Document:

EXHIBIT 4.1

                       UDS 401(k) RETIREMENT SAVINGS PLAN
                           Effective January 1, 1998,
                         and other dates provided herein
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                       UDS 401(k) Retirement Savings Plan
                                Table of Contents

                                                                         Page

INTRODUCTION  ...........................................................    1

ARTICLE I--DEFINITIONS...................................................    2
   Section 1.1.    Account Balance.......................................    2
   Section 1.2.    ACP and ACP Test......................................    2
   Section 1.3.    Active Member.........................................    2
   Section 1.4.    ADP and ADP Test......................................    2
   Section 1.5.    Affiliate.............................................    2
   Section 1.6.    Beneficiary...........................................    2
   Section 1.7.    Benefit Review Committee..............................    2
   Section 1.8.    Board of Directors....................................    2
   Section 1.9.    Break in Service......................................    2
   Section 1.10.   Code..................................................    3
   Section 1.11.   Committee.............................................    3
   Section 1.12.   Company...............................................    3
   Section 1.13.   Company Contribution..................................    3
   Section 1.14.   Compensation..........................................    3
   Section 1.15.   Disability............................................    4
   Section 1.16.   Disability Retirement Date............................    5
   Section 1.17.   Early Retirement Date.................................    5
   Section 1.18.   Early Retirement Eligibility Age......................    5
   Section 1.19.   Effective Date........................................    5
   Section 1.20.   Eligibility Computation Period........................    5
   Section 1.21.   Eligible Employee.....................................    5
   Section 1.22.   Employee..............................................    5
   Section 1.23.   Entry Date............................................    5
   Section 1.24.   ERISA.................................................    6
   Section 1.25.   Fund..................................................    6
   Section 1.26.   Highly Compensated Employee...........................    6
   Section 1.27.   Hour of Service.......................................    6
   Section 1.28.   Leased Employee.......................................   10
   Section 1.29.   Matching Contribution.................................   10
   Section 1.30.   Member................................................   10
   Section 1.31.   Member's Account......................................   10
   Section 1.32.   Normal Retirement Age.................................   10
   Section 1.33.   Normal Retirement Date................................   10
   Section 1.34.   Plan..................................................   11
   Section 1.35.   Plan Merger Date......................................   11
   Section 1.36.   Plan Year.............................................   11
   Section 1.37.   Prior Plan............................................   11
   Section 1.38.   Prior Plan Member.....................................   11
   Section 1.39.   Qualified Matching Contribution.......................   12
   Section 1.40.   Qualified Nonelective Contribution....................   12
   Section 1.41    Required Beginning Date...............................   12
   Section 1.42.   Rollover Contribution.................................   12
   Section 1.43.   Salary Deferral Agreement.............................   12
   Section 1.44.   Salary Deferral Contributions.........................   12
   Section 1.45.   Termination from Employment...........................   12
   Section 1.46.   Trust.................................................   13
   Section 1.47.   Trustee...............................................   13
   Section 1.48.   Union Employee........................................   13
   Section 1.49.   Vested Account Balance................................   13
   Section 1.50.   Vesting Computation Period............................   13
   Section 1.51.   Year of Eligibility Service...........................   13
   Section 1.52.   Year of Vesting Service...............................   13

ARTICLE II--ELIGIBILITY, ENROLLMENT AND PARTICIPATION....................   14
   Section 2.1.    Eligibility to Make Salary Deferral Agreements........   14
   Section 2.2.    General Eligibility Requirements......................   14
   Section 2.3.    Prior Plan Members....................................   14
   Section 2.4.    Previously Eligible Employees.........................   14
   Section 2.5.    Participation by Employees Who Are Not Eligible
                        Employees........................................   14

ARTICLE III--CONTRIBUTIONS...............................................   16
   Section 3.1.    Salary Deferral Contributions.........................   16
   Section 3.2.    Matching Contributions................................   17
   Section 3.3.    Qualified Matching Contributions......................   17
   Section 3.4.    Discretionary Company Contributions...................   17
   Section 3.5.    Qualified Nonelective Contribution....................   17
   Section 3.6.    Rollover Contributions................................   17
   Section 3.7.    Certain Transfers Not Permitted.......................   17
   Section 3.8.    Profits Not Required..................................   18

ARTICLE IV--VESTING AND FORFEITURES......................................   19
   Section 4.1.    100% Immediate Vesting for Certain Contributions......   19
   Section 4.2.    5-Year Vesting........................................   19
   Section 4.3.    Special Vesting Rules for Prior Plan Members..........   19
   Section 4.4.    100% Vesting Upon Occurrence of Certain Events........   20
   Section 4.5.    Forfeitures of Nonvested Account Balances and Cut-Off
                        of Member Status.................................   21
   Section 4.6.    Application of Forfeitures............................   21

ARTICLE V--SECTION 402(g) LIMIT..........................................   22
   Section 5.1.    General Rule..........................................   22
   Section 5.2.    Special Definitions...................................   22
   Section 5.3.    Corrective Distribution of Excess Deferrals...........   22

ARTICLE VI--SECTION 401(k) AND 401(m) LIMITS.............................   25
   Section 6.1.    General Rule..........................................   25
   Section 6.2.    ACP Test..............................................   25
   Section 6.3.    Multiple Use of the Alternative Limitation............   25
   Section 6.4.    Prior Plan Year Testing...............................   25

ARTICLE VII--CORRECTION OF FAILURES OF ADP AND ACP TESTS.................   26
   Section 7.1.    General Rule..........................................   26
   Section 7.2.    Corrective Distribution of Excess ADP Contributions...   27
   Section 7.3.    Corrective Forfeitures of Excess ACP Contributions....   27
   Section 7.4.    Corrections for Failures of the Multiple Use
                        Limitation.......................................   27

ARTICLE VIII--SECTION 415 LIMITS.........................................   29
   Section 8.1.    General Rule..........................................   29
   Section 8.2.    Reductions Among Defined Contribution Plans...........   29
   Section 8.3.    Reductions Under the 415(e) Limit.....................   29
   Section 8.4.    Treatment of Excesses.................................   29

ARTICLE IX--PARTICIPANTS' ACCOUNTS.......................................   31
   Section 9.1.    Generally.............................................   31
   Section 9.2.    Valuation.............................................   32
   Section 9.3.    Members' Self-Directed Investments....................   32
   Section 9.4.    ESOP I and ESOP II Accounts...........................   33

ARTICLE X--DISTRIBUTIONS.................................................   34
   Section 10.1.   General Rule..........................................   34
   Section 10.2.   Timing and Manner of Distributions....................   34
   Section 10.3.   Account Balances of $5,000 or Less....................   35
   Section 10.4.   Death Benefits........................................   35
   Section 10.5.   Limitations on In-Service Distributions...............   35
   Section 10.6.   Notification and Member Election for Distributions
                        Before Normal Retirement Age.....................   35
   Section 10.7.   Special Rules for Plan Termination and Corporate
                        Reorganizations..................................   36
   Section 10.8.   QDROs.................................................  36
   Section 10.9.   Other Restrictions on Distributions...................  37
   Section 10.10.  Distributions to Comply With Other Code Requirements..  37
   Section 10.11.  Direct Rollovers......................................  37

ARTICLE XI--PARTIAL AND TOTAL WITHDRAWALS OF ACCOUNT BALANCE.............  40
   Section 11.1.   General Rule..........................................  40
   Section 11.2.   Hardship Distributions................................  40
   Section 11.3.   Withdrawal of Rollover Contributions..................  42
   Section 11.4.   Withdrawals of After-Tax Employee Contribution Amounts  42
   Section 11.5.   Withdrawals On and After Attainment of Age 59-1/2.....  42

ARTICLE XII--LOANS TO PARTICIPANTS.......................................  44
   Section 12.1.   General Availability of Loans.........................  44
   Section 12.2.   Amount of Loan........................................  45
   Section 12.3.   Terms of Loan.........................................  45
   Section 12.4.   Nonpayment of Required Installment....................  46
   Section 12.5.   Acceleration of Loan..................................  47
   Section 12.6.   Repayment Not Permitted After Deemed Distribution.....  48
   Section 12.7.   Alternate Payees......................................  48
   Section 12.8.   Fees..................................................  49
   Section 12.9.   USERRA................................................  49

ARTICLE XIII--DEATH BENEFITS.............................................  50
   Section 13.1.   General Rules.........................................  50
   Section 13.2.   Married Members.......................................  50
   Section 13.3.   Unmarried Members.....................................  50
   Section 13.4.   Divorced or Separated Members.........................  50
   Section 13.5.   Qualified Beneficiary Designation.....................  51

ARTICLE XIV--ADMINISTRATIVE PROCEDURES...................................  52
   Section 14.1.   Appointment of Employee Benefits Committee Members....  52
   Section 14.2.   Officers and Employees of the Employee Benefits
                        Committee........................................  52
   Section 14.3.   Action of the Employee Benefits Committee.............  52
   Section 14.4.   Expenses..............................................  53
   Section 14.5.   Indemnification.......................................  53
   Section 14.6.   General Powers and Duties of the Employee Benefits
                        Committee........................................  53
   Section 14.7.   Specific Powers of the Employee Benefits Committee....  54
   Section 14.8.   Records and Reports...................................  55
   Section 14.9.   Allocation and Delegation of Fiduciary Responsibility.  55
   Section 14.10.  Claims Procedure......................................  55
   Section 14.11.  Service of Process....................................  58
   Section 14.12.  Payment to Minors or Persons Under Legal Disability...  58
   Section 14.13.  Mistakes in Plan Administration.......................  58

ARTICLE XV--ADOPTION OF PLAN BY AFFILIATES...............................  59
   Section 15.1.   Adoption Procedure....................................  59
   Section 15.2.   Effect of Adoption by Affiliate.......................  59
   Section 15.3.   Withdrawal by Participating Company...................  60

ARTICLE XVI--AMENDMENT, TERMINATION AND MERGER...........................  61
   Section 16.1.   Amendment of the Plan.................................  61
   Section 16.2.   Protected Benefits....................................  61
   Section 16.3.   Reduction or Cessation of Contributions...............  61
   Section 16.4.   Termination of the Plan...............................  61
   Section 16.5.   Treatment of Account Balances Upon Plan Termination...  61
   Section 16.6.   Unfavorable Determination After Initial Qualification.  62
   Section 16.7.   Mergers or Transfers..................................  62

ARTICLE XVII--REVERSIONS.................................................  64
   Section 17.1.   No Reversion Permitted................................  64
   Section 17.2.   Approval by the Internal Revenue Service..............  64
   Section 17.3.   Contribution Recapture................................  65

ARTICLE XVIII--TOP HEAVY PROVISIONS......................................  66
   Section 18.1.   Purpose of Article....................................  66
   Section 18.2.   Definitions...........................................  66
   Section 18.3.   Determination of a Top-Heavy Plan.....................  67
   Section 18.4.   Determination of the Top-Heavy Ratio..................  68
   Section 18.5.   Vesting Requirements..................................  69
   Section 18.6.   Minimum Allocation....................................  70
   Section 18.7.   Reduction in Section 415 Limits.......................  71

ARTICLE XIX--MISCELLANEOUS...............................................  72
   Section 19.1.   Gender and Number.....................................  72
   Section 19.2.   Reference to the Code and ERISA.......................  72
   Section 19.3.   Governing Law.........................................  72
   Section 19.4.   Compliance With the Code and ERISA....................  72
   Section 19.5.   Prohibition Against Assignment or Alienation..........  72
   Section 19.6.   Limitation of Rights..................................  72
   Section 19.7.   USERRA Compliance.....................................  73

APPENDIX A--SPECIAL SERVICE COUNTING RULES...............................  74
   Section A.1.    General Rule..........................................  74
   Section A.2.    Year of Vesting Service...............................  74
   Section A.3.    Hours of Service......................................  74
   Section A.4.    Break in Service......................................  74
   Section A.5.    Additional Rules......................................  75

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                       UDS 401(k) Retirement Savings Plan

                                  INTRODUCTION

This Plan,  known as the UDS 401(k)  Retirement  Savings Plan (the  "Plan"),  is
sponsored  by  Ultramar  Diamond  Shamrock  Corporation,  and has  been  adopted
effective  January 1, 1998. The Plan is created from the merger of the following
plans effective January 1, 1998:

     (a)  Ultramar Diamond Shamrock Corporation U.S. Savings Incentive Plan; and

     (b)  Ultramar Diamond Shamrock Corporation 401(k) Retirement Savings Plan;

the following plans effective April 1, 1998:

     (c)  Total Petroleum, Inc. Tax Reduction Thrift Plan; and

     (d)  Total Petroleum, Inc. Retail Thrift Plan;

and the following plan effective January 1, 1999:

     (e)  Ultramar Energy Inc. U.S. Savings Incentive Plan.

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                                    ARTICLE I
                                   DEFINITIONS

     Section 1.1.  Account Balance on any date shall mean the value on that date
of  the  Member's  Account.

     Section 1.2. ACP Test  shall  mean  the actual contribution percentage test
set forth in Article VI.

     Section 1.3. Active Member shall mean a Member who is an Eligible Employee.

     Section 1.4. ADP and ADP Test   shall  mean actual deferral percentage test
set forth in Article VI.

     Section  1.5.  Affiliate  shall  mean  the  Company  and all  members  of a
controlled group of corporations (as defined in section 414(b) of the Code), all
commonly  controlled  trades or businesses  (as defined in Section 414(c) of the
Code) and all  members of an  affiliated  service  group (as  defined in Section
414(m)  of the  Code) of which  the  Company  is a part,  and any  other  entity
required to be aggregated with the company pursuant to regulations under Section
414(o) of the Code.

     Section  1.6.  Beneficiary  shall mean the person (or  persons) to whom the
Member's  Vested Account  Balance is  distributed  after his death in accordance
with Article XIII.

     Section 1.7. Benefit Review Committee shall mean the Committee appointed by
the Chief Executive Officer of Ultramar Diamond Shamrock Corporation pursuant to
Section  14.10  hereof,  consisting  of not less  than  three nor more than five
persons,  with full  discretionary  power and authority to construe the Plan and
determine all questions of eligibility  and  interpretation  under the Plan, and
all questions of fact, pursuant to Section 14.10 below.

     Section  1.8.  Board of  Directors  shall  mean the Board of  Directors  of
Ultramar Diamond Shamrock Corporation.

     Section 1.9.  Break in Service  shall mean a Plan Year in which an Employee
is  credited  with less than 501 Hours of  Service.  See  Appendix A for special
rules  governing  Breaks in Service  with respect to an Employee  credited  with
service under the Ultramar Energy Inc. U.S. Savings Incentive Plan.

     Section  1.10.  Code  shall  mean the  Internal  Revenue  Code of 1986,  as
amended.

     Section  1.11.   Committee  shall  mean  the  Employee  Benefits  Committee
appointed and acting pursuant to the provisions of Article XIV.

     Section 1.12. Company shall mean Ultramar Diamond Shamrock  Corporation and
any corporation or partnership  which adopts the Plan in accordance with Article
XV.

     Section 1.13. Company  Contribution shall mean any contribution made to the
Plan by the Company on behalf of a Member,  other than a Rollover  Contribution,
or a transfer of assets under section 414(l) of the Code.

     Section  1.14.  Compensation  shall mean,  except as otherwise  provided in
subsections (b) and (c):

          (a)  All remuneration paid to an Employee for services rendered in the
course of employment with the Company,  to the extent includible in gross income
and  reportable to the Employee  under Code section 3402 on his W-2,  subject to
the following qualifications and exceptions:

               (1)  Compensation  shall  include any  amounts  deducted  from an
Employee's salary as elective deferrals to a cash or deferred arrangement  under
Code section 401(k), or as elective contributions to a cafeteria plan under Code
section 125.  Compensation shall not include any other amounts  contributed to a
plan or arrangement  of deferred  compensation,  whether or not qualified  under
section 401(a) of the Code.

               (2)  Compensation   shall not include any fringe benefits such as
moving expenses, employee discounts,  meals, van pooling, reimbursed medical and
educational  expenses  and  life  insurance  to the extent not included in gross
income and reported on the Employee's W-2.

               (3)  Compensation shall not include amounts realized from (A) the
exercise  of  a  nonqualified  stock  option;  (B)  the  sale, exchange or other
disposition  of  stock  acquired  under a qualified stock option; (C) restricted
stock  or  property  held  by  the  Employee  at  the  time  it  becomes  freely
transferable  or is no longer  subject to substantial  risk of  forfeiture;  (D)
stock   appreciation   rights;   (E)  distributions  from  a  plan  of  deferred
compensation, whether or not qualified under section 401(a) of the Code; (F) the
transfer of property to an Employee  accompanied  by an election  under  section
83(b) of the Code, or (G) bonus performance units or stock performance units.

               (4)  Compensation shall include amounts received as long or short
term  disability  benefits  only  if  paid  directly  from the Company's payroll
system,  including  payments  under  the  Company's Unavoidable  Absence Pay and
Salary  Continuation  Pay  programs. Compensation shall  not include any amounts
paid under the Ultramar Diamond Shamrock  Corporation Work Injury Program or any
other plan  maintained  solely  for the  purpose of  complying  with  applicable
workmen's  compensation  laws, or with  unemployment  compensation or disability
insurance laws, whether or not paid through the Company's payroll system.

          (b)  For  purposes  of  Section  1.26  (relating  to the definition of
Highly  Compensated  Employee),  Article  VI (relating to the ADP and ACP tests)
and  Article  VIII  (relating  to  Code  section  415  limitations),  the   term
compensation is undefined and shall have the meanings  permitted by the Code and
regulations  thereunder for  construction of those  provisions.  For purposes of
Article XVIII (relating to top-heavy requirements) the term "Compensation" shall
have the meaning set forth in that Article.

          (c)  Compensation  shall  be  subject  to  the  limitations of section
401(a)(17) of the Code, as set forth in regulations under that section.

     Section 1.15.   Disability shall mean a physical or mental  condition of an
Employee  resulting  from  bodily  injury,  disease  or  mental  disorder  which
renders him incapable of continuing his usual and customary  employment with the
Company  and  which  condition  constitutes  disability  under  the terms of the
Company's  long-term  disability  plan or the Social Security Act. The period of
Disability  shall  include  any waiting  period  under the  Company's  long-term
disability  plan and any period  during which such  Employee is eligible for and
receiving Social Security disability benefits.

     Section 1.16.   Disability Retirement Date shall mean the first  day of the
month  after  the  Committee  has  determined  that  a  Member's  incapacity  is
a Disability.

     Section 1.17.   Early  Retirement  Date  shall  mean  the  first day of the
month  following  the  month in which  the  Member  incurs  a  Termination  from
Employment after his attainment of Early Retirement Eligibility Age.

     Section 1.18.   Early  Retirement Eligibility Age shall mean attainment of
age 55 and  completion  of 5 Years of Vesting  Service.

     Section 1.19.   Effective Date shall mean January 1, 1998.

     Section 1.20.   Eligibility  Computation  Period shall mean the 12-consecu-
tive month period measured from the date an Employee is  first  credited with an
Hour of Service, and thereafter shall mean the succeeding  12-consecutive  month
period  beginning on the January 1st following such date.

     Section 1.21.   Eligible  Employee  shall mean an Employee eligible to make
Salary Deferral  Contributions to the Plan under Sections 2.2, 2.3 or 2.4 of the
Plan.

     Section 1.22.   Employee  shall  mean  only an individual  paid through the
Company's  payroll  system as a common law  employee  of the  Company.  The term
Employee does not include any other common law employee or any Leased  Employee.
The term  Employee  does not include any  individual,  including  any common law
employee,  paid other than through the Company's  payroll system. In particular,
it is expressly intended that individuals not paid through the Company's payroll
system  are  to  be  excluded  from  Plan  participation  even  if  a  court  or
administrative  agency determines that such individuals are common law employees
and not independent contractors.

     Section 1.23.   Entry  Date  shall  mean  the  date  on  which an  Employee
becomes a Member in the Plan, as follows:

          (a)  For a Prior Plan Member, the Entry Date is the Plan Merger  Date.

          (b)  For an  Eligible  Employee,  the  Entry  Date is the first day on
which his valid Salary Deferral Agreement becomes effective under the provisions
of Article III of the Plan.

          (c)  For  an  Eligible  Employee  who  was  a  Member but is no longer
because he took a distribution of his entire Account Balance (including a deemed
distribution of a nonvested  Account  Balance) under the Plan, the Entry Date is
the first date  thereafter  that a new valid Salary  Deferral  Agreement becomes
effective under Article III of the Plan.

          (d)  For  any  Employee  (including an Employee who is not an Eligible
Employee), who is not  yet  a  Member  and  who  makes  a  Rollover Contribution
to the Plan, the Entry Date is the date the Rollover Contribution is received by
the Plan.

     Section 1.24.   ERISA shall  mean  the Employee  Retirement Income Security
Act of 1974 (PL 93-406) as amended.

     Section 1.25.   Fund shall  mean  the fund or funds  held for the Plan by a
Trustee or  insurance  company in Members' Accounts or otherwise.

     Section 1.26.   Highly  Compensated  Employee shall mean an Employee who is
a highly  compensated  employee as that term is defined in section 414(q) of the
Code.

     Section 1.27.   Hour of Service shall mean:

          (a)  Each  hour  for  which  an  Employee  is  directly  or indirectly
compensated, or  entitled  to  compensation,  by  the Company, an Affiliate or a
predecessor  employer  as  required  by  Section  414(a)(2) of  the Code and the
Treasury  regulations  thereunder  for  the  performance  of services.  Hours of
Service  under  this  subsection  will  be  credited  to  the  Employee  for the
computation period in which the services are performed.

