liquidation amount thereof.

         SECTION 2.        PLEDGE.

         SECTION 2.1       PLEDGE.

         Each Holder, acting through the Purchase Contract Agent as such
Holder's attorney-in-fact, hereby pledges and grants to the Collateral Agent, as
agent of and for the benefit of the Company, a continuing first priority
security interest in and to, and a lien upon and right of set-off against, all
of such Holder's right, title and interest in and to the Collateral Account to
secure the prompt and complete payment and performance when due (whether at
stated maturity, by acceleration or otherwise) of the Obligations. The
Collateral Agent shall have all of the rights, remedies and recourses with
respect to the Collateral afforded a secured party by the UCC, in addition to,
and not in limitation of, the other rights, remedies and recourses afforded to
the Collateral Agent by this Agreement.

         SECTION  2.2      CONTROL; FINANCING STATEMENT.

         (a) The Collateral Agent shall have control of the Collateral Account
pursuant to the provisions of Section 4 of this Agreement.

         (b) Subsequent to the date of initial issuance of the Securities, the
Purchase Contract Agent shall deliver to the Collateral Agent a financing
statement prepared by the Company for filing in the Office of the Secretary of
State of the State of New York and any other jurisdictions which the Company
deems necessary, signed by the Purchase Contract Agent, as attorney-in-fact for
the Holders, as Debtors, and describing the Collateral.

         SECTION  2.3      TERMINATION.

         As to each Holder, this Agreement and the Pledge created hereby shall
terminate upon the satisfaction of such Holder's Obligations. Upon such
termination, the Securities Intermediary shall Transfer such Holder's portion of
the Collateral to the Purchase Contract Agent for

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distribution to such Holder in accordance with his interest, free and clear of
any lien, pledge or security interest created hereby.

         SECTION 3.        DISTRIBUTIONS ON PLEDGED COLLATERAL.

         SECTION 3.1       INCOME DISTRIBUTIONS.

         All income distributions received by the Securities Intermediary on
account of the Preferred Securities, the Applicable Ownership Interest (as
specified in clause (A) of the definition of such term) of the Treasury
Portfolio, the Senior Deferrable Notes or Permitted Investments from time to
time held in the Collateral Account shall be distributed to the Purchase
Contract Agent (ABA No. 021000018, GLA No. 111-565, A/C No. 072645, Re: Valero
Energy Corp.) for the benefit of the applicable Holders as provided in the
Purchase Contracts or Purchase Contract Agreement.

         SECTION 3.2       PRINCIPAL PAYMENTS FOLLOWING TERMINATION EVENT.

         All payments received by the Securities Intermediary following a
Termination Event of (1) the liquidation amount of Pledged Preferred Securities
or securities entitlements thereto, or (2) the Applicable Ownership Interests
(as specified in Clause (A) of the definition thereof) of the Treasury
Portfolio, (3) the aggregate principal amount of the Pledged Senior Deferrable
Notes or securities entitlements thereto, or (4) the principal amount of the
Pledged Treasury Securities, shall be distributed to the Purchase Contract Agent
for the benefit of the applicable Holders for distribution to such Holders in
accordance with their respective interests.

         SECTION 3.3       PRINCIPAL PAYMENTS PRIOR TO OR ON PURCHASE CONTRACT
                           SETTLEMENT DATE.

         (a) Subject to the provisions of Section 7.2, and except as provided in
clause 3.3(b) below, if no Termination Event shall have occurred, all payments
received by the Securities Intermediary of (1) the liquidation amount with
respect to the Pledged Preferred Securities or security entitlements with
respect thereto, (2) Applicable Ownership Interests (as specified in Clause (A)
of the definition thereof) of the Treasury Portfolio, (3) the aggregate
principal amount with respect to the Pledged Senior Deferrable Notes or security
entitlements with respect thereto or (4) the principal amount of Pledged
Treasury Securities, shall be held and invested in Permitted Investments until
the Purchase Contract Settlement Date and on the Purchase Contract Settlement
Date distributed to the Company as provided in Section 5.7 hereof. Any balance
remaining in the Collateral Account shall be distributed to the Purchase
Contract Agent for the benefit of the applicable Holders for distribution to
such Holders in accordance with their respective interests. Upon the request of
the Securities Intermediary, the Company shall instruct the Securities
Intermediary as to the type of Permitted Investments in which any payments made
under this Section shall be invested, provided, however, that if the Company
fails to deliver such instructions by 10:30 a.m. (New York City time), the
Securities Intermediary shall invest such payments in the Permitted Investments
described in clause 6 of the definition of Permitted Investments.

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         (b) All payments received by the Securities Intermediary of (1) the
liquidation amount of Preferred Securities or security entitlements with respect
thereto, (2) Applicable Ownership interests (as specified in Clause (A) of the
definition thereof) of the Treasury Portfolio, (3) the aggregate principal
amount with respect to the Senior Deferrable Notes or security entitlements with
respect thereto or (4) the principal amount of Treasury Securities or security
entitlements with respect thereto, that, in each case, have been released from
the Pledge shall be distributed to the Purchase Contract Agent for the benefit
of the applicable Holders for distribution to such Holders in accordance with
their respective interests.

         SECTION 3.4       PAYMENTS TO PURCHASE CONTRACT AGENT.

         The Securities Intermediary shall use all commercially reasonable
efforts to deliver payments to the Purchase Contract Agent hereunder to the
account designated by the Purchase Contract Agent for such purpose not later
than 12:00 p.m. (New York City time) on the Business Day such payment is
received by the Securities Intermediary; provided, however, that if such payment
is received on a day that is not a Business Day or after 11:00 A.M. (New York
City time) on a Business Day, then the Securities Intermediary shall use all
commercially reasonable efforts to deliver such payment no later than 10:30 a.m.
(New York City time) on the next succeeding Business Day.

         SECTION  3.5      ASSETS NOT PROPERLY RELEASED.

         If the Purchase Contract Agent or any Holder shall receive any
principal payments on account of financial assets credited to the Collateral
Account and not released therefrom in accordance with this Agreement, the
Purchase Contract Agent or such Holder shall hold the same as trustee of an
express trust for the benefit of the Company and, upon receipt of an Officers'
Certificate of the Company so directing, promptly deliver the same to the
Securities Intermediary for credit to the Collateral Account or to the Company
for application to the Obligations of the Holders, and the Purchase Contract
Agent and Holders shall acquire no right, title or interest in any such payments
of principal amounts so received.

         SECTION  4.       CONTROL

         SECTION  4.1      ESTABLISHMENT OF COLLATERAL ACCOUNT.

         The Securities Intermediary hereby confirms that:

                  (1) the Securities Intermediary has established the Collateral
         Account;

                  (2) the Collateral Account is a securities account;

                  (3) subject to the terms of this Agreement, the Securities
         Intermediary shall treat the Purchase Contract Agent as entitled to
         exercise the rights that comprise any financial asset credited to the
         Collateral Account;

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                  (4) all property delivered to the Securities Intermediary
         pursuant to this Agreement or the Purchase Contract Agreement will be
         credited promptly to the Collateral Account;

                  (5) all securities or other property underlying any financial
         assets credited to the Collateral Account shall be registered in the
         name of the Securities Intermediary, indorsed to the Securities
         Intermediary or in blank, or credited to another securities account
         maintained in the name of the Securities Intermediary, and in no case
         will any financial asset credited to the Collateral Account be
         registered in the name of the Purchase Contract Agent or any Holder,
         payable to the order of the Purchase Contract Agent or any Holder or
         specially indorsed to the Purchase Contract Agent or any Holder.

         SECTION  4.2      TREATMENT AS FINANCIAL ASSETS.

                  Each item of property (whether investment property, financial
         asset, security, instrument or cash) credited to the Collateral Account
         shall be treated as a financial asset.

         SECTION 4.3       SOLE CONTROL BY COLLATERAL AGENT.

         Except as provided in Section 6, at all times prior to the termination
of the Pledge, the Collateral Agent shall have sole control of the Collateral
Account, and the Securities Intermediary shall take instructions and directions
with respect to the Collateral Account solely from the Collateral Agent. If at
any time the Securities Intermediary shall receive an entitlement order issued
by the Collateral Agent and relating to the Collateral Account, the Securities
Intermediary shall comply with such entitlement order without further consent by
the Purchase Contract Agent or any Holder or any other Person. Until termination
of the Pledge, the Securities Intermediary will not comply with any entitlement
orders issued by the Purchase Contract Agent or any Holder.

         SECTION 4.4       SECURITIES INTERMEDIARY'S LOCATION.

         The Collateral Account, and the rights and obligations of the
Securities Intermediary, the Collateral Agent, the Purchase Contract Agent and
the Holders with respect thereto, shall be governed by the laws of the State of
New York. Regardless of any provision in any other agreement, for purposes of
the UCC, New York shall be deemed to be the Securities Intermediary's location.

         SECTION  4.5      NO OTHER CLAIMS.

         Except for the claims and interest of the Collateral Agent and of the
Purchase Contract Agent and the Holders in the Collateral Account, the
Securities Intermediary (without making any investigation) does not know of any
claim to, or interest in, the Collateral Account or in any financial asset
credited thereto. If any person asserts any lien, encumbrance or adverse claim
(including any writ, garnishment, judgment, warrant of attachment, execution or
similar process) against the Collateral Account or in any financial asset
carried therein, the Securities Intermediary will promptly notify the Collateral
Agent and the Purchase Contract Agent.

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         SECTION  4.6      INVESTMENT AND RELEASE.

         All proceeds of financial assets from time to time deposited in the
Collateral Account shall be invested and reinvested as provided in this
Agreement. At all times prior to termination of the Pledge, no property shall be
released from the Collateral Account except in accordance with this Agreement or
upon written instructions of the Collateral Agent.

         SECTION 4.7       STATEMENTS AND CONFIRMATIONS.

         The Securities Intermediary will promptly send copies of all
statements, confirmations and other correspondence concerning the Collateral
Account and any financial assets credited thereto simultaneously to each of the
Purchase Contract Agent and the Collateral Agent at their addresses for notices
under this Agreement.

         SECTION 4.8       TAX ALLOCATIONS.

         The Purchase Contract Agent shall report all items of income, gain,
expense and loss recognized in the Collateral Account, to the extent such
reporting is required by law, to the Internal Revenue Service and all state and
local taxing authorities under the names and taxpayer identification numbers of
the Holders which are the beneficial owners thereof. Neither the Securities
Intermediary nor the Collateral Agent shall have any tax reporting duties
hereunder.

         SECTION 4.9       NO OTHER AGREEMENTS.

         The Securities Intermediary has not entered into, and prior to the
termination of the Pledge will not enter into, any agreement with any other
Person relating to the Collateral Account or any financial assets credited
thereto, including, without limitation, any agreement to comply with entitlement
orders of any Person other than the Collateral Agent.

         SECTION  4.10     POWERS COUPLED WITH AN INTEREST.

         The rights and powers granted in this Section 4 to the Collateral Agent
have been granted in order to perfect its security interests in the Collateral
Account, are powers coupled with an interest and will be affected neither by the
bankruptcy of the Purchase Contract Agent or any Holder nor by the lapse of
time. The obligations of the Securities Intermediary under this Section 4 shall
continue in effect until the termination of the Pledge.

         SECTION  5.       INITIAL DEPOSIT; ESTABLISHMENT OF TREASURY PEPS UNITS
                           AND RE-ESTABLISHMENT OF PEPS UNITS

         SECTION  5.1      INITIAL DEPOSIT OF TRUST PREFERRED SECURITIES.

         Prior to or concurrently with the execution and delivery of this
Agreement, the Purchase Contract Agent, on behalf of the initial Holders of the
PEPS Units, shall Transfer to the Securities Intermediary, for credit to the
Collateral Account, the Preferred Securities or security entitlements relating
thereto, and the Securities Intermediary shall indicate by book-entry that a
securities entitlement to such Preferred Securities has been credited to the
Collateral Account.

                                       9
<PAGE>   14

         SECTION 5.2       ESTABLISHMENT OF TREASURY PEPS UNITS.

         (a) So long as no Tax Event Redemption shall have occurred, and the
Trust shall not have been dissolved and liquidated, at any time prior to or on
the seventh Business Day immediately preceding August 18, 2003, a Holder of PEPS
Units shall have the right to establish or reestablish Treasury PEPS Units by
substitution of Treasury Securities or security entitlements with respect
thereto for the Pledged Preferred Securities comprising a part of such Holder's
PEPS Units in integral multiples of 40 PEPS Units by:

                  (1) Transferring to the Securities Intermediary for credit to
         the Collateral Account Treasury Securities or security entitlements
         with respect thereto having a Value equal to the aggregate liquidation
         amount of the Pledged Preferred Securities to be released, accompanied
         by a notice, substantially in the form of Exhibit C to the Purchase
         Contract Agreement, whereupon the Purchase Contract Agent shall deliver
         to the Collateral Agent a notice, substantially in the form of Exhibit
         A hereto, (A) stating that such Holder has Transferred Treasury
         Securities or security entitlements with respect thereto to the
         Securities Intermediary for credit to the Collateral Account, (B)
         stating the Value of the Treasury Securities or security entitlements
         with respect thereto Transferred by such Holder and (C) requesting that
         the Collateral Agent release from the Pledge the Pledged Preferred
         Securities that are a component of such PEPS Units; and

                  (2) delivering the related PEPS Units to the Purchase Contract
         Agent.

         Upon receipt of such notice and confirmation that Treasury Securities
or security entitlements with respect thereto have been credited to the
Collateral Account as described in such notice, the Collateral Agent shall
instruct the Securities Intermediary by a notice, substantially in the form of
Exhibit B hereto, to release such Pledged Preferred Securities from the Pledge
by Transfer to the Purchase Contract Agent for distribution to such Holder, free
and clear of any lien, pledge or security interest created hereby.

         (b) If a Tax Event Redemption has occurred and the Treasury Portfolio
has become a component of the PEPS Units, a Holder of PEPS Units shall not have
the right to establish or reestablish Treasury PEPS Units.

         (c) If no Tax Event Redemption shall have occurred, but the Trust shall
have been dissolved and liquidated, and the Senior Deferrable Notes have become
a component of the PEPS Units, at any time on or prior to the seventh Business
Day immediately preceding August 18, 2003, a Holder of PEPS Units shall have the
right to substitute Treasury Securities or security entitlements with respect
thereto for the Pledged Senior Deferrable Notes comprising a part of such
Holder's PEPS Units in integral multiples of 40 PEPS Units by:

                  (1) Transferring to the Securities Intermediary for credit to
         the Collateral Account Treasury Securities or security entitlements
         with respect thereto having a Value equal to the aggregate principal
         amount at maturity of Pledged Senior Deferrable Notes to be released,
         accompanied by a notice, substantially in the form of Exhibit C to the
         Purchase Contract Agreement, whereupon the Purchase Contract Agent
         shall deliver to the

                                       10
<PAGE>   15

         Collateral Agent a notice, substantially in the form of Exhibit A
         hereto, (A) stating that such Holder has Transferred Treasury
         Securities or security entitlements with respect thereto to the
         Securities Intermediary for credit to the Collateral Account, (B)
         stating the Value of the Treasury Securities or securities entitlements
         with respect thereto Transferred by such Holder and (C) requesting that
         the Collateral Agent release from the Pledge the Pledged Senior
         Deferrable Notes that are a component of such PEPS Units; and

                  (2) delivering the related PEPS Units to the Purchase Contract
         Agent.

         Upon receipt of such notice and confirmation that Treasury Securities
or security entitlements with respect thereto have been credited to the
Collateral Account as described in such notice, the Collateral Agent shall
instruct the Securities Intermediary by a notice, substantially in the form of
Exhibit B hereto, to release such Pledged Senior Deferrable Notes from the
Pledge by Transfer to the Purchase Contract Agent for distribution to such
Holder free and clear of any lien, pledge or security interest created hereby.

