Document:

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                                                                    EXHIBIT 4.8

                              REMARKETING AGREEMENT

                                                                  June 28, 2000

MORGAN STANLEY & CO. INCORPORATED
1585 Broadway
New York, New York  10036

Ladies and Gentlemen:

         Morgan Stanley & Co. Incorporated (the "Remarketing Agent") is
undertaking to remarket the 7 3/4% Trust Preferred Securities due August 18,
2005 (the "Trust Preferred Securities"), issued by VEC Trust I, a Delaware
business trust (the "Trust"), pursuant to Amended and Restated Declaration of
Trust (the "Declaration"), dated as of June 28, 2000 by and among Valero Energy
Corporation, a Delaware corporation (the "Company"), as Sponsor, Jay D.
Browning, John D. Gibbons and Donna M. Titzman, as the initial Regular Trustees,
The Bank of New York, as the initial Property Trustee, and The Bank of New York
(Delaware), as the initial Delaware Trustee, not in their individual capacities
but solely as Trustees, and the Holders, from time to time, of the Securities
representing undivided beneficial ownership interests in the assets of the Trust
to be issued pursuant to the Declaration.

         The Remarketing (as defined below) of the Trust Preferred Securities is
provided for in the Declaration, the Pledge Agreement and the Purchase Contract
Agreement (as defined below).

         If a liquidation and dissolution of the Trust shall have occurred prior
to the Purchase Contract Settlement Date and the Senior Deferrable Notes have
been distributed to the holders of the Trust Preferred Securities all references
herein to "Trust Preferred Securities" shall instead be references to "Senior
Deferrable Notes" and references to "Remarketed Trust Preferred Securities"
shall instead be references to "Remarketed Senior Deferrable Notes", unless the
context otherwise requires.

         Section 1. Definitions.

         (a) Capitalized terms used and not defined in this Agreement shall have
the meanings set forth in the Purchase Contract Agreement, dated as of June 28,
2000 (the "Purchase Contract Agreement"), between the Company and The Bank of
New York, as Purchase Contract Agent (the "Purchase Contract Agent").

         (b) As used in this Agreement, the following terms have the following
meanings:

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         "Guarantee Agreement" means the guarantee agreement dated June 28, 2000
between the Company and The Bank of New York.

         "Remarketed Trust Preferred Securities" means the Trust Preferred
Securities subject to the Remarketing, as identified to the Remarketing Agent by
the Purchase Contract Agent after 11:00 a.m., New York City time, on the fifth
Business Day immediately preceding August 18, 2003;

         "Remarketing Procedures" means the procedures in connection with the
Remarketing of the Trust Preferred Securities described in the Purchase Contract
Agreement, the Pledge Agreement and the Declaration, as the case may be; and

         "Remarketing" means the remarketing of the Remarketed Trust Preferred
Securities pursuant to the Remarketing Procedures.

         "Rights Agreement" means the rights agreement dated as of July 17, 1997
between the Company and Harris Trust and Savings Bank.

         "Transaction Documents" means the Purchase Contract Agreement, the
Pledge Agreement and the Declaration, collectively.

         Section 2. Appointment and Obligations of the Remarketing Agent.

         (a) The Company hereby appoints Morgan Stanley & Co. Incorporated as
exclusive remarketing agent (the "Remarketing Agent"), and Morgan Stanley & Co.
Incorporated hereby (1) accepts appointment as Remarketing Agent, for the
purpose of (a) Remarketing Remarketed Trust Preferred Securities on behalf of
the holders thereof and (b) performing such other duties as are assigned to the
Remarketing Agent in the Remarketing Procedures, all in accordance with and
pursuant to the Remarketing Procedures, and (2) accepts and will perform all
obligations of the Remarketing Agent set forth in the Declaration, the Pledge
Agreement and the Purchase Contract Agreement.

         (b) The Remarketing Agent agrees to (1) use reasonable efforts to
remarket the Remarketed Trust Preferred Securities tendered or deemed tendered
to the Remarketing Agent in the Remarketing, (2) notify the Company, the
Depositary and the Indenture Trustee promptly of the Reset Rate and (3) carry
out such other duties as are assigned to the Remarketing Agent in the
Remarketing Procedures, all in accordance with the provisions of the Remarketing
Procedures.

         (c) On the third Business Day immediately preceding the Purchase
Contract Settlement Date (the "Remarketing Date"), the Remarketing Agent shall
use reasonable efforts to remarket the Trust Preferred Securities tendered or
deemed tendered for purchase at a price equal to 100.25% of the aggregate stated
liquidation amount thereof.

         (d) If, as a result of the efforts described in 2(c), the Remarketing
Agent has determined that it will be able to remarket all of the Preferred
Securities tendered or deemed

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tendered for purchase at a price of 100.25% of the aggregate stated liquidation
amount of such Preferred Securities, the Remarketing Agent shall determine the
Reset Rate, which shall be the rate per annum (rounded to the nearest
one-thousandth (0.001) of one percent per annum), sufficient to cause the
then-current aggregate market value of the Preferred Securities to be equal to
100.25% of the aggregate stated liquidation amount of such Preferred Securities,
that the Remarketing Agent determines, in its sole reasonable judgment, to be
the lowest rate per annum that will enable it to remarket all of the Preferred
Securities tendered or deemed tendered for Remarketing.

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

         (f) Upon receipt of the proceeds from the Remarketing, the Remarketing
Agent shall: (1) retain $.0625 per Remarketed Trust Preferred Security as a
remarketing fee for the performance of its services as Remarketing Agent
hereunder; and (2) remit to the Collateral Agent all other proceeds of the
Remarketed Trust Preferred Securities subject to the Pledge Agreement.

         (g) If, by 4:00 p.m., New York City time, on the Remarketing Date, the
Remarketing Agent is unable to remarket all of the Trust Preferred Securities
tendered or deemed tendered for purchase pursuant to the terms and conditions
hereof, a Failed Remarketing shall be deemed to have occurred, and the
Remarketing Agent shall so advise by telephone the Depositary, the Property
Trustee, the Trust and the Company. In the event of a Failed Remarketing, the
Reset Rate shall equal the Two Year Benchmark Treasury Rate plus the Applicable
Margin.

         (h) By approximately 4:30 p.m., New York City time, on the Remarketing
Date (provided there has not been a Failed Remarketing), the Remarketing Agent
shall advise, by telephone:

         (1) the Depositary, the Property Trustee, the Indenture Trustee, the
     Trust and the Company of the Reset Rate determined in the Remarketing and
     the number of Remarketed Trust Preferred Securities sold in the
     Remarketing;

         (2) each purchaser (or the Depositary Participant thereof) of
     Remarketed Trust Preferred Securities of the Reset Rate and the number of
     Remarketed Trust Preferred Securities such purchaser is to purchase; and

         (3) each purchaser to give instructions to its Depositary Participant
     to pay the purchase price on the Purchase Contract Settlement Date in same
     day funds against delivery of the Remarketed Trust Preferred Securities
     purchased through the facilities of the Depositary.

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         Section 3. Representations and Warranties of the Company and the Trust.

         The Company and the Trust jointly and severally represent and warrant
(i) on and as of the date hereof, (ii) on and as of the date the Prospectus or
other Remarketing Materials (each as defined in Section 3(a) below) are first
distributed in connection with the Remarketing (the "Commencement Date"), (iii)
on and as of the Remarketing Date, and (iv) on and as of the Purchase Contract
Settlement Date that:

         (a) A registration statement (File Nos. 333-33846, 333-33846-01 and
333-33846-02) in respect of the initial offering of the Trust Preferred
Securities has been filed with the Securities and Exchange Commission (the
"Commission") on Form S-3; a registration statement on Form S-3, if required in
connection with the Remarketing also may be prepared by the Company; the last of
such registration statement including all exhibits thereto and the documents
incorporated by reference in the prospectus contained in such registration
statement at the time such part of such registration statement became effective
but excluding each Form T-1 filed in connection therewith, and any
post-effective amendment thereto is referred to herein as the "Registration
Statement"; the Registration Statement, in the form heretofore delivered or to
be delivered to the Remarketing Agent, excluding exhibits, but including all
documents incorporated by reference in the prospectus contained therein, has
been declared effective by the Commission in such form; and no stop order
suspending the effectiveness of the Registration Statement has been issued and
no proceeding for that purpose has been initiated or threatened by the
Commission; any preliminary prospectus included in the Registration Statement or
filed with the Commission pursuant to Rule 424(a) of the rules and regulations
of the Commission under the Securities Act of 1933, as amended (the "Securities
Act"), being hereinafter called a "Preliminary Prospectus"; the prospectus
relating to the Trust Preferred Securities, in the form in which first filed, or
transmitted for filing, with the Commission after the effective date of the
Registration Statement pursuant to Rule 424(b), being hereinafter called the
"Prospectus"; any reference herein to any Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include the documents incorporated by
reference therein pursuant to the applicable form under the Securities Act, as
of the date of such Preliminary Prospectus or Prospectus, as the case may be;
any reference to any amendment or supplement to any Preliminary Prospectus or
the Prospectus shall be deemed to refer to and include any documents filed after
the date of such Preliminary Prospectus or Prospectus, as the case may be, under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
incorporated by reference in such Preliminary Prospectus or Prospectus, as the
case may be; any reference to any amendment to the Registration Statement shall
be deemed to refer to and include any annual report of the Company filed
pursuant to Section 13(a) or 15(d) of the Exchange Act after the effective date
of the Registration Statement that is incorporated by reference in the
Registration Statement; and any reference to the Prospectus as amended or
supplemented shall be deemed to refer to the Prospectus as amended or
supplemented in relation to the applicable Trust Preferred Securities in the
form in which it is filed with the Commission pursuant to Rule 424(b) under the
Securities Act in accordance with Section 5(a) hereof, including any documents
incorporated by reference therein as of the date of such filing.