          (b)  Each  hour  for  which  an  Employee  is  directly  or indirectly
compensated, or  entitled  to  compensation,  by  the Company or an Affiliate on
account  of  a  period  of time during which no services are  performed (without
regard  to  whether  the  employment   relationship between the Employee and the
Company  or  Affiliate  has  terminated)  due  to  vacation,  holiday,  illness,
incapacity,  disability,  layoff,  jury duty,  military duty or leave of absence
with pay. Hours of Service under this subsection will be calculated and credited
pursuant to Section 2530.200b-2 of the Department of Labor Regulations which are
incorporated herein by this reference.

          (c)  Each  hour  for  which  an  Employee  is  directly  or indirectly
compensated,  or  entitled  to  compensation for, an amount as back pay (without
regard  to  mitigation of damages)  either  awarded or agreed to by the  Company
or  an Affiliate. Hours of Service under this subsection will be credited to the
Employee  for  the  Plan Year or Eligibility Computation period, as the case may
be,  to  which  the  award or  agreement  pertains  rather than the Plan Year or
Eligibility Computation period in which the award, agreement or payment is made.

          (d)  Each hour credited on the basis of  applicable regulations  under
ERISA  for  unpaid  periods  of  absence  for service in the armed forces of the
United  States  or the Public Health Service of the United States as a result by
which such Employee's reemployment rights are  guaranteed by law, provided  that
the Employee returns to employment with the Company or any  Affiliate within the
time such rights are guaranteed.

          (e)  If the Company or an Affiliate   maintains  a qualified plan of a
predecessor  employer,  each  hour  credited  by  such   predecessor employer as
required by Section 414(a) of the Code.

          (f)  Solely for purposes of preventing a Break in  Service,  each hour
credited in accordance with Sections  410(a)(5)(E)  and 411(a)(6)(E) of the Code
for unpaid  period during which an Employee is absent from work by reason of the
pregnancy of the Employee,  the birth of a child of the Employee,  the placement
of a child with the  Employee in  connection  with the adoption of such child by
the  Employee,  or for purposes of caring for such child for a period  beginning
immediately  following  such  birth or  placement,  provided  that the  Employee
furnishes  timely  information to the Company to establish that the absence from
work is for one of the aforementioned  reasons, and the number of days for which
there was such an absence.  The Hours of Service  credited under this subsection
shall be credited in the Plan Year or  Eligibility  Computation  Period,  as the
case may be, in which the absence begins only if necessary to prevent a Break in
Service in  that  period,  and in all other cases, in the immediately succeeding
Plan Year or Eligibility Computation Period.

          Notwithstanding the  foregoing:  (1) no more than 501 Hours of Service
shall be credited to an Employee under  subsection (b), (c) or (f) on account of
any single continuous period of time during which no services are performed; (2)
an hour for which an Employee is directly or indirectly  compensated or entitled
to  compensation  by the Company or an Affiliate  on account of a period  during
which  no  services  are  performed  shall  not  constitute  an Hour of  Service
hereunder if such compensation is paid or due under a plan maintained solely for
the purpose of complying with  applicable  workers'  compensation,  unemployment
compensation or disability insurance laws or under the Ultramar Diamond Shamrock
Corporation Work Injury Program;  (3) Hours of Service shall not be credited for
payments  which solely  reimburse  an Employee for medical or medically  related
expenses;  and (4) the same Hour of Service shall not be credited to an Employee
both under subsection (a) or (b) and under subsection (c).

          (g)  For any individual who

               (1)   is an Employee on or after the January 1, 1998, and

               (2)   on  December 31, 1997, performed  service as an employee of
(or on such date was shown on the  relevant  payroll as an employee of,  but  on
approved leave of absence from) Ultramar Diamond Shamrock  Corporation, an  hour
of service credited under the terms of the Ultramar Diamond Shamrock Corporation
401(k) Retirement  Savings  Plan  and performed before the Effective Date, shall
count as an Hour of Service.

          (h)  For any individual who

               (1)   is an Employee on or after April 1, 1998, and

               (2)   on  March 31, 1998, performed service as an employee of (or
on  such  date  was  shown  on  the   relevant payroll as an employee of, but on
approved  leave  of  absence  from)  Total  Petroleum,  Inc., an hour of service
credited under the terms of  Total Petroleum, Inc. Tax  Reduction Thrift Plan or
the  Total Petroleum, Inc. Retail Thrift Plan and performed before the Effective
Date, shall count as an Hour of Service.

          (i)  Any individual who

               (1)   is an Employee on or after January 1, 1999, and

               (2)   on December 31, 1998,  performed  service as an employee of
(or on such date was shown on the  relevant  payroll  as  an employee of, but on
approved leave of absence from) Ultramar  Energy Inc., and who was credited with
service  under  the  Ultramar  Energy  Inc. U.S. Savings Incentive Plan shall be
credited with Hours of Service as set forth in Appendix A.

          (j)  For purposes only of counting Years of Vesting Service,  Hours of
Service shall include the number of hours that would normally be worked (up to 8
hours) on any day in which an Employee is not performing  services because of an
incapacity  but  is receiving Company-subsidized short term disability  benefits
(if any).

          (k)  Each Employee  whose Compensation is not determined on  the basis
of  certain  amounts  for  each  hour  worked  (such as salaried, commission and
piecework  employees)  and  whose  hours  are  not  required   to be counted and
recorded  by any  federal  law (such as the Fair Labor  Standards  Act) shall be
credited with 190 Hours of Service for each month in which the Employee would be
credited with at least One Hour of Service pursuant to this Section.

          The Committee shall determine the number of Hours of Service,  if any,
to be  credited  to an  Employee  under the  foregoing  rules in a  uniform  and
nondiscriminatory  manner and in  accordance  with  applicable  federal laws and
regulations  including without limitation Department of Labor Regulation Section
2530.200b-2(b) and (c).

          (l)  If an Employee has previously performed services as a  common law
employee  of  the  Company  or an Affiliate who is not an Employee, or as leased
Employee,  his  service  as  a  common law employee or Leased Employee and as an
Employee  are  added   together to  determine  his total Hours of Service to the
extent required by law. For this purpose, the Employee who was a Leased Employee
shall be  credited  with 190 Hours of Service for every month he would have been
credited  with an Hour of Service if he had been an Employee  during such period
of Leased Employment.

     Section 1.28.   Leased  Employee  shall  mean an individual who is a leased
employee,  as that term is defined in section 414(n) of the Code, of the Company
or an Affiliate.

          For purposes only of the rules defining Hour of  Service under Section
1.27 of the Plan, a Leased Employee includes an individual who would have been a
Leased  Employee  but  for  the  requirement  that  services  be  performed on a
substantially full time basis for one year.

     Section 1.29.   Matching  Contribution  shall  mean a Company  Contribution
treated as a Matching Contribution under section 3.2 of the Plan.

     Section 1.30.   Member  shall  mean  an Employee with an Account Balance of
greater than zero,  and any Employee who has had a Termination  from  Employment
with a Vested Account Balance.

     Section 1.31.   Member's  Account  shall  mean  the sum of the sub-accounts
held on behalf of a Member, in accordance with the provisions of Article IX.

     Section 1.32.   Normal  Retirement  Age  shall mean (a) the later of age 65
or the fifth  anniversary  of the date an Employee  first  performed  an Hour of
Service,  or (b), if  earlier,  in the case of a Prior Plan  Member,  the normal
retirement age specified in such Prior Plan.

     Section  1.33.  Normal  Retirement  Date  shall  mean  the  date  a  Member
incurs a Termination from Employment on or after attaining his Normal Retirement
Age.

     Section 1.34.   Plan  shall  mean the UDS 401(k)  Retirement  Savings Plan.

     Section 1.35.   Plan  Merger Date  shall mean January 1, 1998, with respect
to:

          (a)  Ultramar  Diamond  Shamrock  Corporation  U.S.  Savings Incentive
               Plan;

          (b)  Ultramar  Diamond  Shamrock Corporation 401(k) Retirement Savings
               Plan;

April 1, 1998, with respect to:

          (c)  Total Petroleum, Inc. Tax Reduction Thrift Plan;

          (d)  Total Petroleum, Inc. Retail Thrift Plan;

and January 1, 1999, with respect to:

          (e)  Ultramar Energy Inc. U.S. Savings Incentive Plan.

     Section 1.36.   Plan  Year  shall  mean the 12-month  period  commencing on
January 1  and  ending  on  the following  December 31.

     Section 1.37. Prior Plan shall mean the following plans:

          (a)  Ultramar  Diamond  Shamrock  Corporation  U.S.  Savings Incentive
               Plan;

          (b)  Ultramar  Diamond  Shamrock Corporation 401(k) Retirement Savings
               Plan;

          (c)  Total Petroleum, Inc. Tax Reduction Thrift Plan;

          (d)  Total Petroleum, Inc. Retail Thrift Plan; and

          (e)  Ultramar Energy Inc. U.S. Savings Incentive Plan.

     Section  1.38.  Prior Plan Member shall mean any individual with an account
balance greater than zero in any of the following plans on December 31, 1997:

          (a)  Ultramar  Diamond  Shamrock  Corporation  U.S.  Savings Incentive
               Plan;

          (b)  Ultramar  Diamond  Shamrock Corporation 401(k) Retirement Savings
               Plan;

in any of the following plans on March 31, 1998:

          (c)  Total Petroleum, Inc. Tax Reduction Thrift Plan;

          (d)  Total Petroleum, Inc. Retail Thrift Plan. and

in the following plan on December 31, 1998:

          (e)  Ultramar Energy Inc. U.S. Savings Incentive Plan.

     Section  1.39.  Qualified   Matching   Contribution   shall  mean a Company
Contribution described in Section 3.3 of the Plan.

     Section  1.40.  Qualified  Nonelective  Contribution shall  mean  a Company
Contribution described in Section 3.5 of the Plan.

     Section 1.41.   Required Beginning Date shall mean:

          (a)  For an individual not described in subsection (b), April 1 of the
calendar  year  following the later of the calendar year in which the individual
(1) attains age 70-1/2; or (2) has a Termination of Employment.

          (b)  For an individual who is a 5%-owner (as defined in section 416 of
the  Code) of  an Affiliate, April 1 of the calendar year following the calendar
year in which the individual attains age 70 1/2.

     Section 1.42.   Rollover  Contribution  shall  mean a contribution eligible
for rollover to this Plan in accordance with the  requirements of section 402 or
section 408(d)(3) of the Code.

     Section 1.43.   Salary  Deferral  Agreement shall mean an agreement between
an Eligible  Employee and the Company to defer  Compensation  for the purpose of
making Salary Deferral Contributions to the Plan.

     Section 1.44.   Salary   Deferral   Contributions   shall   mean a  Company
Contribution  treated as made  pursuant  to a Salary  Deferral  Agreement  under
Section 3.1 of the Plan.

     Section 1.45.   Termination  from  Employment  shall mean the date on which
occurs the earlier of (a) or (b):

          (a)  The  date  on  which  an  Employee's employment with an Affiliate
terminates  by   reason  of  a  quit,  discharge,  retirement,    administrative
termination, death, or attainment of his Disability Retirement Date;

          (b)  The first  business day following the end of an approved leave of
absence if the Member fails to return to active employment  with an Affiliate by
that date.

     Section 1.46.   Trust  shall  mean  the  trust  agreement  entered  into by
Ultramar Diamond Shamrock Corporation and the Trustee.

     Section 1.47.   Trustee  shall   mean  one  or  more  persons  collectively
appointed and acting under the Trust, and any successor thereto.

     Section 1.48.   Union  Employee  shall mean an Employee who is in a unit of
employees covered by a collective bargaining agreement.

     Section 1.49.   Vested  Account  Balance  shall  mean  that  portion of his
Account  Balance  in which a Member is vested  in  accordance  with the terms of
Article IV.

     Section 1.50.   Vesting  Computation  Period  shall mean the 12-consecutive
month period that coincides with the Plan Year.

     Section 1.51.   Year  of  Eligibility  Service  shall  mean  an Eligibility
Computation Period during which the Employee completes 1000 Hours of Service.

     Section 1.52.   Year  of  Vesting Service shall mean a Vesting  Computation
Period in which an Employee  completes  1000 Hours of Service.  In the case of a
Member with a zero Vested Account  Balance,  Years of Vesting Service before any
period of five consecutive Breaks in Service shall not be counted.

<PAGE>
                                   ARTICLE II
                    ELIGIBILITY, ENROLLMENT AND PARTICIPATION

     Section 2.1.    Eligibility to Make Salary Deferral Agreements. An Eligible
Employee is permitted to make  Salary  Deferral Contributions under the terms of
Article III.

     Section 2.2.    General Eligibility Requirements. Each individual who:

          (a)  Is an Employee of the Company;

          (b)  Is (1) not a Union Employee, or (2) a Union Employee covered by a
collective bargaining agreement that expressly provides for participation in the
Plan;

          (c)  Has attained age 21; and

          (d)  Has completed a Year of Eligibility Service;

is an Eligible Employee, except that in subsection (c) "age 18" shall be read in
lieu of "age 21" after December 31, 1998.

     Section 2.3.    Prior Plan Members. A  Prior  Plan  Member  is  an Eligible
Employee on the first day in which he performs an Hour of Service as an Employee
on or after the Plan Merger Date with respect to the Prior Plan of which he is a
Prior Plan Member.

     Section 2.4.    Previously  Eligible  Employees.  An  individual  who is an
Eligible Employee but ceases to be an Eligible Employee because he has ceased to
satisfy  subsection (a) or (b) of Section 2.2,  shall be an Eligible Employee on
the first day on which he again  satisfies  both such subsections.

     Section 2.5.    Participation by Employees Who Are Not Eligible Employees.

          (a)  A  Member  who  has  ceased  to  be  an  Eligible Employee is not
eligible  to  make  Salary  Deferral  Contributions  to  the Plan.  Such Member,
however, is eligible to make withdrawals and change investment options under the
terms of the Plan,  and to make Plan loan  repayments  via payroll  deduction in
accordance with Article XII.

          (b)  Such Member is not an Active Member until he is again an Eligible
Employee and has executed a new Salary Deferral Agreement.

          (c)  An  Employee  who is not an Eligible Employee may make a Rollover
Contribution to the Plan.

<PAGE>
                                   ARTICLE III
                                  CONTRIBUTIONS

     Section 3.1.    Salary Deferral Contributions.

          (a)  By  executing  a  Salary  Deferral  Agreement  in accordance with
procedures specified by the Committee, an Eligible   Employee may elect to defer
his  Compensation  in  an  amount equal to not less than 1% nor more than 15% of
Compensation.

          (b)  Percentage  designations  under  subsection  (a) will be in whole
numbers,  except  that  partial percentages may be permitted as determined under
the ADP or ACP Tests.

          (c)  Salary   Deferral   Contributions   are  subject  to  Article  IV
(vesting); Article V (Code section 402(g) dollar cap ); Article  VI (ADP and ACP
Tests); Article  VII (correction  of  violations and potential violations of ADP
and ACP  Tests);  Article  VIII (Code section 415 limits); and Articles X and XI
(distribution limits).

          (d)  A Member  may  elect to change the percentage  deferral under his
Salary Deferral  Agreement,  or  to  cease Salary Deferral Contributions, at any
time by executing a new Salary Deferral Agreement.  A Member who elects to cease
Salary  Deferral  Contributions  shall  cease to be an Active Member on the date
such election is effective.  An initial Salary Agreement, any later  election to
change  an  earlier  Salary Deferral Agreement,  and an election to cease Salary
Deferral  Contributions,  shall be effective within such time or times specified
in  procedures  issued  by the  Committee.  Notwithstanding  a  Member's  Salary
Deferral  Agreement,  if a Member who has an outstanding  loan from the Plan, in
any  pay  period  has  Compensation  net  of  taxes,   employee-paid   benefits,
garnishments and any other withholding amounts, that is less than the sum of (1)
the Salary Deferral  Contribution  elected for that pay period plus (2) the loan
repayment due in that period,  effective  January 1, 1999, such net Compensation
shall be  allocated  first to the loan  repayment,  so that the Salary  Deferral
Contribution  may be  less  than  the  amount  elected  in the  Salary  Deferral
Agreement.

     Section 3.2.    Matching Contributions.

          (a)  The  Company  may  designate  Company Contributions as a Matching
Contribution on behalf of a Member who is  an Eligible Employee.  Such  Matching
Contributions, if  any,  shall  be in an amount and according to a formula to be
determined from time to time by Ultramar Diamond Shamrock Corporation.

          (b)  Matching   Contributions  are  subject  to  Article  IV  (vesting
rules);  Article  VI  (ADP and ACP Tests); Article VII (correction of violations
and potential  violations  of ADP and ACP Tests); and Article VIII (Code section
415 limits).

     Section 3.3.    Qualified  Matching Contributions.  To the extent permitted
by Code sections 401(k) and 401(m) and Treasury regulations thereunder, all or a
portion of any Company  Contribution may be tested under the ACP or ADP Tests as
a Qualified Matching Contribution.

     Section 3.4.    Discretionary  Company Contributions.  The Company may make
discretionary  Company  Contributions  to  the  Plan  for  a  Plan  Year,  if so
determined  by Ultramar  Diamond  Shamrock  Corporation.  Discretionary  Company
Contributions,  if any,  are subject to Article IV  (vesting  rules) and Article
VIII (Code section 415 limits)

     Section  3.5.   Qualified  Nonelective  Contribution.  To  the  extent per-
mitted by  Code  sections 401(k) and 401(m) and Treasury regulations thereunder,
all or a portion of any Company Contribution may be tested  under the ACP or ADP
Tests as a Qualified Nonelective Contribution.

     Section 3.6.    Rollover  Contributions.  The  Plan  shall  accept Rollover
Contributions.  A  Rollover  Contribution may be made by any Employee, including
any Employee who is not an Eligible Employee.

     Section 3.7.    Certain  Transfers  Not Permitted.  The  Plan will not be a
direct or indirect  transferee of a defined benefit plan, money purchase pension
plan  (including a target benefit plan),  stock bonus,  or  profit-sharing  plan
which would otherwise  provide for a life annuity form of payment to the Member.
This Section does not apply to any transferor plan which is a Prior Plan.

     Section 3.8.    Profits  Not  Required.  Company  Contributions to the Plan
shall not be precluded because any of the Affiliates does not have profits.

<PAGE>
                                   ARTICLE IV
                             VESTING AND FORFEITURES

     Section 4.1.    100%  Immediate  Vesting  for  Certain  Contributions.  The
Member  shall  be  vested  in  100% of  his  Account Balance attributable to the
following contributions, including earnings thereon:

          (a)  Salary Deferral Contributions;

          (b)  Rollover Contributions;

          (c)  Qualified Matching Contributions;

          (d)  Qualified Nonelective Contributions.

     Section 4.2.    5-Year Vesting.  For the  portion of the Account Balance in
which he is not vested under any other provision of this Article, a Member shall
be vested in a specified percentage,  determined by his Years of Vesting Service
in accordance with the following schedule.

          Years of Vesting Service                 Percentage
          ------------------------                 ----------
            Less than 5                                  0%
            5 or more                                  100%

     Section 4.3.    Special Vesting Rules for Prior Plan Members.

          (a)  A Prior Plan Member who as of December 31, 1997, is a participant
(or as of January 1, 1998 would have satisfied the eligibility rules for being a
participant) in the Ultramar Diamond Shamrock Corporation U.S. Savings Incentive
Plan shall be 100% vested in his Account Balance under the Plan.

          (b)  A  Prior  Plan  Member who as of March 31, 1998, is a participant
(or as  of  April 1, 1998 would have satisfied the eligibility rules for being a
participant) in the Total Petroleum, Inc. Tax Reduction Thrift Plan or the Total
Petroleum, Inc. Retail Thrift Plan, shall be 100% vested in his  Account Balance
under the Plan.

          (c)  A Prior Plan Member who as of December 31, 1997, is a participant
in the Ultramar Diamond Shamrock Corporation 401(k) Retirement Savings Plan, and
who was a participant in the NCS Plan immediately before the merger of these two
plans, with  3  or  more Years of  Vesting Service as of the July 1, 1996 merger
date between such two plans, shall be 100% vested in his Account Balance.

          (d)  A Prior Plan Member who as of December 31, 1998, is a participant
(or as of January 1, 1999, would have satisfied the eligibility  rules for being
a participant)  in  the  Ultramar  Energy Inc. U.S.  Savings Plan, shall be 100%
vested in his Account Balance under the Plan.

     Section 4.4.    100%  Vesting  Upon  Occurrence of Certain Events. A Member
shall be vested in 100% of his Account Balance upon:

          (a)  His death;

          (b)  Disability;

          (c)  Attainment of Normal Retirement Age;

          (d)  A termination or partial termination of the Plan;

          (e)  A change in control. For this purpose, a change in control  means
any event  which  the  Board of Directors  determines in its sole  discretion by
majority  vote  to  constitute a change in control.  A change in control will be
deemed to have occurred when a report is filed on Schedule 13D or Schedule 14D-1
(or any successor schedule, form or report), each as promulgated pursuant to the
Securities  Exchange  Act of 1934,  as  amended  disclosing  that any person has
become the  beneficial  owner of  securities  representing  more than 25% of the
combined  voting power of the  then-outstanding  voting  securities  of Ultramar
Diamond  Shamrock  Corporation  and such  acquisition  has not been  authorized,
approved or recommended by majority vote of the Board of Directors  prior to the
date of the filing of such report.