         (d) Upon credit to the Collateral Account of Treasury Securities or
security entitlements with respect thereto delivered by a Holder of PEPS Units
and receipt of the related instruction from the Collateral Agent, the Securities
Intermediary shall release the Pledged Preferred Securities or the Pledged
Senior Deferrable Notes, as the case may be, and shall promptly transfer the
same to the Purchase Contract Agent for distribution to such Holder, free and
clear of any lien, pledge or security interest created hereby.

         SECTION 5.3       RE-ESTABLISHMENT OF PEPS UNITS.

         (a) So long as no Tax Event Redemption shall have occurred, and the
Trust shall not have been dissolved and liquidated, at any time on or prior to
the seventh Business Day immediately preceding August 18, 2003, a Holder of
Treasury PEPS Units shall have the right to reestablish PEPS Units by
substitution of Preferred Securities or security entitlements with respect
thereto for Pledged Treasury Securities in integral multiples of 40 Treasury
PEPS Units by:

                  (1) Transferring to the Securities Intermediary for credit to
         the Collateral Account Preferred Securities or security entitlements
         with respect thereto having a liquidation amount equal to the Value of
         the Pledged Treasury Securities to be released, accompanied by a
         notice, substantially in the form of Exhibit C to the Purchase Contract
         Agreement, whereupon the Purchase Contract Agent shall deliver to the
         Collateral Agent a notice, substantially in the form of Exhibit C
         hereto, stating that such Holder has Transferred Trust Preferred
         Securities or security entitlements with respect thereto to the
         Securities Intermediary for credit to the Collateral Account and
         requesting that the Collateral Agent release from the Pledge the
         Pledged Treasury Securities related to such Treasury PEPS Units; and

                  (2) Delivering the related Treasury PEPS Units to the Purchase
         Contract Agent.

                                       11
<PAGE>   16

         Upon receipt of such notice and confirmation that Preferred Securities
or security entitlements thereto have been credited to the Collateral Account as
described in such notice, the Collateral Agent shall instruct the Securities
Intermediary by a notice in the form provided in Exhibit D to release such
Pledged Treasury Securities from the Pledge by Transfer to the Purchase Contract
Agent for distribution to such Holder, free and clear of any lien, pledge or
security interest created hereby.

         (b) If a Tax Event Redemption has occurred and the Treasury Portfolio
has become a component of the PEPS Units, a holder of a Treasury PEPS Unit shall
not have the right to reestablish a PEPS Unit.

         (c) If no Tax Event Redemption shall have occurred, but the Trust shall
have been dissolved and liquidated, and the Senior Deferrable Notes have become
a component of the PEPS Units, at any time on or prior to the seventh Business
Day immediately preceding August 18, 2003, a Holder of Treasury PEPS Units shall
have the right to reestablish PEPS Units by substitution of Senior Deferrable
Notes or security entitlements with respect thereto for Pledged Treasury
Securities in integral multiples of 40 Treasury PEPS Units by:

                  (1) Transferring to the Securities Intermediary for credit to
         the Collateral Account Senior Deferrable Notes or security entitlements
         with respect thereto having a principal amount equal to the Value of
         the Pledged Treasury Securities to be released, accompanied by a
         notice, substantially in the form of Exhibit C to the Purchase Contract
         Agreement, whereupon the Purchase Contract Agent shall deliver to the
         Collateral Agent a notice, substantially in the form of Exhibit C
         hereto, stating that such Holder has Transferred the Senior Deferrable
         Notes or security entitlements with respect thereto to the Securities
         Intermediary for credit to the Collateral Account and requesting that
         the Collateral Agent release from the Pledge the Pledged Treasury
         Securities related to such Treasury PEPS Units; and

                  (2) delivering the related Treasury PEPS Units to the Purchase
         Contract Agent.

         Upon receipt of such notice and confirmation that Senior Deferrable
Notes or security entitlements with respect thereto have been credited to the
Collateral Account as described in such notice, the Collateral Agent shall
instruct the Securities Intermediary by a notice in the form provided in Exhibit
D to release such Pledged Treasury Securities from Pledge by Transfer to the
Purchase Contract Agent for distribution to such Holder, free and clear of any
lien, pledge or security interest created hereby.

         (d) Upon credit to the Collateral Account of Preferred Securities or
security entitlements with respect thereto or Senior Deferrable Notes or
security entitlements with respect thereto, as the case may be, delivered by a
Holder of Treasury PEPS Units and receipt of the related instruction from the
Collateral Agent, the Securities Intermediary shall release the Pledged Treasury
Securities and shall promptly transfer the same to the Purchase Contract Agent
for distribution to such Holder, free and clear of any lien, pledge or security
interest created hereby.

                                       12
<PAGE>   17

         SECTION 5.4       TERMINATION EVENT.

         (a) Upon receipt by the Collateral Agent of written notice from the
Company or the Purchase Contract Agent that a Termination Event has occurred,
the Collateral Agent shall release all Collateral from the Pledge and shall
promptly Transfer:

                  (1) any Pledged Preferred Securities or security entitlements
         with respect thereto or the Applicable Ownership Interest (as specified
         in clause (A) of the definition of such term) of the Treasury Portfolio
         (if a Tax Event Redemption has occurred and the Treasury Portfolio has
         become a component of the PEPS Units) or the Pledged Senior Deferrable
         Notes (if the Trust has been dissolved and liquidated, and the Senior
         Deferrable Notes or security entitlements with respect thereto have
         become a component of the PEPS Units);

                  (2) any Pledged Treasury Securities, and

                  (3) payments by Holders (or the Permitted Investments of such
         payments) pursuant to Section 5.5 hereof,

to the Purchase Contract Agent for the benefit of the Holders for distribution
to such Holders in accordance with their respective interests, free and clear of
any lien, pledge or security interest or other interest created hereby;
provided, however, if any Holder shall be entitled to receive less than $1,000
with respect to his interest in the Applicable Ownership Interest (as specified
in clause (A) of the definition of such term) of the Treasury Portfolio, the
Purchase Contract Agent shall have the right to dispose of such interest for
cash and deliver to such Holder cash in lieu of delivering the Applicable
Ownership Interest (as specified in clause (A) of the definition of such term)
of the Treasury Portfolio.

         (b) If such Termination Event shall result from the Company's becoming
a debtor under the Bankruptcy Code, and if the Collateral Agent shall for any
reason fail promptly to effectuate the release and Transfer of all Pledged
Preferred Securities, the Applicable Ownership Interest (as specified in clause
(A) of the definition of such term) of the Treasury Portfolio, the Pledged
Senior Deferrable Notes, the Pledged Treasury Securities or payments by Holders
(or the Permitted Investments of such payments) pursuant to Section 5.5 hereof,
as the case may be, as provided by this Section 5.4, the Purchase Contract Agent
shall:

                  (1) use its best efforts to obtain an opinion of a nationally
         recognized law firm reasonably acceptable to the Collateral Agent to
         the effect that, as a result of the Company's being the debtor in such
         a bankruptcy case, the Collateral Agent will not be prohibited from
         releasing or Transferring the Collateral as provided in this Section
         5.4, and shall deliver such opinion to the Collateral Agent within ten
         days after the occurrence of such Termination Event, and if (A) the
         Purchase Contract Agent shall be unable to obtain such opinion within
         ten days after the occurrence of such Termination Event or (B) the
         Collateral Agent shall continue, after delivery of such opinion, to
         refuse to effectuate the release and Transfer of all Preferred
         Securities, Applicable Ownership Interest (as specified in clause (A)
         of the definition of such term) of the Treasury Portfolio, all the
         Pledged Senior Deferrable Notes, the Pledged Treasury Securities, the
         payments by Holders or the Permitted Investments of such payments
         pursuant to Section 5.5 hereof or

                                       13
<PAGE>   18

         the Proceeds of any of the foregoing, as the case may be, as provided
         in this Section 5.4, then the Purchase Contract Agent shall within
         fifteen days after the occurrence of such Termination Event commence an
         action or proceeding in the court having jurisdiction of the Company's
         case under the Bankruptcy Code seeking an order requiring the
         Collateral Agent to effectuate the release and transfer of all Pledged
         Preferred Securities, Applicable Ownership Interest (as specified in
         clause (A) of the definition of such term) of the Treasury Portfolio,
         all the Pledged Senior Deferrable Notes, the Pledged Treasury
         Securities, or the payments by Holders or the Permitted Investments of
         such payments pursuant to Section 5.5 hereof, or as the case may be, as
         provided by this Section 5.4; or

                  (2) commence an action or proceeding like that described in
         clause 5.4(b)(1) hereof within ten days after the occurrence of such
         Termination Event.

         SECTION  5.5      CASH SETTLEMENT.

         (a) Upon receipt by the Collateral Agent of (1) a notice from the
Purchase Contract Agent promptly after the receipt by the Purchase Contract
Agent of a notice from a Holder of PEPS Units that such Holder has elected, in
accordance with the procedures specified in Section 5.4(a)(i) or (d)(i) of the
Purchase Contract Agreement, respectively, to effect a Cash Settlement and (2)
payment by such Holder by deposit in the Collateral Account prior to or on 11:00
a.m. (New York City time) on the fifth Business Day immediately preceding August
18, 2003, in the case of a PEPS Unit, unless a Tax Event Redemption has
occurred, or on the Business Day prior to August 18, 2003 in the case of
Treasury PEPS or a PEPS Unit, if a Tax Event Redemption has occurred, of the
Purchase Price in lawful money of the United States by certified or cashier's
check or wire transfer of immediately available funds payable to or upon the
order of the Securities Intermediary, then the Collateral Agent shall:

                  (1) instruct the Securities Intermediary promptly to invest
         any such Cash in Permitted Investments;

                  (2) release from the Pledge the PEPS Unit holder's or the
         Treasury PEPS Unit holder's related Pledged Preferred Securities,
         Applicable Ownership Interest (as specified in clause (A) of the
         definition of such term) of the Treasury Portfolio, the Pledged Senior
         Deferrable Notes or Pledged Treasury Securities, as applicable, as to
         which such Holder has elected to effect a Cash Settlement pursuant to
         this Section 5.5(a); and

                  (3) instruct the Securities Intermediary to Transfer all such
         Pledged Preferred Securities, Applicable Ownership Interest (as
         specified in clause (A) of the definition of such term) of the Treasury
         Portfolio, Pledged Senior Deferrable Notes or the Pledged Treasury
         Securities, as the case may be, to the Purchase Contract Agent for the
         benefit of such Holder, in each case free and clear of the Pledge
         created hereby, for distribution to such Holder.

         Upon the request of the Securities Intermediary, the Company shall
instruct the Securities Intermediary as to the type of Permitted Investments in
which any such Cash shall be invested;

                                       14
<PAGE>   19

provided, however, that if the Company fails to deliver such instructions by
10:30 a.m. (New York City time), the Securities Intermediary shall invest such
Cash in the Permitted Investments described in clause 6 of the definition of
Permitted Investments.

         Upon receipt of the proceeds upon the maturity of the Permitted
Investments on the Purchase Contract Settlement Date, the Collateral Agent shall
(A) instruct the Securities Intermediary to pay the portion of such proceeds and
deliver any certified or cashier's checks received, in an aggregate amount equal
to the Purchase Price, to the Company on the Purchase Contract Settlement Date,
and (B) instruct the Securities Intermediary to release any amounts in excess of
the Purchase Price earned from such Permitted Investments to the Purchase
Contract Agent for distribution to such Holder.

         (a) If a Holder of PEPS Units (if a Tax Event Redemption shall not have
occurred) notifies the Purchase Contract Agent as provided in paragraph
5.4(a)(i) of the Purchase Contract Agreement of its intention to pay the
Purchase Price in cash, but fails to make such payment as required by paragraph
5.4(a)(ii) of the Purchase Contract Agreement, such Holder shall be deemed to
have consented to the disposition of such Holder's Pledged Preferred Securities
or Pledged Senior Deferrable Notes in accordance with paragraph 5.4(a)(iii) of
the Purchase Contract Agreement.

         (b) If a Holder of a Treasury PEPS Unit or a Holder of PEPS Unit (if a
Tax Event Redemption shall have occurred) notifies the Purchase Contract Agent
as provided in paragraph 5.4(d)(i) of the Purchase Contract Agreement of its
intention to pay the Purchase Price in cash, but fails to make such payment as
required by paragraph 5.4(d)(ii) of the Purchase Contract Agreement, such Holder
shall be deemed to have elected to pay the Purchase Price in accordance with
paragraph 5.4(d)(iii) of the Purchase Contract Agreement.

         (c) As soon as practicable after 11:00 a.m. (New York City time) on the
fifth Business Day immediately preceding the Purchase Contract Settlement Date,
the Securities Intermediary shall deliver to the Purchase Contract Agent a
notice, substantially in the form of Exhibit E hereto, stating (i) the amount of
cash that it has received with respect to the Cash Settlement of PEPS Units and
(ii) the amount of cash that it has received with respect to the Cash Settlement
of Treasury PEPS Units.

         SECTION 5.6       EARLY SETTLEMENT.

         Upon receipt by the Collateral Agent of a notice from the Purchase
Contract Agent that a Holder of Securities has elected to effect Early
Settlement of its obligations under the Purchase Contracts forming a part of
such Securities in accordance with the terms of the Purchase Contracts and
Section 5.9 of the Purchase Contract Agreement (which notice shall set forth the
number of such Purchase Contracts as to which such Holder has elected to effect
Early Settlement), and that the Purchase Contract Agent has received from such
Holder, and paid to the Company as confirmed in writing by the Company, the
related Early Settlement Amounts pursuant to the terms of the Purchase Contracts
and the Purchase Contract Agreement and that all conditions to such Early
Settlement have been satisfied, then the Collateral Agent shall release from the
Pledge, (1) Pledged Preferred Securities or the appropriate Applicable Ownership

                                       15
<PAGE>   20
Interest (as specified in clause (A) of the definitions at such term) of the
Treasury Portfolio or Pledged Senior Deferrable Notes in the case of a Holder of
PEPS Units or (2) Pledged Treasury Securities, in the case of a Holder of
Treasury PEPS Units, with a Value equal to the product of (x) the Stated Amount
times (y) the number of Purchase Contracts as to which such Holder has elected
to effect Early Settlement, and shall instruct the Securities Intermediary to
Transfer all such Pledged Preferred Securities or the appropriate Applicable
Ownership Interest (as specified in clause (A) of the definitions at such term)
of the Treasury Portfolio or Pledged Senior Deferrable Notes or Pledged Treasury
Securities, as the case may be, to the Purchase Contract Agent for the benefit
of such Holder, in each case free and clear of the Pledge created hereby, for
distribution to such Holder. A Treasury PEPS Unit holder may settle early only
in integral multiples of 40 Purchase Contracts.

         SECTION 5.7       APPLICATION OF PROCEEDS IN SETTLEMENT OF PURCHASE
                           CONTRACTS.

         (a) If a Holder of PEPS Units (if a Tax Event Redemption has not
occurred) has not elected to make an effective Cash Settlement by notifying the
Purchase Contract Agent in the manner provided for in Section 5.4(a)(i) in the
Purchase Contract Agreement, or has given such notice but failed to deliver the
required cash prior to 11:00 A.M. (New York City time) on the fifth Business Day
immediately preceding August 18, 2003, such Holder shall be deemed to have
elected to pay for the shares of Common Stock to be issued under such Purchase
Contracts from the Proceeds of the remarketing of the related Pledged Preferred
Securities or Pledged Senior Deferrable Notes. Upon notice of such event from
the Purchase Contract Agent, the Collateral Agent shall instruct the Securities
Intermediary to Transfer the related Pledged Preferred Securities or Pledged
Senior Deferrable Notes to the Remarketing Agent for remarketing. Upon receiving
such Pledged Preferred Securities or Pledged Senior Deferrable Notes, the
Remarketing Agent, pursuant to the terms of the Remarketing Agreement, will use
reasonable efforts to remarket such Pledged Preferred Securities or Pledged
Senior Deferrable Notes. The Remarketing Agent will deposit the Proceeds of such
remarketing (less $0.0625 per each Preferred Security remarketed, which shall be
retained by the Remarketing Agent as a fee for its services in the Remarketing)
in the Collateral Account, and the Securities Intermediary shall invest the
Proceeds of the remarketing in Permitted Investments in clause 6 of the
definition of Permitted Investments. On the Purchase Contract Settlement Date,
the Purchase Contract Agent shall give written direction to the Collateral Agent
specifying the instruction the Collateral Agent shall give to the Securities
Intermediary in order to apply a portion of the Proceeds from such remarketing
equal to the aggregate liquidation amount of the Preferred Securities or
aggregate principal amount of such Pledged Senior Deferrable Note to satisfy in
full such Holder's obligations to pay the Purchase Price to purchase the shares
of Common Stock under the related Purchase Contracts and the balance of the
Proceeds from the remarketing, if any, that shall be transferred to the Purchase
Contract Agent for the benefit of such Holder for distribution to such Holder.