         Reference made herein to any Preliminary Prospectus, the Prospectus or
any other information furnished by the Company to the Remarketing Agent for
distribution to investors in

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connection with the Remarketing (the "Remarketing Materials") shall be deemed to
refer to and include any documents incorporated by reference therein pursuant to
Item 12 of Form S-3 under the Securities Act as of the date of such Preliminary
Prospectus or the Prospectus, as the case may be, or, in the case of Remarketing
Materials, referred to as incorporated by reference therein, and any reference
to any amendment or supplement to any Preliminary Prospectus, the Prospectus or
the Remarketing Materials shall be deemed to refer to and include any document
filed under the Exchange Act, after the date of such Preliminary Prospectus or
the Prospectus incorporated by reference therein pursuant to Item 12 of Form S-3
or, if so incorporated, the Remarketing Materials, as the case may be;

         (b) The documents incorporated by reference in the Prospectus, when
they became effective or were filed with the Commission, as the case may be,
conformed in all material respects to the requirements of the Securities Act or
the Exchange Act, as applicable, and the rules and regulations of the Commission
thereunder, and none of such documents contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; and any further documents so filed and
incorporated by reference in the Prospectus or any further amendment or
supplement thereto, when such documents become effective or are filed with the
Commission, as the case may be, will conform in all material respects to the
requirements of the Securities Act or the Exchange Act, as applicable, and the
rules and regulations of the Commission thereunder and will not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that this representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information relating to
the Remarketing Agent furnished in writing to the Company by the Remarketing
Agent or its counsel expressly for use in the Prospectus;

         (c) The Registration Statement conforms (and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus, when they become effective or are filed with the Commission, as the
case may be, will conform) in all material respects to the requirements of the
Securities Act and the rules and regulations promulgated thereunder, and the
Registration Statement, the Prospectus and the Remarketing Materials (and any
amendment or supplement thereto) as of their respective effective or filing
dates and as of the Commencement Date, Remarketing Date and Purchase Contract
Settlement Date do not and will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading; provided that no representation
and warranty is made as to any statement of eligibility on Form T-1 filed or
incorporated by reference as part of the Registration Statement, the Prospectus
or the Remarketing Materials, or as to information relating to the Remarketing
Agent contained in or omitted from the Registration Statement, the Prospectus or
the Remarketing Materials in reliance upon and in conformity with written
information furnished to the Company by the Remarketing Agent;

         (d) The Trust has no subsidiaries. Neither the Trust nor the Company
(including all of its subsidiaries taken as a whole, each a "Subsidiary" and,
collectively, the "Subsidiaries")

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has incurred any material adverse change, or any development involving a
prospective material adverse change in the condition, financial or otherwise, or
in its earnings, business or operations from that set forth in the Prospectus
(exclusive of any amendments or supplements thereto subsequent to the date of
this Agreement);

         (e) This Agreement has been duly authorized, executed and delivered by
each of the Company and the Trust, and this Agreement conforms to the
description thereof in the Transaction Documents;

         (f) Each of the Company and its Subsidiaries has been duly incorporated
and is validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, with corporate power and authority to own or
lease its properties and conduct its business as described in the Remarketing
Materials, and is duly qualified to do business and is in good standing in each
jurisdiction in which the character of the business conducted by it or the
location of the properties owned or leased by it makes such qualification
necessary, except to the extent that the failure to be so qualified or to be in
good standing would not have a material adverse effect on the Company and its
Subsidiaries, taken as a whole. All of the shares of capital stock of each
Subsidiary have been duly authorized and validly issued, are fully paid and
nonassessable. All of the outstanding shares of capital stock of each Subsidiary
are owned directly or indirectly by the Company, free and clear of any claim,
lien, encumbrance or security interest;

         (g) The Senior Deferrable Notes have been duly authorized, and, when
issued and delivered pursuant to the Indenture, will have been duly executed,
authenticated, issued and delivered and will constitute valid and binding
obligations of the Company entitled to the benefits provided by the Indenture;
the Indenture has been duly authorized, executed and delivered by the Company
and constitutes a valid and binding instrument, enforceable in accordance with
its terms, except as the enforceability thereof is subject to the effect of (i)
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other laws relating to or affecting creditors' rights generally and (ii) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law); and the Indenture will conform to the
descriptions thereof in the Prospectus;

         (h) Each of the Guarantee and the Guarantee Agreement has been duly
authorized and when validly executed and delivered by the Company will
constitute a legal, valid and binding obligation of the Company, enforceable in
accordance with its terms, except as the enforceability thereof is subject to
the effect of (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other laws relating to or affecting creditors' rights generally
and (ii) general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law); and the Guarantee will
conform to the description thereof in the Prospectus;

         (i) Neither the Company nor any of its Subsidiaries is, nor with the
giving of notice or lapse of time or both would be, in violation of or in
default under, nor will the execution, delivery and performance by the Company
of its obligations under, this Agreement, the Declaration, the Guarantee
Agreement and the Indenture and the consummation of the

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transactions (the "Transactions") contemplated in this Agreement, the
Declaration, the Guarantee, the Indenture, nor will compliance by the Company
with its obligations under this Agreement, the Declaration, the Guarantee
Agreement and the Indenture, result in a violation of, or constitute a default
under, (1) the certificate of incorporation, by-laws or other governing
documents of the Company or any of its Subsidiaries, (2) any agreement,
indenture or other instrument to which the Company or any of its Subsidiaries is
a party or by which any of them is bound, or to which any of their properties is
subject, or (3) any law, rule, administrative regulation or decree of any court
or any governmental agency or body having jurisdiction over the Company, its
Subsidiaries or any of their properties, or result in the creation or imposition
of any lien, charge, claim or encumbrance upon any property or asset of the
Company or any of its Subsidiaries which would be material to the Company and
its Subsidiaries taken as a whole. Except for permits and similar authorizations
required under the Securities Act, the Trust Indenture Act, and the securities
or Blue Sky laws of certain jurisdictions, and except for such permits and
authorizations as have been obtained, no consent, approval, authorization or
order of any court, governmental agency or body or financial institution is
required for the Guarantee or the consummation of the Transactions;

         (j) The Trust has been duly created and is validly existing as a
statutory business trust in good standing under the Business Trust Act of the
State of Delaware (the "Delaware Trust Act") and is a "grantor trust" for
federal income tax purposes, with the trust power and authority to own property
and conduct its business as described in the Prospectus, and has conducted and
will conduct no business other than the transactions contemplated by the
Underwriting Agreement as described in the Prospectus; the Trust will not be a
party to or bound by any agreement or instrument other than this Agreement, the
Underwriting Agreement and the other agreements entered into in connection with
the transactions contemplated hereby or thereby; the Trust has no liabilities or
obligations other than those arising out of the transactions contemplated by
this Agreement, the Underwriting Agreement and the Declaration; and the Trust is
not a party to or subject to any action, suit or proceeding of any nature;

         (k) The Declaration has been duly authorized by the Company, as
Sponsor, and, when duly executed and delivered by the Company, as Sponsor, and
the Regular Trustees (assuming due authorization, execution and delivery by the
Property Trustee and the Delaware Trustee), will constitute a legal, valid and
binding obligation of the Sponsor and the Trustees, enforceable against the
Sponsor and the Trustees in accordance with its terms, except as the
enforceability thereof is subject to the effect of (i) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other laws relating to or
affecting creditors' rights generally and (ii) general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law); and the Declaration will conform to the description thereof
contained in the Prospectus;

         (l) The Trust Preferred Securities have been duly authorized and, when
executed and authenticated in accordance with the provisions of the Declaration,
and delivered to and paid for by the underwriters in accordance with the terms
of the Underwriting Agreement, will be validly issued and (subject to the terms
of the Declaration) fully paid and non-assessable undivided beneficial interests
in the assets of the Trust, and the issuance of such Trust Preferred Securities
will not be subject to any preemptive or similar rights. Holders of the Trust
Preferred

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Securities will be entitled to the same limitation of personal liability as that
extended to stockholders of private corporations for profit organized under the
General Corporation Law of the State of Delaware. The common securities of the
Trust have been duly authenticated under the Declaration and, when issued and
delivered to the Company against payment therefor as described in the
Prospectus, will be validly issued undivided beneficial interests in the assets
of the Trust, and the issuance of such common securities of the Trust will not
be subject to any preemptive rights;

         (m) The Trust is not, nor with the giving of notice or lapse of time or
both would be, in violation of or in default under, nor will the execution,
delivery and performance by the Trust of its obligations under this Agreement,
the Underwriting Agreement and the Trust Preferred Securities and the common
securities of the Trust, the purchase of the Senior Deferrable Notes by the
Trust from the Company, the distribution of the Senior Deferrable Notes upon the
liquidation of the Trust in the circumstances contemplated by the Declaration,
or the consummation by the Trust of the transactions contemplated in this
Agreement, the Declaration or the Underwriting Agreement (the "Trust
Transactions"), result in a violation of any statute or order, rule or
regulation of any court or governmental agency or body having jurisdiction over
the Trust or any of its assets. Except for permits and similar authorizations
required under the Securities Act, the qualification of the Declaration under
the Trust Indenture Act and the securities or Blue Sky laws of certain
jurisdictions, and except for such permits and authorizations as have been
obtained, no consent, approval, authorization or order of any court,
governmental agency or body or financial institution is required for the
consummation of the Trust Transactions;

         (n) The Trust, the Company and its Subsidiaries have good and
indefeasible title to all material real and personal property owned by them, in
each case free and clear of all mortgages, liens, encumbrances and defects,
except such as are described or referred to in the Remarketing Materials, or
such as do not materially affect the values of such property and do not
unreasonably interfere with the use made or proposed to be made of such property
by the Trust or the Company or such Subsidiaries; and any real property and
buildings held under lease by the Trust and the Company and its Subsidiaries are
held by them under valid, existing and enforceable leases with such exceptions
as are not material and do not unreasonably interfere with the use made or
proposed to be made of such property and buildings by the Trust and the Company
or such Subsidiaries;

         (o) There are no legal or governmental investigations or proceedings
pending or threatened to which the Trust, the Company or any of its Subsidiaries
is a party or to which any of the properties of the Trust, the Company or any of
its Subsidiaries is subject, that are required to be described in the
Registration Statement or the Prospectus and are not so described or any
statutes, regulations, contracts or other documents that are required to be
described in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement that are not described or filed as
required;

         (p) The Company has prepared its financial statements on a consistent
basis in accordance with generally accepted accounting principles. The pro forma
financial statements of the Company, and the related notes thereto, included in
the Prospectus present fairly in all

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material respects the pro forma financial position of the Company, as of the
dates indicated and the results of its operations for the periods specified; the
pro forma combined financial information, and the related notes thereto,
included in the Prospectus has been prepared in accordance with the applicable
requirements of the Exchange Act and is based upon good faith estimates and
assumptions believed by the Company to be reasonable;

         (q) Neither the Company nor the Trust is, and after giving effect to
the offering and sale of the securities contemplated pursuant to the
Underwriting Agreement and the application of the proceeds thereof as described
in the Prospectus, neither will be, required to register as an "investment
company" as such term is defined in the Investment Company Act of 1940, as
amended;

         (r) The execution and delivery by the Company of, and the performance
by the Company of its obligations under, this Agreement, the Rights Agreement,
the Purchase Contract Agreement, the Securities, the Pledge Agreement, the
Declaration, the Guarantee, the Guarantee Agreement, the Senior Deferrable
Notes, the Indenture and the Underwriting Agreement will not contravene any
provision of applicable law or the certificate of incorporation or by-laws of
the Company or any agreement or other instrument binding upon the Company or any
of its Subsidiaries that is material to the Company and its Subsidiaries, taken
as a whole, or any judgment, order or decree of any governmental body, agency or
court having jurisdiction over the Company or any Subsidiary, and no consent,
approval, authorization or order of, or qualification with, any governmental
body or agency that has not already been obtained is required for the
performance by the Company of its obligations under this Agreement, the Rights
Agreement, the Purchase Contract Agreement, the Securities, the Pledge
Agreement, the Declaration, the Guarantee, the Guarantee Agreement, the Senior
Deferrable Notes, the Indenture or the Underwriting Agreement, except such as
may be required by the securities or Blue Sky laws of the various states in
connection with the offer and sale of the Securities;

         (s) Neither the Company nor any of its Subsidiaries is in violation of
its corporate charter or by-laws or other constitutive document or in default
under any agreement, indenture or instrument, which default could reasonably be
expected to have a material adverse effect on the business, properties,
financial condition or results of operations of the Company and its
Subsidiaries, taken as a whole, and no event or condition has occurred or exists
which, with the giving of notice or the lapse of time or both, would result in
any such violation or default which would have such an effect.