<PAGE>
     Section 4.5.    Forfeitures  of  Nonvested  Account Balances and Cut-Off of
Member Status.

          (a)  If a Member receives a distribution of his vested Account Balance
following a  Termination  from  Employment, the nonvested portion of his Account
Balance will be treated as a forfeiture.

          (b)  If the vested Account Balance is  zero upon  his Termination from
Employment,  the  entire  Account  Balance  is  treated as a forfeiture, and the
employee will be deemed to have received a  distribution  of the entirety of his
vested Account Balance in accordance with Article X.

     Section 4.6.    Application of Forfeitures.

          (a)  Any forfeiture  arising  under  this Article shall be used by the
Company to reduce contributions made by the Company due under Article III, or to
pay Plan expenses.

          (b)  Upon the termination of the Plan, any forfeitures which  have not
been applied towards subsection (a) shall be credited on a pro rata basis to the
Accounts of Active Members in the same manner as the last  contribution  made by
the Company under the Plan.

<PAGE>
                                    ARTICLE V
                              SECTION 402(g) LIMIT

     Section 5.1.    General Rule. The sum of the Salary Deferral Contributions,
plus any other Company Contributions defined as elective deferrals under section
402(g)(3) of the Code and regulations thereunder, contributed by the Company  on
behalf of a Member for a taxable year may not  exceed the  greater  of $7,000 or
the dollar limit of section  402(g) of the Code,  as  indexed in accordance with
that section and regulations thereunder.

     Section 5.2.    Special Definitions. For the purposes of this Article:

          (a)  "Excess  Deferrals"  shall  be  defined  as  the  Member's Salary
Deferral  Contributions  for a taxable year,  to the extent such  Contributions,
when added to the sum of any other  Company  Contributions  defined as  elective
deferrals  under  section  402(g)(3)  of the  Code and  regulations  thereunder,
contributed  by the Company on behalf of such Member for the taxable year exceed
the limit of section  402(g) of the Code,  as indexed  in  accordance  with that
section and regulations thereunder.

          (b)  A "Corrective Distribution of Excess Deferrals" shall be  defined
as  the  Excess Deferrals, plus any income and minus any loss allocable thereto,
distributed to a Member to whose account Excess Deferrals were allocated for his
taxable year.

     Section 5.3.    Corrective  Distribution  of  Excess Deferrals. The Plan is
permitted but not required to make Corrective Distributions of Excess Deferrals,
according to the provisions of this Section.

          (a)  Correction After Taxable Year.

               (1)   Not  later  than  the  March  15  following  the close of a
Member's taxable year, the Member may notify  the  Plan  of the amount of Excess
Deferrals received  by  the  Plan  during  that taxable year, in accordance with
procedures set forth by the Committee.

               (2)   Not  later  than  the  April  15 following the close of the
taxable  year,  the  Plan  may  distribute  to  the  Member the amount of Excess
Deferrals designated under paragraph (1) of this subsection.

          (b)  Correction  During the Taxable Year. A Corrective Distribution of
Excess  Deferrals  may  be  made  during  the  taxable  year in which the Excess
Deferral arose if:

               (1)   The  Member  designates  the  distribution  as  an   Excess
Deferral in  accordance with  procedures set forth by the Committee (or a deemed
designation is made for the Member by the Committee in accordance with Plan pro-
cedures);

               (2)   The  distribution  is made after the date on which the Plan
received the Excess Deferral; and

               (3)   The  Plan  designates  the  distribution  as  a  Corrective
Distribution of Excess Deferrals.

          (c)  A  Corrective  Distribution  of  Excess Deferrals may in no event
exceed  the  amount  of  Salary  Deferral  Contributions actually contributed on
behalf of the Member to this Plan during the Member's taxable year.

          (d)  The income and loss allocable to Excess Deferrals:

               (1)   Shall  equal  the  sum  of  allocable  gain or loss for the
taxable  year  of the Member, determined in accordance with procedures specified
by the Committee, to the degree consistent with Code section 402(g) and Treasury
regulations thereunder, but

               (2)   Shall not include the allocable gain or loss for the period
between the end of the taxable year and the date of distribution.

          (e)  A  Corrective  Distribution  of  Excess  Deferrals  shall be made
without  regard  to  any  notice  or consent  otherwise  required under sections
411(a)(11) or 417 of the Code.

          (f)  Any  Matching  Contributions  (including  any  Qualified Matching
Contributions) that relate to the Excess  Deferral being  distributed under this
Article  shall  be  treated  as  forfeitures  under Article IV of the Plan.  The
Matching  Contribution  so  forfeited  shall  be in proportion to the applicable
Employee's  vested and nonvested  interest in Matching  Contributions  under the
Plan for the Plan Year in which the Excess  Deferral  arose.  Forfeitures  under
this Article shall be treated under the rules of Section 4.6.

<PAGE>
                                  ARTICLE VI
                        SECTION 401(k) AND 401(m) LIMITS

     Section 6.1.    ADP Test.  For  each Plan Year,  the Plan shall satisfy the
ADP Test  described  in  section  401(k)(3)  of the Code,  section  401(k)-1  of
Treasury  regulations,  and  subsequent  guidance  thereunder,  which are herein
incorporated by reference.

     Section 6.2.    ACP Test.  For  each Plan Year,  the Plan shall satisfy the
ACP Test  described in section  401(m)(2)  of the Code,  section  1.401(m)-1  of
Treasury  regulations,  and  subsequent  guidance  thereunder,  which are herein
incorporated by reference.

     Section 6.3.    Multiple Use of  the Alternative  Limitation.  The Plan may
not make  multiple  use of the  alternative  limitation,  as provided in section
1.401(m)-2 of Treasury regulations, which is incorporated here by reference.

     Section  6.4.   Prior Plan  Year  Testing.  For  any  Plan Year,  except as
prohibited in Treasury  regulations or other  guidance,  the ADP Test, ACP Test,
and multiple use of alternative limitations test, will be conducted by reference
to Company  Contributions made in the preceding Plan Year on behalf of Employees
who are not Highly Compensated Employees.

<PAGE>
                                   ARTICLE VII
                   CORRECTION OF FAILURES OF ADP AND ACP TESTS

     Section 7.1.    General Rule.

          (a)  The Company  may  prevent  or correct failures of the ADP Test in
any one  or  combination  of  appropriate ways decided  by the Committee, to the
extent  not  prohibited  by  sections 401(k),  401(m) or regulations under those
sections; including but not limited to the following:

               (1)   Testing any Company Contributions under the ADP Test,

               (2)   Limiting  allowable Salary Deferral Contributions on behalf
of Highly Compensated Employees;

               (3)   Distributing Company  Contributions to the extent permitted
by section 401(k)(8) of the Code and regulations thereunder.

          (b)  The Company may  prevent  or  correct failures of the ACP Test in
any one  or  combination  of  appropriate  ways decided by the Committee, to the
extent not prohibited by sections 401(k),  401(m) or regulations under those
sections, including but not limited to the following:

               (1)   Testing any Company Contributions under the ACP Test;

               (2)   Limiting  the  amount of Company Contributions allocated to
the accounts of Highly Compensated Employees;

               (3)   Distributing  Company  Contributions  in  accordance   with
section 401(m)(6) of the Code and regulations thereunder;

               (4)   Making corrective forfeitures of Company Contributions.

     Section 7.2.    Corrective Distribution of Excess ADP Contributions.

          (a)  Distributions  of Company Contributions under this Article,  plus
allocable earnings thereon, shall be made within 12 months  after  the  close of
the Plan Year in which the applicable failure of the ADP or ACP test arose.

          (b)  Distribution  of  Company  Contributions  plus allocable earnings
thereon,   to  the  extent  made  to  correct failures of the ADP Test, shall be
reduced by Excess Deferrals (as defined in Article V) previously  distributed to
the Employee for the  Employee's  taxable year ending with or within the Plan
Year.

          (c)  Distributions  of Company Contributions under this Article  shall
be made without regard to any Member or spousal consent or any notice  otherwise
required under sections 411(a) (11) and 417 of the Code.

          (d)  Any Company  Contributions  made  as  matching contributions that
relate Salary Deferral  Contributions  distributed under this Article shall be a
forfeiture.  Matching  contribution  forfeited under this subsection shall be in
proportion  to  the  applicable  Employee's  vested  and  nonvested  interest in
matching  contributions  under  the Plan for the Plan  Year in which  the  Total
Excess ADP Contribution arose.

          (e)  Distributions to  an Employee made to correct failures of the ADP
test  for  any  Plan Year may not exceed the amount of Salary Deferral Contribu-
tions made on behalf of that Employee for the Plan Year.

          (f)  In  the  event  of  a complete termination of the Plan during the
Plan   Year   in   which   the   failure  of  the  APD  test  arose,  corrective
distributions  under this  Article  shall be made not later than 12 months after
the date of termination.

     Section 7.3.    Corrective   Forfeitures   of  Excess   ACP  Contributions.
Forfeitures  of  Company   Contributions  under  this  Article  are  treated  in
accordance with the rules governing forfeitures under Section 4.6 of the Plan.

     Section 7.4.    Corrections  for  Failures  of the Multiple Use Limitation.
If  Contributions  for a Plan Year for Highly  Compensated  Employees exceed the
aggregate limit as defined in section  1.401(m)-2 of Treasury  regulations,  the
corrections  of  violations  of the  ADP  Test  or ACP  Test  shall  be  made in
accordance with this Article.

<PAGE>
                                  ARTICLE VIII
                               SECTION 415 LIMITS

     Section 8.1.    General Rule.  Under  the Plan, annual  additions,  as that
term is defined in section 415(c)(2) of the Code, are subject to the limitations
of section 415 of the Code and its regulations,  which are incorporated  here by
reference.

     Section 8.2.    Reductions Among  Defined  Contribution Plans. For a Member
participating  in more  than  one  defined  contribution  plan,  any  reductions
required by Code  section 415 with respect to the Member will be made first with
respect to the plan in which the Member  most  recently  accrued  benefits.  Any
further  reductions  will be made  according the  priorities  established by the
Committee and the administrators of the other plans.

     Section 8.3.    Reductions  Under the 415(e) Limit.  For Members subject to
the overall  limit under Code  section  415(e)  (relating to  contributions  and
benefits  under both defined  contribution  and defined  benefit  plans) in Plan
Years  beginning  before January 1, 2000,  reductions will be made under defined
benefit  plans  rather than  defined  contribution  plans.  The defined  benefit
reductions will be made as set forth in those plans.

     Section 8.4.    Treatment of Excesses. Amounts under this Plan which are in
excess of the Code section 415 limits will be treated as follows:

          (a)  First, any such excess otherwise allocable to a Member's  Account
(excluding  Salary  Deferral  Contributions)  shall  be  held  unallocated  in a
suspense  account  for the Plan Year and  allocate  in the next Plan Year to all
Members  in the  Plan.  The  excess  amount  must  be  used  to  reduce  Company
Contributions  for the next Plan Year (and  succeeding Plan Years, as necessary)
for all of the  Members in the Plan,  and may not be  distributed  to Members or
former Members.

          (b)  If, after  the  application  of  subsection (a) any of the excess
still  exists,  then  the  Member's  Salary  Deferral  Contributions  (including
earnings and losses thereon) allocated for the Limitation Year shall be returned
to the Member to the extent  that an Excess  Amount  exists.  This  distribution
shall be made as soon as  administratively  feasible  after the Excess Amount is
determined.  Any Salary  Deferral  Contributions  returned  under this paragraph
shall be disregarded for purposes of the ADP Test.

          (c)  Alternatively, the  Committee  may elect to dispose of the Excess
Amount by applying the procedure in subsection (b) before applying the procedure
in subsection (a).  If the  Committee  makes  this  election, the Committee must
apply it uniformly to all Members in a Limitation Year.

          (d)  Amounts  in  the  suspense  account will not be credited with any
earnings or losses.

          (e)  If the Plan is terminated, a special allocation of any amounts in
a suspense  account  will  be made to all Members employed as of the termination
date  in  proportion to  their  Compensation  as of such date for the Plan Year,
subject to the limitations of section 415 of the Code.

<PAGE>
                                   ARTICLE IX
                             PARTICIPANTS' ACCOUNTS

     Section 9.1.    Generally.  A   Member's  Account  shall be  maintained  on
behalf of each Member until  distributed  (or deemed  distributed) in accordance
with the terms of this Plan. A Member's Account shall include subaccounts, which
as appropriate may include (but are not limited to):

          (a)  Salary  Deferral  Contribution  Account,  consisting  of   Salary
Deferral Contributions and earnings thereon;

          (b)  Matching  Contribution  Account, consisting of Matching Contribu-
tions and earnings thereon;

          (c)  Qualified Matching Contributions Account, consisting of Qualified
Matching Contributions and earnings thereon;

          (d)  Qualified  Nonelective   Contributions  Account,  consisting   of
Qualified Nonelective Contributions and earnings thereon;

          (e)  Rollover  Contributions Account, consisting of Rollover Contribu-
tions and earnings thereon;

          (f)  Frozen  After-Tax  Contribution  Account, consisting of after-tax
employee contributions made by an  participant of a Prior Plan before January 1,
1998, and earnings thereon;

          (g)  Employer Stock Account, consisting of funds transferred  from any
other subaccount  at  the  direction  of  the Member, and invested solely in the
stock  of  Ultramar Diamond Shamrock Corporation and dividends thereon, plus any
funds transferred by the Company from the ESOP I and ESOP II Accounts;

          (h)  ESOP I Account, consisting of funds transferred from the Ultramar
Diamond Shamrock Corporation Employee Stock Ownership Plan I;

          (i)  ESOP  II  Account,  consisting of consisting of funds transferred
from the Ultramar Diamond Shamrock Corporation Employee Stock Ownership Plan II.

     Section 9.2.    Valuation.  A Member's Account Balance shall be valued on a
daily basis, and shall equal the sum of contributions,  earnings, gains, losses,
withdrawals, loans, and expenses, on and after the Member's Entry Date and until
distribution (or deemed distribution) of the Account Balance.

     Section 9.3.   Members'  Self-Directed  Investments.  Except  as  otherwise
provided in this  Article,  a Member's  Account  shall be invested by the Member
according to the procedures set forth in this Section.

          (a)  Generally.  Funds in  a Member's Account shall be invested in one
or  more  investment  vehicles  selected  by  the  Committee  in accordance with
procedures established by the Committee.

          (b)  Initial  Investment  Instructions.   As soon as practicable after
becoming  eligible  to  participate  in  the  Plan,  a Member shall instruct the
Committee, in accordance with procedures set forth by the Committee,  concerning
allocation of his Account Balance among the available investment funds. A Member
may instruct  allocation of his Account  Balance to one  investment  fund, or in
fractional  shares or dollar amounts (to the extent  permitted by the Committee)
among  different  investment  funds,  as long as the  total  dollar  amounts  or
fractional  shares  do not  exceed  100%  of  his  account  balance.  Procedures
established  under  this  Section  by the  Committee  shall  permit  a  Member's
investment  instructions  to be transmitted  or effective  before the Member has
received the information described in subsection (f).

          (c)  Changes in  Investment Instructions. Investment instructions by a
Member shall continue in effect until changed by the Member. A Member may change
his  investment  instructions  at  any  time,  in  accordance  with   procedures
prescribed by the Committee.

          (d)  Committee's  Obligations  With  Respect  to Changes in Investment
Instructions.  The Committee  will implement investment  instructions (including
changes  in  earlier  investment  instructions)  no  later  than  the  first day
following  the  calendar  quarter  in  which  such  Committee  receives such in-
structions.   At   its  discretion,  the   Committee  may  provide  for  earlier
implementation  of  changes  in  investment  instructions,  and  may  limit  the
frequency with which changes in investment instructions are permitted.

          (e)  Default  Investment  Funds.  To the extent a Member designates no
investment fund for a portion of his Account  Balance, his Account Balance shall
be placed in the Vanguard Retirement Savings Trust.

          (f)  Information.  The  Committee  shall  provide  Members  sufficient
information  to  make  informed  investment  decisions with regard to investment
alternatives  available  under  the  Plan,  including  (but  not  limited  to) a
description of those investment alternatives.

          (g)  Procedures.  The  Committee  shall  establish  procedures for re-
ceiving  and  acting on Members'  investment  instructions.  The Committee shall
establish  procedures by which Members have the  opportunity  to obtain  written
confirmation  of  their  investment  instructions.   The  Committee  may  charge
participants'  accounts for the  reasonable  expenses of carrying out investment
and  other  instructions.  In  accordance  with  procedures  established  by the
Committee, Members will be periodically informed of the actual expenses incurred
with respect to their Employee Accounts.

          (h)  Assumption  of  Investment  Risk.  Each  Member  shall assume all
investment risks connected with the assets held in his Employee Account,  and is
solely  responsible  for  the selection of his investment options.  The Trustee,
the  Committee,  an  Affiliate,  and  any  officer,  owner,  or  employee  of an
Affiliate,  are not  empowered  to advise a Member as to the manner in which his
Employee  Account  shall  be  invested.  The  fact  that an  Investment  Fund is
available to Members for investment  shall not be construed as a  recommendation
for investment in that Investment Fund.

     Section 9.4.    ESOP I  and  ESOP II Accounts. Funds in the ESOP I and ESOP
II  Accounts  are  invested  solely in the shares of Ultramar  Diamond  Shamrock
Corporation and any other  investments  determined by Ultramar  Diamond Shamrock
Corporation.

<PAGE>
                                    ARTICLE X
                                  DISTRIBUTIONS

     Section 10.1.   General Rule.  If  the  Member's  Vested  Account   Balance
exceeds  the  greater  of  $5,000 or the dollar amount described in Code section
411(a)(11):

          (a)  His Vested Account Balance shall be distributed to him as soon as
reasonably  practical  after  the  later  of  his  Normal  Retirement Age or his
Termination from Employment, unless he elects otherwise under (b).

          (b)  The  Member  may  elect  an  earlier  distribution  of his Vested
Account  Balance,  except  with  respect  to  funds  in the  ESOP I and  ESOP II
Accounts.  An election  under this  subsection may be made at any time after the
earlier of  Disability,  Termination  from  Employment or his  attainment of age
59-1/2,  and is subject to the  qualifications  of Section 10.5  (Limitations on
In-Service Distributions), and 10.6 (Notification and Member Election).

     Section 10.2.   Timing  and  Manner of  Distributions.  Distribution  of  a
Member's Vested Account Balance under Section 10.1 shall be made under the terms
of this Article to a Member in the form of a single cash lump sum payment except
as otherwise provided under subsections (a), (b) and (c).

          (a)  The  Member  may elect distribution of his Vested Account Balance
in  monthly  installments  over  a  period not to exceed the greater of his life
expectancy (recalculated  annually)  or 10 years (or any shorter period required
by section 401(a)(9) of the Code).

          (b)  The  Member  may  elect that funds in his Employer Stock Account,
ESOP I  Account or  ESOP II  Account,  be  distributed  in  the form of Ultramar
Diamond Shamrock Corporation Stock (and cash for any fractional shares) as

               (1)   A single payment; or

               (2)   Annual installments over a period not to exceed the greater
of  his  life  expectancy  (recalculated  annually)  or 10 years (or any shorter
period required by section 401(a)(9) of the Code).

     Section  10.3.  Account Balances of $5,000 or Less.  If the Member's Vested
Account  Balance  is  equal  to  or  less than $5,000 (or if greater, the dollar
amount described in Code section 411(a)(11)), it shall be distributed as soon as
practicable after the earlier of his Termination from Employment or his Required
Beginning Date.

     Section 10.4.   Death Benefits.  All distributions after the Member's death
are governed by the provisions of Article XIII.

     Section 10.5.   Limitations on  In-Service  Distributions.  Salary Deferral
Contributions,  Qualified  Nonelective  Contributions  and  Qualified   Matching
Contributions,   and   the  income  allocable  to  such contributions may not be
distributed before a Member's death, disability or  separation  from  service as
defined  in  section  401(k)  of  the  Code and Treasury regulations thereunder,
except  as  provided  under  sections 11.2 (hardship distributions), 11.5 (with-
drawals on  or after  reaching age-59-1/2), 10.7 (relating to termination of the
Plan), 10.8 (QDROs)  and 10.10  (distributions  to comply  with  other  Code re-
quirements).

     Section 10.6.   Notification  and  Member Election for Distributions Before
Normal  Retirement Age. If a Member's  Account  Balance  exceeds $5,000,  or, if
higher, the dollar amount set forth in Code section  411(a)(11),  then except as
otherwise  provided in Section 10.7 (relating to Plan termination) it may not be
distributed to him before his attainment of Normal  Retirement  Age,  unless the
Committee  provides the Member with the notice described in this Section and the
Member makes the written election described in this Section.

          (a)  The notice under this Section must inform the Member of the means
to  obtain  the  value  of  his  distribution,  the  optional distribution forms
available,  and  his  right  to  defer distribution, and must be provided by the
Committee  no  less  than  30  days and no more than 90 days before the date the
distribution commences.

          (b)  The distribution may commence less than 30 days after the  notice
described in subsection (a) of this Section is provided, if the notice indicates
that  the  Member  has a right to 30 days to consider  whether to consent to the
distribution.