         If the Remarketing Agent advises the Collateral Agent in writing that
there has been a Failed Remarketing, thus resulting in an event of default under
the Purchase Contract Agreement and hereunder, the Collateral Agent, for the
benefit of the Company shall, at the written direction of the Company, dispose
of the Pledged Preferred Securities or Pledged Senior Deferrable Notes

                                       16
<PAGE>   21

in accordance with applicable law and satisfy in full, from such disposition,
such Holder's obligations to pay the Purchase Price for the shares of Common
Stock.

         (b) If a Holder of a Treasury PEPS Unit or a Holder of PEPS Unit (if a
Tax Event Redemption has occurred) has not elected to make an effective Cash
Settlement by notifying the Purchase Contract Agent in the manner provided for
in Section 5.4(d)(i) of the Purchase Contract Agreement, or has given such
notice but failed to make such payment in the manner required by Section
5.4(d)(ii) of the Purchase Contract Agreement, such Holder shall be deemed to
have elected to pay for the shares of Common Stock to be issued under such
Purchase Contracts from the Proceeds of the related Pledged Treasury Securities
or such Applicable Ownership Interest (as specified in clause (A) of the
definition of such term) of the Treasury Portfolio, as the case may be.
Promptly, after 11:00 a.m. (New York City time) on the Business Day immediately
prior to the Purchase Contract Settlement Date, the Securities Intermediary
shall invest the Cash Proceeds of the maturing Pledged Treasury Securities or
such Applicable Ownership Interest (as specified in clause (A) of the definition
of such term) of the Treasury portfolios, as the case may be, in Permitted
Investments in clause 6 of the definition of Permitted Investments, unless prior
to 10:30 a.m. (New York City time), the Company shall otherwise instruct the
Securities Intermediary as to the type of Permitted Investments in which any
such Cash Proceeds shall be invested. Without receiving any instruction from any
such Holder, the Collateral Agent shall apply the Proceeds of the related
Pledged Treasury Securities or such Applicable Ownership Interest (as specified
in clause (A) of the definition of such term) of the Treasury Portfolio, as the
case may be, to the settlement of such Purchase Contracts on the Purchase
Contract Settlement Date. In the event the sum of the Proceeds from the related
Pledged Treasury Securities or such Applicable Ownership Interest (as specified
in clause (A) of the definition of such term) of the Treasury Portfolio as the
case may be, and the investment earnings from the investment in Permitted
Investments exceeds the aggregate Purchase Price of the Purchase Contracts being
settled thereby, the Collateral Agent shall instruct the Securities Intermediary
to distribute such excess, when received, to the Purchase Contract Agent for the
benefit of such Holder for distribution to such Holder.

         SECTION 5.8       TAX EVENT REDEMPTION.

         If the Securities Intermediary receives notice that a Tax Event
Redemption has occurred prior to the Purchase Contract Settlement Date, the
Securities Intermediary shall apply the Redemption Amount to purchase the
Treasury Portfolio and the Securities Intermediary shall credit the Applicable
Ownership Interest (as specified in clause (A) of the definition of such term)
of the Treasury Portfolio to the Collateral Account and shall transfer the
Applicable Ownership Interest (as specified in clause (B) of the definition of
such term) of the Treasury Portfolio to the Purchase Contract Agent for
distribution to the Holders of the PEPS Units. Upon credit to the Collateral
Account of the Applicable Ownership Interest (as specified in clause (A) of the
definition of such term) of the Treasury Portfolio having a Value equal to the
liquidation amount of the Pledged Preferred Securities or the aggregate
principal amount of the Pledged Senior Deferrable Notes, the Securities
Intermediary shall release the Pledged Preferred Securities or the Pledged
Senior Deferrable Notes, as applicable, from the Collateral Account and shall
promptly transfer the Pledged Preferred Securities to the Trust and the Pledged
Senior Deferrable Notes to the Company, as applicable.

                                       17
<PAGE>   22
SECTION  6.     VOTING RIGHTS - TRUST PREFERRED SECURITIES AND
                PLEDGED SENIOR DEFERRABLE NOTES

         The Purchase Contract Agent may exercise, or refrain from exercising,
any and all voting and other consensual rights pertaining to the Pledged
Preferred Securities or the Pledged Senior Deferrable Notes or any part thereof
for any purpose not inconsistent with the terms of this Agreement and in
accordance with the terms of the Purchase Contract Agreement; provided, that the
Purchase Contract Agent shall not exercise or shall not refrain from exercising
such right, as the case may be, if, in the judgment of the Purchase Contract
Agent, such action would impair or otherwise have a material adverse effect on
the value of all or any of the Pledged Preferred Securities or the Pledged
Senior Deferrable Notes; and provided, further, that the Purchase Contract Agent
shall give the Company and the Collateral Agent at least five Business Days'
prior written notice of the manner in which it intends to exercise, or its
reasons for refraining from exercising, any such right. Upon receipt of any
notices and other communications in respect of any Pledged Preferred Securities
or the Pledged Senior Deferrable Notes, including notice of any meeting at which
holders of the Preferred Securities or the Pledged Senior Deferrable Notes are
entitled to vote or solicitation of consents, waivers or proxies of holders of
the Preferred Securities or Senior Deferrable Notes, the Collateral Agent shall
use reasonable efforts to send promptly to the Purchase Contract Agent such
notice or communication, and as soon as reasonably practicable after receipt of
a written request therefor from the Purchase Contract Agent, execute and deliver
to the Purchase Contract Agent such proxies and other instruments in respect of
such Pledged Preferred Securities or the Pledged Senior Deferrable Notes (in
form and substance satisfactory to the Collateral Agent) as are prepared by the
Purchase Contract Agent with respect to the Pledged Preferred Securities or the
Pledged Senior Deferrable Notes.

SECTION  7.     RIGHTS AND REMEDIES.

         SECTION  7.1.     RIGHTS AND REMEDIES OF THE COLLATERAL AGENT.

         (a) In addition to the rights and remedies specified in Section 5.7
hereof or otherwise available at law or in equity, after an event of default (as
specified in Section 7.1(b) below) hereunder, the Collateral Agent shall have
all of the rights and remedies with respect to the Collateral of a secured party
under the UCC (whether or not the UCC is in effect in the jurisdiction where the
rights and remedies are asserted) and the TRADES Regulations and such additional
rights and remedies to which a secured party is entitled under the laws in
effect in any jurisdiction where any rights and remedies hereunder may be
asserted. Without limiting the generality of the foregoing, such remedies may
include, to the extent permitted by applicable law, (1) retention of the Pledged
Preferred Securities, Pledged Senior Deferrable Notes, Pledged Treasury
Securities or the appropriate Applicable Ownership Interest (as specified in
clause (A) of the definition of such term) in full satisfaction of the Holders'
obligations under the Purchase Contracts and the Purchase Contract Agreement or
(2) sale of the Pledged Preferred Securities, Pledged Senior Deferrable Notes,
Pledged Treasury Securities or the appropriate Applicable Ownership Interest (as
specified in clause (A) of the definition of such term) in one or more public or
private sales.

                                       18
<PAGE>   23

         (b) Without limiting any rights or powers otherwise granted by this
Agreement to the Collateral Agent, in the event the Collateral Agent is unable
to make payments to the Company on account of the appropriate Applicable
Ownership Interest (as specified in clause (A) of the definition of such term)
of the Treasury Portfolio, or on account of principal payments of any Pledged
Treasury Securities as provided in Section 3 hereof, in satisfaction of the
Obligations of the Holder of the PEPS Units (if a Tax Event Redemption has
occurred) of which such appropriate Applicable Ownership Interest (as specified
in clause (A) of the definition of such term) of the Treasury Portfolio or the
Holder of the Treasury PEPS Units of which such Pledged Treasury Securities, as
applicable, is a part under the related Purchase Contracts, the inability to
make such payments shall constitute an event of default hereunder and the
Collateral Agent shall have and may exercise, with reference to such Pledged
Treasury Securities or the appropriate Applicable Ownership Interest (as
specified in clause (A) of the definition of such term) of the Treasury
Portfolio, as applicable, any and all of the rights and remedies available to a
secured party under the UCC and the TRADES Regulations after default by a
debtor, and as otherwise granted herein or under any other law.

         (c) Without limiting any rights or powers otherwise granted by this
Agreement to the Collateral Agent, the Collateral Agent is hereby irrevocably
authorized to receive and collect all payments of (i) the liquidation amount of
the Pledged Preferred Securities, (ii) the principal amount of the Pledged
Senior Deferrable Notes, (iii) the principal amount of the Pledged Treasury
Securities and (iv) the principal amount of the Applicable Ownership Interest
(as specified in clause (A) of the definition of such term) of the Treasury
Portfolio, subject, in each case, to the provisions of Section 3 hereof, and as
otherwise granted herein.

         (d) The Purchase Contract Agent and each Holder of Securities agrees
that, from time to time, upon the written request of the Collateral Agent or the
Purchase Contract Agent, such Holder shall execute and deliver such further
documents and do such other acts and things as the Collateral Agent may
reasonably request in order to maintain the Pledge, and the perfection and
priority thereof, and to confirm the rights of the Collateral Agent hereunder.
The Purchase Contract Agent shall have no liability to any Holder for executing
any documents or taking any such acts requested by the Collateral Agent
hereunder, except for liability for its own negligent acts, its own negligent
failure to act or its own willful misconduct.

         SECTION 7.2       SUBSTITUTION OF SENIOR DEFERRABLE NOTES.

         If the Trust shall have been dissolved and liquidated prior to the
Purchase Contract Settlement Date, the Securities Intermediary shall transfer to
the Collateral Agent Senior Deferrable Notes having a Value equal to the
liquidation amount of the Pledged Preferred Securities for credit to the
Collateral Account. Upon credit to the Collateral Account of such Senior
Deferrable Notes, the Collateral Agent shall release the Pledged Preferred
Securities from the Collateral Account and shall promptly transfer the same to
the Trust.

         SECTION  7.3      TAX EVENT REDEMPTION.

         Upon the occurrence of a Tax Event Redemption prior to the Purchase
Contract Settlement Date, the Redemption Price payable on the Tax Event
Redemption Date with respect

                                       19
<PAGE>   24

to the Applicable Principal Amount shall be credited to the Collateral Account
by the Property Trustee or, in case there has been a dissolution of the Trust
and the distribution of the related Senior Deferrable Notes, by the Indenture
Trustee, on or prior to 12:30 p.m., New York City time on such Tax Event
Redemption date, by federal funds check or wire transfer of immediately
available funds. The Collateral Agent is hereby authorized to present the
Pledged Preferred Securities or the Pledged Senior Deferrable Notes for payment
as may be required by their respective terms. Upon receipt of such funds, the
Pledged Preferred Securities or Pledged Senior Deferrable Notes, as the case may
be, shall be released from the Collateral Account. In the event such funds are
credited to the Collateral Account, the Collateral Agent, at the written
direction of the Company, shall instruct the Securities Intermediary to (a)
apply an amount equal to the Redemption Amount of such Redemption Price to
purchase the Treasury Portfolio from the Quotation Agent for credit to the
Collateral Account and (b) promptly remit the remaining portion of such
Redemption Price, if any, to the Purchase Contract Agent for payment to the
Holders of PEPS Units.

         SECTION 7.4       SUBSTITUTIONS.

         Whenever a Holder has the right to substitute Treasury Securities,
Trust Preferred Securities, Senior Deferrable Notes or security entitlements for
any of them or the appropriate Applicable Ownership Interest of the Treasury
Portfolio, as the case may be, for financial assets held in the Collateral
Account, such substitution shall not constitute a novation of the security
interest created hereby.

SECTION  8.     REPRESENTATIONS AND WARRANTIES; COVENANTS.

         SECTION 8.1       REPRESENTATIONS AND WARRANTIES.

         Each Holder from time to time, acting through the Purchase Contract
Agent as attorney- in-fact (it being understood that the Purchase Contract Agent
shall not be liable for any representation or warranty made by or on behalf of a
Holder), hereby represents and warrants to the Collateral Agent (with respect to
such Holder's interest in the Collateral), which representations and warranties
shall be deemed repeated on each day a Holder Transfers Collateral that:

                  (1) such Holder has the power to grant a security interest in
         and lien on the Collateral;

                  (2) such Holder is the sole beneficial owner of the Collateral
         and, in the case of Collateral delivered in physical form, is the sole
         holder of such Collateral and is the sole beneficial owner of, or has
         the right to Transfer, the Collateral it Transfers to the Securities
         Intermediary for credit to the Collateral Account, free and clear of
         any security interest, lien, encumbrance, call, liability to pay money
         or other restriction other than the security interest and lien granted
         under Section 2 hereof;

                  (3) upon the Transfer of the Collateral to the Securities
         Intermediary for credit to the Collateral Account, the Collateral
         Agent, for the benefit of the Company, will have a

                                       20
<PAGE>   25

         valid and perfected first priority security interest therein (assuming
         that any central clearing operation or any securities intermediary or
         other entity not within the control of the Holder involved in the
         Transfer of the Collateral, including the Collateral Agent and the
         Securities Intermediary, gives the notices and takes the action
         required of it hereunder and under applicable law for perfection of
         that interest and assuming the establishment and exercise of control
         pursuant to Section 4 hereof); and

                  (4) the execution and performance by the Holder of its
         obligations under this Agreement will not result in the creation of any
         security interest, lien or other encumbrance on the Collateral other
         than the security interest and lien granted under Section 2 hereof or
         violate any provision of any existing law or regulation applicable to
         it or of any mortgage, charge, pledge, indenture, contract or
         undertaking to which it is a party or which is binding on it or any of
         its assets.

         SECTION  8.2      COVENANTS.

         The Holders from time to time, acting through the Purchase Contract
Agent as their attorney-in-fact (it being understood that the Purchase Contract
Agent shall not be liable for any covenant made by or on behalf of a Holder),
hereby covenant to the Collateral Agent that for so long as the Collateral
remains subject to the Pledge:

                  (1) neither the Purchase Contract Agent nor such Holders will
         create or purport to create or allow to subsist any mortgage, charge,
         lien, pledge or any other security interest whatsoever over the
         Collateral or any part of it other than pursuant to this Agreement; and

                  (2) neither the Purchase Contract Agent nor such Holders will
         sell or otherwise dispose (or attempt to dispose) of the Collateral or
         any part of it except for the beneficial interest therein, subject to
         the Pledge hereunder, transferred in connection with the Transfer of
         the Securities.

SECTION 9.   THE COLLATERAL AGENT AND THE SECURITIES INTERMEDIARY.

         It is hereby agreed as follows:

         SECTION 9.1       APPOINTMENT, POWERS AND IMMUNITIES.