         (t) The Company and its Subsidiaries (i) are in compliance with any and
all applicable foreign, federal, state and local laws and regulations relating
to the protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("Environmental Laws"),
(ii) have received all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective businesses and
(iii) are in compliance with all terms and conditions of any such permit,
license or approval, except where such noncompliance with Environmental Laws,
failure to receive required permits, licenses or other approvals or failure to
comply with the terms and conditions of such permits, licenses or approvals
would not, singly or in the aggregate, have a material adverse effect on the
Company and its Subsidiaries, taken as a whole; and except, in each case,

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as described in the Prospectus (exclusive of any amendments or supplements
thereto subsequent to the date of this Agreement);

         (u) Except as described in the Prospectus (exclusive of any amendments
or supplements thereto subsequent to the date of this Agreement), there are no
costs or liabilities associated with Environmental Laws (including, without
limitation, any capital or operating expenditures required for clean-up, closure
of properties or compliance with Environmental Laws or any permit, license or
approval, any related constraints on operating activities and any potential
liabilities to third parties) which would, singly or in the aggregate, have a
material adverse effect on the Company and its Subsidiaries, taken as a whole;

         (v) All licenses, permits, consents, certificates of need,
authorizations, certifications, accreditations, franchises, approvals, grants of
rights by, or filings or registrations with, any federal, state, local or
foreign court or governmental or public body, authority, or other
instrumentality or third person (including without limitation the Federal Energy
Regulatory Commission ("FERC")) (any of the foregoing a "License") necessary for
either the Company and its Subsidiaries to own, build, maintain or operate their
respective businesses or properties have been duly authorized and obtained, and
are in full force and effect, except where the failure to so be obtained or in
effect would not, individually or in the aggregate, have a material adverse
effect on the Company and its Subsidiaries, taken as a whole; and the Company
and its Subsidiaries are in compliance in all material respects with all
provisions thereof; no event has occurred which permits (or with the passage of
time would permit) the revocation or termination of any License, or which could
result in the imposition of any restriction thereon, which is of such a nature
or the effect of which would reasonably be expected to have a material adverse
effect on the Company and its Subsidiaries, taken as a whole; no material
License is the subject of any pending or, to the best of the Company's
knowledge, threatened challenge or revocation which, if such License were
revoked, would reasonably be expected to have a material adverse effect on the
Company and its Subsidiaries, taken as a whole; the Company and its Subsidiaries
are not required to obtain any material License that has not already been
obtained from, or effect any material filing or registration that has not
already been effected with, the FERC or any other federal, state or local
regulatory authority in connection with the execution and delivery of this
Agreement, the Rights Agreement, the Purchase Contract Agreement, the
Securities, the Pledge Agreement, the Declaration, the Guarantee, the Guarantee
Agreement, the Senior Deferrable Notes, the Indenture or the Underwriting
Agreement; and except, in each case, as described in the Prospectus (exclusive
of any amendments or supplements thereto subsequent to the date of this
Agreement);

         (w) The certificate delivered pursuant to paragraph (e) of Section 6
hereof and all other documents delivered by the Company or its representatives
in connection with the issuance and sale of the Remarketed Trust Preferred
Securities were on the dates on which they were delivered, or will be on the
dates on which they are to be delivered, in all material respects true and
complete.

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         Section 4. Fees.

         For the performance of its services as Remarketing Agent hereunder, the
Remarketing Agent shall retain from the proceeds of the Remarketing an amount
equal to .25% of the $25 Stated Amount of all Remarketed Trust Preferred
Securities.

         Section 5. Covenants of the Company.

         The Company covenants and agrees as follows:

         (a) (1) To prepare any registration statement or the Prospectus, if
     required in connection with the Remarketing, in a form approved by the
     Remarketing Agent and to file any such prospectus pursuant to the
     Securities Act within the period required by the Securities Act and the
     rules and regulations thereunder;

         (2) to advise the Remarketing Agent, promptly after it receives notice
     thereof, of the time when any amendment to the Registration Statement has
     been filed or becomes effective or any supplement to the Prospectus or any
     amended Prospectus has been filed and to furnish the Remarketing Agent with
     copies thereof;

         (3) to file promptly all reports and any definitive proxy or
     information statements required to be filed by the Company with the
     Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
     Act subsequent to the date of the Prospectus and for so long as the
     delivery of a prospectus is required in connection with the offering or
     sale of the Remarketed Trust Preferred Securities;

         (4) to advise the Remarketing Agent, promptly after it receives notice
     thereof, of the issuance by the Commission of any stop order or of any
     order preventing or suspending the use of the Prospectus, of the suspension
     of the qualification of any of the Remarketed Trust Preferred Securities
     for offering or sale in any jurisdiction, of the initiation or threatening
     of any proceeding for any such purpose, or of any request by the Commission
     for the amending or supplementing of the Registration Statement or the
     Prospectus or for additional information, and, in the event of the issuance
     of any stop order or of any order preventing or suspending the use of any
     Prospectus or suspending any such qualification, to use promptly its best
     efforts to obtain its withdrawal.

         (b) To furnish promptly to the Remarketing Agent and to counsel to the
     Remarketing Agent a conformed copy of the Registration Statement as
     originally filed with the Commission, and each amendment thereto filed with
     the Commission, including all consents and exhibits filed therewith.

         (c) To furnish to the Remarketing Agent in New York City such copies of
     the following documents as the Remarketing Agent shall reasonably request:
     (1) conformed copies of the Registration Statement as originally filed with
     the Commission and each amendment thereto (in each case excluding
     exhibits); (2) the Prospectus and any amended or supplemented Prospectus;
     (3) any document incorporated by reference in the

                                       11
<PAGE>   12

     Prospectus (excluding exhibits thereto); and (4) any Remarketing Materials;
     and, if the delivery of a prospectus is required at any time in connection
     with the Remarketing and if at such time any event shall have occurred as a
     result of which the Prospectus as then amended or supplemented would
     include any untrue statement of a material fact or omit to state any
     material fact necessary in order to make the statements therein, in the
     light of the circumstances under which they were made when such Prospectus
     is delivered, not misleading, or if for any other reason it shall be
     necessary during such same period to amend or supplement the Prospectus or
     to file under the Exchange Act any document incorporated by reference in
     the Prospectus in order to comply with the Securities Act or the Exchange
     Act, to notify the Remarketing Agent and, upon its request, to file such
     document and to prepare and furnish without charge to the Remarketing Agent
     and to any dealer in securities as many copies as the Remarketing Agent may
     from time to time reasonably request of an amended or supplemented
     Prospectus which will correct such statement or omission or effect such
     compliance.

         (d) To file promptly with the Commission any amendment to the
     Registration Statement or the Prospectus or any supplement to the
     Prospectus that may, in the reasonable judgment of the Company or the
     Remarketing Agent, be required by the Securities Act or requested by the
     Commission.

         (e) Prior to filing with the Commission (1) any amendment to the
     Registration Statement or supplement to the Prospectus or (2) any
     Prospectus pursuant to Rule 424 of the Rules and Regulations, to furnish a
     copy thereof to the Remarketing Agent and counsel to the Remarketing Agent;
     and not to file any such amendment or supplement which shall be reasonably
     disapproved by the Remarketing Agent promptly after reasonable notice.

         (f) As soon as practicable, but in any event not later than eighteen
     months, after the Effective Date of the Registration Statement, to make
     "generally available to its security holders" an "earnings statement" of
     the Company and its Subsidiaries complying with (which need not be audited)
     Section 11(a) of the Securities Act and the Rules and Regulations
     (including, at the option of the Company, Rule 158). The terms "generally
     available to its security holders" and "earnings statement" shall have the
     meanings set forth in Rule 158 of the Rules and Regulations.

         (g) To take such action as the Remarketing Agent may reasonably request
     in order to qualify the Remarketed Trust Preferred Securities for offer and
     sale under the securities or "blue sky" laws of such jurisdictions as the
     Remarketing Agent may reasonably request; provided that in no event shall
     the Company be required to qualify as a foreign corporation or to file a
     general consent to service of process in any jurisdiction.

         (h) To pay: (1) the costs incident to the preparation and printing of
     the Registration Statement, Prospectus and any Remarketing Materials and
     any amendments or supplements thereto; (2) the costs of distributing the
     Registration Statement, Prospectus and any Remarketing Materials and any
     amendments or supplements thereto; (3) the fees and expenses of qualifying
     the Remarketed Trust Preferred Securities under

                                       12
<PAGE>   13

     the securities laws of the several jurisdictions as provided in Section
     5(g) and of preparing, printing and distributing a Blue Sky Memorandum
     (including related fees and expenses of counsel to the Remarketing Agent);
     (4) all other costs and expenses incident to the performance of the
     obligations of the Company, hereunder; and (5) the reasonable fees and
     expenses of counsel to the Remarketing Agent in connection with their
     duties hereunder.

         Section 6. Conditions to the Remarketing Agent's Obligations.

         The obligations of the Remarketing Agent hereunder are subject to the
following conditions:

         (a) The Prospectus shall have been timely filed with the Commission; no
     stop order suspending the effectiveness of the Registration Statement or
     any part thereof or suspending the qualification of the Indenture shall
     have been issued and no proceeding for that purpose shall have been
     initiated or threatened by the Commission; and any request of the
     Commission for inclusion of additional information in the Registration
     Statement or the Prospectus or otherwise shall have been complied with.

         (b) The Remarketing Agent shall not have discovered and disclosed to
     the Company prior to or on the Remarketing Date that the Prospectus, the
     Registration Statement, or the Remarketing Materials or any amendment or
     supplement thereto contains any untrue statement of a fact which, in the
     opinion of counsel for the Remarketing Agent, is material or omits to state
     any fact which, in the opinion of such counsel, is material and is required
     to be stated therein or is necessary to make the statements therein not
     misleading.