          (c)  The  Member's  election  must affirmatively elect a distribution,
must be  in  writing  on forms prescribed by the Committee, and must not be made
before  the  Member  receives  the  notice  described  in subsection (a) of this
Section.

     Section 10.7.   Special   Rules   for   Plan   Termination   and  Corporate
Reorganizations.

          (a)  Upon  the  termination  of  the Plan  under certain circumstances
specified  in  Section  16.5  of  the  Plan, distributions shall be made without
regard to sections 10.5 (relating to in-service distributions) or 10.6 (relating
to Member elections and notification) to the extent specified in Section 16.5.

          (b)  Upon  a  disposition  of  assets   described  under  Code section
401(k)(10)(A)(ii),  or the  disposition  of a  subsidiary  described  under Code
section 401(k)(10)(A)(iii)  constituting a line of business as determined by the
Committee, distribution of a Vested Account Balance shall be made without regard
to Section 10.5 (relating to in-service distributions), with respect to a Member
who continues employment with the corporation acquiring such assets or with such
subsidiary,   unless  the  transferor   corporation   continues  as  a  Company.
Distributions  under this  subsection  (b) will be permitted  only to the extent
permitted by Treas. Reg. ss. 1.401(k)-1(d)(4).

     Section 10.8.   QDROs.  A  distribution  to  an  alternate  payee  under  a
qualified  domestic relations order as defined in section 414(p) of the Code may
be made at any time.  A  distribution  under this  Section  shall be paid to the
alternate payee in a single lump sum as soon as practicable after  determination
that the  domestic  relations  order is a qualified  domestic  relations  order.
However,  if the  distribution  payable to an  alternate  payee is more than the
greater of $5,000 or the dollar amount described in Code section 411(a)(11), and
the qualified domestic relations order specifies payment according to a schedule
that would be permitted for  distributions  to a Member under the Plan, then the
payment shall be paid according to such schedule.

     Section 10.9.   Other Restrictions on Distributions.

          (a)  The  payment  of  benefits  under  this  Plan to the Member shall
begin not later than the 60th day after the latest of the close of the Plan Year
in which occurs:

               (1)   The Member's attainment of Normal Retirement Age;

               (2)   The Member's incurrance of a Termination from Employment;

               (3)   The 10th anniversary of the Member's Entry Date;

               (4)   The  date  specified  by  the  Member  in an election under
Section 10.1.

          (b)  In  no  event  may  distribution  of  a  Member's Account Balance
commence later than his Required  Beginning  Date. All  distributions  under the
Plan shall comply with section 401(a)(9) of the Code,  including  subsection (G)
thereof, which are incorporated here by reference.

     Section 10.10.  Distributions  to  Comply  With Other Code Requirements.  A
distribution is not prohibited under any provision of this Article to the extent
the distribution is:

          (a)  Permitted  or  required  to  comply  with  Code  sections 401(k),
401(m), 402(g), or 415;

          (b)  Made  to  an alternate payee under a qualified domestic relations
order as defined in section 414(p) of the Code; or

          (c)  Required to comply with any other provision of the Code.

     Section 10.11.  Direct  Rollovers.  Notwithstanding  any  provision  of the
Plan to the contrary that would otherwise  limit a Distributee's  election under
this Article,  a Distributee may elect, at the time and in the manner prescribed
by the Committee,  to have any portion of an Eligible Rollover Distribution paid
directly to an Eligible Retirement Plan specified by the Distributee in a Direct
Rollover,   except  as  otherwise  provided  by  the  Company's   administrative
procedures as permitted by regulations. In addition, a Distributee may not elect
a Direct Rollover of an Offset Amount. The following definitions shall apply:

          (a)  Direct Rollover:  A  Direct  Rollover is a payment by the plan to
the Eligible Retirement Plan specified by the Distributee.

          (b)  Distributee:  A   Distributee  includes  an  Employee  or  former
Employee. In addition,  the Employee's or former Employee's Surviving Spouse and
the Employee's or former  Employee's  Spouse who is the alternate  payee under a
qualified  domestic  relations  order, as defined in section 414(p) of the Code,
are Distributees with regard to the interest of the Spouse or former Spouse.

          (c)  Eligible  Retirement  Plan: An  Eligible  Retirement  Plan  is an
individual   retirement   account   described in section  408(a) of the Code, an
individual  retirement  annuity  described  in  section  408(b) of the Code,  an
annuity  plan  described  in section  403(a) of the Code,  or a qualified  trust
described in section 401(a) of the Code, that accepts the Distributee's Eligible
Rollover Distribution. However, in the case of an Eligible Rollover Distribution
to the alternate payee or Surviving  Spouse,  an Eligible  Retirement Plan is an
individual retirement account or an individual retirement annuity.

          (d)  Eligible  Rollover  Distribution:  An Eligible Rollover Distribu-
tion is  any  distribution of all or any portion of the balance to the credit of
the Distributee, except that an Eligible Rollover Distribution does not include:
any  distribution  that  is  one  of  a  series  of substantially equal periodic
payments  (not   less  frequently  than  annually)  made  for  the life (or life
expectancy) of the  Distributee or the joint lives (or joint life  expectancies)
of the  Distributee  and  the  Distributee's  designated  beneficiary,  or for a
specified  period of ten years or more;  any  distribution  to the  extent  such
distribution  is  required  under  section   401(a)(9)  of  the  Code;  and  any
distribution  option that is not includible in gross income (determined  without
regard to the exclusion for net unrealized appreciation with respect to employer
securities).

          (e)  Offset Amount: An Offset Amount is the amount by which a Member's
Account is reduced to repay a loan from  the  Plan (including the enforcement of
the Plan's security interest in the Member's Account).

<PAGE>
                                   ARTICLE XI
                PARTIAL AND TOTAL WITHDRAWALS OF ACCOUNT BALANCE

     Section 11.1.   General Rule.  In  addition to the distributions  described
in Article X, a Member may receive a  distribution  of part or all of his Vested
Account  Balance to the extent  permitted by the terms of this  Article,  in the
form of a:

          (a)  Hardship Distribution under Section 11.2;

          (b)  Withdrawal  o f any portion of his Rollover Account under Section
11.3;

          (c)  Withdrawal  of  a  portion  of  his Frozen After-Tax Contribution
Account under Section 11.4; or

          (d)  Withdrawal  after  attainment  of  age 59 1/2 under Section 11.5.

     Section 11.2.   Hardship  Distributions.  Distributions  of Salary Deferral
Contributions  (but not the income thereon) may be made to a Member in the event
of a hardship.  A  distribution  may be made on account of  hardship  under this
Section only if the  distribution  is made on account of an immediate  and heavy
financial  need of the Employee as specified in subsection  (a), is necessary to
satisfy such  financial  need as set forth in subsection  (b), and is limited to
the  distributable  amount set forth in  subsection  (c). A Member  shall not be
entitled  to more than two  distributions  on  account  of  hardship  under this
Section in any Plan  Year.  A hardship  distribution  under this  Section is not
permitted from the ESOP I or ESOP II Accounts.

          (a)  The  only  financial  needs  considered  immediate  and heavy for
purposes of this Section are as follows:

               (1)   Expenses  for  medical  care described in section 213(d) of
the  Code  previously  incurred by  the Employee, the Employee's  Spouse, or any
dependents of the Employee (as defined in section 152 of the Code) or  necessary
for  these  persons  to  obtain  medical care described in section 213(d) of the
Code;

               (2)   Payment  of  tuition  and  related educational fees for the
next  12  months  of  post-secondary  education  for  the  Employee, his Spouse,
children, or dependents (as defined in section 152 of the Code);

               (3)   Costs  directly  related  to  the  purchase  of a principal
residence for the Employee (excluding mortgage payments); or

               (4)   Payments  necessary to prevent the eviction of the Employee
from the  Employee's  principal residence or foreclosure on the mortgage on that
residence.

          (b)  The   standards  for  determining  whether  the  distribution  is
necessary  to  satisfy  the  Member's  financial  need  are  set  forth  in this
subsection.  A  distribution  will be  considered  as  necessary  to  satisfy an
immediate and heavy  financial need of the Employee only if all of the following
requirements are satisfied:

               (1)   The hardship distribution is not in excess of the amount of
the  immediate  and  heavy  financial  need  of  the Employee.  The amount of an
immediate and heavy financial need may include  the amounts  necessary  to apply
any  federal,  state,  or local income taxes or penalties reasonably anticipated
to result from the distribution.

               (2)   The  Employee  had  obtained  all distributions, other than
hardship  distributions,  and  all  nontaxable  (at  the time of the loan) loans
currently available under all plans maintained by an Affiliate.

               (3)   A  distribution  will  be treated as necessary to satisfy a
financial need if the Committee relies upon the Employee's  written  representa-
tion,  unless the  Committee has actual knowledge to the contrary, that the need
cannot reasonably be relieved:

                     (A)   Through reimbursement or compensation by insurance or
otherwise;

                     (B)   By liquidation of the Employee's assets;

                     (C)   By  cessation  of Salary Deferral Contributions under
the Plan; or

                     (D)   By other distributions or nontaxable (at  the time of
the loan) loans from plans maintained by an Affiliate or by any other  employer,
or by  borrowing  from  commercial  sources on reasonable commercial terms in an
amount sufficient to satisfy the need.

          A  need  cannot  reasonably  be  relieved by one of the actions listed
above if the effect would be to increase the amount of the need.

          (c)  The distributable amount is equal  to the Employee's total Salary
Deferral  Contribution as of the date of distribution, reduced by the  amount of
previous distributions of Salary Deferral  Contributions on account of hardship.
The  Employee's  total  Salary  Deferral  Contributions shall not include income
allocable to  such  Salary  Deferral  Contributions.  The  minimum distributable
amount is $100.00.

     Section 11.3.   Withdrawal  of  Rollover Contributions.  A Member may elect
to  withdraw  any  portion  of his  Rollover  Contribution  Account  by  written
application  to the Committee.  Distributions  under this Section are subject to
the notice and election  provisions of Section 10.6. A Member may not elect more
than two withdrawals in any Plan Year under this Section. Withdrawals under this
Section may not be repaid.

     Section 11.4.   Withdrawals  of  After-Tax Employee Contribution Amounts. A
Member may elect to withdraw  any portion of his Frozen  After-Tax  Contribution
Account by written  application  to the  Committee.  A Member may not elect more
than two withdrawals in any Plan Year under this Section. Withdrawals under this
Section may not be repaid.

     Section 11.5.   Withdrawals  On  and  After  Attainment  of  Age 59-1/2.  A
Participant  who has  attained age 59-1/2 may withdraw any portion of his Vested
Account Balance upon written  notification  to the Committee,  without regard to
whether he has incurred a Termination  from Employment or other  separation from
service as defined under section 401(k) of the Code and regulations  thereunder.
A  Participant  may not elect more than two  withdrawals  in any Plan Year under
this Section. Withdrawals from a Participants ESOP I and ESOP II Account are not
permitted under this Section. Withdrawals under this Section may not be repaid.

<PAGE>
                                   ARTICLE XII
                             LOANS TO PARTICIPANTS.

     Section 12.1.   General Availability of Loans

          (a)  Loans  shall be made available on a reasonably  equivalent  basis
to all Members and  beneficiaries who are parties in interest within the meaning
of section 3(14) of ERISA.  The  individuals  described in this  subsection  are
hereinafter referred to as Eligible Borrowers.

          (b)  Loans shall not be made available to Highly Compensated Employees
in an amount  greater than the amount loans are made available to other Eligible
Borrowers.

          (c)  Application  for  a loan must be made to the Committee in writing
and on prescribed  forms.  The  decisions by the Committee on loan  applications
shall be made on a reasonably equivalent,  uniform, and nondiscriminatory basis.
Notwithstanding  the  foregoing,  the  Committee may apply  different  terms and
conditions for loans to Eligible  Borrowers who are not actively employed by the
Company,  or for whom payroll deduction is not available,  based on economic and
other  differences  affecting the  individual's  ability to repay any loan.  The
Committee may change the terms of any outstanding loan to the extent required by
applicable law.

          (d)  If the Committee is in receipt of a domestic relations order with
respect  to any  Eligible  Borrower's  account,  it may  deny  any  loan to that
Eligible  Borrower  until the  rights of the payee  named  under  such order are
determined,  and satisfied, to the extent that the order is a qualified domestic
relations order under section 414(p) of the Code.

          (e)  The  Committee  shall  limit  the  number  of   outstanding loans
permitted for each Eligible  Borrower to one outstanding  loan at a time, with a
waiting period in between.

<PAGE>
     Section 12.2.   Amount of Loan.

          (a)  The minimum loan available is $1,000.

          (b)  The maximum loan available is the lesser of:

               (1)   $50,000  less the highest outstanding balance of Plan loans
to such Eligible  Borrower  during the 12-month  period ending on the day before
the loan is made; or

               (2)   the  amount  that (when added to the outstanding balance of
all  other  loans to the  Eligible  Borrower  from the Plan)  equals  50% of the
Eligible Borrower's vested interest in his Account Balance.

     The Eligible  Borrower's  vested  interest in his Employee Account shall be
based on the most recent  account  valuation  available to the  Committee on the
date the loan is approved.  Loans are not  permitted  from the ESOP I or ESOP II
Accounts.

     Section 12.3.   Terms of Loan.

          (a)  A  loan  shall  be  secured  by a lien on the Eligible Borrower's
interest in the Plan, to the maximum extent  permitted by the Code and ERISA and
guidance  issued  thereunder.  The Committee may in addition  require such other
security as is necessary to assure,  as determined  within the discretion of the
Committee, that the loan is adequately secured.

          (b)  The  interest  rate  on   a  loan  shall  be a reasonable rate of
interest, as determined by the Committee, and shall be fixed for the term of the
loan.

          (c)  The principal  amount  and  interest on a loan shall be repaid no
less  frequently  than quarterly in level  amounts,  and (except for an Eligible
Borrower who is not employed by an  Affiliate,  or receiving  payments  from the
payroll of an Affiliate) by payroll deductions. An Eligible Borrower may pre-pay
the full amount due under the loan at any time without penalty.

          (d)  Subject to agreement by the Committee, the Eligible Borrower  may
elect a repayment  term of up to 5 years,  except that a repayment term of up to
10 years may apply to a loan used to  acquire a  dwelling  unit  which  within a
reasonable  time is to be used,  determined at the time the loan is made, as the
principal residence of the Eligible Borrower.

          (e)  Notwithstanding  subsection  (c),   a  loan  may  provide that no
payments  will be made for up to one year  during a period in which an  Eligible
Borrower is on approved leave of absence without pay, or being paid at a rate of
pay, after income and employment tax  withholding,  that is less than the amount
of the installment  payments required under the terms of the loan. However,  the
loan must be repaid by the latest date  permitted  under section  72(p)(2)(B) of
the Code, and the amount of each  installment  due after the individual  returns
from leave (or, if earlier,  after the first year of the leave) must not be less
than those required under the terms of the original loan.

          (f)  Each loan shall be evidenced by a promissory note, evidencing the
Eligible Borrower's obligation to repay the borrowed amount to the Plan, in such
form and with such provisions  consistent with this Section as are acceptable to
the Committee. All promissory notes shall be deposited with the Trustee.

          (g)  The Committee may determine a loan to be in default, and may take
necessary and appropriate  actions to enforce  repayment of the loan,  including
any actions set forth in Sections 12.4 and 12.5.

     Section 12.4.   Nonpayment of Required Installment.

          (a)  Nonpayment of installment.  If an Eligible Borrower does  not pay
a required  installment of principal or interest under a Plan loan in the amount
and at the time required by the terms of the loan, the loan shall be in default.

          (b)  Payment  of  required  installment.  If  payment  of the required
installment  (plus accrued interest) is made by the Member by the date specified
in (d), the loan is no longer in default.

          (c)  Upon a default under (a), the Committee may:

               (1)   Enforce  the  Plan's  lien  against the Employee Account by
directing that the Trustee to reduce  (offset) the amount of the Member's vested
account balance by the outstanding loan balance  (including  accrued  interest),
unless a distribution is prohibited by section 401, 402 or 401(k) of the Code;

               (2)   Make  demand  for  repayment   of  the required installment
(including accrued interest);

               (3)   Perfect any other security interest held by the Plan;

               (4)   Direct  the  Trustee to offset any distribution made to the
Eligible  Borrower  (including  any  rollover   distribution  and  any  hardship
distribution) by the amount of the outstanding loan balance  (including  accrued
interest); or

               (5)   Take  any  other  actions  determined  by  the Committee as
necessary or advisable to prevent the loss of principal and interest.

          (d)  Deemed distribution at end of grace period. If by the end  of the
last day of the first  quarter  following  the date of the  default  under  (a),
neither the required  installment (plus accrued interest) has been paid, nor the
loan balance repaid by offset, other perfection of collateral, or otherwise, the
outstanding loan balance  (including  accrued  interest) shall be treated by the
Plan as a deemed  distribution  on that date (i.e., on the last day of the first
quarter  following the date of default) in accordance  with section 72(p) of the
Code and guidance thereunder. No further interest shall accrue with respect to a
loan after a deemed distribution of that loan.

     Section 12.5.   Acceleration of Loan.

          (a)  Upon  an  Eligible  Borrower's  Termination  from Employment, the
entire  loan  balance  (including  accrued  interest)  may be treated as due and
payable within a reasonable period of time after such Termination.

          (b)  The Committee  may  designate  other  events  (including, but not
limited to, hardship  distributions;  receipt of a qualified  domestic relations
order; and direct transfers under Code section 401(a)(31)) upon which, or within
a reasonable time after which, the entire  outstanding loan balance shall become
immediately due and payable.

          (c)  To enforce collection of the loan the Committee may:

               (1)   Enforce  the  Plan's  lien against the Account by directing
that the Trustee offset the amount of the Member's Vested Account Balance by the
outstanding loan balance (including accrued interest),  unless a distribution is
prohibited by section 401, 402 or 401(k) of the Code;

               (2)   Make  demand for repayment of the outstanding loan balance,
including accrued interest, from the Eligible Borrower or his Beneficiary;

               (3)   Perfect any other security interest held by the Plan;

               (4)   Direct  the  Trustee to offset any distribution made to the
Eligible  Borrower  (including  any  rollover   distribution  and  any  hardship
distribution) by the amount of the outstanding loan balance  (including  accrued
interest); or

               (5)   Take  any  other  actions  determined  by  the Committee as
necessary or advisable to prevent the loss of principal and interest.

          (d)  On the date on which the loan becomes immediately due and payable
under this Section,  to the extent not repaid by offset or  otherwise,  the loan
balance (including accrued interest) shall be treated as a deemed  distribution.
No  further  interest  shall  accrue  with  respect  to a loan  after  a  deemed
distribution of that loan.

     Section 12.6.   Repayment Not  Permitted After Deemed Distribution.  Repay-
ment of the  loan is not  permitted  after  such  loan  has  been  treated  as a
deemed distribution.

     Section 12.7.   Alternate Payees.  If,  before  a loan is repaid in full, a
distribution  is required to be made from the Plan to an alternate payee under a
qualified  domestic  relations order (as defined in section 414(p) of the Code),
such distribution  shall be made from the vested portion of the Employee Account
that is not  attributable  to the  outstanding  loan  balance  (from the  vested
non-loan balance).

     If  the  amount  of  any  distribution  required by the qualified  domestic
relations order exceeds the vested non-loan balance at the time of such required
distribution, the Committee may provide that:

          (a)  Such  excess  will  be  distributed  to  the alternate payee from
future  additions  to  the  account  as  soon as reasonably practical after such
future additions are made (whether in the form of repayments under the loan, new
contributions to the account, or other additions); or

          (b)  The loan is due and payable.

     Section 12.8.   Fees.  The   Committee   may   charge  Eligible   Borrowers
reasonable fees for loans under this Section.

     Section 12.9.   USERRA. Loan  repayments  will be suspended under this plan
as permitted under section 414(u) of the Code.

<PAGE>
                                  ARTICLE XIII
                                 DEATH BENEFITS

     Section 13.1.   General Rules.  After  the  death  of a Member,  his Vested
Account  Balance  shall  be  paid  as  soon  as  reasonably  practicable  to his
Beneficiary  in a single lump sum under the  provisions of this  Article,  which
shall take precedence over any conflicting provision of this Plan.

     Section 13.2.   Married Members.  In the case of a Member who is married at
the time of his death, the Beneficiary is:

          (a)  The  individual designated under a Qualified Beneficiary Designa-
tion as defined in Section 13.5, except that

          (b)  If  a Beneficiary has not been designated under (a), the designa-
tion is not a Qualified Beneficiary Designation, or no Beneficiary so designated
survives the Member, the Beneficiary is the Member's surviving spouse.

     Section 13.3.   Unmarried Members.  In  the  case  of  a  Member who is not
married at the time of his death:

          (a)  The  Beneficiary  is  the  individual designated by the Member in
beneficiary  forms  provided  by  the  Committee,  or  under such  procedures as
permitted by the Committee.

          (b)  In the absence of a specific designation by an unmarried  Member,
the Beneficiary shall be the person, trust or other entity designated to receive
any group term life  insurance  benefits  with respect to the Member,  or in the
case that there is no such group term life benefit, the Beneficiary shall be the
first surviving person or persons in the following  successive classes:  (1) the
surviving  children of the deceased  Member,  (2) the  surviving  parents of the
deceased member, and (3) the Member's estate.

     Section 13.4.   Divorced or Separated Members.  In the case of a Member who
at the time of his  death  has been  married  and  divorced  or  separated,  the
individual named in a qualifying  domestic relations order as defined in section
414(p) of the Code and regulations  thereunder shall be treated as a Beneficiary
to the extent specified in such order.