         The Collateral Agent shall act as agent for the Company hereunder with
such powers as are specifically vested in the Collateral Agent by the terms of
this Agreement, together with such other powers as are reasonably incidental
thereto. The Collateral Agent shall:

                  (1) have no duties or responsibilities except those expressly
         set forth in this Agreement and no implied covenants or obligations
         shall be inferred from this Agreement against the Collateral Agent, nor
         shall the Collateral Agent be bound by the provisions of any agreement
         by any party hereto beyond the specific terms hereof;

                                       21
<PAGE>   26

                  (2) not be responsible for any recitals contained in this
         Agreement, or in any certificate or other document referred to or
         provided for in, or received by it under, this Agreement, the
         Securities or the Purchase Contract Agreement, or for the value,
         validity, effectiveness, genuineness, enforceability or sufficiency of
         this Agreement (other than as against the Collateral Agent), the
         Securities or the Purchase Contract Agreement or any other document
         referred to or provided for herein or therein or for any failure by the
         Company or any other Person (except the Collateral Agent) to perform
         any of its obligations hereunder or thereunder or for the perfection,
         priority or, except as expressly required hereby, maintenance of any
         security interest created hereunder;

                  (3) not be required to initiate or conduct any litigation or
         collection proceedings hereunder (except pursuant to directions
         furnished under Section 9.2 hereof, subject to Section 9.6 hereof);

                  (4) not be responsible for any action taken or omitted to be
         taken by it hereunder or under any other document or instrument
         referred to or provided for herein or in connection herewith or
         therewith, except for its own negligence or willful misconduct; and

                  (5) not be required to advise any party as to selling or
         retaining, or taking or refraining from taking any action with respect
         to, any securities or other property deposited hereunder.

Subject to the foregoing, during the term of this Agreement, the Collateral
Agent shall take all reasonable action in connection with the safekeeping and
preservation of the Collateral hereunder.

         No provision of this Agreement shall require the Collateral Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder. In no event shall the Collateral
Agent be liable for any amount in excess of the Value of the Collateral.
Notwithstanding the foregoing, each of the Collateral Agent and the Securities
Intermediary in its individual capacity hereby waives any right of setoff,
bankers' lien, liens or perfection rights as securities intermediary or any
counterclaim with respect to any of the Collateral.

         SECTION  9.2      INSTRUCTIONS OF THE COMPANY.

         The Company shall have the right, by one or more written instruments
executed and delivered to the Collateral Agent, to direct the time, method and
place of conducting any proceeding for the realization of any right or remedy
available to the Collateral Agent, or of exercising any power conferred on the
Collateral Agent, or to direct the taking or refraining from taking of any
action authorized by this Agreement; provided, however, that (i) such direction
shall not conflict with the provisions of any law or of this Agreement and (ii)
the Collateral Agent shall be adequately indemnified as provided herein. Nothing
contained in this Section 9.2 shall impair the right of the Collateral Agent in
its discretion to take any action or omit to take any action which it deems
proper and which is not inconsistent with such direction.

                                       22
<PAGE>   27

         SECTION  9.3      RELIANCE BY COLLATERAL AGENT AND SECURITIES
                           INTERMEDIARY.

         Each of the Securities Intermediary and the Collateral Agent shall be
entitled to rely upon any certification, order, judgment, opinion, notice or
other written communication (including, without limitation, any thereof by
e-mail or similar electronic means, telecopy, telex or facsimile) believed by it
to be genuine and correct and to have been signed or sent by or on behalf of the
proper Person or Persons (without being required to determine the correctness of
any fact stated therein) and consult with and rely upon advice, opinions and
statements of legal counsel and other experts selected by the Collateral Agent
and the Securities Intermediary. As to any matters not expressly provided for by
this Agreement, the Collateral Agent and the Securities Intermediary shall in
all cases be fully protected in acting, or in refraining from acting, hereunder
in accordance with instructions given by the Company in accordance with this
Agreement.

         SECTION  9.4      RIGHTS IN OTHER CAPACITIES.

         The Collateral Agent and the Securities Intermediary and their
affiliates may (without having to account therefor to the Company) accept
deposits from, lend money to, make their investments in and generally engage in
any kind of banking, trust or other business with the Purchase Contract Agent,
any other Person interested herein and any Holder of Securities (and any of
their respective subsidiaries or affiliates) as if it were not acting as the
Collateral Agent or the Securities Intermediary, as the case may be, and the
Collateral Agent, the Securities Intermediary and their affiliates may accept
fees and other consideration from the Purchase Contract Agent and any Holder of
Securities without having to account for the same to the Company; provided that
each of the Securities Intermediary and the Collateral Agent covenants and
agrees with the Company that it shall not accept, receive or permit there to be
created in favor of itself and shall take no affirmative action to permit there
to be created in favor of any other Person, any security interest, lien or other
encumbrance of any kind in or upon the Collateral other than the lien created by
the Pledge.

         SECTION  9.5      NON-RELIANCE ON COLLATERAL AGENT AND SECURITIES
                           INTERMEDIARY.

         Neither the Securities Intermediary nor the Collateral Agent shall be
required to keep itself informed as to the performance or observance by the
Purchase Contract Agent or any Holder of Securities of this Agreement, the
Purchase Contract Agreement, the Securities or any other document referred to or
provided for herein or therein or to inspect the properties or books of the
Purchase Contract Agent or any Holder of Securities. Neither the Collateral
Agent nor the Securities Intermediary shall have any duty or responsibility to
provide the Company with any credit or other information concerning the affairs,
financial condition or business of the Purchase Contract Agent or any Holder of
Securities (or any of their respective affiliates) that may come into the
possession of the Collateral Agent or the Securities Intermediary or any of
their respective affiliates.

         SECTION  9.6      COMPENSATION AND INDEMNITY.

         The Company agrees to:

                                       23
<PAGE>   28

                  (1) pay the Collateral Agent and the Securities Intermediary
         from time to time such compensation as shall be agreed in writing
         between the Company and the Collateral Agent or the Securities
         Intermediary, as the case may be, for all services rendered by them
         hereunder;

                  (2) indemnify and hold harmless the Collateral Agent, the
         Securities Intermediary and each of their respective directors,
         officers, agents and employees (collectively, the "INDEMNITEES"),
         harmless from and against any and all claims, liabilities, losses,
         damages, fines, penalties and expenses (including reasonable fees and
         expenses of counsel) (collectively, "LOSSES" and individually, a
         "LOSS") that may be imposed on, incurred by, or asserted against, the
         Indemnitees or any of them for following any instructions or other
         directions upon which either the Collateral Agent or the Securities
         Intermediary is entitled to rely pursuant to the terms of this
         Agreement; and

                  (3) in addition to and not in limitation of paragraph (2)
         immediately above, indemnify and hold the Indemnitees and each of them
         harmless from and against any and all Losses that may be imposed on,
         incurred by or asserted against, the Indemnitees or any of them in
         connection with or arising out of the Collateral Agent's or the
         Securities Intermediary's acceptance or performance of its powers and
         duties under this Agreement, provided the Collateral Agent or the
         Securities Intermediary has not acted with negligence or engaged in
         willful misconduct or bad faith with respect to the specific Loss
         against which indemnification is sought.

         SECTION  9.7      FAILURE TO ACT.

         In the event of any ambiguity in the provisions of this Agreement or
any dispute between or conflicting claims by or among the parties hereto or any
other Person with respect to any funds or property deposited hereunder, then at
its sole option, each of the Collateral Agent and the Securities Intermediary
shall be entitled, after prompt notice to the Company and the Purchase Contract
Agent, to refuse to comply with any and all claims, demands or instructions with
respect to such property or funds so long as such dispute or conflict shall
continue, and the Collateral Agent and the Securities Intermediary shall not be
or become liable in any way to any of the parties hereto for its failure or
refusal to comply with such conflicting claims, demands or instructions. The
Collateral Agent and the Securities Intermediary shall be entitled to refuse to
act until either:

                  (1) such conflicting or adverse claims or demands shall have
         been finally determined by a court of competent jurisdiction or settled
         by agreement between the conflicting parties as evidenced in a writing
         satisfactory to the Collateral Agent or the Securities Intermediary; or

                  (2) the Collateral Agent or the Securities Intermediary shall
         have received security or an indemnity satisfactory to it sufficient to
         save it harmless from and against any and all loss, liability or
         reasonable out-of-pocket expense which it may incur by reason of its
         acting.

                                       24

<PAGE>   29

The Collateral Agent and the Securities Intermediary may in addition elect to
commence an interpleader action or seek other judicial relief or orders as the
Collateral Agent or the Securities Intermediary may deem necessary.
Notwithstanding anything contained herein to the contrary, neither the
Collateral Agent nor the Securities Intermediary shall be required to take any
action that is in its opinion contrary to law or to the terms of this Agreement,
or which would in its opinion subject it or any of its officers, employees or
directors to liability.

         SECTION  9.8      RESIGNATION OF COLLATERAL AGENT AND SECURITIES
                           INTERMEDIARY.

                  (a) Subject to the appointment and acceptance of a successor
         Collateral Agent as provided below:

                           (1) the Collateral Agent may resign at any time by
                  giving notice thereof to the Company and the Purchase Contract
                  Agent as attorney-in-fact for the Holders of Securities;

                           (2) the Collateral Agent may be removed at any time
                  by the Company; and

                           (3) if the Collateral Agent fails to perform any of
                  its material obligations hereunder in any material respect for
                  a period of not less than 20 days after receiving written
                  notice of such failure by the Purchase Contract Agent and such
                  failure shall be continuing, the Collateral Agent may be
                  removed by the Purchase Contract Agent.

The Purchase Contract Agent shall promptly notify the Company of any removal of
the Collateral Agent pursuant to clause (3) of the immediately preceding
sentence. Upon any such resignation or removal, the Company shall have the right
to appoint a successor Collateral Agent. If no successor Collateral Agent shall
have been so appointed and shall have accepted such appointment within 30 days
after the retiring Collateral Agent's giving of notice of resignation or the
Company or the Purchase Contract Agent giving notice of such removal, then the
retiring Collateral Agent may petition any court of competent jurisdiction for
the appointment of a successor Collateral Agent. The Collateral Agent shall be a
bank or a national banking association which has an office (or an agency office)
in New York City with a combined capital and surplus of at least $50,000,000 and
shall not be the Purchase Contract Agent or any of its affiliates. Upon the
acceptance of any appointment as Collateral Agent hereunder by a successor
Collateral Agent, such successor Collateral Agent shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties of the retiring
Collateral Agent, and the retiring Collateral Agent shall take all appropriate
action to transfer any money and property held by it hereunder (including the
Collateral) to such successor Collateral Agent. The retiring Collateral Agent
shall, upon such succession, be discharged from its duties and obligations as
Collateral Agent hereunder. After any retiring Collateral Agent's resignation
hereunder as Collateral Agent, the provisions of this Section 9 shall continue
in effect for its benefit in respect of any actions taken or omitted to be taken
by it while it was acting as the Collateral Agent.

         (b) Subject to the appointment and acceptance of a successor Securities
Intermediary as provided below:

                                       25
<PAGE>   30

                  (1) the Securities Intermediary may resign at any time by
         giving notice thereof to the Company and the Purchase Contract Agent as
         attorney-in-fact for the Holders of Securities;

                  (2) the Securities Intermediary may be removed at any time by
         the Company; and

                  (3) if the Securities Intermediary fails to perform any of its
         material obligations hereunder in any material respect for a period of
         not less than 20 days after receiving written notice of such failure by
         the Purchase Contract Agent and such failure shall be continuing, the
         Securities Intermediary may be removed by the Purchase Contract Agent.

The Purchase Contract Agent shall promptly notify the Company of any removal of
the Securities Intermediary pursuant to clause (3) of the immediately preceding
sentence. Upon any such resignation or removal, the Company shall have the right
to appoint a successor Securities Intermediary. If no successor Securities
Intermediary shall have been so appointed and shall have accepted such
appointment within 30 days after the retiring Securities Intermediary's giving
of notice of resignation or the Company or the Purchase Contract Agent giving
notice of such removal, then the retiring Securities Intermediary may petition
any court of competent jurisdiction for the appointment of a successor
Securities Intermediary. The Securities Intermediary shall be a bank or a
national banking association which has an office (or an agency office) in New
York City with a combined capital and surplus of at least $50,000,000 and shall
not be the Purchase Contract Agent or any of its affiliates. Upon the acceptance
of any appointment as Securities Intermediary hereunder by a successor
Securities Intermediary, such successor Securities Intermediary shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Securities Intermediary, and the retiring Securities
Intermediary shall take all appropriate action to transfer any money and
property held by it hereunder (including the Collateral) to such successor
Securities Intermediary. The retiring Securities Intermediary shall, upon such
succession, be discharged from its duties and obligations as Securities
Intermediary hereunder. After any retiring Securities Intermediary's resignation
hereunder as Securities Intermediary, the provisions of this Section 9 shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as the Securities Intermediary.

         SECTION  9.9      RIGHT TO APPOINT AGENT OR ADVISOR.

         The Collateral Agent shall have the right to appoint agents or advisors
in connection with any of its duties hereunder, and the Collateral Agent shall
not be liable for any action taken or omitted by, or in reliance upon the advice
of, such agents or advisors selected in good faith. The appointment of agents
pursuant to this Section 9.9 shall be subject to prior consent of the Company,
which consent shall not be unreasonably withheld.

         SECTION  9.10     SURVIVAL.

         The provisions of this Section 9 shall survive termination of this
Agreement and the resignation or removal of the Collateral Agent or the
Securities Intermediary.

                                       26
<PAGE>   31

         SECTION  9.11     EXCULPATION.

         Anything contained in this Agreement to the contrary notwithstanding,
in no event shall the Collateral Agent or the Securities Intermediary or their
officers, directors, employees or agents be liable under this Agreement to any
third party for indirect, special, punitive, or consequential loss or damage of
any kind whatsoever, including, but not limited to, lost profits, whether or not
the likelihood of such loss or damage was known to the Collateral Agent or the
Securities Intermediary, or any of them.

SECTION  10       AMENDMENT.

         SECTION  10.1     AMENDMENT WITHOUT CONSENT OF HOLDERS.

         Without the consent of any Holders, the Company, the Collateral Agent,
the Securities Intermediary and the Purchase Contract Agent, at any time and
from time to time, may amend this Agreement, in form satisfactory to the
Company, the Collateral Agent, the Securities Intermediary and the Purchase
Contract Agent, to:

                  (1) evidence the succession of another Person to the Company,
         and the assumption by any such successor of the covenants of the
         Company;

                  (2) evidence and provide for the acceptance of appointment
         hereunder by a successor Collateral Agent, Securities Intermediary or
         Purchase Contract Agent;

                  (3) add to the covenants of the Company for the benefit of the
         Holders, or surrender any right or power herein conferred upon the
         Company, provided such covenants or such surrender do not adversely
         affect the validity, perfection or priority of the Pledge created
         hereunder; or

                  (4) cure any ambiguity (or formal defect), correct or
         supplement any provisions herein which may be inconsistent with any
         other such provisions herein, or make any other provisions with respect
         to such matters or questions arising under this Agreement, provided
         such action shall not adversely affect the interests of the Holders.

         SECTION  10.2     AMENDMENT WITH CONSENT OF HOLDERS.

         With the consent of the Holders of not less than a majority of the
Purchase Contracts at the time outstanding, by Act of such Holders delivered to
the Company, the Purchase Contract Agent, the Securities Intermediary or the
Collateral Agent, as the case may be, the Company, when duly authorized, the
Purchase Contract Agent, the Securities Intermediary and the Collateral Agent
may amend this Agreement for the purpose of modifying in any manner the
provisions of this Agreement or the rights of the Holders in respect of the
Securities; provided, however, that no such supplemental agreement shall,
without the unanimous consent of the Holders of each Outstanding Security
adversely affected thereby:

                                       27
<PAGE>   32

                  (1) Change the amount or type of Collateral underlying a
         Security (except for the rights of holders of PEPS Units to substitute
         the Treasury Securities for the Pledged Preferred Securities or the
         Pledged Senior Deferrable Notes, as the case may be, or the rights of
         Holders of Treasury PEPS Units to substitute Preferred Securities or
         Senior Deferrable Notes, as applicable, for the Pledged Treasury
         Securities), impair the right of the Holder of any Security to receive
         distributions on the underlying Collateral or otherwise adversely
         affect the Holder's rights in or to such Collateral; or

                  (2) otherwise effect any action that would require the consent
         of the Holder of each Outstanding Security affected thereby pursuant to
         the Purchase Contract Agreement if such action were effected by an
         agreement supplemental thereto; or

                  (3) reduce the percentage of Purchase Contracts the consent of
         whose Holders is required for any such amendment;

provided that if any amendment or proposal referred to above would adversely
affect only the PEPS Units or only the Treasury PEPS Units, then only the
affected class of Holders as of the record date for the Holders entitled to vote
thereon will be entitled to vote on such amendment or proposal, and such
amendment or proposal shall not be effective except with the consent of Holders
of not less than a majority of such class; provided, further, that the unanimous
consent of the Holders of each outstanding Purchase Contract of such class
affected thereby shall be required to approve any amendment or proposal
specified in clauses (1) through (3) above.