         (c) Since the respective dates as of which information is given in the
     Remarketing Materials (1) trading generally shall not have been suspended
     or materially limited on or by, as the case may be, any of the New York
     Stock Exchange, the American Stock Exchange or the National Association of
     Securities Dealers, Inc., (2) trading of any securities of the Company
     shall not have been suspended on any exchange or in any over-the-counter
     market, (3) a general moratorium on commercial banking activities in New
     York shall not have been declared by either federal or New York State
     authorities or (4) there shall not have occurred any outbreak or escalation
     of hostilities or any change in financial markets or any calamity or crisis
     that, in your judgment, is material and adverse and in the case of any of
     the events specified in clauses (1), (2), (3) and (4), such event, singly
     or together with any other such event, makes it, in the judgment of the
     Remarketing Agent, impracticable to proceed with the Remarketing on the
     terms and in the manner contemplated in the Prospectus and in the
     Remarketing Materials.

         (d) The representations and warranties of the Company contained herein
     shall be true and correct in all material respects on and as of the
     Remarketing Date, and the Company shall have performed in all material
     respects all covenants and agreements herein contained to be performed on
     its part at or prior to the Remarketing Date.

                                       13
<PAGE>   14

         (e) The Company shall have furnished to the Remarketing Agent a
     certificate, dated the Remarketing Date, of the Chief Executive Officer and
     the Treasurer satisfactory to the Remarketing Agent stating that: (1) no
     order suspending the effectiveness of the Registration Statement or
     prohibiting the sale of the Remarketed Trust Preferred Securities is in
     effect, and no proceedings for such purpose are pending before or, to the
     knowledge of such officers, threatened by the Commission; (2) the
     representations and warranties of the Company in Section 3 are true and
     correct on and as of the Remarketing Date and the Company has performed in
     all material respects all covenants and agreements contained herein to be
     performed on its part at or prior to the Remarketing Date; (3) the
     Registration Statement, as of its Effective Date, and the Remarketing
     Materials, as of their respective dates, did not contain any untrue
     statement of a material fact and did not omit to state any material fact
     required to be stated therein or necessary to make the statements therein
     not misleading and the Prospectus did not contain any untrue statement of
     material fact or omit to state a material fact required to be stated
     therein or necessary to make the statements therein, in light of the
     circumstances under which they were made, not misleading.

         (f) On the Remarketing Date, the Remarketing Agent shall have received
     a letter addressed to the Remarketing Agent and dated such date, in form
     and substance satisfactory to the Remarketing Agent, of Arthur Andersen
     LLP, containing statements and information of the type ordinarily included
     in accountants' "comfort letters" with respect to certain financial
     information contained in the Prospectus and in the Remarketing Materials.

         (g) Baker Botts L.L.P., outside counsel to the Company, Jay D.
     Browning, Esq., counsel to the Company, and Richards, Layton & Finger,
     P.A., Delaware counsel to the Company and the Trust, shall have furnished
     to the Remarketing Agent their opinion letters addressed to the Remarketing
     Agent and dated the Remarketing Date, in form and substance reasonably
     satisfactory to the Remarketing Agent addressing such matters as are set
     forth in such counsels' opinions furnished pursuant to Sections 5(d), 5(e)
     and 5(f), respectively, of the Underwriting Agreement dated June 22, 2000
     among the Company, the Trust and the underwriters named therein relating to
     6,000,000 7 3/4% Premium Equity Participating Securities Units -- PEPS(SM)
     Units, adapted as necessary to relate to the securities being remarketed
     hereunder and to the Remarketing Materials;

         (h) Davis Polk & Wardwell, counsel for the Remarketing Agent, shall
     have furnished to the Remarketing Agent its opinion, addressed to the
     Remarketing Agent and dated the Remarketing Date, in form and substance
     satisfactory to the Remarketing Agent;

         (i) Subsequent to the execution and delivery of this Agreement and
     prior to the Closing Date, there shall not have occurred any downgrading,
     nor shall any notice have been given of any intended or potential
     downgrading or of any review for a possible change that does not indicate
     an improvement, in the rating accorded any of the Company's securities by
     any "nationally recognized statistical rating organization," as such term
     is defined for purposes of Rule 436(g)(2) under the Securities Act.

                                       14
<PAGE>   15

         Section 7. Indemnification.

         (a) The Company agrees to indemnify and hold harmless the Remarketing
     Agent and each person, if any, who controls the Remarketing Agent within
     the meaning of either Section 15 of the Securities Act or Section 20 of the
     Exchange Act, from and against any and all losses, claims, damages and
     liabilities (including, without limitation, any legal or other expenses
     reasonably incurred in connection with defending or investigating any such
     action or claim) caused by any untrue statement or alleged untrue statement
     of a material fact contained in the Registration Statement or any amendment
     thereof, any preliminary prospectus or the Prospectus (as amended or
     supplemented if the Company shall have furnished any amendments or
     supplements thereto) or any other Remarketing Materials, or caused by any
     omission or alleged omission to state therein a material fact required to
     be stated therein or necessary to make the statements therein not
     misleading, except insofar as such losses, claims, damages or liabilities
     are caused by any such untrue statement or omission or alleged untrue
     statement or omission based upon information relating to the Remarketing
     Agent furnished to the Company in writing by the Remarketing Agent
     expressly for use therein; provided, that the foregoing indemnity agreement
     with respect to any preliminary prospectus shall not inure to the benefit
     of the Remarketing Agent from whom the person asserting any such losses,
     claims, damages or liabilities purchased Remarketed Trust Preferred
     Securities, or any person controlling such Remarketing Agent, if a copy of
     the Prospectus (as then amended or supplemented if the Trust and the
     Company shall have furnished any amendments or supplements thereto) was not
     sent or given by or on behalf of such Remarketing Agent to such person, if
     required by law so to have been delivered, at or prior to the written
     confirmation of the sale of the Remarketed Trust Preferred Securities to
     such person, and if the Prospectus (as so amended or supplemented) would
     have cured the defect giving rise to such losses, claims, damages or
     liabilities, unless such failure is the result of noncompliance by the
     Company with Section 5(c) hereof.

         (b) The Remarketing Agent agrees to indemnify and hold harmless the
     Company, the directors of the Company, the officers of the Company who
     signed the Registration Statement, the Trustees and each person, if any,
     who controls the Company or the Trust within the meaning of either Section
     15 of the Securities Act or Section 20 of the Exchange Act from and against
     any and all losses, claims, damages and liabilities (including, without
     limitation, any legal or other expenses reasonably incurred in connection
     with defending or investigating any such action or claim) caused by any
     untrue statement or alleged untrue statement of a material fact contained
     in the Registration Statement or any amendment thereof, any preliminary
     prospectus or the Prospectus (as amended or supplemented if the Company
     shall have furnished any amendments or supplements thereto) or any other
     Remarketing Materials, or caused by any omission or alleged omission to
     state therein a material fact required to be stated therein or necessary to
     make the statements therein not misleading, but only with reference to
     information relating to such Remarketing Agent furnished to the Company in
     writing by the Remarketing Agent expressly for the use in the Registration
     Statement, any preliminary prospectus, the Prospectus or any amendments or
     supplements thereto.

                                       15
<PAGE>   16

         (c) In case any proceeding (including any governmental investigation)
     shall be instituted involving any person in respect of which indemnity may
     be sought pursuant to Section 7(a) or 7(b), such person (the "indemnified
     party") shall promptly notify the person against whom such indemnity may be
     sought (the "indemnifying party") in writing and the indemnifying party,
     upon request of the indemnified party, shall retain counsel reasonably
     satisfactory to the indemnified party to represent the indemnified party
     and any others the indemnifying party may designate in such proceeding and
     shall pay the fees and disbursements of such counsel related to such
     proceeding. In any such proceeding, any indemnified party shall have the
     right to retain its own counsel, but the fees and expenses of such counsel
     shall be at the expense of such indemnified party unless (i) the
     indemnifying party and the indemnified party shall have mutually agreed to
     the retention of such counsel or (ii) the named parties to any such
     proceeding (including any impleaded parties) include both the indemnifying
     party and the indemnified party and representation of both parties by the
     same counsel would be inappropriate due to actual or potential differing
     interests between them. It is understood that the indemnifying party shall
     not, in respect of the legal expenses of any indemnified party in
     connection with any proceeding or related proceedings in the same
     jurisdiction, be liable for (i) the fees and expenses of more than one
     separate firm (in addition to any local counsel) for the Remarketing Agent
     and all persons, if any, who control the Remarketing Agent within the
     meaning of either Section 15 of the Securities Act or Section 20 of the
     Exchange Act and (ii) the fees and expenses of more than one separate firm
     (in addition to any local counsel) for the Company, its directors, its
     officers who sign the Registration Statement and each person, if any, who
     controls the Company within the meaning of either such Section, and that
     all such fees and expenses shall be reimbursed as they are incurred. In the
     case of any such separate firm for the Remarketing Agent and such control
     persons of the Remarketing Agent, such firm shall be designated in writing
     by the Remarketing Agent. In the case of any such separate firm for the
     Company, and such directors, officers and control persons of the Company,
     such firm shall be designated in writing by the Company. The indemnifying
     party shall not be liable for any settlement of any proceeding effected
     without its written consent, but if settled with such consent or if there
     be a final judgment for the plaintiff, the indemnifying party agrees to
     indemnify the indemnified party from and against any loss or liability by
     reason of such settlement or judgment. Notwithstanding the foregoing
     sentence, if at any time an indemnified party shall have requested the
     indemnifying party to reimburse the indemnified party for fees and expenses
     of counsel as contemplated by the second and third sentences of this
     paragraph, the indemnifying party agrees that it shall be liable for any
     settlement of any proceeding effected without its written consent if (i)
     such settlement is entered into more than 30 days after receipt by such
     indemnifying party of the aforesaid request and (ii) such indemnifying
     party shall not have reimbursed the indemnified party in accordance with
     such request prior to the date of such settlement. No indemnifying party
     shall, without the prior written consent of the indemnified party, effect
     any settlement of any pending or threatened proceeding in respect of which
     any indemnified party is or could have been a party and indemnity could
     have been sought hereunder by such indemnified party, unless such
     settlement includes an unconditional release of such

                                       16
<PAGE>   17

     indemnified party from all liability on claims that are the subject matter
     of such proceeding.

         Section 8. Contribution.