     Section 13.5.   Qualified  Beneficiary Designation.  A Member's designation
is  a  Qualified  Beneficiary  Designation  only if the Member's spouse consents
under the provisions of this Section.

          (a)  The  spouse's  consent  must  be in writing, must acknowledge the
financial  effect of the waiver of the spouse's rights, and must be witnessed by
a Plan representative or notary public.

          (b)  If the  spouse's consent specifically acknowledges a  Beneficiary
designated  by the Member and does not  expressly  grant the Member the right to
make future changes to this designation without spousal consent, then the Member
may not subsequently  designate another  Beneficiary without the further written
consent of the Spouse.

          (c)  Notwithstanding   this   consent   requirement,  if   the  Member
establishes  to the  satisfaction  of a Plan  representative  that such  written
consent may not be obtained  because  there is no Spouse or the Spouse cannot be
located,  then spousal consent in compliance with (a) is deemed, and such deemed
consent is further deemed to qualify as consent to any subsequent changes in the
Member's beneficiary designations.

          (d)  Any consent under this Section is valid only with respect  to the
spouse who signs the consent.  Any deemed  consent  under (c) is valid only with
respect to the designated Spouse.

          (e)  At  any time,  and without the consent of his spouse,  the Member
may revoke any previous Beneficiary designation if the effect of such revocation
is  that  his  Beneficiary  is (1)  his  spouse;  or (2)  any  other  designated
Beneficiary  if the  consent  under  subsection  (a) of this  Section  expressly
granted  the Member  the right to make  subsequent  changes  in his  Beneficiary
designations.

<PAGE>
                                   ARTICLE XIV
                            ADMINISTRATIVE PROCEDURES

     Section 14.1.   Appointment  of  Employee  Benefits Committee Members.  The
Chief Executive Officer of Ultramar Diamond Shamrock Corporation shall appoint a
Committee  consisting  of not fewer than three  members who shall hold office at
the  pleasure of the Chief  Executive  Officer.  Any member may resign by giving
notice, in writing, filed with the Trustee and the Chief Executive Officer.

     Section  14.2.  Officers   and   Employees   of   the   Employee   Benefits
Committee.  The  Committee  shall  choose  from its  members  a  Chairman  and a
Secretary.  The Chairman may appoint one or more Assistant  Secretaries  for the
Committee who may, but need not, be members of the Committee.  The Secretary (or
an Assistant  Secretary) shall keep a record of the Committee's  proceedings and
all dates, records and documents pertaining to the Committee's administration of
the Plan.  The  Committee  may employ and  suitably  compensate  such persons or
organizations to render advice with respect to the duties of the Committee under
the Plan as the Committee determines to be necessary or appropriate.

     Section 14.3.   Action  of  the Employee Benefits Committee.  Action of the
Committee may be taken with or without a meeting of Committee members, provided,
however,  that any action shall be taken only upon the vote or other affirmative
expression  of a majority  of the  Committee's  members  qualified  to vote with
respect to such action.  The  Chairman or the  Secretary  of the  Committee  may
execute any  certificate or other written  direction on behalf of the Committee.
In the event the Committee  members qualified to vote on any question are unable
to determine such question by a majority vote or other affirmative expression of
a majority of the Committee  members  qualified to vote on such  question,  such
question shall be determined by the Chief Executive Officer.

     Section 14.4.   Expenses.

          (a)  All reasonable and proper expenses of administration of  the Plan
and Trust,  including,  but not limited to, fees of  accountants,  counsel,  and
other  specialists and their agents,  and other costs of administering the Plan,
shall be paid out of the Fund unless paid by the Company.

          (b)  The Company may initially pay any expense that normally  would be
a charge  on the Fund and  later  obtain  reimbursement  from the Trust Fund.

               (1)   This  even  applies  in  cases  where  at  the  time of the
Company's  initial payment of the expense,  it is not clear that the Company may
lawfully seek reimbursement from the Trust Fund but the Company's legal right to
reimbursement is later clarified.

               (2)   It   is   specifically   anticipated   that  there  may  be
situations,  such as  litigation,  where the Company  might choose to bear costs
initially,  but later  obtain  reimbursement  many  years  after the costs  were
incurred. Such delayed reimbursements shall be permissible.

          (c)  The Company may at the sole discretion of the Board reimburse the
Fund for any administration expense incurred. Any administration expense paid to
the Fund as a reimbursement shall not be considered a Company contribution.

     Section 14.5.   Indemnification.  The  Company  agrees  to   indemnify  and
reimburse the members of the Committee,  to the fullest extent permitted by law,
for  any  and all  liabilities  or  losses  arising  out of any act or  omission
relating to the rendition of services for or the management  and  administration
of the Plan.

     Section 14.6.   General  Powers  and   Duties   of  the  Employee  Benefits
Committee.  The Committee  shall have full power to administer  the Plan and the
Trust and to construe and apply their  provisions.  For  purposes of ERISA,  the
Committee  shall be the  named  fiduciary  with  respect  to the  operation  and
administration of the Plan and the Trust. In addition,  the Committee shall have
the powers and authority granted by the terms of the Trust.

     Section 14.7.   Specific  Powers of  the Employee Benefits  Committee.  The
Committee  shall have all powers  necessary  or  incident  to its office as Plan
administrator.  Such powers include,  but are not limited to, full discretionary
authority to:

          (a)  Prescribe rules for the operation of the Plan.

          (b)  Determine eligibility.

          (c)  Comply with  the  requirements  of reporting and disclosure under
ERISA  and  any  other  applicable  law  and to  prepare  and  distribute  other
communications to employees as a part of Plan operations.

          (d)  Prescribe forms to facilitate the operation of the Plan.

          (e)  Secure government approvals for the Plan.

          (f)  Construe and interpret the terms of the Plan, including the power
to remedy possible ambiguities, inconsistencies or omissions.

          (g)  Determine the  facts  underlying a claim for benefits by a Member
or Beneficiary.

          (h)  Determine the amount, manner and timing of benefits and authorize
payments from the Fund.

          (i)  Maintain records.

          (j)  Litigate,  settle  claims,  and  respond to and comply with court
proceedings and orders on the Plan's behalf.

          (k)  Enter into contracts on the Plan's behalf.

          (l)  Exercise  all  other  powers   given to the Committee under other
Sections of the Plan.

          (m)  Engage  any administrative, legal, medical, accounting, clerical,
or other services it may deem appropriate to effectuate the Plan or the Trust.

          (n)  Review  the  performance  of  the   Trustee  with  respect to the
Trustee's administrative duties, responsibilities and obligations under the Plan
and the Trust as such administrative  duties,  responsibilities  and obligations
are set forth in the  Trust;  report to the Board of  Directors  regarding  such
administrative  performance  of the Trustee;  and  recommending  to the Board of
Directors,  if necessary,  the removal of the Trustee and the  appointment  of a
successor Trustee.

     Section 14.8.   Records and  Reports. The  Committee shall keep a record of
all its proceedings, which shall be open to inspection by the Board.

     Section 14.9.   Allocation and Delegation of Fiduciary Responsibility.  The
Committee  from time to time may  allocate to one or more of its members  and/or
may delegate to any other persons or  organizations  any of the rights,  powers,
duties and  responsibilities  of the Committee with respect to the operation and
administration  of the Plan and the Trust that are  permitted to be so delegated
under ERISA. Any such allocation or delegation shall be reviewed periodically by
the Committee,  and shall be terminable upon such notice as the Committee in its
discretion  deems  reasonable  and proper  under the  circumstances.  Any right,
power,  duty or  responsibility  given to the Committee  under the Plan shall be
construed as the right, power, duty or responsibility of the person or entity to
whom allocated or delegated under this Section.

          Whenever a  person  or organization  has the power and authority under
the Plan or the Trust to delegate  discretionary power and authority  respecting
the control, management,  operation or administration of the Plan or any portion
of  the  Fund  to  another  person  or  organization,   the  delegating  party's
responsibility  with respect to such  delegation  is limited to the selection of
the  appointee  and the  periodic  review  of the  appointee's  performance  and
compliance with applicable law and regulations.

     Section 14.10   Claims Procedure.  All  claims  for benefits under the Plan
shall be made in writing and shall be signed by the  applicant.  Claims shall be
submitted to the Benefit  Review  Committee.  If the applicant  does not furnish
sufficient  information  with the claim for the  Benefits  Review  Committee  to
determine the validity of the claim, the Benefit Review Committee shall indicate
to the applicant any additional  information  which is necessary for the Benefit
Review Committee to determine the validity of the claim.

          (a)  Appeals Procedure.  Any  applicant  whose  claim  for benefits is
denied in whole or in part may appeal  from such  denial to the  Benefit  Review
Committee  for a review of the decision by the Benefit  Review  Committee.  Such
appeal must be made within  three  months after the denial  provided  above.  An
appeal must be submitted in writing within such period and must:

               (1)   Request a   review by the  Benefit  Review Committee of the
claim  for  benefits  under the Plan;

               (2)   Set  forth  all  of  the grounds upon which the  claimant's
request for review is based and any facts in support thereof; and

               (3)   Set  forth  any issues or comments which the claimant deems
pertinent to the appeal. The Benefit Review Committee shall act upon each appeal
within 60 days after receipt  thereof  unless special  circumstances  require an
extension of the time for processing, in which case a decision shall be rendered
by the Benefit Review  Committee as soon as possible but not later than 120 days
after the appeal is received by the Benefit Review Committee.

     The  Benefit  Review  Committee  shall  review  each appeal and any written
materials  submitted by  therewith.  The Benefit  Review  Committee  may require
claimant and/or the Company to submit such additional facts,  documents or other
evidence as the Benefit Review  Committee in its discretion  deems  necessary or
advisable in making its review.  The claimant shall be given the  opportunity to
review pertinent  documents or materials upon submission of a written request to
the Benefit Review  Committee,  provided the Benefit Review  Committee finds the
requested documents or materials are pertinent to the appeal.

     On  the  basis of its review,  the   Benefit Review  Committee shall make a
determination  of the  claimant's  eligibility  for benefits under the Plan. The
decision of the Benefit  Review  Committee  on any claim for  benefits  shall be
final and conclusive upon all parties thereto.

     In  the event the Benefit  Review   Committee denies  an appeal in whole or
in part, the Benefit Review  Committee shall give written notice of the decision
to the  claimant,  which  notice  shall set forth in a manner  calculated  to be
understood by the claimant the specific  reasons for such denial and which shall
make specific  reference to the pertinent  Plan  provisions on which the Benefit
Review Committee decision was based.

          (b)  Review  of Annual Statement.  If  a Member, Spouse or Beneficiary
believes  a  statement  he  receives  regarding  his  interest  in the  Plan  is
incorrect,  such  Member  or  Beneficiary  may  submit  a  written  request  for
correction  or  verification  of such annual  statement  to the  Benefit  Review
Committee,  and the Benefit  Review  Committee  shall respond in writing to such
request in the same manner as a claim for benefit by an applicant.

          (c) Benefit Review Committee.  The Chief Executive Officer of Ultramar
Diamond Shamrock Corporation shall appoint a Benefit Review Committee consisting
of not less than three nor more than five  persons,  having like  administrative
responsibilities and discretionary  authority as those described in Section 14.7
as  appropriate  or necessary to review a claim appeal under this  Section.  The
determinations  of the  Benefit  Review  Committee  shall be final  and  binding
subject only to subsection (d) below.

          (d)  Dialogue. The Plan and any claims arising from the Plan or in any
way related to the Plan,  are subject to and  governed by the  Ultramar  Diamond
Shamrock Corporation Dialogue Dispute Resolution Program (Dialogue).  If a claim
has  been  has  been  appealed  from the  administrator  to the  Benefit  Review
Committee and the claimant  desires to appeal the decision of the Benefit Review
Committee,  such appeal must be  conducted  solely  within the  limitations  and
procedures of Dialogue.

     Section 14.11.  Service of Process.  The Committee  may  from  time to time
designate an agent of the Plan for the service of legal  process.  The Committee
shall cause such agent to be identified in materials it distributes or causes to
be distributed when such identification is required under applicable law. In the
absence of such a  designation,  the Company  shall be the agent of the Plan for
the service of legal process.

     Section 14.12.  Payment to  Minors  or  Persons Under Legal Disability.  If
any benefit becomes payable to a minor or to a person under a legal  disability,
payment of such benefit shall be made only to the conservator or the guardian of
the estate of such person appointed by a court of competent jurisdiction or such
other person or in such other manner as the Committee determines is necessary to
ensure that the payment will legally  discharge  the Plan's  obligation  to such
person.

     Section 14.13.  Mistakes in Plan Administration.  From time to time, claims
or issues may arise that involve the Plan,  including,  among others, claims and
issues  raised by Members,  those  addressed  under any of the Internal  Revenue
Service's  Employee  Plans  Compliance  Resolution  System  programs  or similar
programs,  or those permitted under the terms of a qualified  domestic relations
order that  complies with Code section  414(p).  The  resolution,  settlement or
adjudication of these claims or issues may result in a compliance procedure that
is not expressly permitted under some other Section of the Plan document. Such a
procedure,  agreement  or  order  will  be  respected  to the  extent  that,  as
determined  in the sole  discretion  of the  Committee,  it does not  result  in
disqualification  of the Plan or  violate  (or  cause the Plan to  violate)  any
applicable statue, government regulation or ruling.

<PAGE>
                                   ARTICLE XV
                         ADOPTION OF PLAN BY AFFILIATES

     Section 15.1.   Adoption Procedure.  Any  corporation or  partnership  may
become a participating Company under the Plan provided that:

          (a)  Ultramar  Diamond  Shamrock  Corporation approves the adoption of
the Plan by the corporation or partnership  and designates  such  corporation or
partnership as a participating Company;

          (b)  The  corporation or partnership adopts the Plan together with all
amendments then in effect by appropriate action;

          (c)  The corporation or partnership adopts the Trust together with all
 amendments then in effect by appropriate action; and

          (d)  The  corporation  or partnership by action agrees to be  bound by
any other  terms  and  conditions  which may  be  required  by  Ultramar Diamond
Shamrock   Corporation,  provided  that   such  terms  and  conditions  are  not
inconsistent with the purposes of the Plan.

     Section 15.2.   Effect of Adoption by Affiliate.  A corporation or partner-
ship  which  adopts  the Plan  pursuant  Section  15.1 shall be deemed to be the
Company for all  purposes  hereunder,  unless  otherwise  specified  by Ultramar
Diamond Shamrock Corporation. In addition, Ultramar Diamond Shamrock Corporation
may provide that the Employees of the  corporation or partnership  shall receive
credit for their  employment  with the  corporation or partnership  prior to the
date it became an  corporation or  partnership  for purposes of determining  the
eligibility of such Employees to participate in the Plan, the  determination  of
their Account Balance,  and the vested and nonvested  interest of such Employees
as Members under Article. By adopting the Plan, a participating Company shall be
deemed thereby to appoint Ultramar Diamond Shamrock Corporation or the Committee
as its exclusive agent to exercise on its behalf all of the powers and authority
conferred  upon Ultramar  Diamond  Shamrock  Corporation or the Committee by the
terms of the Plan  including,  but not by way of limitation,  the power to amend
and terminate the Plan and the Trust. The authority of Ultramar Diamond Shamrock
Corporation  and the Committee to act as such agent shall  continue with respect
to all funds contributed by each participating  Company and the income therefrom
until and unless the amount of such funds and income has been distributed by the
Trustee as hereinafter provided in this Section.

     Section 15.3.   Withdrawal  by   Participating  Company.  A   participating
Company may withdraw  from  participation  in the Plan only with the approval of
Ultramar Diamond Shamrock  Corporation.  If any participating  Company withdraws
from the Plan, a copy of  appropriate  documents  adopting  such action shall be
delivered to the Committee as soon as it is administratively  feasible to do so,
and the  Committee  shall  communicate  such  action to the  Trustee  and to the
Employees of the participating Company.

<PAGE>
                                   ARTICLE XVI
                        AMENDMENT, TERMINATION AND MERGER

     Section 16.1.   Amendment   of   the   Plan.   Ultramar   Diamond  Shamrock
Corporation  shall have the right at any time to amend the Plan in any  respect,
by written  resolution of the Board of  Directors.  The Committee may by written
resolution amend the Plan to the extent necessary to keep the Plan in compliance
with law, to make clarifying  changes,  and with respect to  administrative  and
procedural matters.  The participation in the Plan by an adopting corporation or
partnership  as  provided  in Article  XV shall not limit the power of  Ultramar
Diamond Shamrock Corporation under the foregoing provisions,  provided, however,
that Ultramar  Diamond  Shamrock  Corporation  shall deliver a copy of each Plan
amendment to each adopting corporation or partnership as soon as practical after
such amendment is adopted.  Amendments  adopted by the Board of Directors or the
Committee  in  accordance  with this  Section  16.1 shall be  binding  upon each
adopting corporation or partnership.

     Section 16.2.   Protected   Benefits.  No   amendment   shall   decrease  a
participant's accrued benefit to the extent protected by section 411(d)(6)(a) of
the Code,  or any  benefit  subsidy  or  optional  form of benefit to the extent
protected by section 411(d)(6)(b) of the Code.

     Section 16.3.   Reduction or Cessation of Contributions.  Ultramar  Diamond
Shamrock Corporation reserves the right to cease or reduce contributions at  any
time by resolution of the Board of Directors.

     Section 16.4.   Termination   of  the  Plan.   Ultramar   Diamond  Shamrock
Corporation  reserves the right to terminate  the Plan at any time by resolution
of the Board of Directors.

     Section 16.5.   Treatment of Account Balances Upon Plan Termination.

          (a)  Upon termination of the Plan without establishment or maintenance
by an Affiliate of a successor  plan (as defined in Treasury  regulations  under
Code section  401(k)(10)),  distributions  of a Member's Vested Account Balance,
including the balance of his Salary  Deferral  Contribution  Account,  Qualified
Nonelective  Contribution  Account, and Qualified Matching Contribution Account,
shall be made in a lump sum (as defined in Code section  401(k)(10)(b))  without
regard to any limitations in the Plan relating to in-service distributions.

          (b)  Upon termination  of the Plan without maintenance by an Affiliate
Company of another  defined  contribution  plan (other  than an  Employee  Stock
Ownership  Plan as  defined in Code  section  4975(e)(7)),  distribution  of the
Member's Vested Account Balance may be made without regard to any limitations in
the Plan relating to notification and Member elections.

     Section 16.6.   Unfavorable Determination  After Initial Qualification.  If
Ultramar  Diamond  Shamrock   Corporation  is  notified  subsequent  to  initial
favorable  qualification that the Plan is no longer qualified within the meaning
of section  401(a) of the Code, or that the Trust is no longer  entitled to Plan
Sponsor under the  provisions of Code section  501(a),  and if Ultramar  Diamond
Shamrock  Corporation  shall fail within a reasonable time to make any necessary
changes in order that the Plan and/or Trust shall so qualify,  the Members shall
be fully  vested in the  Accounts,  and shall  receive a  distribution  of their
Account Balances.

     Section 16.7.   Mergers or Transfers.  If  the Plan shall merge or with, or
transfer its assets or liabilities to, any other plan:

          (a)  Only to  the  extent required by section 208 of ERISA and section
401(a)(12)  or 414(l) of the Code,  each  Member  shall be entitled to receive a
benefit  immediately after such merger, or transfer which is equal to or greater
than the benefit which he or she would have been entitled to receive immediately
before such merger, or transfer (assuming that the Plan had then terminated).

          (b)  Merely by virtue of such merger or transfer a Member shall not be
entitled to  any  change  in  status that would be required by Plan termination,
including, but not limited to, 100% Vesting in his Account Balance.

          (c)  This  section in  no  way shall be construed as a guaranty of, or
entitlement by, any Member to an Account Balance valued at an amount equal to or
greater than his Account Balance immediately before such merger or transfer.

<PAGE>
                                  ARTICLE XVII
                                   REVERSIONS

     Section 17.1.   No  Reversion Permitted.  This Plan has been established by
Ultramar  Diamond  Shamrock  Corporation and maintained by the Companies for the
exclusive  benefit of the Members and their  Beneficiaries.  Except as otherwise
provided in Section 17.2 (relating to approval by the Internal Revenue Service),
Section 17.3 (relating to contribution  recapture) and Section 10.8 (relating to
qualified  domestic relations  orders),  under no circumstances  shall any funds
contributed  hereunder,  at any time, revert to or be used by an Affiliate,  nor
shall any such funds or assets of any kind be used other than for the benefit of
the Members or Beneficiaries.

     Section 17.2.   Approval by the Internal Revenue Service.

          (a)  Notwithstanding any other  provisions  of this Plan, the adoption
of this Plan by the  Companies is subject to the  condition  precedent  that the
Plan shall be approved and qualified by the Internal  Revenue Service as meeting
the requirements of section 401(a) of the Code and that the Trust established in
connection  herewith shall be entitled to exemption under the provisions of Code
section  501(a).  In the  event  the Plan  initially  fails to  qualify  and the
Internal  Revenue  Service issues a final ruling that the Plan or Trust fails to
so qualify as of the  Effective  Date,  all  liability of the  Companies to make
further contributions hereunder shall cease.