         It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed amendment, but it shall be
sufficient if such Act shall approve the substance thereof.

         SECTION  10.3     EXECUTION OF AMENDMENTS.

         In executing any amendment permitted by this Section, the Collateral
Agent, the Securities Intermediary and the Purchase Contract Agent shall be
entitled to receive and (subject to Section 7.1 of the Purchase Contract
Agreement with respect to the Purchase Contract Agent) shall be fully protected
in relying upon, an Opinion of Counsel stating that the execution of such
amendment is authorized or permitted by this Agreement and that all conditions
precedent, if any, to the execution and delivery of such amendment have been
satisfied.

         SECTION  10.4     EFFECT OF AMENDMENTS.

         Upon the execution of any amendment under this Section, this Agreement
shall be modified in accordance therewith, and such amendment shall form a part
of this Agreement for all purposes; and every Holder of Certificates theretofore
or thereafter authenticated, executed on behalf of the Holders and delivered
under the Purchase Contract Agreement shall be bound thereby.

                                       28
<PAGE>   33

         SECTION  10.5     REFERENCE TO AMENDMENTS.

         Certificates authenticated, executed on behalf of the Holders and
delivered after the execution of any amendment pursuant to this Section may, and
shall if required by the Collateral Agent or the Purchase Contract Agent, bear a
notation in form approved by the Purchase Contract Agent and the Collateral
Agent as to any matter provided for in such amendment. If the Company shall so
determine, new Security Certificates so modified as to conform, in the opinion
of the Collateral Agent, the Purchase Contract Agent and the Company, to any
such amendment may be prepared and executed by the Company and authenticated,
executed on behalf of the Holders and delivered by the Purchase Contract Agent
in accordance with the Purchase Contract Agreement in exchange for Outstanding
Security Certificates.

SECTION 11.   MISCELLANEOUS.

         SECTION  11.1     NO WAIVER.

         No failure on the part of the Collateral Agent, the Securities
Intermediary or any of their respective agents to exercise, and no course of
dealing with respect to, and no delay in exercising, any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise by the Collateral Agent, the Securities Intermediary or any of their
respective agents of any right, power or remedy hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
The remedies herein are cumulative and are not exclusive of any remedies
provided by law.

         SECTION  11.2     GOVERNING LAW.

         THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK. The Company, the Collateral Agent, the
Securities Intermediary and the Holders from time to time of the Securities,
acting through the Purchase Contract Agent as their attorney-in-fact, hereby
submit to the nonexclusive jurisdiction of the United States District Court for
the Southern District of New York and of any New York state court sitting in New
York City for the purposes of all legal proceedings arising out of or relating
to this Agreement or the transactions contemplated hereby. The Company, the
Collateral Agent, the Securities Intermediary and the Holders from time to time
of the Securities, acting through the Purchase Contract Agent as their
attorney-in-fact, irrevocably waive, to the fullest extent permitted by
applicable law, any objection which they may now or hereafter have to the laying
of the venue of any such proceeding brought in such a court and any claim that
any such proceeding brought in such a court has been brought in an inconvenient
forum.

         SECTION  11.3     NOTICES.

         All notices, requests, consents and other communications provided for
herein (including, without limitation, any modifications of, or waivers or
consents under, this Agreement) shall be given or made in writing (including,
without limitation, by telecopy) delivered to the intended recipient at the
"ADDRESS FOR NOTICES" specified below its name on the signature pages hereof or,
as to any party, at such other address as shall be designated by such party in a
notice to the other parties. Except as otherwise provided in this Agreement, all
such communications shall be

                                       29
<PAGE>   34

deemed to have been duly given when transmitted by telecopier or personally
delivered or, in the case of a mailed notice, upon receipt, in each case given
or addressed as aforesaid.

         SECTION  11.4     SUCCESSORS AND ASSIGNS.

         This Agreement shall be binding upon and inure to the benefit of the
respective successors and assigns of the Company, the Collateral Agent, the
Securities Intermediary and the Purchase Contract Agent, and the Holders from
time to time of the Securities, by their acceptance of the same, shall be deemed
to have agreed to be bound by the provisions hereof and to have ratified the
agreements of, and the grant of the Pledge hereunder by, the Purchase Contract
Agent.

         SECTION  11.5     COUNTERPARTS.

         This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument, and any of
the parties hereto may execute this Agreement by signing any such counterpart.

         SECTION  11.6     SEVERABILITY.

         If any provision hereof is invalid and unenforceable in any
jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in order to carry out the intentions of the parties
hereto as nearly as may be possible and (ii) the invalidity or unenforceability
of any provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.

         SECTION  11.7     EXPENSES, ETC.

         The Company agrees to reimburse the Collateral Agent and the Securities
Intermediary for:

                  (1) all reasonable costs and expenses of the Collateral Agent
         and the Securities Intermediary (including, without limitation, the
         reasonable fees and expenses of counsel to the Collateral Agent and the
         Securities Intermediary), in connection with (i) the negotiation,
         preparation, execution and delivery or performance of this Agreement
         and (ii) any modification, supplement or waiver of any of the terms of
         this Agreement;

                  (2) all reasonable costs and expenses of the Collateral Agent
         and the Securities Intermediary (including, without limitation,
         reasonable fees and expenses of counsel) in connection with (i) any
         enforcement or proceedings resulting or incurred in connection with
         causing any Holder of Securities to satisfy its obligations under the
         Purchase Contracts forming a part of the Securities and (ii) the
         enforcement of this Section 11.7;

                  (3) all transfer, stamp, documentary or other similar taxes,
         assessments or charges levied by any governmental or revenue authority
         in respect of this Agreement or any other

                                       30
<PAGE>   35

         document referred to herein and all costs, expenses, taxes, assessments
         and other charges incurred in connection with any filing, registration,
         recording or perfection of any security interest contemplated hereby;

                  (4) all fees and expenses of any agent or advisor appointed by
         the Collateral Agent and consented to by the Company under Sections 9.3
         and 9.9 of this Agreement; and

                  (5) any other out-of-pocket costs and expenses reasonably
         incurred by the Collateral Agent and the Securities Intermediary in
         connection with the performance of their duties hereunder.

         SECTION  11.8     SECURITY INTEREST ABSOLUTE.

         All rights of the Collateral Agent and security interests hereunder,
and all obligations of the Holders from time to time hereunder, shall be
absolute and unconditional irrespective of:

                  (1) any lack of validity or enforceability of any provision of
         the Purchase Contracts or the Securities or any other agreement or
         instrument relating thereto;

                  (2) any change in the time, manner or place of payment of, or
         any other term of, or any increase in the amount of, all or any of the
         obligations of Holders of the Securities under the related Purchase
         Contracts, or any other amendment or waiver of any term of, or any
         consent to any departure from any requirement of, the Purchase Contract
         Agreement or any Purchase Contract or any other agreement or instrument
         relating thereto; or

                  (3) any other circumstance which might otherwise constitute a
         defense available to, or discharge of, a borrower, a guarantor or a
         pledger.

         SECTION 11.9       NOTICE OF TAX EVENT, TAX EVENT REDEMPTION AND
                            TERMINATION EVENT.

         Upon the occurrence of a Tax Event, a Tax Event Redemption or a
Termination Event, the Company shall deliver written notice to the Collateral
Agent and the Securities Intermediary. Upon the written request of the
Collateral Agent or the Securities Intermediary, the Company shall inform such
party whether or not a Tax Event, a Tax Event Redemption or a Termination Event
has occurred.

                       [SIGNATURES ON THE FOLLOWING PAGE]

                                       31
<PAGE>   36

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.

----------------------------------           -----------------------------------
VALERO ENERGY CORPORATION                    THE BANK OF NEW YORK as
                                             Purchase Contract Agent and as
                                             attorney-in-fact of the Holders
                                             from time to time of the Securities

By:                                          By:
   -------------------------------               -------------------------------
   Name: John D. Gibbons                         Name:
   Title: Vice President and Chief               Title:
           Financial Officer

Address for Notices:                         Address for Notices:

Valero Energy Corporation                    The Bank of New York
One Valero Place                             101 Barclay Street
P.O. Box 500                                 21 West
San Antonio, Texas 78212 (78292-0500)        New York, NY 10286
Attention: Jay D. Browning                   Attention: Corporate Trust Trustee
Telecopy: (210) 370-2988                     Administration
With a copy to: Donna M. Titzman             Telecopy: (212) 815-5915
Telecopy: (210) 370-2497

----------------------------------           -----------------------------------
BANK ONE TRUST COMPANY, N.A.,                BANK ONE TRUST COMPANY, N.A.,
as Collateral Agent                          as Securities Intermediary

By:                                          By:
   -------------------------------               -------------------------------
   Name:                                         Name:
   Title:                                        Title:

Address for Notices:                         Address for Notices:

Bank One Trust Company, N.A.                 Bank One Trust Company, N.A.
One North State Street, 9th Floor            One North State Street, 9th Floor
Chicago, Illinois 60670-0126                 Chicago, Illinois 60670-0126
Attention:  Corporate Trust                  Attention:  Corporate Trust
             Administration                               Administration
Telecopy: (312) 407-1708                     Telecopy: (312) 407-1708

                                       32
<PAGE>   37

                                                                       EXHIBIT A

                                   INSTRUCTION
                          FROM PURCHASE CONTRACT AGENT
                               TO COLLATERAL AGENT
                     (Establishment of Treasury PEPS Units)

Bank One Trust Company, N.A.
One North State Street, 9th Floor
Chicago, Illinois 60670-0126
Attention:  Corporate Trust Administration
Telecopy: (312) 407-1708

         Re:      PEPS Units of Valero Energy Corporation. (the "COMPANY") and
                  VEC Trust I

                  The securities account of Bank One Trust Company, N.A., as
                  Collateral Agent, maintained by the Securities Intermediary
                  and designated "The Bank One Trust Company, N.A., as
                  Collateral Agent of Valero Energy Corporation, as pledgee of
                  The Bank of New York, as the Purchase Contract Agent on behalf
                  of and as attorney-in-fact for the Holders" (the "COLLATERAL
                  ACCOUNT")

         Please refer to the Pledge Agreement, dated as of June 28, 2000 (the
"PLEDGE AGREEMENT"), among the Company, you, as Collateral Agent, Bank One Trust
Company, N.A., as Securities Intermediary, and the undersigned, as Purchase
Contract Agent and as attorney-in- fact for the holders of PEPS Units from time
to time. Capitalized terms used herein but not defined shall have the meaning
set forth in the Pledge Agreement.

         We hereby notify you in accordance with Section 5.2 of the Pledge
Agreement that the holder of securities named below (the "HOLDER") has elected
to substitute $__________ Value of Treasury Securities or security entitlements
thereto in exchange for [an equal Value of [Pledged Preferred Securities]
[Pledged Senior Deferrable Notes] relating to _________ PEPS Units] and has
delivered to the undersigned a notice stating that the Holder has Transferred
such Treasury Securities or security entitlements thereto to the Securities
Intermediary, for credit to the Collateral Account.

         We hereby request that you instruct the Securities Intermediary, upon
confirmation that such Treasury Securities or security entitlements thereto have
been credited to the Collateral Account, to release to the undersigned [an equal
Value of [Pledged Preferred Securities] [Pledged Senior Deferrable Notes]] in
accordance with Section 5.2 of the Pledge Agreement. We also hereby confirm that
no Tax Event Redemption has occurred.

                                      A-1
<PAGE>   38

                                   THE BANK OF NEW YORK,
Date:                              as Purchase Contract Agent and as
      ---------------------        attorney-in-fact of the Holders from time to
                                   time of the Securities

                                   By:
                                       -----------------------------------------
                                       Name:
                                       Title:

                                      A-2
<PAGE>   39

Please print name and address of Holder electing to substitute Treasury
Securities or security entitlements thereto for the [Pledged Preferred
Securities] [Pledged Senior Deferrable Notes]:

-------------------------------------            -------------------------------
                Name                             Social Security or other
                                                 Taxpayer Identification Number,
                                                 if any

-------------------------------------
               Address

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

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

                                      A-3
<PAGE>   40

                                                                       EXHIBIT B

                                   INSTRUCTION
                              FROM COLLATERAL AGENT
                           TO SECURITIES INTERMEDIARY
                     (Establishment of Treasury PEPS Units)

Bank One Trust Company, N.A., as Securities Intermediary
One North State Street, 9th Floor
Chicago, Illinois 60670-0126
Attention:  Corporate Trust Administration
Telecopy: (312) 407-1708

         Re:      PEPS Units of Valero Energy Corporation (the "COMPANY") and
                  VEC Trust I

                  The securities account of Bank One Trust Company, N.A., as
                  Collateral Agent, maintained by the Securities Intermediary
                  and designated "The Bank One Trust Company, N.A., as
                  Collateral Agent of Valero Energy Corporation, as pledgee of
                  The Bank of New York, as the Purchase Contract Agent on behalf
                  of and as attorney-in-fact for the Holders" (the "COLLATERAL
                  ACCOUNT")

         Please refer to the Pledge Agreement, dated as of June 28, 2000 (the
"PLEDGE AGREEMENT"), among the Company, you, as Securities Intermediary, The
Bank of New York, as Purchase Contract Agent and as attorney-in-fact for the
holders of PEPS Units from time to time, and the undersigned, as Collateral
Agent. Capitalized terms used herein but not defined shall have the meanings set
forth in the Pledge Agreement.

         When you have confirmed that $__________ Value of Treasury Securities
or security entitlements thereto has been credited to the Collateral Account by
or for the benefit of _________, as Holder of PEPS Units (the "HOLDER"), you are
hereby instructed to release from the Collateral Account [an equal Value of
[Preferred Securities or security entitlements thereto] [Senior Deferrable Notes
or security entitlements thereto]] relating to _____ PEPS Units of the Holder]
by Transfer to the Purchase Contract Agent.

                                          BANK ONE TRUST COMPANY, N.A.,
                                          as Collateral Agent

Dated:
      -----------------------
                                          By:
                                              ----------------------------------
                                              Name:
                                              Title:

                                       B-1

<PAGE>   41

Please print name and address of Holder:

-------------------------------------            -------------------------------
                Name                             Social Security or other
                                                 Taxpayer Identification Number,
                                                 if any

-------------------------------------
               Address

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

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

                                       B-2

<PAGE>   42

                                                                       EXHIBIT C

                                   INSTRUCTION
                          FROM PURCHASE CONTRACT AGENT
                               TO COLLATERAL AGENT
                        (Reestablishment of PEPS Units )

Bank One Trust Company, N.A.
One North State Street, 9th Floor
Chicago, Illinois 60670-0126
Attention:  Corporate Trust Administration
Telecopy: (312) 407-1708

         Re:      ________________ PEPS Units of Valero Energy Corporation (the
                  "COMPANY") and VEC Trust I

         Please refer to the Pledge Agreement dated as of June 28, 2000 (the
"PLEDGE AGREEMENT"), among the Company, you, as Collateral Agent, Bank One Trust
Company, N.A., as Securities Intermediary, and the undersigned, as Purchase
Contract Agent and as attorney-in- fact for the holders of PEPS Units from time
to time. Capitalized terms used herein but not defined shall have the meaning
set forth in the Pledge Agreement.

         We hereby notify you in accordance with Section 5.3(a) of the Pledge
Agreement that the holder of securities listed below (the "HOLDER") has elected
to substitute [$ _______ Value of [Preferred Securities or security entitlements
thereto] [Senior Deferrable Notes or security entitlements thereto]] in exchange
for $__________ Value of Pledged Treasury Securities and has delivered to the
undersigned a notice stating that the holder has Transferred such [Preferred
Securities or security entitlements thereto] [Senior Deferrable Notes or
security entitlements thereto] to the Securities Intermediary, for credit to the
Collateral Account.