         (a) To the extent the indemnification provided for in Section 7(a) or
     7(b) is unavailable to an indemnified party or insufficient in respect of
     any losses, claims, damages or liabilities referred to therein, then each
     indemnifying party under such subsections, in lieu of indemnifying such
     indemnified party thereunder, shall contribute to the amount paid or
     payable by such indemnified party as a result of such losses, claims,
     damages or liabilities (i) in such proportion as is appropriate to reflect
     the relative benefits received by the indemnifying party or parties on the
     one hand and the indemnified party or parties on the other hand from the
     Remarketing or (ii) if the allocation provided by clause (i) above is not
     permitted by applicable law, in such proportion as is appropriate to
     reflect not only the relative benefits referred to in clause (i) above but
     also the relative fault of the indemnifying party or parties on the one
     hand and of the indemnified party or parties on the other hand in
     connection with the statements or omissions that resulted in such losses,
     claims, damages or liabilities, as well as any other relevant equitable
     considerations. The relative benefits received by the Company on the one
     hand and the Remarketing Agent on the other hand in connection with the
     Remarketing shall be deemed to be in the same respective proportions as the
     total principal amount of Remarketed Trust Preferred Securities less the
     fee paid to the Remarketing Agent on the one hand and the fee paid to the
     Remarketing Agent on the other hand bear to the total principal amount of
     the Remarketed Trust Preferred Securities. The relative fault of the
     Company on the one hand and the Remarketing Agent on the other hand shall
     be determined by reference to, among other things, whether the untrue or
     alleged untrue statement of a material fact or the omission or alleged
     omission to state a material fact relates to information supplied by the
     Company or by the Remarketing Agent and the parties' relative intent,
     knowledge, access to information and opportunity to correct or prevent such
     statement or omission.

         (b) The Company and the Remarketing Agent agree that it would not be
     just or equitable if contribution pursuant to this Section 8 were
     determined by pro rata allocation or by any other method of allocation that
     does not take account of the equitable considerations referred to in
     Section 8(a). The amount paid or payable by an indemnified party as a
     result of the losses, claims, damages and liabilities referred to in the
     immediately preceding paragraph shall be deemed to include, subject to the
     limitations set forth above, any legal or other expenses reasonably
     incurred by such indemnified party in connection with investigating or
     defending any such action or claim. Notwithstanding the provisions of this
     Section 8, the Remarketing Agent shall not be required to contribute any
     amount in excess of the amount by which the fees received by it under
     Section 4 exceed the amount of any damages that the Remarketing Agent has
     otherwise been required to pay by reason of such untrue or alleged untrue
     statement or omission or alleged omission. No person guilty of fraudulent
     misrepresentation (within the meaning of Section 11(f) of the Securities
     Act) shall be entitled to contribution from any person who was not guilty
     of such fraudulent misrepresentation. The remedies

                                       17
<PAGE>   18

     provided for in Section 7 and this Section 8 are not exclusive and shall
     not limit any rights or remedies which may otherwise be available to any
     indemnified party at law or in equity.

         (c) The indemnity and contribution provisions contained in Section 7
     and this Section 8 and the representations, warranties and other statements
     of the Company contained in this Agreement shall remain operative and in
     full force and effect regardless of any termination of this Agreement, any
     investigation made by or on behalf of the Remarketing Agent or any person
     controlling the Remarketing Agent, or the Company, its officers or
     directors or any person controlling the Company and the completion of the
     Remarketing.

         Section 9. Resignation and Removal of the Remarketing Agent.

         The Remarketing Agent may resign and be discharged from its duties and
obligations hereunder, and the Company or the Trust may remove the Remarketing
Agent, by giving 60 days' prior written notice, in the case of a resignation, to
the Company, the Depository, the Property Trustee, the Trust and the Indenture
Trustee and, in the case of a removal, the removed Remarketing Agent, the
Depository, the Property Trustee, the Trust and the Indenture Trustee; provided,
however, that:

         (a) the Company may not remove the Remarketing Agent unless (1) the
     Remarketing Agent becomes involved as a debtor in a bankruptcy, insolvency
     or similar proceeding, (2) the Remarketing Agent shall not be among the 15
     underwriters with the largest volume underwritten in dollars, on a lead or
     co-managed basis, of U.S. domestic debt securities during the twelve-month
     period ended as of the last calendar quarter preceding the Remarketing
     Date, (3) the Remarketing Agent shall be subject to one or more legal
     restrictions preventing the performance of its obligations hereunder, or
     (4) the Remarketing Agent shall determine that (i) the Company has not met
     its obligation under Section 6(d) or (ii) using its reasonable efforts, the
     Remarketing Agent would be unable to consummate the Remarketing on the
     terms and in the manner contemplated in the Prospectus and the Remarketing
     Materials;

         (b) the Remarketing Agent may not resign without reasonable cause; and

         (c) no such resignation nor any such removal shall become effective
     until the Company shall have appointed at least one nationally recognized
     broker-dealer as successor Remarketing Agent and such successor Remarketing
     Agent shall have entered into a remarketing agreement with the Company and
     the Trust, in which it shall have agreed to conduct the Remarketing in
     accordance with the Remarketing Procedures in all material respects.

In any such case, the Company will use its reasonable efforts to appoint a
successor Remarketing Agent and enter into such a remarketing agreement with
such person as soon as reasonably practicable. The provisions of Sections 7 and
8 shall survive the resignation or removal of any Remarketing Agent pursuant to
this Agreement.

                                       18
<PAGE>   19

         Section 10. Dealing in the Remarketed Trust Preferred Securities.

         The Remarketing Agent, when acting as a Remarketing Agent or in its
individual or any other capacity, may, to the extent permitted by law, buy,
sell, hold and deal in any of the Remarketed Trust Preferred Securities. The
Remarketing Agent may exercise any vote or join in any action which any
beneficial owner of Remarketed Trust Preferred Securities may be entitled to
exercise or take pursuant to the Declaration with like effect as if it did not
act in any capacity hereunder. The Remarketing Agent, in its individual
capacity, either as principal or agent, may also engage in or have an interest
in any financial or other transaction with the Company as freely as if it did
not act in any capacity hereunder.

         Section 11. Remarketing Agent's Performance; Duty of Care.

         The duties and obligations of the Remarketing Agent shall be determined
solely by the express provisions of this Agreement, the Declaration, the Pledge
Agreement and the Purchase Contract Agreement. No implied covenants or
obligations of or against the Remarketing Agent shall be read into this
Agreement, the Declaration, the Pledge Agreement or the Purchase Contract
Agreement. In the absence of bad faith on the part of the Remarketing Agent, the
Remarketing Agent may conclusively rely upon any document furnished to it, as to
the truth of the statements expressed in any of such documents. The Remarketing
Agent shall be protected in acting upon any document or communication reasonably
believed by it to have been signed, presented or made by the proper party or
parties except as otherwise set forth herein. The Remarketing Agent, acting
under this Agreement, shall incur no liability to the Company, the Trust or to
any holder of Remarketed Trust Preferred Securities in its individual capacity
or as Remarketing Agent for any action or failure to act, on its part in
connection with a Remarketing or otherwise, except if such liability is
judicially determined to have resulted from its failure to comply with the
material terms of this Agreement or the gross negligence or willful misconduct
on its part.

         Section 12. Termination.

         This Agreement shall terminate as to the Remarketing Agent on the
effective date of the resignation or removal of the Remarketing Agent pursuant
to Section 9. In addition, this Agreement may be terminated (a) by the Company
or the Trust by notifying the Remarketing Agent at any time before the time when
the Remarketed Trust Preferred Securities are first generally offered by the
Remarketing Agent to dealers by letter or telegram, or (b) by the Remarketing
Agent by notifying the Company and the Trust at or prior to 10:00 a.m. (New York
City time) five business days prior to the Remarketing Date by letter or
telegram if any of the conditions described in Section 6 are not satisfied.

         If this Agreement is terminated pursuant to any of the provisions
hereof, except as otherwise provided herein, the Company shall not be under any
liability to the Remarketing Agent and the Remarketing Agent shall not be under
any liability to the Company, except that (a) if this Agreement is terminated by
the Remarketing Agent because of any failure or refusal on the part of the
Company to comply with the terms or to fulfill any of the conditions of this

                                       19
<PAGE>   20

Agreement, the Company will reimburse the Remarking Agent for all of its
out-of-pocket expenses (including the fees and disbursements of its counsel)
reasonably incurred by it, and (b) if the Remarketing Agent failed or refused to
purchase the Remarketed Trust Preferred Securities hereunder, without some
reason sufficient hereunder to justify the cancellation or termination of if
obligations hereunder, the Remarketing Agent shall not be relieved of liability
to the Company for damages occasioned by its default.

         Section 13. Notices.

         All statements, requests, notices and agreements hereunder shall be in
writing, and:

         (a) if to the Remarketing Agent, shall be delivered or sent by mail,
     telex or facsimile transmission to Morgan Stanley & Co. Incorporated, 1585
     Broadway, New York, New York 10036, Attention: David Ballard (Fax:
     212-761-0538);

         (b) if to the Company, shall be delivered or sent by mail, telex or
     facsimile transmission to One Valero Place, P.O. Box 500, San Antonio,
     Texas 78212, Attention: Jay D. Browning, Corporate Secretary (Fax:
     210-370-2988) and Donna M. Titzman, Treasurer (Fax: 210-370-2497); and

         (c) if to the Trust, shall be delivered or sent by mail, telex or
     facsimile transmission to One Valero Place, P.O. Box 500, San Antonio,
     Texas 78212, Attention: Jay D. Browning, Corporate Secretary (Fax:
     210-370-2988) and Donna M. Titzman, Treasurer (Fax: 210-370-2497).

Any such statements, requests, notices or agreements shall take effect at the
time of receipt thereof.

         Section 14. Persons Entitled to Benefit of Agreement.

         This Agreement shall inure to the benefit of and be binding upon the
Remarketing Agent, the Company, the Trust and their respective successors. This
Agreement and the terms and provisions hereof are for the sole benefit of only
those persons, except that (x) the representations, warranties, indemnities and
agreements of the Company contained in this Agreement shall also be deemed to be
for the benefit of the Remarketing Agent and the person or persons, if any, who
control the Remarketing Agent within the meaning of Section 15 of the Securities
Act and (y) the indemnity agreement of the Remarketing Agent contained in
Section 7(b) of this Agreement shall be deemed to be for the benefit of the
Company's and the Trust's directors, officers and Trustees who sign the
Registration Statement and any person controlling the Company or the Trust
within the meaning of Section 15 of the Securities Act. Nothing contained in
this Agreement is intended or shall be construed to give any person, other than
the persons referred to herein, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision contained herein.

                                       20
<PAGE>   21

         Section 15. Survival.

         The respective indemnities, representations, warranties and agreements
of the Company and the Remarketing Agent contained in this Agreement or made by
or on behalf of them, respectively, pursuant to this Agreement, shall survive
the Remarketing and shall remain in full force and effect, regardless of any
investigation made by or on behalf of any of them or any person controlling any
of them.

         Section 16. Governing Law.

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

         Section 17. Counterparts.

         This Agreement may be executed in one or more counterparts and, if
executed in more than one counterpart, the executed counterparts shall each be
deemed to be an original but all such counterparts shall together constitute one
and the same instrument.