          (b)  The  Committee, Trustee  and  any  other Named Fiduciary shall be
notified  immediately by Ultramar Diamond Shamrock  Corporation,  in writing, of
such  failure to  qualify.  Upon such  notification,  the value of the  Members'
Accounts shall be distributed in cash to the Companies, subject to the terms and
conditions of Article VI.

          (c)  That portion of  such distribution which is attributable to Roll-
over Contributions,  if any, shall be paid to the Member, and the balance of
such distribution shall be paid to the Participating Companies.

     Section 17.3.   Contribution  Recapture.  Notwithstanding  any other provi-
sions of this Plan,

          (a)  In  the  case  of  a contribution which is made by a Company by a
mistake  of  fact,   Section  17.1.  shall  not  prohibit  the  return  of  such
contribution   to  the  Company  within  one  year  after  the  payment  of  the
contribution, and

          (b)  If a  contribution  is  conditioned upon the deductibility of the
contribution under section 404 of the Code, then, to the extent the deduction is
disallowed,  Section  17.1 shall not  prohibit the return to the Company of such
contribution (to the extent  disallowed)  within one year after the disallowance
of the deduction.

          (c)  The amount which may be returned to the Company is the  excess of
(1) the amount  contributed over (2) the amount that would have been contributed
had there  not  occurred  a mistake  of fact or a  mistake  in  determining  the
deduction.  Earnings attributable to the excess contribution may not be returned
to the Company,  but losses attributable thereto must reduce the amount to be so
returned.  Furthermore,  if the  withdrawal  of the amount  attributable  to the
mistaken  contribution  would cause the balance of the individual account of any
Member to be  reduced  to less than the  balance  which  would  have been in the
account  had the  mistaken  amount not been  contributed,  then the amount to be
returned to the Company would have to be limited so as to avoid such reduction.

<PAGE>
                                  ARTICLE XVIII
                              TOP HEAVY PROVISIONS

     Section 18.1.   Purpose  of  Article.  This  Article  is intended to insure
compliance  with section 416 of the Code and shall be effective in any Plan Year
in which this Plan is  determined to be a Top-Heavy  Plan. If the  provisions of
this  Article  apply to the  Plan,  such  provisions  will  override  any  other
inconsistent portion of such Plan.

     Section 18.2.   Definitions. The terms used  in this Article XVIII shall be
defined as follows:

          (a)  "Determination  Date"  with respect  to  any Plan Year shall mean
the last day of the preceding Plan Year; or, in the case of the first Plan Year,
the last day of such Plan Year.

          (b)  "Determination  Period" shall mean  the  Plan Year containing the
Determination Date and the four preceding Plan Years.

          (c)  "Employee" shall  mean  an  individual who performs service as an
employee of the Employer.

          (d)  "Employer" shall mean  Ultramar  Diamond Shamrock Corporation and
any entity related to it under subsections  (b), (c), (m) or (o) of Code section
414.

          (e)  "Key  Employee"  shall  mean  any  Employee  or  former  Employee
(including  the  Beneficiaries  of such  Employee)  who at any time  during  the
Determination Period is or was an officer of the Employer,  if such individual's
annual  compensation   exceeds  50%  of  the  dollar  limitation  under  section
415(b)(1)(a)  of the Code, an owner (or considered an owner under section 318 of
the  Code)  of one  of the  ten  largest  interests  in  the  Employer  if  such
individual's   compensation   exceeds  the  dollar   limitation   under  section
415(c)(1)(a)  of the Code,  a 5%-owner  of the  Employer,  or a 1%-owner  of the
Employer who has an annual  compensation of more than $150,000.  For purposes of
this subsection,  annual  compensation  means compensation as defined in section
415(q)(4) of the Code. The  determination  of who is a Key Employee will be made
in accordance with section 416(i)(1) of the Code and the regulations thereunder.

          (f)  "Non-Key Employee" shall mean any Employer or former Employee who
is not a Key Employee.

          (g)  "Permissive  Aggregation  Group" shall mean the Required Aggrega-
tion Group of plans plus any other plan or plans of the  Employer,  which,  when
considered as a group with the Required Aggregation Group,  continues to satisfy
the requirements of sections 401(a)(4) and 410 of the Code.

          (h)  "Required Aggregation Group"  shall  mean (1) each qualified plan
of the Employer in which at least one Key Employee  participates or participated
at any time during the  Determination  Period regardless of whether the Plan had
terminated,  and (2) any other  qualified  plan of the Employer  which enables a
plan in paragraph (1) of this subsection to satisfy the requirements of sections
401(a)(4) and 410 of the Code.

          (i)  "Super Top-Heavy Plan"  shall mean a Top-Heavy Plan for which the
Top Heavy Ratio exceeds 90%.

          (j)  "Top-Heavy Plan" shall  mean  a  plan determined  to be Top-Heavy
under Section 18.3.

          (k)  "Top-Heavy  Ratio"  shall mean the  ratio  defined  under Section
18.4.

          (l)  "Valuation  Date"  shall  mean the same date as the Determination
Date.

     Section 18.3.   Determination of a Top-Heavy Plan.  This Plan is determined
to be Top-Heavy if either (a) the Top-Heavy  Ratio for this Plan exceeds 60% and
this  Plan  is  not  part  of  any  Required  Aggregation  Group  or  Permissive
Aggregation  Group of plans, or (b) this Plan is part of a Required  Aggregation
Group  of  plans,  but  not  part of a  Permissive  Aggregation  group,  and the
Top-Heavy  Ratio for the group of plans exceeds 60%, or (c) this Plan is part of
a  Required  Aggregation  Group and part of a  Permissive  Aggregation  Group of
plans, and the Top-Heavy Ratio for the Permissive Aggregation Group exceeds 60%.

     Section 18.4.   Determination  of  the Top-Heavy  Ratio.  If  the  Employer
maintains  one or more defined  contribution  plans  (including  any  simplified
employee  pension plan but no including a simple  retirement  account under Code
section  408(p)) and the Employer has never  maintained any defined benefit plan
which during the 5-year period ending on the  Determination  Date has or has had
accrued benefits, the Top-Heavy Ratio for this Plan alone or for the Required or
Permissive  Aggregation  Group as appropriate,  is a fraction,  the numerator of
which  is the  sum of the  account  balances  of  all  Key  Employees  as of the
Determination Date (including any part of any account balance distributed in the
5-year period ending on the Determination Date), and the denominator of which is
the sum of all  account  balances  (including  any part of any  account  balance
distributed  in the  5-year  period  ending  on the  Determination  Date),  both
computed  in  accordance  with  section  416 of the  Code  and  the  regulations
thereunder.  Both the  numerator  and  denominator  of the  Top-Heavy  Ratio are
increased to reflect any contribution not actually made as of the  Determination
Date,  but which is required to be taken into account on that date under section
416 of the Code and the regulations thereunder.

     If  the  Employer  maintains   one  or  more   defined  contribution  plans
(including any simplified  employee pension plan) and the Employer  maintains or
has maintained one or more defined  benefit plans which during the 5-year period
ending  on the  Determination  Date  has or has had any  accrued  benefits,  the
Top-Heavy Ratio for any Required or Permissive Aggregation Group as appropriate,
is a fraction,  the numerator of which is the sum of account  balances under the
aggregated  defined  contribution  plans for all Key  Employees  and the present
value of accrued benefits under the aggregated defined benefit plans for all Key
Employees as of the Determination  Date, and the denominator of which is the sum
of the account balances under the aggregated defined  contribution plans for all
Members and the present value of accrued  benefits under the aggregated  defined
benefit plans for all Members as of the  Determination  Date,  all determined in
accordance with section 416 of the Code and the regulations thereunder. Both the
numerator  and  denominator  of  the  Top-Heavy  Ratio  are  increased  for  any
distribution  of an account  balance or an  accrued  benefit  made in the 5-year
period ending on the Determination Date.

     For  purposes of  this  Section,  the  value  of account  balances  and the
present  value of accrued  benefits  will be  determined  as of the most  recent
Valuation Date that falls within or ends with the 12-month  period ending on the
Determination  Date,  except  as  provided  in  section  416 of the Code and the
regulations thereunder for the first and second years of a defined benefit plan.
The account  balances and accrued benefits of a Member who is not a Key Employee
but  who was a Key  Employee  in a prior  Determination  Period,  or who had not
received any  Compensation  from the Employer  maintaining  the Plan at any time
during the 5-year period ending on the  Determination  Date will be disregarded.
The calculation of the Top-Heavy Ratio,  and the extent to which  distributions,
rollovers,  and transfers are taken into account will be made in accordance with
section  416 of the  Code  and  the  regulations  thereunder.  Salary  Reduction
Contributions  will not be taken into  account  for  purposes of  computing  the
Top-Heavy  Ratio.  When  aggregating  plans the value of  account  balances  and
accrued  benefits will be calculated with reference to the  Determination  Dates
that fall within the same calendar year.

     The  accrued  benefit  of  a  Member  other  than  a  Key Employee shall be
determined  under (a) the  method,  if any that  uniformly  applies  for accrual
purposes under all defined benefit plans  maintained by the Employer,  or (b) if
there is no such method,  as if such  benefit  accrued not more rapidly than the
slowest accrual rate permitted under the fractional rule of section 411(b)(1)(c)
of the Code.

     Section 18.5.   Vesting Requirements.  For any Plan Year in which this Plan
is Top-Heavy,  a vesting schedule at least as rapid as the schedule  provided in
this Section will automatically  apply to the Plan. The minimum vesting schedule
applies to all  benefits  within the meaning of section  411(a)(7)  of the Code,
except those attributable to Employee Contributions,  including benefits accrued
before the effective  date of Code section 416 and benefits  accrued before this
Plan became  Top-Heavy.  No reduction in vested  benefits may occur in the event
the Plan's status as Top-Heavy  changes for any Plan Year. This Section does not
apply  to the  account  balances  of any  Employee  who does not have an Hour of
Service after the plan has become Top-Heavy and such Employee's  account balance
attributable  to  Employer  Contributions  and  forfeitures  will be  determined
without regard to this Section.

         Years of Vesting Service                    Percentage Vested
         ------------------------                    -----------------
                Less than 3                                  0%
               3 or more                                   100%

     If  this  Plan  ceases to be Top-Heavy, the Employer will maintain the Top-
Heavy vesting schedule in this Section.

     Section 18.6.   Minimum Allocation.

          (a)  Except as otherwise provided in (c) below, the Employer Contribu-
tions  and  forfeitures  allocated  on  behalf  of any  Member  who is not a Key
Employee  shall not be less than the lesser of 3% of such Member's  compensation
(as defined in subsection (b)), or in the case where the Employer has no defined
benefit plan which  designates this Plan to satisfy section 401 of the Code, the
largest percentage of Employer Contributions and forfeitures, as a percentage of
the first  $200,000 of the Key Employee's  compensation,  allocated on behalf of
any Key Employee for that year. Salary Deferral Contribution to the Plan may not
be included as an Employer  Contribution  for purposes of satisfying the minimum
allocation  requirement.  Matching  Contributions may only be taken into account
only to the  extent  allowed  under Q&A M-19 of Treas.  Reg.  ss.  1.416-1.  The
minimum   allocation  is  determined  without  regard  to  any  Social  Security
contribution.  This minimum  allocation  shall be made even though,  under other
plan  provisions,  the Member  would not  otherwise  be  entitled  to receive an
allocation,  or would have received a lesser allocation  because of the Member's
failure  to make  Salary  Reduction  Contributions,  if such  Contributions  are
required to  participate  in the Plan,  or because of  Compensation  less than a
stated amount.

          (b)  For purposes of  computing  the  minimum allocation, Compensation
shall  mean  total  Compensation  subject  to  federal  income tax withholding.

          (c)  The  provisions  in (a)  and (b)  above  shall  not  apply to any
Member who was not  employed by the Employer on the last day of the Plan Year.

     Section 18.7.   Reduction in Section 415 Limits.

          (a)  For any Plan Year in which the Employer  maintains both a defined
contribution  plan and a defined benefit plan which comprise a Top-Heavy  group,
the number  100% shall be  substituted  for the number 125% in  determining  the
denominators of the defined  contribution  and defined benefit  fractions.  This
section shall not apply if (1) the Employer  provides a minimum  contribution to
the  account of each  non-key  employee,  which is 1% greater  than the  minimum
contribution  that would otherwise be allocated under Section 18.6, and (2) this
Plan is not a Super Top-Heavy Plan (i.e., the Top-Heavy Ratio exceeds 90%).

          (b)  This   section shall   not be effective   for a  limitation  year
beginning after December 31, 1999.

<PAGE>
                                   ARTICLE XIX
                                  MISCELLANEOUS

     Section 19.1.   Gender and Number.  When  necessary to  the meaning hereof,
and except when otherwise indicated by the context,  either the masculine or the
neuter pronoun shall be deemed to include the masculine,  the feminine,  and the
neuter, and the singular shall be deemed to include the plural.

     Section 19.2.   Reference  to  the  Code  and ERISA.  Any  reference to any
section of the Internal  Revenue  Code,  ERISA,  or to any other  statute or law
shall be deemed to include any successor law of similar import.

     Section 19.3.   Governing Law.  Except as provided by Section 514 of ERISA,
this Plan shall be construed and governed by the laws of the State of Texas.

     Section 19.4.   Compliance With  the Code and ERISA.  This Plan is intended
to comply with all  requirements  for  qualification  under the Internal Revenue
Code  and  ERISA,  and if any  provision  hereof  is  subject  to more  than one
interpretation or any term used herein is subject to more than one construction,
such ambiguity shall be resolved in favor of that interpretation or construction
which is consistent  with the Plan being so  qualified.  If any provision of the
Plan is held invalid or unenforceable, such invalidity or unenforceability shall
not affect any other  provisions,  and this Plan shall be construed and enforced
as if such provision had not been included.

     Section 19.5.   Prohibition Against Assignment or Alienation.  The Member's
right to  any payments, benefits,  and refunds is not transferable or subject to
assignment or alienation,  except  to the extent required by Code section 414(p)
(relating to qualified domestic relations orders).

     Section 19.6.   Limitation of Rights.  Participation in  the Plan shall not
grant any Member the right to be retained in the service of the  Employer or any
other  rights or  interest  in the Plan or Trust  other than those  specifically
herein set forth.

     Section 19.7.   USERRA Compliance.  Notwithstanding  any  provision  of the
Plan to the contrary, contributions, benefits and service credit with respect to
qualified military service will be provided in accordance with section 414(u) of
the Code.

<PAGE>
                                   APPENDIX A
                         SPECIAL SERVICE COUNTING RULES

     Section A.1.    General Rule.  The  special service counting  rules of this
Appendix shall apply only for purposes of computing Years of Vesting Service and
Years of  Eligibility  Service to be credited  under the Plan to an Employee who
was credited with service under the Ultramar Energy Inc. U.S. Savings  Incentive
Plan before January 1, 1999.

     Section A.2.    Year  of  Vesting  Service.  An  Employee's total  Years of
Vesting Service shall be computed under this Section as the sum of:

          (a)  The number of whole one-year periods of service credited (or that
would have  been credited) as  of January 1, 1999, under the terms of such plan,
plus

          (b)  For Plan  Years  beginning on and after January 1, 1999, any Plan
Year in which he is credited with 1000 Hours of Service  computed  under Section
A.3.

     Section A.3.    Hours  of  Service.  For  purposes  of  computing  Years of
Vesting Service for an Employee described in this
Appendix:

          (a)  For any  service  performed on or  before December 31, 1998, that
was credited under the terms of the Ultramar Energy Inc. U.S. Savings  Incentive
Plan on such date but is not  counted as whole  Years of Vesting  Service  under
subsection  A.2(a), the Employee shall be credited with 190 Hours of Service for
each month (or fraction of a month) of such  service.  Hours of Service shall be
credited under this  subsection  (a) only in the Plan Year beginning  January 1,
1999.

          (b)  For Plan  Years  beginning on and after January 1, 1999, Hours of
Service  shall in addition be credited  under the rules of Plan Section 1.27.

     Section A.4.    Break in Service.  An Employee shall be credited under this
Appendix  with  Breaks in Service  on  January  1, 1999,  equal to the number of
1-Year Periods of Severance that would have been credited to him under the terms
of the Ultramar Energy Inc. U.S. Savings Incentive Plan as of such date.

<PAGE>
     Section A.5.    Additional Rules.

          (a)  An individual  who  is  absent  from service  for purposes of the
Ultramar  Energy  Inc.  U.S.  Savings  Incentive Plan (for any reason other than
quit, discharge or retirement) on December 31, 1998, and who performs an hour of
service as an Employee on or after the January 1, 1999, will be credited with no
less  than  the  service  required by Treas. Reg.ss.1.401(a)-7(a)(ii) and (a)(3)
(iii).

          (b)  An individual whose  service  crediting under the Ultramar Energy
Inc. U.S. Savings Incentive Plan terminated before January 1, 1999, by reason of
quit,  discharge  or  retirement,  and  who  performs  an  hour of service as an
Employee within one year of such termination, will be credited with no less than
the service required by Treas. Reg.ss.1.401(a)-7(a)(3)(vi).

<PAGE>

     IN WITNESS WHEREOF,  Ultramar Diamond Shamrock Corporation has  caused this
Plan to be executed by its duly  authorized  officer  this 31st day of December,
1998  effective  as of January 1, 1998,  and other  dates  provided  herein,  in
accordance with the adoption of the Plan by the Board of Directors on September,
24, 1997.

                                          ULTRAMAR DIAMOND SHAMROCK CORPORATION

ATTEST:  /s/ Bill Hamersly                /s/ Penelope R. Viteo
             Bill Hamersly                    Penelope R. Viteo
<PAGE>

                                Second Amendment
                    To the UDS 401(k) Retirement Savings Plan

Ultramar Diamond Shamrock  Corporation  hereby amends the UDS 401(k)  Retirement
Savings Plan, effective January 1, 1998 ("the Plan"), as follows:

Section 1.27 of the Plan (which  defines "Hour of Service") is amended by adding
the following subsection (m):

         (m)      For any individual who
                                    (1)     is an Employee on or after September
                                            30, 2000, and
                                    (2)     on  September  29,  2000,  performed
                                            service as an employee of or on such
         date was shown   on  the   relevant   payroll as an employee of, but on
         approved  leave  of  absence  from) Valley  Shamrock,  Inc., an hour of
         service   credited   under  the   terms of the  Valley  Shamrock,  Inc.
         Employees'  401(k) Plan and performed  before September 29, 2000, shall
         count as an Hour of Service.

Article II of the Plan (relating to eligibility to participate) shall be amended
by adding new section 2.4 to read in its entirety as follows, and by renumbering
current section 2.4 and all subsequent sections accordingly:

         Section 2.4: Valley Shamrock Inc., Employees

         Effective September 29, an Eligible Employee shall include any Employee
         of Valley Shamrock,  Inc. who immediately before that date was eligible
         (or on that date would have been eligible) to participate in the Valley
         Shamrock, Inc. Employees' 401(k) Plan under the terms of such plan.

Article IV of the Plan (relating to vesting and forfeitures) shall be amended by
adding new Section 4.5:

         Section 4.5: Special Vesting Rule for Valley Shamrock, Inc. Employees

         Effective September 30, 2000, an Employee of Valley Shamrock,  Inc. who
         immediately  before that date was  eligible (or on that date would have
         been eligible) to participate in the Valley Shamrock,  Inc.  Employees'
         401(k)  Plan under the terms of such plan,  shall be 100% vested in his
         Account Balance.

                                 Effective Date

This Amendment is effective September 30, 2000.

                                        /s/ Penelope R. Video
                                            Penelope R. Video
                                        ULTRAMAR DIAMOND SHAMROCK CORPORATION

                                                              October 3, 2000
                                                              DATE

ATTEST:  /s/ Todd Walker
             Todd  Walker

<PAGE>
                                   APPENDIX B
                                 AVON EMPLOYEES
                                                                          Page

Introduction  1
Article B-I--Definitions......................................................3
Article B-II--Eligibility, Enrollment and Participation.......................6
Article B-III--Contributions..................................................8
Article B-IV--Vesting........................................................11
Article B-V--402(g) Limit....................................................12
Article B-VI--401(k) and 401(m) Limits and Other Nondiscrimination Rules.....13
Article B-VII--Correction of Failures of ADP and ACP Tests...................14
Article B-VIII--Section 415 Limits...........................................15
Article B-IX--Participants' Accounts.........................................16
Article B-X--Distributions...................................................17
Article B-XI--Withdrawals of Account Balances................................18
Article B-XII--Loans.........................................................20
Article B-XIII--Death Benefits...............................................21
Article B-XIV--Other Provisions..............................................22

                                  Introduction

         For any payroll  period in which an Employee  is an Avon  Employee  (as
defined in this Appendix B) his eligibility for  contributions to the Plan shall
be determined solely under the provisions of this Appendix B.

         For any payroll period,  an Employee who is eligible for  contributions
to the Plan by him or on his  behalf  under the terms of this  Appendix B is not
eligible  for  contributions  under  Article III of the Plan except as expressly
permitted in this Appendix.

         For an Employee who is not an Avon Employee,  but whose account balance
is partly  attributable to  contributions  made to the Plan while he was an Avon
Employee,  distributions  shall be governed by the terms of this Appendix to the
extent of that portion of his Account Balance so attributable.

         In the event of a conflict  between any other provision of the Plan and
Appendix B with  respect to the benefits of an Avon  Employee,  Appendix B shall
govern.