         We hereby request that you instruct the Securities Intermediary, upon
confirmation that such [Preferred Securities or security entitlements thereto]
[Senior Deferrable Notes or security entitlements thereto] have been credited to
the Collateral Account, to release to the undersigned $__________ Value of
Treasury Securities or security entitlements thereto related to _____ PEPS Units
of such Holder in accordance with Section 5.3(a) of the Pledge Agreement. We
also hereby confirm that no Tax Event Redemption has occurred.

                                          THE BANK OF NEW YORK,
                                          as Purchase Contract Agent

Date:                                     By:
      -------------------                     ----------------------------------
                                              Name:
                                              Title:

                                       C-1

<PAGE>   43

Please print name and address of Holder electing to substitute [Preferred
Securities or security entitlements thereto] [Pledged Senior Deferrable Notes or
security entitlements thereto] for Pledged Treasury Securities:

-------------------------------------            -------------------------------
                Name                             Social Security or other
                                                 Taxpayer Identification Number,
                                                 if any

-------------------------------------
               Address

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

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

                                       C-2

<PAGE>   44

                                                                       EXHIBIT D

                                   INSTRUCTION
                              FROM COLLATERAL AGENT
                           TO SECURITIES INTERMEDIARY
                         (Reestablishment of PEPS Units)

Bank One Trust Company, N.A., as Securities Intermediary
One North State Street, 9th Floor
Chicago, Illinois 60670-0126
Attention:  Corporate Trust Administration
Telecopy: (312) 407-1708

         Re:      _____________________ PEPS Units of Valero Energy Corporation
                  (the "COMPANY") and VEC Trust I

                  The securities account of Bank One Trust Company, N.A., as
                  Collateral Agent, maintained by the Securities Intermediary
                  and designated "The Bank One Trust Company, N.A., as
                  Collateral Agent of Valero Energy Corporation, as pledgee of
                  the Bank of New York, as the Purchase Contract Agent on behalf
                  of and as attorney-in-fact for the Holders" (the "COLLATERAL
                  ACCOUNT")

         Please refer to the Pledge Agreement dated as of June 28, 2000 (the
"PLEDGE AGREEMENT"), among the Company, you, as Securities Intermediary, The
Bank of New York, as Purchase Contract Agent and as attorney-in-fact for the
holders of PEPS Units from time to time, and the undersigned, as Collateral
Agent. Capitalized terms used herein but no defined shall have the meaning set
forth in the Pledge Agreement.

         When you have confirmed that $ __________ Value of [Preferred
Securities or security entitlements thereto] [Senior Deferrable Notes or
security entitlements thereto] has been credited to the Collateral Account by or
for the benefit of ________________, as Holder of PEPS Units (the "HOLDER"), you
are hereby instructed to release from the Collateral Account $ ________________
Value of Treasury Securities or security entitlements thereto by Transfer to the
Purchase Contract Agent.

                                              BANK ONE TRUST COMPANY, N.A.,
                                              as Collateral Agent

Dated:                                        By:
       --------------------                       ------------------------------
                                                  Name:
                                                  Title:

                                       D-1

<PAGE>   45

-------------------------------------            -------------------------------
                Name                             Social Security or other
                                                 Taxpayer Identification Number,
                                                 if any

-------------------------------------
               Address

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

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

                                       D-2

<PAGE>   46

                                                                       EXHIBIT E

             NOTICE OF CASH SETTLEMENT FROM SECURITIES INTERMEDIARY
                           TO PURCHASE CONTRACT AGENT
                            (Cash Settlement Amounts)

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

         Re:      _____________________ PEPS Units of Valero Energy Corporation
                  (the "COMPANY") and VEC Trust I

         Please refer to the Pledge Agreement dated as of June 28, 2000 (the
"PLEDGE AGREEMENT"), by and among you, the Company, Bank One Trust Company,
N.A., as Collateral Agent and the undersigned, as Securities Intermediary.
Unless otherwise defined herein, terms defined in the Pledge Agreement are used
herein as defined therein.

         In accordance with Section 5.5(d) of the Pledge Agreement, we hereby
notify you that as of 11:00 a.m. (New York City time) on the fifth Business Day
immediately preceding August 18 2003, we have received (i) $ _______________ in
immediately available funds paid in an aggregate amount equal to the Purchase
Price to the Company on the Purchase Contract Settlement Date with respect to
________________ PEPS Units and (ii) $ ___________ in immediately available
funds paid in an aggregate amount equal to the Purchase Price to the Company on
the Purchase Contract Settlement Date with respect to ______ Treasury PEPS
Units.

                                              BANK ONE TRUST COMPANY, N.A.,
                                              as Securities Intermediary,

Date:                                         By:
       --------------------                       ------------------------------
                                                  Name:
                                                  Title:

                                      E-1<PAGE>   1
                                                                    EXHIBIT 4.6
===============================================================================

                           VALERO ENERGY CORPORATION

                                      and

                              THE BANK OF NEW YORK

                                   as Trustee

                                  ----------

                    7 3/4% Senior Deferrable Notes due 2005

                                  ----------

                          FIRST SUPPLEMENTAL INDENTURE

                           Dated as of June 28, 2000

===============================================================================

<PAGE>   2

                  FIRST SUPPLEMENTAL INDENTURE, dated as of June 28, 2000,
(herein called the "First Supplemental Indenture"), between Valero Energy
Corporation, a corporation duly organized and existing under the laws of the
State of Delaware (hereinafter called the "Company"), party of the first part,
and The Bank of New York, a New York banking corporation, as Trustee under the
Indenture referred to below (hereinafter called the "Trustee"), party of the
second part.

                                  WITNESSETH:

                  WHEREAS, the Company has heretofore executed and delivered to
the Trustee an Indenture, dated as of December 12, 1997 (hereinafter called the
"Indenture"), to provide for the issuance from time to time of certain of its
unsecured senior notes (hereinafter called the "Securities"), the form and
terms of which are to be established as set forth in Sections 201 and 301 of
the Indenture; and

                  WHEREAS, Section 901 of the Indenture provides, among other
things, that the Company and the Trustee may enter into indentures supplemental
to the Indenture for, among other things, the purpose of establishing the form
or terms of the Securities of any series as permitted in Sections 201 and 301
of the Indenture; and

                  WHEREAS, the Company desires to create a series of the
Securities in an aggregate principal amount of up to $177,835,075 to be
designated the "7 3/4% Senior Deferrable Notes due 2005" (the "Senior Notes"),
and all action on the part of the Company necessary to authorize the issuance
of the Senior Notes under the Indenture and this First Supplemental Indenture
has been duly taken; and

                  WHEREAS, all acts and things necessary to make the Senior
Notes when executed by the Company and completed, authenticated and delivered
by the Trustee as in the Indenture and this First Supplemental Indenture
provided, the valid and binding obligations of the Company and to constitute
these presents a valid and binding supplemental indenture and agreement
according to its terms, have been done and performed; and

                  WHEREAS, Section 901 of the Indenture provides, among other
things, that the Company and the Trustee may enter into indentures supplemental
to the Indenture to, among other things, add to the covenants of the Company
for the benefit of the Holders of all or any series of Securities; and

                  WHEREAS, VEC Trust I, a Delaware statutory business trust
(the "Trust"), has offered to the public up to $172,500,000, in aggregate
liquidation amount of its 7 3/4% Trust Preferred Securities (the "Preferred
Securities") and, in connection therewith, the Company has agreed to purchase
up to $5,335,075 in value of the aggregate liquidation amount of the Trust's
common securities (the "Common Securities" and together with the Preferred
Securities, the "Trust Securities"), each representing an undivided beneficial
interest in the assets of the Trust, and proposes to invest the proceeds from
such offerings in up to $177,835,075 aggregate principal amount of the Senior
Notes;

                                       1
<PAGE>   3

                  NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:

                  That in consideration of the premises, the Company covenants
and agrees with the Trustee, for the equal benefit of holders of the Senior
Notes, as follows:

                                   ARTICLE I
                                  DEFINITIONS

                  Section 1.1 Definition of Terms. Unless the context otherwise
requires:

                           (a) a term not defined herein that is defined in the
Indenture has the same meaning when used in this First Supplemental Indenture;

                           (b) a term defined anywhere in this First
Supplemental Indenture has the same meaning throughout;

                           (c) the singular includes the plural and vice versa;

                           (d) a reference to a Section or Article is to a
Section or Article of this First Supplemental Indenture;

                           (e) headings are for convenience of reference only
and do not affect interpretation;

                           (f) the following terms have the meanings given to
them in the Declaration: (i) Applicable Margin; (ii) Applicable Principal
Amount; (iii) Common Securities; (iv) Delaware Trustee; (v) Failed Remarketing;
(vi) Guarantee; (vii) Majority in Liquidation Amount; (viii) Preferred
Securities; (ix) Preferred Security Certificate; (x) Property Trustee; (xi)
Redemption Amount; (xii) Redemption Price; (xiii) Regular Trustees; (xiv)
Remarketing Agreement; (xv) Tax Event; (xvi) Remarketing Date; (xvii) Reset
Rate; (xviii) Tax Event Redemption; (xix) Treasury Portfolio; and (xx) Two-Year
Benchmark Treasury Rate;

                           (g) the following terms have the meanings given to
them in the Purchase Contract Agreement: (i) Cash Settlement; (ii) PEPS Units;
(iii) Purchase Contract and (iv) Purchase Contract Settlement Date; (v)
Treasury PEPS Unit; (vi) Global Certificate;

                           (h) the following terms have the meanings given to
them in this Section 1.1(h):

                           "Business Day" means any day other than a Saturday
                  or Sunday or a day on which banking institutions in the city
                  of New York, New York or San Antonio, Texas are authorized or
                  required by law or executive order to remain closed or a day
                  on which the principal corporate trust office of the Trustee
                  or the Property Trustee is closed for business.

                                       2
<PAGE>   4

                           "Declaration" means the Amended and Restated
                  Declaration of Trust of the Trust, dated as of June 28, 2000,
                  as amended and restated from time to time.

                           "Direct Action" has the meaning specified in Section
                  6.2.

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

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

                           "Quotation Agent" means (i) Morgan Stanley & Co.
                  Incorporated and its respective successors, provided that if
                  Morgan Stanley & Co. Incorporated ceases to be a Primary
                  Treasury Dealer, the Company will substitute another Primary
                  Treasury Dealer therefor, or (ii) any other Primary Treasury
                  Dealer selected by the Company.

                           "Remarketing" means (i) as long as the Trust has not
                  been liquidated, the operation of the procedures for
                  remarketing specified in Section 7.13 of the Declaration and
                  (ii) if the Trust has been liquidated, the operation of the
                  procedures for remarketing specified in Section 5.02 of the
                  Purchase Contract Agreement.

                           "Remarketing Agent" shall mean Morgan Stanley & Co.
                  Incorporated or any successor remarketing agent selected by
                  the Company.

                                  ARTICLE II
                     TERMS AND ISSUANCE OF THE SENIOR NOTES

                  Section 2.1 Issue of Senior Notes. A series of Securities
which shall be designated the "7 3/4% Senior Deferrable Notes due 2005" shall
be executed, authenticated and delivered in accordance with the provisions of,
and shall in all respects be subject to, the terms, conditions and covenants of
the Indenture and this First Supplemental Indenture (including the form of
Senior Note set forth as Exhibits A and B hereto). The aggregate principal
amount of Senior Notes of the series created hereby which may be authenticated
and delivered under the Indenture shall not, except as permitted by the
provisions of the Indenture, exceed $177,835,075. The Senior Notes shall be
initially issued in certificated form to the Trust (the "Initial Senior Notes")
and shall be substantially in the Form of Exhibit B attached hereto. The terms
of such Senior Notes are herein incorporated by reference and are part of the
First Supplemental Indenture.

                                       3
<PAGE>   5

                  Section 2.2 Maturity. Unless a Tax Event Redemption occurs,
the entire principal amount of the Senior Notes will mature and become due and
payable together with any accrued and unpaid interest thereon, on August 18,
2005 (the "Maturity Date").

                  Section 2.3 Global Senior Notes. If distributed to holders of
Preferred Securities in connection with the involuntary or voluntary
liquidation and dissolution of the Trust:

                           (a) If the Preferred Securities are held in
book-entry form, the Initial Senior Notes may be presented to the Trustee by
the Property Trustee in exchange for a Global Security in the form of Exhibit A
in an aggregate principal amount equal to all Outstanding Senior Notes (a
"Global Senior Note"). The Depositary for the Global Senior Note will be The
Depository Trust Company. The Global Senior Note will be registered in the name
of the Depositary or its nominee, Cede & Co., and delivered by the Trustee to
the Depositary or a custodian appointed by the Depositary for crediting to the
accounts of its participants pursuant to the instructions of the Property
Trustee. The Company upon any such presentation shall execute a Global Senior
Note in such aggregate principal amount and deliver the same to the Trustee for
authentication and delivery in accordance with the Indenture and this First
Supplemental Indenture. Payments on the Senior Notes issued as a Global Senior
Note will be made to the Depositary or its nominee.

                           (b) If any Preferred Securities are held in non
book-entry certificated form ("Non Book-Entry Preferred Securities"), the
Initial Senior Notes may be presented to the Trustee by the Property Trustee,
and such Non Book-Entry Preferred Securities will be deemed to represent
beneficial interests in Senior Notes presented to the Trustee by the Property
Trustee having an aggregate principal amount equal to the aggregate liquidation
amount of the Non Book-Entry Preferred Securities until the Preferred Security
Certificates representing such Non Book-Entry Preferred Securities are
presented to the Security Registrar for transfer or reissuance, at which time
such Preferred Security Certificates will be canceled and a Senior Note
registered in the name of the holder of the Preferred Security Certificate or
the transferee of the holder of such Preferred Security Certificate, as the
case may be, with an aggregate principal amount equal to the aggregate
liquidation amount of the Preferred Security Certificate canceled will be
executed by the Company and delivered to the Trustee for authentication and
delivery in accordance with the Indenture and this First Supplemental
Indenture. On issue of such Senior Notes, Senior Notes with an equivalent
aggregate principal amount that were presented by the Property Trustee to the
Trustee will be deemed to have been canceled.

                  Section 2.4 Interest. (a) Each Senior Note will bear interest
at the rate of 7 3/4% per annum from June 28, 2000 until the Purchase Contract
Settlement Date, and at the Reset Rate thereafter, payable quarterly in arrears
on February 18, May 18, August 18 and November 18 of each year, commencing
August 18, 2000 (the "Interest Payment Dates").

                  (b) The Regular Record Dates for the payment of interest on
the Senior Notes on any Interest Payment Date, shall be (i) as long as the
Senior Notes are represented by a Global Senior Note or the Initial Senior
Notes, the Business Day preceding each Interest Payment Date or (ii) if the
Senior Notes are issued pursuant to Section 2.3(b) above, the fifteenth
Business Day prior to each Interest Payment Date.

                                       4
<PAGE>   6

                  (c) The interest rate on the Senior Notes outstanding on and
after the Remarketing Date will be reset to the Reset Rate. The Reset Rate will
be equal to the rate per annum that results from the Remarketing, provided that
if a Failed Remarketing occurs, the Reset Rate will be equal to (i) the
Two-Year Benchmark Treasury Rate plus (ii) the Applicable Margin.

                  (d) The amount of interest payable on the Senior Notes for
any period will be computed (i) for any full quarterly period on the basis of a
360-day year of twelve 30-day months and (ii) for any period shorter than a
full quarterly period, on the basis of a 30-day month and, for any period less
than a month, on the basis of the actual number of days elapsed per 30-day
month. In the event that any date on which interest is payable on the Senior
Notes is not a Business Day, then payment of the interest payable on such date
will be made on the next day that is a Business Day (and without interest or
other payment in respect of any such delay), except that, if such Business Day
is in the next calendar year, then such payment will be made on the preceding
Business Day.