         Section 18. Headings.

         The headings herein are inserted for convenience of reference only and
are not intended to be part of, or to affect the meaning or interpretation of,
this Agreement.

If the foregoing correctly sets forth the agreement between the Company, the
Trust and the Remarketing Agent, please indicate your acceptance in the space
provided for that purpose below.

                       [SIGNATURES ON THE FOLLOWING PAGE]

                                       21
<PAGE>   22

                                        Very truly yours,

                                        VALERO ENERGY CORPORATION

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

                                        VEC TRUST I

                                        By:      Valero Energy Corporation,
                                                 as Sponsor

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

Accepted:

MORGAN STANLEY & CO. INCORPORATED

By:
   ------------------------------
  Name:
  Title:<PAGE>   1
                                                                     EXHIBIT 4.9

                           VALERO ENERGY CORPORATION

                             OFFICERS' CERTIFICATE

    This Officer's Certificate is being executed and delivered (a) pursuant to
Sections 102, 301 and 303 of the Indenture dated as of December 12, 1997 (the
"Indenture") by and between Valero Energy Corporation, a Delaware corporation
(the "Company"), and The Bank of New York, as trustee (the "Trustee"), and (b)
in connection with the order dated June 29, 2000 by the Company to the Trustee
(the "Order") for the authentication and delivery by the Trustee of
$200,000,000 aggregate principal amount of the Company's 8 3/8% Notes due 2005
and $200,000,000 aggregate principal amount of the Company's 8 3/4% Notes due
2030 (collectively, the "Notes"). The undersigned hereby certify that they are
the duly elected or appointed and acting Vice President and Chief Financial
Officer and the duly elected or appointed and acting Secretary of the Company,
respectively, and further certify that:

         (a). As of June 23, 2000, other terms of the Notes (including the form
    of the Notes) set forth in Annex A hereto were established by the Special
    Committee designated by the Board of Directors of the Company.

         (b). The undersigned have read Sections 102, 301 and 303 of the
    Indenture and the definitions in the Indenture relating thereto.

         (c). The statements made herein are based either upon the personal
    knowledge of the persons making this Certificate or on information, data
    and reports furnished to such persons by the officers, counsel, department
    heads or employees of the Company who have knowledge of the facts involved.

         (d). The undersigned have examined the Order, and they have examined
    the covenants, conditions and provisions of the Indenture relating thereto.

         (e). In the opinion of the undersigned, they have made such examination
    or investigation as is necessary to enable them to express an informed
    opinion as to whether or not all conditions provided for in the Indenture
    with respect to the authentication of the Notes have been complied with.

         (f). In the opinion of the undersigned, all conditions precedent
    provided in the Indenture to the authentication by the Trustee of the Notes
    have been complied with.

<PAGE>   2
        IN WITNESS WHEREOF, the undersigned have executed this certificate as of
this 29th day of June, 2000.

                                        /s/ JOHN D. GIBBONS
                                        ------------------------
                                        John D. Gibbons
                                        Vice President and Chief
                                        Financial Officer

                                        /s/ JAY D. BROWNING
                                        ------------------------
                                        Jay D. Browning
                                        Secretary

<PAGE>   3
                                    ANNEX A

                           VALERO ENERGY CORPORATION

                             8 3/8% Notes due 2005
                             8 3/4% Notes due 2030

         Two series of Securities are hereby established pursuant to Section
301 of the Indenture dated as of December 12, 1997 (the "Indenture"), between
Valero Energy Corporation, a Delaware corporation (the "Company"), and The Bank
of New York, as Trustee (in such capacity, the "Trustee"), as follows
(capitalized terms used and not defined herein shall have the meanings assigned
to them in the Indenture, and all references herein to a Section shall refer to
the corresponding Section in the Indenture):

1. The title of the 8 3/8% Notes due 2005 shall be "8 3/8% Notes due 2005" (the
"2005 Notes"), and the title of the 8 3/4% Notes due 2030 shall be "8 3/4% Notes
due 2030" (the "2030 Notes" and together with the 2005 Notes, the "Notes").

2. The limit upon the aggregate principal amount of the 2005 Notes that may be
authenticated and delivered under the Indenture (except for 2005 Notes
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other 2005 Notes pursuant to Sections 304, 305, 306, 906 or
1207) is $200,000,000.

3. The limit upon the aggregate principal amount of the 2030 Notes that may be
authenticated and delivered under the Indenture (except for 2030 Notes
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other 2030 Notes pursuant to Sections 304, 305, 306, 906 or
1207) is $200,000,000.

4. Each series of Notes shall be initially issued as Registered Securities in
the form of one or more global securities under the Indenture. The Depository
Trust Company is hereby designated as the Depository for these global
Securities under the Indenture.

         As long as any Note is in global form, then, notwithstanding clause
(11) of Section 301 and the provisions of Section 302, any such global Note
shall represent such of the outstanding Notes as shall be specified therein and
may provide that it shall represent the aggregate amount of outstanding Notes
from time to time endorsed thereon and that the aggregate amount of outstanding
Notes represented thereby may from time to time be reduced to reflect
exchanges. Any endorsement of a global Note to reflect the amount, or any
increase or decrease in the amount, of outstanding Notes represented thereby
shall be made by the Trustee in such manner and upon instructions given by such
Person or Persons as shall be specified in such Note or in a Company Order to
be delivered to the Trustee pursuant to Section 303. Subject to the provisions
of Section 303 and, if applicable Section 304, the Trustee shall deliver and
redeliver any Note in permanent global form in the manner and upon instructions
given by the Person or Persons specified in such Note or in the applicable
Company Order. With respect to the Notes of any series that are represented by
a global Note, the Company authorizes the execution and delivery by the Trustee
of a letter of representations or other similar agreement or instrument in the
form customarily provided for by the Depository appointed with respect to such
global Note. Any global Note may be deposited with the Depository or its
nominee, or may remain in the custody of the Trustee pursuant to a FAST Balance
Certificate Agreement or similar agreement between the Trustee and the
Depository. If a Company Order has been, or simultaneously is, delivered, any
instructions by the Company with respect to endorsement or delivery or
redelivery of a Note in global form shall be in writing but need not comply
with Section 102 and need not be accompanied by an Opinion of Counsel.

         Members of, or participants in, the Depository ("Agent Members") shall
have no rights under the Indenture with respect to any global Note held on
their behalf by the Depository, or the Trustee as its custodian, or under such
global Note and the Depository may be treated by the Company, the Trustee and
any agent of the Company or the Trustee as the absolute owner of such global
Note for all purposes whatsoever. Notwithstanding the foregoing, (i) the
registered holder of a global Note may grant proxies and otherwise authorize
any Person, including Agent Members and Persons that may hold interests through
an Agent Member, to take any action that a Holder is entitled to take under the
Indenture or the Notes and (ii) nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee, from giving effect to any
written certification, proxy or other authorization furnished by the Depository
or shall impair, as between the Depository and its Agent Members, the operation
of customary practices governing the exercise of the rights of a beneficial
owner of any Note.

<PAGE>   4

         Notwithstanding Section 305, and except as otherwise provided pursuant
to Section 301, transfers of a global Note shall be limited to transfers of
such global Note in whole but not in part, to the Depository, its successors or
their respective nominees. Interests of beneficial owners in a global Note may
be transferred in accordance with the rules and procedures of the Depository.
In all other respects, Notes shall be transferred to all beneficial owners in
exchange for their beneficial interest in a Global Security solely as expressly
provided in Section 305.

         In connection with any transfer of a portion of the beneficial
interest in a global Note to beneficial owners pursuant hereto and Section 305,
the Security Registrar shall reflect on its books and records the date and a
decrease in the principal amount of the global Note of the applicable series in
an amount equal to the principal amount of the beneficial interest in the
global Note to be transferred, and the Company shall execute, and the Trustee
upon receipt of a Company Order for the authentication and delivery of Notes
shall authenticate and deliver, one or more Notes of like tenor and amount.

         In connection with the transfer of an entire global Note to beneficial
owners pursuant hereto and Section 305, the global Security shall be deemed to
be surrendered to the Trustee for cancellation, and the Company shall execute,
and the Trustee shall authenticate and deliver, to each beneficial owner
identified by the Depository in exchange for its beneficial interest in the
global Note, an equal aggregate principal amount of Notes of the applicable
series of authorized denominations.

         Neither the Company nor the Trustee will have any responsibility or
liability for any aspect of the records relating to, or payments made on
account of, Notes by the Depository, or for maintaining, supervising or
reviewing any records of the Depository relating to such Notes. Neither the
Company nor the Trustee shall be liable for any delay by the related global
Note Holder or the Depository in identifying the beneficial owners, and each
such Person may conclusively rely on, and shall be protected in relying on,
instructions from such global Note Holder or the Depository for all purposes
(including with respect to the registration and delivery, and the respective
principal amounts, of the Notes to be issued).

         Notwithstanding the provisions of Sections 201 and 307, unless
otherwise specified as contemplated by Section 301, payment of principal of,
premium (if any) or interest on any global Note shall be made to the Person or
Persons specified in such global Note.

5. The dates on which the principal of the 2005 Notes and the 2030 Notes are
payable shall be June 15, 2005 and June 15, 2030, respectively.

6. The rate at which the 2005 Notes shall bear interest shall be 8 3/8% per
annum and the rate at which the 2030 Notes shall bear interest shall be 8 3/4%
per annum. Interest will be computed on the basis of a 360-day year of twelve
30-day months. The date from which interest shall accrue for the Notes shall be
June 29, 2000. The Interest Payment Dates on which interest on the Notes shall
be payable are June 15 and December 15, commencing December 15, 2000. Interest
on the Notes shall be payable to the persons in whose name the Notes are
registered at the close of business on the Regular Record Date for such
interest payment, except in the case of default interest, which will be payable
as provided in the Indenture. The Regular Record Date for the interest payable
on the Notes on any Interest Payment Date shall be the June 1 and December 1,
as the case may be, immediately preceding such Interest Payment Date. No
Additional Amounts shall be payable with respect to the Notes.

7. The place or places where the principal of, premium (if any) and interest on
the Notes shall be payable is at the office or agency of the Trustee in New
York, New York or such other offices or agencies maintained for such purpose as
the Company may from time to time and in accordance with the Indenture
designate. If appropriate wire transfer instructions have been received by the
Trustee at its Corporate Trust Office or at its corporate trust facility in the
Borough of Manhattan, The City of New York, not later than 5 Business Days
prior to the record date for an applicable Interest Payment Date, then payments
in respect of the Notes evidenced by a global Security (including principal,
premium, if any, and interest) shall be made by wire transfer of immediately
available funds to the accounts specified by the Holder of such global Note. In
all other cases, payment of interest on the Notes may be made at the option of
the Company by check mailed to the address of the person entitled thereto as
such address shall appear in the Security Register.