<PAGE>
                                   Article B-I
                                   Definitions

         All terms  used in this  Appendix  B are as defined in Article I of the
Plan, with the following additions and exceptions:

         Section   B-1.1.   Avon   After-Tax   Contributions   shall   mean  the
contributions by Avon Employees permitted under Section B-3.4 of Appendix B.

         Section B-1.2.  Avon Early Retirement  Eligibility Age shall mean Early
Retirement  Eligibility  Age as defined in Article I of the Plan  except that "5
one-year  Periods of Special Avon Service"  shall be read in lieu of "5 Years of
Vesting Service" therein.

         Section B-1.3. Avon Employee shall mean an Employee who:

         (a)  Is  listed as an  Ultramar Avon Employee  on the Company's payroll
records;

         (b)  Is  not (i) an  Employee who is  listed on  the Company's  payroll
records as an Ultramar  Avon  salaried  transferred  employee,  or who,  without
regard to payroll designation,  commenced service for the Company as an Employee
other  than an  Avon  Employee;  (ii)  or any  other  individual  who  commenced
employment for any Affiliate as other than an Avon Employee.

         (c)  Is  not a  Union   Employee,  other than  a  Union Employee who is
covered  by a  collective  bargaining  agreement  that  expressly  provides  for
participation in (i) the Tosco CAP or (ii) Appendix B of the Plan.

         Section B-1.4. Avon Employment Commencement Date shall mean

         The date on which an Employee  first  performs an Hour of Service as an
Avon Employee,  or (if earlier) an Hour of Service (as defined in the Tosco CAP)
for Tosco Corporation or a predecessor thereof.

         Section B-1.5.  Avon Entry Date shall mean any of the following  dates,
but only with respect to an Employee who is an Avon Employee on such date:

         (a)  For an Avon  Employee  who  is  a Tosco CAP Participant, the first
day of the first payroll period on or after Purchase Date on which he becomes an
Avon Employee;

         (b)  For  any  other  Avon  Employee,  the first day of the first month
after his Avon Employment Commencement Date.

         Section B-1.6. Avon 2%-Profit Sharing Contribution shall mean a Company
Contribution  made  under  Section  B-3.5 of  Appendix  B on  behalf  of an Avon
Employee who has satisfied the  eligibility  conditions  therefor  under Section
B-2.1(c) of Appendix B.

         Section  B-1.7.  Period of Special Avon Service with respect to an Avon
Employee  shall mean a period of service  performed for the Company by such Avon
Employee  beginning on his Avon Employment  Commencement  Date and ending on his
Termination from Employment Date.

         Section B-1.8. Purchase Date shall mean September 1, 2000.

         Section B-1.9. Special Avon Rollover Contribution shall mean a Rollover
Contribution  by an Avon  Employee  which is an eligible  rollover  distribution
under Section 401(a)(31) of the Code, and for which the individual has submitted
such forms as required by the  Committee,  in such time,  place and manner as is
satisfactory  to the Committee at its sole  discretion,  on or before October 9,
2000.

         Section  B-1.10.  Tosco CAP shall  mean the Tosco  Corporation  Capital
Accumulation Plan, as amended and restated, as of January 1, 1993, including all
amendments thereto executed and effective as of the Purchase Date.

         Section B-1.11.  Tosco CAP Participant  shall mean an Avon Employee who
was a Tosco  CAP  "Participant"  as  defined  in  Section  12.62  of such  plan,
immediately before the Purchase Date.

<PAGE>
                                  Article B-II
                    Eligibility, Enrollment and Participation

         Section B-2.1. Eligibility  to make Employee Contributions  and Receive
Company Contributions.

         An  Avon  Employee  is eligible  to  make  or  have  made on his behalf
contributions to the Plan as follows:

         (a)  An Avon Employee is eligible to make Salary Deferral Contributions
as of  first  day of  the  first  month  beginning  after  his  Avon  Employment
Commencement Date.

         (b)  An Avon  Employee  is  eligible  to make Rollover Contributions at
         any time.

         (c)  An Avon Employee shall receive an Avon 2%-Profit Sharing Contribu-
tion under  Section  B-3.5 of Appendix B, but only if he was eligible to receive
the 2% "Employer Non-Matching Contribution" under Section 3.5.3(ii) of the Tosco
CAP as in effect on the Purchase Date, including the eligibility  provisions set
forth in the document entitled "Amendment No. 4" dated January 1, 1998, (whether
or not such document was validly adopted as an amendment to the Tosco CAP).

         (d)  An  Avon  Employee  who  has  a  one-year  Period of  Special Avon
Service shall receive Avon Matching Contributions in accordance with the formula
under Section B-3.3 of Appendix B.

         (e)  An  Avon  Employee  who  has  a  one-year  Period  of Special Avon
Service is  eligible  to make Avon  After-Tax  Contributions  as set forth under
Section B-3.4 of Appendix B.

         (f)  An  Avon  Employee  is  eligible  to  make a Special Avon Rollover
Contribution as set forth under Section B-3.2(b) of Appendix B.

<PAGE>
                                  Article B-III
                                  Contributions

         Section B-3.1.  Salary Deferral  Contributions  An Avon Employee who is
eligible therefor under Section B-2.1(a) may make Salary Deferral  Contributions
in accordance  with the  provisions of Section 3.1 of the Plan, in an amount not
less than 2% of Compensation  nor greater than 15% of  Compensation.  Percentage
designations  under this Section shall be in whole  numbers  except that partial
percentages may be permitted to comply with the ADP Test.

         Section B-3.2. Rollover Contributions.

         (a)  An  Avon   Employee  may  make   a  Rollover  Contribution   under
         Article III of the Plan.

         (b)  In  addition, an Avon  Employee may make  a Special  Avon Rollover
Contribution but only if such contribution  satisfies the requirements set forth
in  Section  B-1.8.  To the  extent  not  prohibited  by the Code or  ERISA,  or
regulations  thereunder,  a Special Avon Rollover  Contribution  may include any
loan still outstanding at the time the Employee's account was rolled over to the
Plan, but not any securities, funds or other investments except those acceptable
to the Committee at its sole discretion.  Any loan accepted as part of a Special
Avon Rollover Contribution shall have the same interest rate, final payment date
and any  other  terms  applicable  to such loan  under  the Tosco CAP  except as
otherwise decided by the Committee in its sole discretion.

         (c)  No loans will be accepted by the Plan in any rollover contribution
under this Appendix except as part of a Special Avon Rollover  Contribution, and
in accordance with the provisions of this Section.

         Section  B-3.3.  Avon  Matching  Contributions.  The Company shall make
Matching  Contributions  (subject to the general  restrictions of Section 3.2 of
the Plan),  to an Avon Employee  eligible  therefor  under  Section  B-2.1(d) of
Appendix B, in accordance with the following formula:

         (a)  For  an Avon  Employee  who  has  credit  for  at least one but no
more than 5 one-year  Periods of Special  Avon Service an amount equal to 75% of
the sum of Salary Deferral  Contributions and Avon After-Tax  Contributions made
by or on  behalf  of such  Employee  for the  Plan  Year,  not to  exceed  6% of
Compensation;

         (b)  For  an Avon  Employee  who has  credit  for  6  or more  one-year
Periods  Special  Avon  Service,  an  amount  equal to 100% of the sum of Salary
Deferral Contributions and Avon After-Tax  Contributions made by or on behalf of
such Employee for the Plan Year, not to exceed 6% of Compensation.

         Section B-3.4. Avon After-Tax Contributions.

         (a)  By  executing   an   agreement   in   accordance  with  procedures
specified by the  Committee,  an Avon  Employee who is eligible  therefor  under
Section  B-2.1(e) may elect to make Avon After-Tax  Contributions,  in an amount
equal to not less than 2% of Compensation. With respect to an Avon Employee in a
Plan  Year,  the  sum  of  Avon  After-Tax  Contributions  and  Salary  Deferral
Contributions may not equal more than 15% of Compensation.

         (b)  Percentage  designations  under  subsection  (a) shall be in whole
numbers except that partial  percentages may be permitted to comply with the ACP
Test.

         (c)  Avon  After-Tax  Contributions   are  subject  to   Articles  B-IV
(vesting),  B-VI (ACP test),  B-VII  (correction  of  violations  and  potential
violations  of ACP Test);  B-VIII (Code  Section 415  limits);  and B-X and B-X1
(distribution limits)

         (d)  An  Avon  Employee  may  elect  to change his election  under this
Section under  procedures  specified by the  Committee,  and in accordance  with
rules that may be (but are not  required  to be)  similar to those set forth for
Salary Deferral Contribution elections under Section 3.1(d) of the Plan.

         (e)  Avon   After-Tax   Contributions    are   to   be   accounted  for
separately  from other  contributions  made by or on behalf of an Avon Employee,
and are intended to be treated as a separate  contract under Section 72(d)(2) of
the Code.

         Section  B-3.5.  Avon  2%-Profit  Sharing  Contribution.  For  an  Avon
Employee who is eligible under Section B-2.1(c) of Appendix B, the Company shall
contribute to his Account an amount equal to 2% of his Compensation for the Plan
Year.

         Section  B-3.6.  General  Provisions  Relating  to  Contributions.   In
addition to the provisions set forth in this Article,  Company  Contributions on
behalf of an Avon Employee  shall be governed by Sections 3.2, 3.3, 3.5, 3.7 and
3.8 of the Plan.

<PAGE>
                                  Article B-IV
                                     Vesting

         Section  B-4.1.  Company  Contributions  under  Appendix B. All Company
Contributions  made by or on behalf of an Avon Employee  under  Sections  B-3.1,
B-3.3 and B-3.5 of  Appendix B (Salary  Deferral  Contributions,  Avon  Matching
Contributions and Avon 2%-Profit Sharing Contributions) are immediately vested.

         Section B-4.2. After-Tax  and  Rollover  Contributions.  Avon After-Tax
Contributions  and  Rollover  Contributions,  including  Special  Avon  Rollover
Contributions, are immediately vested.

         Section  B-4.3.  Other  Company   Contributions   shall  be  vested  in
accordance with Article IV of the Plan.

<PAGE>
                                   Article B-V
                                  402(g) Limit

         Section B-5.1. General Rule.  The Salary Deferral Contributions of Avon
Employees are subject to Article V of the Plan and Section 204(g) of the Code.

<PAGE>
                                  Article B-VI
           401(k) and 401(m) Limits and Other Nondiscrimination Rules

         Section  B-6.1.  General  Rule.  Salary  Deferral  Contributions,  Avon
Matching  Contributions and  Avon-After-Tax  Contributions  made by and for Avon
Employees  are subject to the ADP and ACP Tests,  and to Article VI of the Plan.
Company  Contributions  by or on  behalf  of an Avon  Employee  are  subject  to
Sections 401(a) and 410(b) of the Code to the extent required by law.

<PAGE>
                                  Article B-VII
                   Correction of Failures of ADP and ACP Tests

         Section B-7.1.  General Rule.  The failure or potential  failure of any
Company  Contribution  to  satisfy  the  ADP  Test,  or  of  any  Avon  Matching
Contribution or Avon After-Tax  Contribution  to satisfy the ACP test,  shall be
corrected  under Article VII of the Plan.  Failure of  contributions  to satisfy
Sections  401(a)  and  410(b)  of the Code may be  corrected  by any  means  not
prohibited by the Code.

<PAGE>

                                 Article B-VIII
                               Section 415 Limits

         Section  B-8.1.  General Rule.  Company  Contributions,  Avon After-Tax
Contributions  and any other annual  additions on behalf of an Avon Employee are
subject  to the  limitations  of  Section  415 of the  Code as  incorporated  by
reference under Article VIII of the Plan.

<PAGE>
                                  Article B-IX
                             Participants' Accounts

         Section B-9.1. General Rule. The Account of a Member who is or has been
an Avon Employee shall consist of the  contributions  set forth in Article B-III
and attributable earnings,  plus any other Company Contributions made under this
Plan. Accounts under this Article shall include the following subaccounts:

         (a)  An Avon  After-Tax  Contribution  account,  which shall consist of
a Member's Avon After-Tax Contributions (if any) plus attributable earnings, and
shall be  administered as a "separate  contract"  under Section  72(d)(2) of the
Code, and

         (b)  Other subaccounts as necessary and appropriate.

         Section B-9.2. Valuation.  Account Balances under this Article shall be
valued in accordance with Section 9.2 of the Plan.

         Section B-9.3.  Members'  Self-Directed  Investments. Funds in Accounts
under this Article shall be  invested according to the provisions of Section 9.3
of the Plan.

<PAGE>
                                   Article B-X
                                  Distributions

         Section  B-10.1.  General  Rule.  Distributions  of the Vested  Account
Balance of an Avon Employee are governed by Article X of the Plan.

         Section B-10.2.  Special Rule for  Avon-Attributable  Account Balances.
In-service  distributions  of a Member who is or has been an Avon  Employee  are
governed by Article B-XI of this Appendix to the extent such  distributions  are
from accounts  attributable  to  contributions  described  under Sections B-3.3,
B-3.4 or B-3.5 of this Appendix.

<PAGE>
                                  Article B-XI
                         Withdrawals of Account Balances

         Section  B-11.1.   General  Rule.  In  addition  to  the  distributions
described  in Section  B-10.1,  an Avon  Employee  who is a Member may receive a
distribution  of part or all of his  Vested  Account  Balance  under the Plan in
accordance  with the  following  Plan  provisions  generally  applicable  to all
Members:

         (a)  A  hardship  distribution of  his  Salary  Deferral  Contributions
(but not the income thereon) under the provisions of Section 11.2 of the Plan;

         (b)  A   withdrawal  of  any   part   of   his  Rollover  Contributions
(including  his Special Avon  Rollover  Contribution)  under Section 11.3 of the
Plan,  except that a  withdrawal  of any portion of his  Special  Avon  Rollover
Contribution  Account which  contains a loan  transferred  from the Tosco CAP is
subject to the provisions of Article XII of the Plan,  regarding  administration
of Plan loans.

         (c)  Withdrawals  of  any   portion   of   his  Account  Balance  after
attainment of age 59 1/2 under the terms of Section 11.5 of the Plan.

         Section B-11.2. Special Rules.

         (a)  Withdrawals  of  Avon  After-Tax  Contributions. A Member may make
withdrawals  from  his  Avon  After-Tax   Contribution   Account  at  any  time.
Withdrawals  shall  be  treated  as  being  made  from  the  Member's  After-Tax
Contributions and earnings thereon to the extent prescribed by Section 72 of the
Code.  A Member  may make no more than 2  withdrawals  in a Plan Year under this
Section.

         (b)  Other In-Service  Withdrawals.  A  Member who has not attained age
59 1/2 may, under this  subsection,  make  withdrawals  from his Account Balance
attributable to Avon Matching  Contributions,  to the extent such  Contributions
have been  credited to his Account for at least 24 months.  A withdrawal  is not
permitted  under  this  subsection  unless  the  Member  has  already  made  all
withdrawals  available to him from his Avon After-Tax  Contribution  Account.  A
Member  who  makes a  withdrawal  under  this  subsection  may not make a Salary
Deferral  Contribution  or an Avon  After-Tax  Contribution  during the 12-month
period following the withdrawal.

<PAGE>
                                  Article B-XII
                                      Loans

         Section B-12.1. General Availability of Loans. Loans shall be available
to Members who are Avon  Employees  under the terms of Section 12.1 of the Plan.
In the  case  of a loan to a  Member  whose  Account  Balance  includes  an Avon
After-Tax  Contributions  Account, the loan shall be treated as coming first out
of all  other  accounts,  and only then out of the Avon  After-Tax  Contribution
Account.

<PAGE>
                                 Article B-XIII
                                 Death Benefits

         Section B-13.1.  General Rule. After the death of a Member,  his Vested
Account  Balance,  including any accounts  attributable to  contributions  under
Article B-III of this  Appendix,  shall be paid  according to the  provisions of
Article XIII of the Plan.

<PAGE>
                                  Article B-XIV
                                Other Provisions

         Section B-14.1.  Other  provisions.  In addition to the foregoing,  the
benefits of Avon  Employees are governed by Articles XIV, XV, XVI,  XVII,  XVIII
and XIX of the Plan.

                                        /s/ Penelope R. Video
                                            Penelope R. Video
                                        Ultramar Diamond Shamrock Corporation

                                                                October 3, 2000
                                                                Date<PAGE>   1
                                                                   EXHIBIT 10.14

                          FIXED TERM LICENSE AGREEMENT
                          AGREEMENT NO.: FTLA-00CDS0717
                         DATE OF AGREEMENT: ___________

        This FIXED TERM LICENSE AGREEMENT ("Agreement"), entered into as of the
date specified above, is by and between CADENCE DESIGN SYSTEMS, INC., a Delaware
corporation having a principal place of business at 555 River Oaks Parkway, San
Jose, California 95134-1937, USA ("Cadence"), and TALITY LP, A DELAWARE LIMITED
PARTNERSHIP , having a place of business at 2655 Seely Ave., San Jose, CA 95134
("Customer"). Customer desires by this Agreement to obtain from Cadence limited,
temporary licenses to Use certain Licensed Programs and related Documentation
(as defined below) under the terms and conditions set forth below. Customer
intends to provide integrated circuit design, product design, PCB design,
manufacturing, and other services to its customers. In connection with such
services, Customer's employees along with subcontractors, and consultants (at
either a Designated Site or a remote location) may require the right to Use the
Licensed Programs as provided hereunder in connection with specific Customer
Projects ("Projects"). In addition, customers of Customer may also require the
right to view design results and Use the Licensed Program operation via
Customer's web site for such Projects. Therefore, Cadence and Customer agree as
follows:

        Therefore, Cadence and Customer agree as follows:

1. DEFINITIONS

        The following definitions apply herein:

        (a) "DESIGNATED EQUIPMENT" means either: (i) a server (located at the
Designated Site) identified by serial number, or host I.D on which the Licensed
Programs are stored, or; (ii) a computer or workstation, as identified by its
serial number, host I.D. number or ethernet address, located at the Designated
Site, to which the Licensed Programs are downloaded and Used only upon the
issuance of an electronic "key". The Designated Equipment shall be of a
manufacture, make and model, and have the configuration, capacity, (i.e.,
memory/disk), operating software version level and pre-requisite and
co-requisite applications, prescribed in the Documentation as necessary or
desirable for the operation of the Software.

        (b) "DESIGNATED SITE" means the specific address of Customer's facility
consisting of one or more buildings within a radius of one mile of the
Designated Equipment. Use of the Licensed Programs may be either at the
Designated Site or through remote access via a secure interface to the Licensed
Programs on the Designated Equipment at the Designated Site. The geographic
scope of such remote access shall be as set forth in the Product Quotation.

        (c) "DOCUMENTATION" means the user manuals and other written materials
which describes the Software, its operation and matters related to its use and
which Cadence generally makes available to its commercial licensees for use with
the Software and any updated, improved or modified version(s) of such materials,
whether provided in published written material, on magnetic media or
communicated by electronic means.

        (d) "EFFECTIVE DATE" means the date specified in each Product Quotation
representing the commencement of the Term of Use for the Licensed Programs.

        (e) "INITIAL CONFIGURATION" means the specific group of Licensed
Programs listed in each Product Quotation which represents the initial usage by
the Customer on the Effective Date.

        (f) "LICENSED PROGRAM(S)" means the specific group of Cadence Software
and the associated Documentation listed in the Product Quotation. Unless
otherwise specified in the Product Quotation, Licensed Programs excludes New
Technology as defined in Section 9(a)(6) herein.

        (g) "MAINTENANCE SERVICE(S)" shall mean any maintenance services,
installation assistance, customized support, consulting, or similar assistance
which Cadence may consent to provide to Customer related to the Licensed
Programs or to facilitate Customer's productive Use of the same, as is more
particularly described in Section 9 (Technical Support) herein.

        (h) "PRODUCT QUOTATION" means a written quotation from Cadence to
Customer identifying the Licensed Programs, Initial Configuration, quantity,
charges, term of Use and other information relevant to a specific transaction
which Cadence is quoting to Customer. Each Product Quotation will be included as
an Attachment to this Agreement and incorporated herein by reference.

        (i) "SOFTWARE" means any applications programming code or executable
computer program(s), and any updated, improved or otherwise modified version(s)
thereof, generally made commercially available by or on behalf of Cadence to
customers.

                                       1
<PAGE>   2

        (j) "TERM OF USE" means that period of time Customer has Use of the
Licensed Programs as specified in each Product Quotation.

        (k) "THEN CURRENT CONFIGURATION" means the specific group of Licensed
Programs being Used by Customer in accordance with the provisions of this
Agreement at the time Customer has the right to "remix" as provided in Section
3(b).

        (l) "USE" means copying all or any portion of a Licensed Program into
the Designated Equipment or transmitting it to the Designated Equipment for
processing instructions contained in the Licensed Program and/or loading data
into or displaying, viewing or extracting output results from or otherwise
operating any portion of the Licensed Program for the purpose of Customer's
design and manufacture of electronic circuits and systems.

2. SCOPE AND BACKGROUND

        This Agreement puts into place a mechanism whereby Customer can: (i)
temporarily license a number of Licensed Programs and its Documentation; and
(ii) obtain Maintenance Services for the Licensed Programs pursuant to the
provisions and during the Term of Use for such Licensed Programs. This Agreement
has the following characteristics: (i) only Cadence Licensed Programs can be
licensed; (ii) the duration of the Use of the Licensed Programs is limited to
the Term of Use as specified in each Product Quotation attached to this
Agreement; (iii) Maintenance Service charges are included as part of the Fees
(as defined in Section 4 below); and (iv) any copy of the Licensed Programs can
only be Used by Customer at a Designated Site or at remote sites in accordance
with Section 3(c) of this Agreement. If Customer desires to acquire a license to
Use any third party program marketed by Cadence, or a perpetual license to any
Cadence Software, such acquisitions shall be a separate transaction outside the
scope of this Agreement.