                  Section 2.5 Redemption. (a) If a Tax Event occurs and is
continuing, the Company may, at its option and upon not less than 30 nor more
than 60 days' notice to the Holders of the Senior Notes, redeem the Senior
Notes in whole (but not in part) within 90 days following the occurrence of
such Tax Event, at a price equal to, for each Senior Note, the Redemption
Price. The aggregate Redemption Price shall be paid prior to 12:00 noon, New
York City time, on the date of redemption (the "Tax Event Redemption Date") or
such earlier time as the Company determines, provided that the Company shall
have deposited with the Trustee an amount sufficient to pay the aggregate
Redemption Price by 10:00 a.m. on the Tax Event Redemption Date. Such
redemption shall otherwise be in accordance with the provisions of Article III
of the Indenture.

                  (b) Except as provided in Section 2.5(a), the Company will
have no right to redeem the Senior Notes.

                  (c) The Senior Notes will not be subject to a sinking fund
provision.

                  Section 2.6 Events of Default. So long as the Senior Notes
are held by the Trust, it shall be an Event of Default with respect to the
Senior Notes if the Trust shall have voluntarily or involuntarily dissolved,
wound up its business or otherwise terminated its existence except in
connection with (i) the distribution of the Senior Notes held by the Trust to
the holders of the Preferred Securities and Common Securities in liquidation of
their interests in the Trust, (ii) the redemption of all of the outstanding
Preferred Securities and Common Securities or (iii) a consolidation,
conversion, amalgamation, merger or other transaction involving the Trust that
is permitted under Section 3.15 of the Declaration.

                  Section 2.7 Paying Agent; Security Registrar. If the Senior
Notes are issued in certificated form, the Paying Agent and the Security
Registrar for the Senior Notes shall be the Property Trustee.

                  Section 2.8 Extension of Interest Payment Period. The Company
shall have the right at any time and from time to time, prior to August 18,
2003, to defer payments of interest by extending the interest payment period of
such Senior Notes for a period not exceeding

                                       5
<PAGE>   7

12 consecutive quarters or extending beyond August 18, 2003 (the "Extension
Period"), during which Extension Period no interest shall be due and payable.
To the extent permitted by applicable law, interest, the payment of which has
been deferred because of the extension of the interest payment period pursuant
to this Section 2.8, will bear interest thereon at the rate of 7 3/4%
compounded quarterly for each quarter of the Extension Period ("Compounded
Interest"). At the end of the Extension Period, the Company shall pay all
interest accrued and unpaid on the Senior Notes and Compounded Interest
(together, "Deferred Interest") that shall be payable to the Holders of the
Senior Notes in whose names the Senior Notes are registered in the Security
Register on the first Regular Record Date after the end of the Extension
Period. During any such Extension Period or an Event of Default, however, the
Company shall not (a) make any payment of principal, interest or premium, if
any, on or repay, repurchase or redeem any debt securities that rank junior to
the Senior Notes in the right of payment issued by the Company, or (b) make any
guarantee payments with respect to any guarantee by the Company of any
securities of any of its subsidiaries if such guarantee ranks junior to the
Senior Notes in right of payment or (c) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of the Company's capital stock, except for or as a result
of (i) dividends or distributions in, or options, warrants or rights to
subscribe for or purchase, the Company's common stock; (ii) any declaration of
a dividend in connection with the implementation of a shareholder's rights
plan, or the issuance of shares under any such plan in the future, or the
redemption or repurchase of any such rights pursuant thereto; (iii) a
reclassification of the Company's capital stock solely into shares of one or
more classes or series of the Company's capital stock or the exchange or
conversion of one class or series of the Company's capital stock for or into
another class or series of the Company's capital stock; (iv) the purchase of
fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged; and (v) the purchase of the Company's common stock in
connection with the Company's normal course issuer bid-purchases for the
satisfaction by the Company of its obligations under any benefit plans for the
Company and the Company's subsidiaries' directors, officers or employees or
under any of the Company's dividend reinvestment plans. Prior to the expiration
of any Extension Period, the Company may further extend such period, provided
that such period together with all such previous and further extensions thereof
shall not exceed 12 quarters or extend beyond August 18, 2003. Upon termination
of any Extension Period and the payment of all Deferred Interest then due, the
Company may commence a new Extension Period, subject to the foregoing
requirements. No interest shall be due and payable during an Extension Period
except at the end thereof, but the Company, at its option, may prepay on any
Interest Payment Date all or any portion of the interest accrued during the
then elapsed portion of an Extension Period.

                  Section 2.9 Notice of Extension. The Company shall give
written notice to the Trustee of its election of any Extension Period (or any
further extension thereof) at least five Business Days before the earlier of
(i) the date the interest on the Senior Notes would have been payable except
for the election to begin or extend the Extension Period; (ii) the date the
Trustee is required to give notice to any securities exchange or to Holders of
Senior Notes of the Record Date or the Interest Payment Date, and (iii) the
Record Date.

                                       6
<PAGE>   8

                  Section 2.10 Place of Payment. The Place of Payment will be
initially the principal corporate trust office of the Trustee which, at the
date hereof, is located at 101 Barclay, 21 West, New York, New York 10286,
Attention: Corporate Trust Administration Department.

                                  ARTICLE III
                                    EXPENSES

                  Section 3.1 Payment of Expenses. In connection with the
offering, sale and issuance of the Senior Notes to the Trust in connection with
the sale of the Preferred Securities and Common Securities by the Trust, the
Company will:

                           (a) pay for all costs and expenses relating to the
offering, sale and issuance of the Senior Notes, including compensation of the
Trustee under the Indenture in accordance with the provisions of Section 607 of
the Indenture; and

                           (b) pay for all costs and expenses of the Trust,
including, but not limited to, costs and expenses relating to the organization
of the Trust, the offering, sale and issuance of the Trust Securities; the fees
and expenses of the Property Trustee (including, without limitation, those
incurred in connection with the enforcement by the Property Trustee of the
rights of the holders of the Preferred Securities), the Delaware Trustee and
the Regular Trustees; the costs and expenses relating to the operation of the
Trust (including, without limitation, costs and expenses of accountants,
attorneys, statistical or bookkeeping services, expenses for printing and
engraving and computing or accounting equipment, paying agent(s), registrar(s),
transfer agent(s), duplicating, travel and telephone and other
telecommunications expenses); and costs and expenses incurred in connection
with the acquisition, financing and disposition of Trust assets;

                           (c) be primarily liable for any indemnification
obligations arising with respect to the Declaration; and

                           (d) pay any and all taxes (other than United States
withholding taxes attributable to the Trust or its assets) and all liabilities,
costs and expenses with respect to such taxes of the Trust.

                                   ARTICLE IV
                                   COVENANTS

                  Section 4.1 Covenants in the Event of an Event of Default. As
long as the Senior Notes are held by the Trust, if an Event of Default occurs
and written notice of such event has been given to the Company, then the
Company may not:

                           (a) declare or pay any dividends or distributions
on, or redeem, purchase, acquire, or make a liquidation payment with respect
to, any of its capital stock; or

                           (b) make any payment of principal, interest or
premium, if any, on or repay, repurchase or redeem any debt securities that rank
on a parity with or junior in interest to the Senior Notes or make any guarantee
payments with respect to any guarantee by the Company of the debt securities of
any subsidiary of the Company if such guarantee ranks on a parity with

                                       7
<PAGE>   9
or junior in interest to the Senior Notes; other than (i) purchases or
acquisitions of capital stock of the Company in connection with the satisfaction
by the Company of its obligations under any employee benefit plans or the
satisfaction by the Company of its obligations pursuant to any contract or
security outstanding on the date of such Event of Default requiring the Company
to purchase capital stock of the Company, (ii) as a result of a reclassification
of the Company's capital stock for another class or series of the Company's
capital stock, (iii) the purchase of fractional interests in shares of the
Company's capital stock pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or exchanged, (iv) dividends
or distributions in capital stock of the Company, (v) redemptions or repurchases
of any rights pursuant to a rights agreement and (vi) payments under the
Guarantee.

                  Section 4.2 Additional Covenants Relating to the Trust. For
as long as the Preferred Securities remain outstanding, the Company will:

                           (a) maintain, directly or indirectly, 100% ownership
of the Common Securities;

                           (b) cause the Trust to remain a statutory business
trust and not to voluntarily dissolve, wind up, liquidate or be terminated,
except as permitted by the Declaration;

                           (c) use its commercially reasonable efforts to
ensure that the Trust will not be an "investment company" required to be
registered under the Investment Company Act of 1940;

                           (d) not take any action that would be reasonably
likely to cause the Trust to be classified as an association or a publicly
traded partnership taxable as a corporation for United States federal income
tax purposes; and

                           (e) pay all of the debts and obligations of the
Trust (other than with respect to the securities issued by the Trust) and all
costs and expenses of the Trust (including, but not limited to, all costs and
expenses relating to the organization of the Trust, the fees and expenses of
the trustees and all costs and expenses relating to the operation of the Trust)
and any and all taxes, duties, assessments or governmental charges of whatever
nature (other than withholding taxes) imposed on the Trust by the United
States, or any other taxing authority, so that the net amounts received and
retained by the Trust after paying such expenses will be equal to the amounts
the Trust would have received had no such costs or expenses been incurred by or
imposed on the Trust.

                                   ARTICLE V
                         ORIGINAL ISSUE OF SENIOR NOTES

                  Section 5.1 Original Issue of Senior Notes. Senior Notes in
an aggregate principal amount of up to $177,835,075 may, upon execution of this
First Supplemental Indenture, be executed by the Company and delivered to the
Trustee for authentication, and the Trustee shall thereupon authenticate and
deliver said Senior Notes upon receipt of a Company Order for authentication
and delivery, without any further action by the Company.

                                       8
<PAGE>   10

                                  ARTICLE VI
                   RIGHTS OF HOLDERS OF PREFERRED SECURITIES

                  Section 6.1 Preferred Security Holders' Rights.
Notwithstanding Section 507 of the Indenture, if the Property Trustee fails to
enforce its rights under the Senior Notes after a holder of Preferred
Securities has made a written request, the holder of Preferred Securities may,
to the fullest extent permitted by law, institute a legal proceeding directly
against the Company to enforce the Property Trustee's rights under the
Indenture without first instituting any legal proceeding against the Property
Trustee or any other Person.

                  Section 6.2 Direct Action. Notwithstanding any other
provision of the Indenture, for as long as any Preferred Securities remain
outstanding, to the fullest extent permitted by law, if an Event of Default has
occurred and is continuing and such event is attributable to the failure of the
Company to pay interest or principal on the Senior Notes on the date such
interest or principal is otherwise payable (or in the case of redemption, the
redemption date), then a holder of Preferred Securities may institute a
proceeding directly against the Company (a "Direct Action") to enforce payment
to such holder of the principal or interest on Senior Notes having an aggregate
principal amount equal to the aggregate liquidation amount of the Preferred
Securities of such holder.

                  Section 6.3 Payments Pursuant to Direct Actions. The Company
will have the right to set off against its obligations to the Trust, as Holder
of the Senior Notes, any payment made to a holder of Preferred Securities in
connection with a Direct Action.

                  Section 6.4 Modifications. So long as any Preferred
Securities remain outstanding, (i) no amendment to this Indenture shall be made
that adversely affects the holders of the Preferred Securities in any material
respect, and no termination of this Indenture shall occur, and no waiver of any
Event of Default or compliance with any covenant under this Indenture shall be
effective, without the prior consent of the holders of at least a Majority in
Liquidation Amount (as defined in the Declaration) of the Preferred Securities
then outstanding unless and until the principal of (and premium, if any, on)
the Senior Note and all accrued and unpaid interest thereon have been paid in
full, and (ii) no amendment shall be made to this Article VI of this First
Supplemental Indenture that would impair the rights of the holders of the
Preferred Securities without the prior consent of the holders of each Preferred
Security then outstanding unless and until the principal of (and premium, if
any, on) the Senior Note and all accrued and unpaid interest thereon have been
paid in full.

                                  ARTICLE VII
                                  REMARKETING

                  Section 7.1 Effectiveness of this Article. Upon a
distribution of the Senior Notes upon the liquidation and dissolution of the
Trust which occurs prior to the Remarketing of the Preferred Securities
pursuant to the Declaration, the Senior Notes shall be Remarketed in accordance
with the Remarketing procedures of the Declaration where all references in the
Remarketing procedures to Preferred Securities shall be read as references to
the Senior Notes, unless the context requires otherwise. Until such a
distribution, or if such distribution occurs

                                       9
<PAGE>   11

after the Remarketing of the Preferred Securities pursuant to the Declaration,
this Article VII will have no effect.

                                 ARTICLE VIII
                            ACCELERATION OF MATURITY

                  Section 8.1 Automatic Acceleration. Notwithstanding Section
502 of the Indenture, if an Event of Default with respect to the Senior Notes
specified in clauses (5) or (6) of Section 501 of the Indenture occurs and is
continuing, the principal of the Senior Notes shall become due and payable
immediately, without any declaration, notice or other act on the part of the
Trustee or any holder thereof.

                                  ARTICLE IX
                                 MISCELLANEOUS

                  Section 9.1 Execution of Supplemental Indenture. This First
Supplemental Indenture is executed and shall be construed as an indenture
supplemental to the Indenture and, as provided in the Indenture, this First
Supplemental Indenture forms a part thereof.

                  Section 9.2 Conflict with Trust Indenture Act. If any
provision hereof limits, qualifies or conflicts with another provision hereof
which is required to be included in this First Supplemental Indenture by any of
the provisions of the Trust Indenture Act, such required provision shall
control.

                  Section 9.3 Effect of Headings. The Article and Section
headings herein are for convenience only and shall not affect the construction
hereof.

                  Section 9.4 Successors and Assigns. All covenants and
agreements in this First Supplemental Indenture by the Company shall bind its
successors and assigns, whether so expressed or not.

                  Section 9.5 Separability Clause. In case any provision in
this First Supplemental Indenture or in the Senior Notes shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.

                  Section 9.6 Benefits of First Supplemental Indenture. Nothing
in this First Supplemental Indenture or in the Senior Notes, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder and the holders, any benefit or any legal or equitable
right, remedy or claim under this First Supplemental Indenture.

                  Section 9.7 Governing Law. This First Supplemental Indenture
and each Senior Note shall be deemed to be a contract made under the laws of
the State of New York, and for all purposes shall be governed by and construed
in accordance with the laws of said State.

                                      10
<PAGE>   12

                  IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed and attested and the Company has
caused its corporate seal to be hereunto affixed and attested, all as of the
day and year first above written.

                                             VALERO ENERGY CORPORATION

[Seal]                                       By:
                                                -------------------------------
                                                John D. Gibbons, Vice President
                                                and Chief Financial Officer

Attest:

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

                                             THE BANK OF NEW YORK
                                             as Trustee

                                             By:
                                                -------------------------------
                                                Name:
                                                Title:

Attest:

--------------------------------
Name:
Title:

<PAGE>   13

STATE OF TEXAS          )
                        )  ss.:
COUNTY OF BEXAR         )

                  On the 28th day of June 2000, before me personally came John
D. Gibbons, to me known, who, being by me duly sworn, did depose and say that
he is Vice President and Chief Financial Officer of Valero Energy Corporation,
the corporation described in and which executed the foregoing instrument; that
he knows the seal of said corporation; that the seal affixed to said instrument
is such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation, and that he signed his name thereto by like
authority.

                                            ------------------------------------
                                            Notary Public,
                                            State of Texas

STATE OF ________          )
                           ) ss.:
COUNTY OF________          )

                  On the ____ day of June 2000, before me personally came
________________, to me known, who, being by me duly sworn, did depose and say
that he is ________________ of The Bank of New York, the national banking
association described in and which executed the foregoing instrument; that he
knows the seal of said association; that the seal affixed to said instrument is
such association seal; that it was so affixed by authority of the Board of
Directors of said association, and that he signed his name thereto by like
authority.