8. Each series of Notes will be redeemable, in whole or in part, at the option
of the Company at any time, at a redemption price equal to the greater of (i)
100% of the principal amount of the applicable series of Notes, and (ii) as

<PAGE>   5

determined by the Quotation Agent (as defined below), the sum of the present
values of the remaining scheduled payments of principal and interest thereon
(not including any portion of such payments of interest accrued as of the date
of redemption) discounted to the date of redemption on a semi-annual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Adjusted
Treasury Rate (as defined below) plus 25 basis points with respect to the 2005
Notes and 37.5 basis points with respect to the 2030 Notes plus, in each case,
accrued interest thereon to the date of redemption.

         "Adjusted Treasury Rate" means, with respect to any date of
         redemption, the rate per annum equal to the semi-annual equivalent
         yield to maturity of the Comparable Treasury Issue, assuming a price
         for the Comparable Treasury Issue (expressed as a percentage of its
         principal amount) equal to the Comparable Treasury Price for such date
         of redemption.

         "Comparable Treasury Issue" means the United States Treasury security
         selected by the Quotation Agent as having a maturity comparable to the
         remaining term of the series of Notes to be redeemed that would be
         utilized, at the time of selection and in accordance with customary
         financial practice, in pricing new issues of corporate debt securities
         of comparable maturity to the remaining term of such Notes.

         "Comparable Treasury Price" means, with respect to any date of
         redemption, (i) the average of the Reference Treasury Dealer
         Quotations for such date of redemption, after excluding the highest
         and lowest such Reference Treasury Dealer Quotations, or (ii) if the
         Trustee obtains fewer than three such Reference Treasury Dealer
         Quotations, the average of all such Reference Treasury Dealer
         Quotations.

         "Quotation Agent" means the Reference Treasury Dealer appointed by the
         Company.

         "Reference Treasury Dealers" means (i) each of J. P. Morgan Securities
         Inc., Credit Suisse First Boston Corporation, and Morgan Stanley & Co.
         Incorporated and their respective successors; provided, however, that
         if any of the foregoing shall cease to be a primary U.S. Government
         securities dealer in New York City (a "Primary Treasury Dealer"), the
         Company shall substitute therefor another Primary Treasury Dealer; and
         (ii) any other Primary Treasury Dealer selected by the Company.

         "Reference Treasury Dealer Quotations" means, with respect to each
         Reference Treasury Dealer and any date of redemption, the average, as
         determined by the Trustee, of the bid and asked prices for the
         Comparable Treasury Issue (expressed in each case as a percentage of
         its principal amount) quoted in writing to the Trustee by such
         Reference Treasury Dealer at 5:00 p.m., New York City time, on the
         third Business Day preceding such date of redemption.

         Notice of any redemption will be mailed at least 30 days but not more
         than 60 days before the date of redemption to each Holder of the
         applicable series of Notes to be redeemed. Unless the Company defaults
         in payment of the redemption price, on and after the date of
         redemption, interest will cease to accrue on the Notes or portions
         thereof called for redemption.

9. The Notes shall not be entitled to the benefit of any sinking fund, any
optional repurchase or redemption right in favor of any holder thereof or other
mandatory repurchase or redemption provisions.

10. The Notes shall be in substantially the form of Attachment A hereto (the
"Form of Note").

11. Each Note that is a global Security shall bear the legend set forth on the
face of the Form of Note.

<PAGE>   6

                                                  ATTACHMENT A TO TERMS OF NOTE

                               [FACE OF SECURITY]

         THIS SECURITY IS A GLOBAL SECURITY AS PROVIDED FOR IN THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE
ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER
OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO
THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT
IN SUCH LIMITED CIRCUMSTANCES.

         UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO ISSUER OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

                           VALERO ENERGY CORPORATION

                            ______% NOTES(1) DUE 20_

REGISTERED                                                             CUSIP No.

         VALERO ENERGY CORPORATION, a Delaware corporation (the "Company,"
which term includes any successor Person under the Indenture hereinafter
referred to), for value received promises to pay to Cede & Co. or registered
assigns, the principal sum of ____________ Dollars or such lesser amount as
indicated on the schedule of exchanges of definitive Securities, on _________,
20__.

              Interest Payment Dates: _________ 15 and ________ 15

               Regular Record Dates: __________ 1 and _________ 1

         Reference is hereby made to the further provisions of this Security
set forth in the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.

----------

    (1)   Two Notes will be issued if the Notes are issued as a single series
          in the principal amount of $___ million: a $___ million Note to be
          registered "R-001" and a $___ million Note to be registered "R-002".

<PAGE>   7

          IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers and its corporate seal
or a facsimile thereof to be affixed hereto or imprinted hereon.

Dated:          , 2000
      ----------
[SEAL]                                               VALERO ENERGY CORPORATION

                                                     By:(2)
                                                           ---------------------
                                                           Name:
                                                           Title:

ATTEST:

By:(3)
      ----------------------------
         Name:
         Title:

                    TRUSTEE'S CERTIFICATE OF AUTHENTICATION:

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

                                                THE BANK OF NEW YORK, as Trustee

Dated:           , 2000                         By:
      -----------                                  -----------------------------
                                                        Authorized Signatory

----------

    (2)   Executed by Chairman of Board, President, Vice President serving as
          Chief Financial Officer or Treasurer.

    (3)   Attested by Secretary or one of the Assistant Secretaries.

<PAGE>   8

                             [REVERSE OF SECURITY]

                           VALERO ENERGY CORPORATION

                              _____% NOTES DUE 20_

         This Security is one of a duly authorized issue of debentures, notes
or other evidences of indebtedness of VALERO ENERGY CORPORATION, a Delaware
corporation (the "Company"), issued under the Indenture hereinafter referred to
and is one of a series of such debentures, notes or other evidences of
indebtedness designated pursuant thereto as __% Notes due 20__ (the
"Securities") of the Company.

         1. Interest. The Company promises to pay interest on the principal
amount of this Security at ____% per annum from ________, 2000 until Maturity
of the Securities. The Company will pay interest semiannually on _______ and
________ of each year (each an "Interest Payment Date") and on the Maturity of
the Securities, or if any such day is not a Business Day, on the next
succeeding Business Day. Interest on the Securities will accrue from the most
recent Interest Payment Date on which interest has been paid or, if no interest
has been paid, from ________, 2000; provided that if there is no existing
Default in the payment of, or provisions for, interest, and if this Security is
authenticated between a Regular Record Date referred to on the face hereof
(whether or not a Business Day) and the next succeeding Interest Payment Date,
interest shall accrue from such next succeeding Interest Payment Date;
provided, further, that the first Interest Payment Date shall be ________,
2000. The interest so payable, and punctually paid or provided for, on any
Interest Payment Date will, as provided in the Indenture, be paid to the Person
in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest as set forth on the face hereof, provided, however, that interest
payable at Maturity of this Security will be payable to the Person to whom the
principal hereof shall be payable. Any such interest which is so payable, but
is not punctually paid or duly provided for on any Interest Payment Date, shall
forthwith cease to be payable to the registered Holder on such Regular Record
Date, and may be paid as more fully provided in the Indenture. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.

         2. Method of payment. Payment of the principal of (and premium, if
any) and interest on this Security will be made at the office or agency of the
Company maintained for that purpose at the Corporate Trust Office of the
Trustee in the Borough of Manhattan, The City of New York, or at such other
offices or agencies maintained for such purpose as the Company may from time to
time and in accordance with the Indenture designate, in such coin or currency
of the United States of America as at the time of payment is legal tender for
payment of public and private debts; provided, however, that (i) payment of
interest may, at the option of the Company, be made (subject to collection) by
check mailed to the address of the Person entitled thereto as such address
shall appear on the Security Register or, with respect to Securities evidenced
by a global Security, if appropriate wire transfer instructions have been
received in writing by the Trustee at its Corporate Trust Office or at its
corporate trust facility in the Borough of Manhattan, The City of New York, not
later than 5 Business Days prior to the record date for an applicable Interest
Payment Date, be made by wire transfer of immediately available funds in
accordance with such wire transfer instructions; and (ii) payment of available
funds upon surrender of this Security will be made at the Corporate Trust
Office of the Trustee or at the corporate trust facility of the Trustee located
in the Borough of Manhattan, The City of New York, or at such additional
offices or agencies maintained for such purpose as the Company may from time to
time and in accordance with the Indenture designate.

         3. Certain Office. Initially, The Bank of New York, the Trustee under
the Indenture (in such capacity, the "Trustee"), will, at its Corporate Trust
Office in the Borough of Manhattan, The City of New York, act as the Company's
office or agency where the Securities may be presented or surrendered for
payment, where the Securities may be surrendered for registration of transfer
or exchange and where notices and demands to or upon the Company in respect of
the Securities and the Indenture may be served.

         4. Indenture. The Company issued the Securities under an Indenture
dated as of December 12, 1997 (the "Indenture") between the Company and the
Trustee. The terms of the Securities include those stated in the Indenture
(including terms defined therein, which terms when used herein, unless the
context requires otherwise, shall have the meanings assigned to such terms in
the Indenture) and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb) (the
"TIA"), as in effect on the date of execution of the Indenture. The Securities
are subject to all such terms, and Holders are referred to the Indenture and the
TIA for a statement of such terms. The Securities are unsecured general
obligations of the Company limited to $________ in

<PAGE>   9

aggregate principal amount and will rank on a parity with all other unsecured
and unsubordinated indebtedness of the Company. The Indenture provides for the
issuance of other series of debentures, notes and other evidences of
Indebtedness (including the Securities, the "Debt Securities") thereunder.

         5. Denominations, Transfer, Exchange. The Securities are in registered
form without coupons and, if not in global form, in denominations of $1,000 and
integral multiples of $1,000. The transfer of Securities may be registered and
Securities may be exchanged as provided in the Indenture. The Security
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Security Registrar need not
exchange or register the transfer of any Securities during the period beginning
on the opening of business 15 days before the day of mailing of a notice of
redemption of the Securities and ending at the close of business on the day of
such mailing or of any Securities selected for redemption, except the
unredeemed portion of any Securities being redeemed in part.

         6. Persons Deemed Owners. The Holder of a Security shall be treated as
its owner for all purposes.

         7. Redemption. The Securities will be redeemable, in whole or in part,
at the option of the Company at any time, at a redemption price equal to the
greater of (i) 100% of the principal amount of such Securities, and (ii) as
determined by the Quotation Agent (as defined below), the sum of the present
values of the remaining scheduled payments of principal and interest thereon
(not including any portion of such payments of interest accrued as of the date
of redemption) discounted to the date of redemption on a semi-annual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Adjusted
Treasury Rate (as defined below) plus ____ basis points plus, in each case,
accrued interest thereon to the date of redemption.