                                            ------------------------------------
                                            Notary Public,
                                            State of________________

<PAGE>   14

                                                                      EXHIBIT A

                    [FORM OF FACE OF SENIOR DEFERRABLE NOTE]

THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE OF A DEPOSITARY. THIS GLOBAL SECURITY IS EXCHANGEABLE FOR SECURITIES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE
ONLY IN THE LIMITED CIRCUMSTANCES HEREINAFTER DESCRIBED AND MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY
OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY OR BY THE DEPOSITARY OR ANY NOMINEE TO A SUCCESSOR OF THE DEPOSITARY
OR A NOMINEE OF SUCH SUCCESSOR.

REGISTERED                                                            REGISTERED

                           VALERO ENERGY CORPORATION

                         % SENIOR DEFERRABLE NOTE DUE 2005
                      ---

                                                                   $
                                                                    -----------

                  VALERO ENERGY CORPORATION, a corporation duly organized and
existing under the laws of Delaware (herein called the "Company", which term
includes any successor corporation under the Indenture hereinafter referred to),
for value received, hereby promises to pay VEC Trust I, or registered assigns,
the principal sum of _______________________ Dollars on August 18, 2005, and to
pay interest on said principal sum from __________, 2000, or from the most
recent Interest Payment Date to which interest has been paid or duly provided
for, quarterly in arrears on February 18, May 18, August 18 and November 18 of
each year (an "Interest Payment Date") commencing August 18, 2000, at the rate
of ___% per annum until August 18, 2003, and at the Reset Rate thereafter, until
the principal hereof shall have become due and payable, and on any overdue
principal and premium, if any, and (without duplication and to the extent that
payment of such interest is enforceable under applicable law) on any

                                      A-1
<PAGE>   15

overdue installment of interest at the same rate per annum compounded quarterly.
Any deferred interest shall accrue interest at the rate set forth in the First
Supplemental Indenture. The amount of interest payable for any period will be
computed (1) for any full quarterly period on the basis of a 360-day year of
twelve 30-day months and (2) for any period shorter than a full quarterly
period, on the basis of a 30-day month and, for any period less than a month, on
the basis of the actual number of days elapsed per 30-day month. In the event
that any date on which interest is payable is not a Business Day, then payment
of the interest payable on such date will be made on the next day that is a
Business Day (and without any interest or other payment in respect of such
delay), except that, if such Business Day is in the next calendar year, then
such payment will be made on the preceding Business Day. The interest
installment so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in the Indenture, referred to on the
reverse side hereof, be paid to the Holder in whose name this Security (or one
or more Predecessor Securities, as defined in said Indenture) is registered at
the close of business on the Regular Record Date for such interest installment,
which, shall be the close of business on the Business Day preceding such
Interest Payment Date. Any such interest installment not punctually paid or duly
provided for shall forthwith cease to be payable to the Holder on such Regular
Record Date, and may be paid to the Holder in whose name this Security (or one
or more Predecessor Securities) is registered at the close of business on a
Special Record Date to be fixed by the Trustee referred to on the reverse side
hereof for the payment of such defaulted interest, notice whereof shall be given
to the Holders of the Security not less than 10 days prior to such Special
Record Date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Security may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in the Indenture.

                  Payment of the principal of and premium, if any, and interest
on this Security will be made at the office or agency of the Trustee maintained
for that purpose in such coin or currency of the United States of America that
at the time of payment is legal tender for payment of public and private debts.
The Company may pay principal and interest by check payable in such money
mailed to the Holder's registered address or by wire transfer to a dollar
account designated by the Holder.

                  Interest on the Securities is deferrable in accordance with
the terms of the First Supplemental Indenture.

                  This Security is, to the extent provided in the Indenture,
unsecured and will rank in right of payment on a parity with all other
unsecured and unsubordinated obligations of the Company.

                  Unless the Certificate of Authentication hereon has been
executed by or on behalf of the Trustee, this Security shall not be entitled to
any benefit under the Indenture or be valid or obligatory for any purpose. The
provisions of this Security are continued on the reverse side hereof, and such
continued provisions shall for all purposes have the same effect as though
fully set forth at this place.

                                      A-2
<PAGE>   16

                  IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed under its corporate seal.

                                   VALERO ENERGY CORPORATION

Dated:                             By:
                                      ---------------------------------------
                                      John D. Gibbons, Vice President
                                      and Chief Financial Officer

                                      Attest:

                                      By:
                                         ----------------------------------
                                         Jay D. Browning, Secretary

                    (FORM OF CERTIFICATE OF AUTHENTICATION)

                         CERTIFICATE OF AUTHENTICATION

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

Dated:                                     THE BANK OF NEW YORK, as
                                           Trustee

                                           By:
                                              ----------------------------------
                                              Authorized Signatory

                                      A-3

<PAGE>   17

                  (FORM OF REVERSE OF SENIOR DEFERRABLE NOTE)

                           VALERO ENERGY CORPORATION

                         % SENIOR DEFERRABLE NOTE DUE 2005
                      ---

                  This Senior Deferrable Note is one of a duly authorized series
of securities of the Company (herein called the "Securities"), issued and to be
issued in one or more series under an Indenture, dated as of December 12, 1997,
as amended and supplemented (as amended and supplemented, the "Indenture"),
between the Company and The Bank of New York as Trustee (herein called the
"Trustee", which term includes any successor trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Company, the Trustee and the Holders of the
Securities and the terms upon which the Securities are, and are to be,
authenticated and delivered. This Security is one of the series designated on
the face hereof, limited in aggregate principal amount to $___________.

                  All terms used in this Security that are defined in the
Indenture shall have the meanings assigned to them in the Indenture.

                  This Security is not subject to any sinking fund, nor may
this Security be redeemed at the option of the Company prior to the Maturity
Date except upon the occurrence of a Tax Event as described below.

                  The Indenture contains provisions for defeasance at any time
of the entire indebtedness of this Security upon compliance by the Company with
certain conditions set forth therein.

                  If an Event of Default with respect to Securities of this
series shall occur and be continuing, the principal of the Securities of this
series may be declared due and payable in the manner and with the effect
provided in the Indenture.

                  If a Tax Event occurs and is continuing, the Company may, at
its option and upon not less than 30 nor more than 60 days' notice to the
Holders of the Securities, redeem the Securities in whole (but not in part)
within 90 days following the occurrence of such Tax Event at the Redemption
Price. The Redemption Price shall be paid prior to 12:00 noon, New York City
time, on the Tax Event Redemption Date, by check or wire transfer in
immediately available funds at such place and to such account as may be
designated by each such Holder.

                  The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Securities of
each series to be affected under the Indenture at any time by the Company and
the Trustee with the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities at the time of all series to be
affected (voting as

                                      A-4
<PAGE>   18

a class). The Indenture also contains provisions permitting the Holders of a
majority in aggregate principal amount of the Outstanding Securities of each
series at the time, on behalf of the Holders of all Securities of such series,
to waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be conclusive and
binding upon such Holder and upon all future Holders of this Security and of
any Security issued upon the registration of transfer hereof or in exchange
hereof or in lieu hereof, whether or not notation of such consent or waiver is
made upon this Security.

                  No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
premium, if any, and interest, if any, on this Security at the times, place and
rate, and in the coin or currency, herein prescribed.

                  This Security shall be exchangeable for Securities registered
in the names of Persons other than the Depositary with respect to such series
or its nominee only as provided in this paragraph. This Security shall be so
exchangeable if (x) the Depositary is at any time unwilling or unable to
continue as Depositary for such series, (y) the Company executes and delivers
to the Trustee a Company Order providing that this Security shall be so
exchangeable or (z) there shall have occurred and be continuing an Event of
Default with respect to the Securities of such series. Securities so issued in
exchange for this Security shall be of the same series, having the same
interest rate, if any, and maturity and having the same terms as this Security,
in authorized denominations and in the aggregate having the same principal
amount as this Security and registered in such names as the Depositary for such
Global Security shall direct.

                  As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of a Security of the series of
which this Security is a part is registrable in the Security Register, upon
surrender of this Security for registration of transfer at the office or agency
of the Company in any place where the principal of and premium, if any, and
interest, if any, on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities
of this series, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.

                  The Securities of the series of which this Security is a part
are issuable only in registered form without coupons in denominations of $25
and in integral multiples thereof. As provided in the Indenture and subject to
certain limitations therein set forth, Securities of this series are
exchangeable for a like aggregate principal amount of Securities of this series
and of like tenor of a different authorized denomination, as requested by the
Holder surrendering the same.

                  No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.

                                      A-5
<PAGE>   19

                  Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Holder in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.

                  This Security shall be governed by and construed in
accordance with the laws of the State of New York.

                  All terms used in this Security which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.

                                      A-6

<PAGE>   20

                                                                      EXHIBIT B

                    [FORM OF FACE OF SENIOR DEFERRABLE NOTE]

No.                                                                   REGISTERED
    -------

                           VALERO ENERGY CORPORATION

                         % SENIOR DEFERRABLE NOTE DUE 2005
                      ---
                                                                   $
                                                                    -----------

                  VALERO ENERGY CORPORATION, a corporation duly organized and
existing under the laws of Delaware (herein called the "Company", which term
includes any successor corporation under the Indenture hereinafter referred
to), for value received, hereby promises to pay VEC Trust I, or registered
assigns, the principal sum of _______________________ Dollars on August 18,
2005, and to pay interest on said principal sum from __________, 2000, or from
the most recent Interest Payment Date to which interest has been paid or duly
provided for, quarterly in arrears on February 18, May 18, August 18 and
November 18 of each year (an "Interest Payment Date") commencing August 18,
2000, at the rate of 7 3/4% per annum until August 18, 2003, and at the Reset
Rate thereafter, until the principal hereof shall have become due and payable,
and on any overdue principal and premium, if any, and (without duplication and
to the extent that payment of such interest is enforceable under applicable
law) on any overdue installment of interest at the same rate per annum
compounded quarterly. Any deferred interest shall accrue interest at the rate
set forth in the First Supplemental Indenture. The amount of interest payable
for any period will be computed (1) for any full quarterly period on the basis
of a 360-day year of twelve 30-day months and (2) for any period shorter than a
full quarterly period, on the basis of a 30-day month and, for any period less
than a month, on the basis of the actual number of days elapsed per 30-day
month. In the event that any date on which interest is payable is not a
Business Day, then payment of the interest payable on such date will be made on
the next day that is a Business Day (and without any interest or other payment
in respect of such delay), except that, if such Business Day is in the next
calendar year, then such payment will be made on the preceding Business Day.
The interest installment so payable, and punctually paid or duly provided for,
on any Interest Payment Date will, as provided in the Indenture, referred to on
the reverse side hereof, be paid to the Holder in whose name this Security (or
one or more Predecessor Securities as defined in said Indenture) is registered
at the close of business on the Regular Record Date for such interest
installment, which, shall be the close of business on the Business Day
preceding such Interest Payment Date. Any such interest installment not
punctually paid or duly provided for shall forthwith cease to be payable to the
Holder on such Regular Record Date, and may be paid to the Holder in whose name
this Security (or one or more Predecessor Securities) is registered at the
close of business on a Special Record Date to be fixed by the Trustee referred
to on the reverse side hereof for the payment of such defaulted interest,
notice whereof shall be given to the Holders of the Security not less than 10
days prior to such Special Record Date, or may be paid at any time in any other
lawful manner not

                                      B-1
<PAGE>   21

inconsistent with the requirements of any securities exchange on which the
Security may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in the Indenture.

                  Payment of the principal of and premium, if any, and interest
on this Security will be made at the office or agency of the Trustee maintained
for that purpose in such coin or currency of the United States of America that
at the time of payment is legal tender for payment of public and private debts.
The Company may pay principal and interest by check payable in such money
mailed to the Holder's registered address or by wire transfer to a dollar
account designated by the Holder

                  Interest on the Securities is deferrable in accordance with
the terms of the First Supplemental Indenture.

                  This Security is, to the extent provided in the Indenture,
unsecured and will rank in right of payment on a parity with all other
unsecured and unsubordinated obligations of the Company.

                  Unless the Certificate of Authentication hereon has been
executed by or on behalf of the Trustee, this Security shall not be entitled to
any benefit under the Indenture or be valid or obligatory for any purpose. The
provisions of this Security are continued on the reverse side hereof, and such
continued provisions shall for all purposes have the same effect as though
fully set forth at this place.

                                      B-2
<PAGE>   22

                  IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed under its corporate seal.

                                         VALERO ENERGY CORPORATION

Dated:                                   By:
                                            -----------------------------------
                                            John D. Gibbons, Vice President
                                            and Chief Financial Officer

                                         Attest:

                                         By:
                                            -----------------------------------
                                            Jay D. Browning, Secretary

                    (FORM OF CERTIFICATE OF AUTHENTICATION)

                         CERTIFICATE OF AUTHENTICATION

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

Dated:                                       THE BANK OF NEW YORK,
                                             as Trustee

                                             By:
                                                -------------------------------
                                                Authorized Signatory

                                      B-3
<PAGE>   23

                  (FORM OF REVERSE OF SENIOR DEFERRABLE NOTE)

                           VALERO ENERGY CORPORATION

                      ___% SENIOR DEFERRABLE NOTE DUE 2005

                  This Senior Deferrable Note is one of a duly authorized
series of securities of the Company (herein called the "Securities"), issued
and to be issued in one or more series under an Indenture, dated as of December
12, 1997, as amended and supplemented (as amended and supplemented, the
"Indenture"), between the Company and The Bank of New York, as Trustee (herein
called the "Trustee", which term includes any successor trustee under the
Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights, limitations
of rights, duties and immunities thereunder of the Company, the Trustee and the
Holders of the Securities and the terms upon which the Securities are, and are
to be, authenticated and delivered. This Security is one of the series
designated on the face hereof, limited in aggregate principal amount to
$___________.

                  All terms used in this Security that are defined in the
Indenture shall have the meanings assigned to them in the Indenture.

                  This Security is not subject to any sinking fund, nor may
this Security be redeemed at the option of the Company prior to the Maturity
Date except upon the occurrence of a Tax Event as described below.

                  The Indenture contains provisions for defeasance at any time
of the entire indebtedness of this Security upon compliance by the Company with
certain conditions set forth therein.

                  If an Event of Default with respect to Securities of this
series shall occur and be continuing, the principal of the Securities of this
series may be declared due and payable in the manner and with the effect
provided in the Indenture.

                  If a Tax Event occurs and is continuing, the Company may, at
its option and upon not less than 30 nor more than 60 days' notice to the
Holders of the Securities, redeem the Securities in whole (but not in part)
within 90 days following the occurrence of such Tax Event at the Redemption
Price. The Redemption Price shall be paid prior to 12:00 noon, New York City
time, on the Tax Event Redemption Date, by check or wire transfer in
immediately available funds at such place and to such account as may be
designated by each such Holder.

                  The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Securities of
each series to be affected under the Indenture at any time by the Company and
the Trustee with the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities at the time of all series to be
affected (voting as a class). The Indenture also contains provisions permitting
the Holders of a majority in aggregate principal amount of the Outstanding
Securities of each series at the time, on behalf of

                                      B-4
<PAGE>   24

the Holders of all Securities of such series, to waive compliance by the
Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the
Holder of this Security shall be conclusive and binding upon such Holder and
upon all future Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security.

                  No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
premium, if any, and interest, if any, on this Security at the times, place and
rate, and in the coin or currency, herein prescribed.

                  As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of a Security of the series of
which this Security is a part is registrable in the Security Register, upon
surrender of this Security for registration of transfer at the office or agency
of the Company in any place where the principal of and premium, if any, and
interest, if any, on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities
of this series, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.

                  The Securities of the series of which this Security is a part
are issuable only in registered form without coupons in denominations of $25
and in integral multiples thereof. As provided in the Indenture and subject to
certain limitations therein set forth, Securities of this series are
exchangeable for a like aggregate principal amount of Securities of this series
and of like tenor of a different authorized denomination, as requested by the
Holder surrendering the same.

                  No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.

                  Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Holder in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.

                  This Security shall be governed by and construed in
accordance with the laws of the State of New York.

                  All terms used in this Security which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.

                                      B-5

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