         "Adjusted Treasury Rate" means, with respect to any date of
         redemption, the rate per annum equal to the semi-annual equivalent
         yield to maturity of the Comparable Treasury Issue, assuming a price
         for the Comparable Treasury Issue (expressed as a percentage of its
         principal amount) equal to the Comparable Treasury Price for such date
         of redemption.

         "Comparable Treasury Issue" means the United States Treasury security
         selected by the Quotation Agent as having a maturity comparable to the
         remaining term of the Securities to be redeemed that would be
         utilized, at the time of selection and in accordance with customary
         financial practice, in pricing new issues of corporate debt securities
         of comparable maturity to the remaining term of such Securities.

         "Comparable Treasury Price" means, with respect to any date of
         redemption, (i) the average of the Reference Treasury Dealer
         Quotations for such date of redemption, after excluding the highest
         and lowest such Reference Treasury Dealer Quotations, or (ii) if the
         Trustee obtains fewer than three such Reference Treasury Dealer
         Quotations, the average of all such Reference Treasury Dealer
         Quotations.

         "Quotation Agent" means the Reference Treasury Dealer appointed by the
         Company.

         "Reference Treasury Dealers" means (i) each of J. P. Morgan Securities
         Inc., Credit Suisse First Boston Corporation and Morgan Stanley & Co.
         Incorporated and their respective successors; provided, however, that
         if any of the foregoing shall cease to be a primary U.S. Government
         securities dealer in New York City (a "Primary Treasury Dealer"), the
         Company shall substitute therefor another Primary Treasury Dealer; and
         (ii) any other Primary Treasury Dealer selected by the Company.

         "Reference Treasury Dealer Quotations" means, with respect to each
         Reference Treasury Dealer and any date of redemption, the average, as
         determined by Trustee, of the bid and asked prices for the Comparable
         Treasury Issue (expressed in each case as a percentage of its
         principal amount) quoted in writing to the Trustee by such Reference
         Treasury Dealer at 5:00 p.m., New York City time, on the third
         Business Day preceding such date of redemption.

Notice of any redemption will be mailed at least 30 days but not more than 60
days before the date of redemption to each Holder of the Securities to be
redeemed. Unless the Company defaults in payment of the redemption price, on
and after the date of redemption, interest will cease to accrue on the
Securities or portions thereof called for redemption.

<PAGE>   10

         8. Amendments and Waivers. Subject to certain exceptions and
limitations, the Indenture or the Securities may be supplemented with the
consent of the Holders of not less than a majority in aggregate principal
amount of the outstanding Securities, and any past default under the Indenture
with respect to the Securities, and its consequences, may be waived (other than
a default in the payment of the principal of (or premium, if any) or interest
on the Securities or in respect of a covenant or provision of the Indenture
which under Article 9 thereof cannot be modified or amended without the consent
of the Holder of each outstanding Security) by the Holders of not less than a
majority in principal amount of the outstanding Securities in accordance with
the terms of the Indenture. Without the consent of any Holder, the Company and
the Trustee may supplement the Indenture or the Securities (i) to cure any
ambiguity, omission, defect or inconsistency, in each case which shall not be
inconsistent with the provisions of the Indenture and which shall not adversely
affect the interest of the Holders of the Securities in any material respect;
(ii) to evidence the assumption by a successor Person of the obligations of the
Company under the Indenture and this Security; (iii) to change or eliminate any
restrictions on the payment of principal (or premium, if any) on Registered
Securities, to permit Registered Securities to be exchanged for Bearer
Securities or to permit the issuance of Securities in uncertificated form,
provided any such action shall not adversely affect the interest of the Holders
of the Securities in any material respect; (iv) to add to the covenants of the
Company for the benefit of the Holders of the Securities or Holders of other
series of Debt Securities, or to surrender any right or power conferred by the
Indenture upon the Company; (v) to add to, delete from or revise the
conditions, limitations and restrictions on the authorized amount, terms or
purpose of issue, authentication and delivery of the Securities as set forth in
the Indenture; or (vi) to evidence and provide for the acceptance of
appointment under the Indenture by a successor Trustee with respect to the
Securities and to add to or change any of the provisions of the Indenture as
shall be necessary to provide for or facilitate the administration of the
trusts thereunder by more than one Trustee, pursuant to the requirements of the
Indenture.

         The right of any Holder to participate in any consent required or
sought pursuant to any provision of the Indenture (and the obligation of the
Company to obtain any such consent otherwise required from such Holder) may be
subject to the requirement that such Holder shall have been the Holder of
record of any Securities with respect to which consent is required or sought as
of a date fixed in accordance with the terms of the Indenture.

         Subject to certain exceptions and limitations set forth in the
Indenture, without the consent of each Holder affected, the Company may not (i)
change the Stated Maturity of the principal of or any installment of interest
on any Security, (ii) reduce the principal amount of, or any premium or
interest on, any Security, (iii) change any Place of Payment where, or the
currency in which, any Security or any premium or interest thereon is payable,
(iv) impair the right to institute suit for the enforcement of any payment with
respect to any Security after the Stated Maturity thereof (or, in the case of
redemption, on or after the applicable Redemption Date), (v) reduce the
percentage in principal amount of the outstanding Securities whose Holders must
consent to a supplement or waiver, or reduce the requirements in Section 1504
of the Indenture for quorum or voting, or make any change in the percentage of
principal amount of Securities necessary to waive compliance with certain
provisions of the Indenture or (vi) waive a continuing Default or Event of
Default in the payment of principal of or premium (if any) or interest on the
Securities.

         A supplemental indenture that changes or eliminates any covenant or
other provision of the Indenture which has expressly been included solely for
the benefit of one or more particular series of Debt Securities under the
Indenture, or which modifies the rights of the Holders of Debt Securities of
such series with respect to such covenant or other provision, shall be deemed
not to affect the rights under the Indenture of the Holders of Debt Securities
of any other series.

         9. Defaults and Remedies. Events of Default are defined in the
Indenture and generally include: (i) failure to pay principal of or any premium
on any Security when due and payable; (ii) failure to pay any interest on any
Security when due and payable, and the continuation of the default for 30 days;
(iii) failure to perform any other covenant, or breach of any warranty, of the
Company in the Indenture, continued for 60 days after written notice is given
or received as provided in the Indenture; (iv) certain events of bankruptcy,
insolvency, or reorganization; and (v) failure to pay at final maturity (after
the expiration of any applicable grace periods) or upon the declaration of
acceleration of payment of indebtedness for borrowed money of the Company or
any Subsidiary in excess of $25 million, if such indebtedness is not
discharged, or such acceleration is not annulled, within 10 days after written
notice. If any Event of Default at any time outstanding occurs and is
continuing, either the Trustee or the Holders of at least 25% in aggregate
principal amount of the then outstanding Securities may declare the principal
amount of all Securities to be due and payable immediately. At any time after a
declaration or occurrence of acceleration with respect to the Securities has
been made, but before a judgment or decree based on acceleration has been
obtained, the Holders of a majority in

<PAGE>   11

aggregate principal amount of the then outstanding Securities may, under
certain circumstances, rescind and annul the acceleration.

         Holders may not enforce the Indenture or the Securities except as
provided in the Indenture. The Trustee may require indemnity reasonably
satisfactory to it before it enforces the Indenture or the Securities. Subject
to certain limitations, Holders of a majority in principal amount of the then
outstanding Securities may direct the Trustee in its exercise of any trust or
power with respect to the Securities. The Trustee may withhold from Holders
notice of any continuing default (except a default in payment of principal,
premium (if any) or interest) if in good faith it determines that withholding
notice is in their interests. The Company must furnish an annual compliance
certificate to the Trustee. 10. Discharge Prior to Maturity. The Indenture with
respect to the Securities shall be discharged and canceled upon the payment of
all Securities and, as provided in the Indenture, shall be discharged except
for certain obligations upon the irrevocable deposit with the Trustee of funds
sufficient for such payment.

         10. Discharge Prior to Maturity. The Indenture with respect to the
Securities shall be discharged and canceled upon the payment of all Securities
and, as provided in the Indenture, shall be discharged except for certain
obligations upon the irrevocable deposit with the Trustee of funds sufficient
for such payment.

         11. Trustee Dealings with Company. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not Trustee.

         12. Authentication. This Security shall not be valid until
authenticated by the manual signature of an authorized signer of the Trustee.

         13. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Securities as a convenience to the Holders
of the Securities. No representation is made as to the correctness of such
numbers as printed on the Securities and reliance may be placed only on the
other identification numbers printed thereon.

         14. Abbreviations. Customary abbreviations may be used in the name of
a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform gifts
to Minors Act).

         15. Restrictions on Transfer. By its acceptance of any Security
bearing a legend restricting transfer, each Holder of a Security acknowledges
the restrictions on transfer of such Security set forth in the officers'
certificate executed pursuant to Section 303 of the Indenture in respect of the
Securities and such legend and agrees that it will transfer such Security only
as provided in such officers' certificate and in the Indenture.

         THE COMPANY WILL FURNISH TO ANY HOLDER UPON WRITTEN REQUEST AND
WITHOUT CHARGE A COPY OF THE INDENTURE. REQUEST MAY BE MADE TO:

                  VALERO ENERGY CORPORATION
                  ONE VALERO PLACE
                  SAN ANTONIO, TEXAS 78212
                  TELEPHONE: (210) 370-2000
                  ATTENTION:  GENERAL COUNSEL

<PAGE>   12

                  SCHEDULE OF EXCHANGES OF DEFINITIVE SECURITY

         The following exchanges of a part of this global Security for
definitive Securities have been made:

<TABLE>
<CAPTION>

                                                                           Principal Amount of         Signature of
                          Amount of decrease in   Amount of increase in   this global Security    authorized officer of
                           Principal Amount of     Principal Amount of       following such        Trustee or Security
   Date of Exchange       this global Security    this global Security   decrease (or increase)         Registrar
   ----------------       --------------------    --------------------   ----------------------         ---------
<S>                      <C>                      <C>                    <C>                      <C>

</TABLE>

<PAGE>   13

                                ASSIGNMENT FORM

         To assign this Security, fill in the form below: (I) or (we) assign
and transfer this Security to __________________________ (Insert assignee's
social security or tax I.D. number)

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

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

-------------------------------------------------------------------------------
             (Print or type assignee's name, address and zip code)

and irrevocably appoint ________________________ as agent to transfer this
Security on the books of the Company. The agent may substitute another to act
for him.

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

Date:                                   Your Signature:
     -----------------                                  ---------------------
                                                        (Sign exactly as your
                                                        name appears on the face
                                                        of this Security)

Signature Guarantee:
                    ------------------------------------------------------------
                           (Participant in a Recognized Signature Guaranty
                                          Medallion Program)

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