3. LICENSE GRANT

        (a) GRANT: Subject to Customer's timely payment of the Fees as set forth
in Section 4 and subject to the limitations set forth in Section 3(b), Cadence
hereby grants Customer, for the Term of Use as specified in each Product
Quotation attached to this Agreement, a non-transferable, non-exclusive,
personal, limited license to: (i) Use the quantity of Licensed Programs
identified in that Product Quotation at the Designated Sites on any unit of
Designated Equipment owned or leased by Customer, or at remote locations as
provided in sub-part (c) below, provided, however, each item of Licensed
Programs is only Used on one unit of Designated Equipment at a time by a single
user; and (ii) Use the Documentation at the Designated Site, or at remote
locations as provided in sub-part (c) below, as is reasonably necessary for
Customer's licensed Use of the Licensed Programs (collectively, a "Fixed Term
License"). All rights not expressly granted to Customer pursuant to this
Agreement are reserved by Cadence.

        (b) LIMITATION: Customer agrees as of the Effective Date of the
applicable Product Quotation, Customer may initially Use only those Licensed
Programs identified in the Initial Configuration. If specified in the Product
Quotation, and upon reasonable prior written notice to Cadence, Customer may
periodically remix the Initial Configuration or the Then Current Configuration
with the following limitations: (i) the total value of the new configuration, as
calculated in the Product Quotation, may not exceed the total value of the
Initial Configuration, and (ii) the maximum dollar value of the Then Current
Configuration, which may be exchanged for other Licensed Programs, is specified
in the Product Quotation. Customer shall execute a Certificate of Discontinued
Use upon the completion of each remix for those Licensed Programs that are
exchanged or terminated in the remix.

        (c) RESTRICTION: All rights, title and interest in the Licensed Programs
shall remain the exclusive property of Cadence and/or its licensors. Each
Licensed Program and its Documentation are the confidential and proprietary
property of Cadence or third parties from whom Cadence has obtained the
appropriate rights. Customer shall not Use or copy the Licensed Program or
Documentation except as expressly permitted hereunder. In order to protect
Cadence and/or its licensors' intellectual property, Customer shall not modify,
disassemble, decompile or reverse translate or create derivative works from the
Licensed Programs or otherwise attempt to derive the Software's source code, or
let any third party do so. No right or license is granted or implied under any
of Cadence's, or its licensors', patents, copyrights, trademarks, trade names,
service marks or other intellectual property rights to Use the Licensed Programs
or to license or authorize others to Use the Licensed Programs beyond the rights
and restrictions set forth in this Agreement. Customer shall not remove or alter
any of Cadence or its licensors' restrictive or ownership legends appearing on
or in the Licensed Programs and shall reproduce such legends on all copies
permitted to be made. Customer shall not let the Licensed Programs be accessed
or used by third parties or anyone other than Customer's employees whose duties
require such access or use. Notwithstanding the foregoing, Customers authorized
consultants and subcontractors may Use the Licensed Program on the Designated
Equipment at the Designated Site or from remote locations (specified in a
Product Quotation) but only where such Use is in connection with their
performing services for a Project on Customer's behalf consistent with the Fixed
Term License granted to Customer hereunder. In addition, clients of Customer
may Use the Licensed Program on the Designated Equipment at the Designated site
or access the Designated Equipment from a remote location, only where such Use
is in connection with performing services for a Project consistent with the
Fixed Term License granted to Customer hereunder. For each such Project,
Customer shall establish a specific authorization procedure whereby only
Customer employees, consultants, subcontractors and/or clients with specific
authorization from Customer on such Project shall have access to and Use of the
Licensed Programs. As a condition precedent to such Use of the Licensed
Programs, Customer shall (i) require such consultants, subcontractors and
clients to sign written agreements obligating them to observe the same material
restrictions concerning the Licensed Program as are contained in this

                                       2
<PAGE>   3

Agreement, (ii) ensure that such agreements contain a provision establishing
Cadence, in the event of a reasonable belief by Cadence that the other party to
such agreement has been or is breaching Cadence's intellectual property rights,
as a third party beneficiary of such agreements with respect to such
intellectual property rights and the right of Cadence to seek injunctive or
other legal or equitable relief for such breach, (iii) have in place reasonable
security measures to ensure that the Licensed Programs are Used only in
accordance with the terms of this Agreement, and (iv) promptly notify Cadence in
the event Customer learns of any material breach of such agreements. Customer
shall remain fully liable to Cadence for any misuse of the Licensed Programs by
Customer's authorized consultants, subcontractors and clients.

        (d) ADDITIONAL LICENSED PROGRAMS: Subject to Customer's payment to
Cadence of additional fees as determined by mutual agreement of the parties,
Customer may acquire the right and license to Use additional Cadence Software.

4. FEES; TAXES

        (a) FEES AND PAYMENT: Customer shall pay Cadence the license fees
("License Fees") and maintenance services fees ("Maintenance Services Fees")
(collectively, the "Fees"). Such Fees shall be remitted so that they are
received by Cadence by the dates and in the amounts set forth in the Product
Quotation and, except as expressly provided herein, are non-refundable. In
addition, Customer's obligation to remit License Fee payments to Cadence in
accordance with the payment schedule set forth in the Product Quotation shall be
absolute, unconditional, noncancellable and nonrefundable, and shall not be
subject to any abatement, set-off, claim, counterclaim, adjustment, reduction,
or defense for any reason, including, but not limited to, any claims that
Cadence failed to perform under this Agreement or termination of this Agreement.
Past due amounts shall be subject to a monthly service charge of one and
one-half percent (11/2%) per month of the unpaid balance or the maximum rate
allowable by law. In addition to all other sums payable hereunder, Customer
shall pay all reasonable out-of-pocket expenses incurred by Cadence, including
fees and disbursements of counsel, in connection with collection and other
enforcement proceedings resulting therefrom or in connection therewith.

        (b) TAXES: All Fees are net. Customer will pay or reimburse all taxes,
duties and assessments, if any due, based on or measured by amounts payable to
Cadence in any transaction between Customer and Cadence under this Agreement
(excluding taxes based on Cadence's net income) together with any interest or
penalties assessed thereon, or furnish Cadence with evidence acceptable to the
taxing authority to sustain an exemption therefrom (collectively, "Taxes").

5. TERM AND TERMINATION

        (a) TERM: This Agreement is entered into as of the date specified on the
initial page and shall terminate on the latest termination date set forth in the
Product Quotation(s) ("Term") unless terminated as provided in Section 5(b), or
the parties have negotiated a continuance or renewal hereof.

        (b) TERMINATION: This Agreement may be terminated by Cadence: (i) if
Customer fails to pay when due all or any portion of any amounts payable
hereunder, and such failure is not cured within thirty (10) days after written
notice; or (ii) if Customer breaches any provisions of Section 3 herein and such
breach is not cured within ten (10) days after written notice; or (iii) in the
event of a material breach by Customer of any other provision of this Agreement
where Customer fails to correct such breach within thirty (30) days of its
receipt of written notice thereof; or (iv) immediately if Customer becomes
insolvent or makes an assignment for the benefit of creditors, or a trustee or
receiver is appointed for Customer or for a substantial part of its assets, or
bankruptcy, reorganization or insolvency proceedings shall be instituted by or
against Customer; or (v) if an "Event of Default" (as defined in the Installment
Payment Agreement "IPA") occurs and is continuing under any IPA in favor of
Cadence or Cadence Credit, if Customer enters into such an IPA in order to
finance the License Fees. This Agreement may be terminated by Customer in the
event of a material breach by Cadence of any provision of this Agreement where
Cadence fails to correct such breach within thirty (30) days of its receipt of
written notice thereof. In the event of a material breach by Cadence, Customer
may, at its option, either (i) terminate the Agreement as provided herein, or
(ii) continue to Use the Licensed Programs provided that in such instance,
Customer agrees to continue to make Maintenance Fee payments during the Term of
Use.

        (c) EFFECT OF TERMINATION: Expiration or termination of this Agreement
shall simultaneously terminate Customer's usage rights for all Fixed Term
Licenses and Cadence's Maintenance Service obligations with respect thereto.
Within thirty (30) days after expiration or termination of this Agreement,
Customer shall: (i) furnish Cadence written notice certifying that the original
and all copies, including partial copies, of the Licensed Programs furnished by
Cadence under this Agreement or made by Customer as permitted by this Agreement,
have either been returned to Cadence or destroyed and no copies or portions
thereof remain in the possession of Customer, its employees or agents; and (ii)
make prompt payment in full to Cadence for all amounts then due plus the present
value (discounted at the lesser of; (a) the then current one year U.S. Treasury
Bill Rate and, (b) the one year U.S. Treasury Bill Rate as of the Effective Date
of this Agreement) of the unpaid balance of the License Fees as set forth in the
Product Quotation, together with any applicable Taxes. Sections 3(c), 4, 5(c),
10, 11(b), 12, 13.6, 13.7 and 13.8 shall survive expiration or termination of
this Agreement.

                                       3
<PAGE>   4

6. ORDERING

        If required by Customer, Customer shall order Licensed Programs and
Maintenance Services using its standard purchase order forms. All Customer
orders shall: (i) conform to and cite this Agreement; and (ii) describe the
Licensed Programs and/or Maintenance Services being ordered (by Cadence's
product numbers and nomenclature), (iii) identify the quantity, price, ship and
bill to addresses and (iv) include such other data as Cadence may reasonably
require. This Agreement shall govern all Customer purchase orders accepted by
Cadence during the Term and within the scope of this Agreement. Any terms and
conditions contained or incorporated by reference in purchase orders,
acknowledgments, invoices, confirmations or other business forms of either party
which add to or differ from the terms and conditions of this Agreement or the
Attachments made a part hereof shall be of no force or effect whatsoever
concerning the subject matter of this Agreement, and either party's failure to
object thereto shall not be deemed a waiver of its rights hereunder.

7. SHIPMENT

        Delivery is to be made F.O.B point of shipment. Customer shall pay
shipping charges, including insurance. Risk of loss shall pass to Customer upon
delivery to carrier.

8. COPIES AND TRANSFER

        (a) COPIES: Customer may make a reasonable number of copies of a
Licensed Program for either of the following purposes only: (i) archival
purposes; or (ii) for use as a back-up when the Licensed Program is not
operational. All legends, trademarks, trade names, copyright legends and other
identifications must be copied when copying the Licensed Program. Documentation
may not be copied except for a reasonable number of printed copies produced by
Customer for internal use only from the Documentation provided in electronic
form. At Cadence's request, Customer will provide Cadence with a listing of the
number of copies currently in possession or control by Customer.

        (b)TRANSFER: The Licensed Program may be moved from the Designated Site
or the Designated Equipment only if the Designated Equipment malfunctions and
only with Cadence's prior written consent. Customer will immediately return
Cadence's Rehost Certificate when the Licensed Program is moved from either the
previously identified Designated Equipment or Designated Site and completely
remove the Licensed Program from such equipment.

9. TECHNICAL SUPPORT

        Subject to the terms and conditions of this Agreement and Customer's
timely payment of applicable Fees, Cadence agrees to use commercially reasonable
efforts to perform, or have provided, during the Term hereof, the following
technical assistance with respect to the Licensed Programs:

        (a) MAINTENANCE SERVICES:

            (1) TELEPHONE SUPPORT: Cadence will make available telephone
assistance to Customer through Cadence's Customer Response Center ("CRC")
between 8:00 a.m. and 5:00 p.m., Designated Site local time (the "Prime Shift"),
Monday through Friday excluding Cadence's holidays.

            (2) ERROR RESOLUTION ASSISTANCE: Cadence will acknowledge receipt of
Customer's error or problem changes request (a "PCR") within four (4) Prime
Shift hours. Upon receipt of a Customer's PCR containing a detailed description
of the nature of the error, the conditions under which it occurs and other
relevant data sufficient to enable Cadence to reproduce a reported error in
order to verify its existence and diagnose its cause, upon completion of
diagnosis Cadence will provide Customer appropriate assistance in accordance
with Cadence's standard commercial practices, including furnishing Customer with
an avoidance procedure, bypass, work-around, patch or hot-fix (i.e., a Customer
specific release for a production stopping problem with no work-around) to
correct or alleviate the condition reported.

            (3) UPDATE(S): Cadence will provide Customer any Update(s) (as
defined below) for Licensed Programs that Cadence releases on a general
commercial basis to its other customers. Cadence will also provide instructions
and/or Documentation that Cadence considers reasonably necessary to assist in a
smooth transition for Use of an Update.

            (4) COMMUNICATION: Cadence will provide Customer: (i) access to
Cadence's SourceLink(TM) electronic bulletin board service; and, (ii) such
newsletters and other publications, as Cadence routinely provides or makes
accessible to all Maintenance Service customers to furnish information on topics
such as Software advisories, known problem and solution summaries, product
release notes, application notes, product descriptions, removal of an item from
a product line, training class descriptions and schedules, bulletins about user
group activity and the like.

            (5) VERSIONS SUPPORTED: Customer acknowledges that Cadence will
maintain only the most current version of the Licensed Programs. Cadence shall
also maintain the last prior version until the earlier of twelve (12) months
from the release of each new version release, or termination of this Agreement.

            (6) GENERAL: As used herein an "Update" means a Software
modification released by Cadence on a general, regularly scheduled basis as a
standard Maintenance Service offering to its other commercial customers who have
the same Software version under maintenance contract coverage with Cadence and
Use such Software on computer hardware of the same manufacture, make and model
as the Designated Equipment upon which Customer Uses the Software. Updates may
include revisions to Documentation. "New Technology" means any enhancement(s) or
addition(s) to Software (other than an Update) which Cadence does not make
available to its

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<PAGE>   5

commercial customers as a part of the standard Maintenance Service offering
under a software maintenance contract, but rather is only provided subject to
payment of a separate fee. New Technology is determined and defined by Cadence
and is not covered by, and will not be provided in consideration of the Fees
already paid by Customer unless otherwise specified in a Product Quotation.

        (b) CUSTOMER'S RESPONSIBILITIES: Customer shall:

            (1) NOTIFICATION: Notify Cadence promptly by either (i) Cadence
electronic problem reporting software; or (ii) telephone with a description of
the problem and a follow-up with a written PCR. If Customer does not receive
Cadence's acknowledgment of its receipt of such report within four (4) Prime
Shift hours, Customer shall promptly re-transmit such report.

            (2) ACCESS: Allow Cadence access to the Designated Equipment and
communication facilities during Prime Shift and subject to Customer's security
and safety procedures, and provide Cadence reasonable work space and other
normal and customary facilities.

            (3) ASSISTANCE: Provide Cadence with reasonable assistance as
requested and when Maintenance Services are performed on site at Customer's
facility and ensure that a Customer employee is present.

            (4) TEST TIME: Provide sufficient support and test time on
Customer's Equipment to allow Cadence to duplicate an error and verify if it is
due to a Licensed Program, and when corrections are complete, acknowledge that
the error has been resolved.

            (5) STANDARD OF CARE: Provide the same standard of care for the
Licensed Program that it applies to its own products or data of like value to
its business and return any defective Licensed Programs or attest in writing to
the destruction of same as directed by Cadence.

            (6) SUPPORT: If Customer makes modifications, interfaces, and/or
other changes to the Licensed Program as permitted under this Agreement,
promptly inform Cadence in writing and provide such information as Cadence
determines necessary to properly maintain the Licensed Program.

            (7) DATA NECESSARY: Provide data sufficient to enable Cadence to
replicate a reported error on its own computers at the CRC.

        (c) EXCLUDED SERVICES: Maintenance Services required in connection with
or resulting from the following are excluded from this Agreement:

            (1) abuse, misuse, accident or neglect; or, repairs, alterations,
and/or modifications which are not permitted under this Agreement and which are
performed by other than Cadence or its agents; or

            (2) the relocation of Licensed Programs from one unit of Equipment
to another or from the Designated Site; or making changes due to Customer's
decision to reconfigure the Licensed Program or the system or network upon which
it is installed; or

            (3) maintenance, malfunction, modification of the Designated
Equipment or its operating system; or

            (4) Use of the Licensed Program on a hardware platform other than
the Designated Equipment; or use of other than the most current or last prior
release of the Licensed Program; or

            (5) Customer's failure to maintain configuration environment (i.e.,
memory/disk capacity, operating system revision level, prerequisite or
co-requisite items, etc.) specified in the Documentation; or where inadequate
backups are supplied.

        (d) ADDITIONAL SERVICES: If Cadence agrees to perform services requested
by Customer which are not included as part of this Agreement, such services
shall be billed to Customer at prices and terms to be agreed by the parties.

10. PROPRIETARY RIGHTS INDEMNITY

        Cadence will indemnify, defend and hold Customer harmless, at Cadence's
own expense, against any legal claim or action brought against Customer to the
extent that it is based on a claim or allegation that any Licensed Program
directly infringes a U.S., European or Japanese patent, copyright, trademark, or
trade secret of any third party, and Cadence will pay any liabilities and costs
and damages finally awarded against Customer in any such action that are
attributable to any such claim or incurred by Customer through settlement
thereof, but shall not be responsible for any compromise made or expense
incurred without its consent. However, such defense and payments are subject to
the condition that Customer gives Cadence prompt written notice of such claim,
allows Cadence to direct the defense and settlement of the claim, and cooperates
with Cadence as reasonably necessary for defense and settlement of the claim.
Should any Licensed Program, or the operation thereof, become or in Cadence's
opinion be likely to become, the subject of such claim, Cadence may, at
Cadence's option and expense, procure for Customer the right to continue using
the Licensed Program, replace or modify the Licensed Program so that it becomes
non-infringing, or, if neither of the foregoing options are commercially
reasonable or practicable, terminate the license granted hereunder for such
Licensed Program and refund to Customer the Fees (less a reasonable charge for
the period during which Customer has had availability of such Licensed Program
for Use and of the Maintenance Services). Cadence will have no liability for any
infringement claim to the extent it (i) is based on modification of a Licensed
Program other than by Cadence, with or without authorization; or (ii) results
from failure of Customer to use an updated version of a Licensed Program
provided by Cadence to Customer; or (iii) is based on the combination or use of
a Licensed Program with any other software, program or device not provided by
Cadence if such infringement would not have arisen but for such use or
combination; or (iv) results from compliance by Cadence with designs, plans or
specifications furnished by Customer, or (v) is based on

                                       5
<PAGE>   6

any products, devices, software or applications designed or developed through
use of the Licensed Programs. THE FOREGOING STATES CADENCE'S ENTIRE LIABILITY
AND CUSTOMER'S EXCLUSIVE REMEDY FOR PROPRIETARY RIGHTS INFRINGEMENT.

11. LIMITED WARRANTY

        (a) Cadence warrants for thirty (30) days after shipment that the
recording media by which the Licensed Programs are furnished is free of
manufacturing defects and shipping damage if the media has been properly
installed on the Designated Equipment. Cadence does not warrant that Licensed
Programs will meet Customer's requirements or that their Use will be
uninterrupted or error free. As Customer's sole remedy and Cadence's entire
liability for breach of the warranty herein, Cadence will provide a replacement
magnetic media containing the Licensed Programs ordered by Customer.

        (b) EXCEPT AS PROVIDED ABOVE, CADENCE MAKES NO WARRANTIES TO CUSTOMER
WITH RESPECT TO THE LICENSED PROGRAMS OR ANY SERVICE, ADVICE, OR ASSISTANCE
FURNISHED HEREUNDER, AND NO WARRANTIES OF ANY KIND, WHETHER WRITTEN, ORAL,
IMPLIED OR STATUTORY, INCLUDING WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, NON-INFRINGEMENT OR ARISING FROM COURSE OF DEALING OR USAGE
IN TRADE SHALL APPLY.

12. LIMITATION OF LIABILITY

        Cadence's cumulative liability to Customer for all claims of any kind
resulting from Cadence's performance or breach of this Agreement or the Licensed
Program(s) or Services furnished hereunder shall not exceed, to the extent
collected by Cadence, the Fees actually received by Cadence from Customer under
this Agreement during the current Term for the Licensed Program(s) or
Maintenance Services which are the subject of such claim, regardless of whether
Cadence has been advised of the possibility of such damages or whether any
remedy set forth herein fails of its essential purpose or otherwise. NEITHER
PARTY SHALL BE LIABLE FOR COSTS OF PROCUREMENT OF SUBSTITUTES, LOSS OF PROFITS,
INTERRUPTION OF BUSINESS, OR FOR ANY OTHER SPECIAL, CONSEQUENTIAL OR INCIDENTAL
DAMAGES, HOWEVER CAUSED, WHETHER FOR BREACH OF WARRANTY, CONTRACT, TORT,
NEGLIGENCE, STRICT LIABILITY OR OTHERWISE. Customer agrees it will take no legal
action against Cadence's third party software suppliers related to the Software
licensed under this Agreement.

13. GENERAL PROVISIONS

        13.1 NOTICES

        Notices to Customer shall be sent to the address on the initial page and
to Cadence at 555 River Oaks Parkway, San Jose, California 95134 USA, Attn:
Legal Department, or such new address as a party specifies to the other in
writing.

        13.2 EXPORT

        The Fixed Term License(s) granted hereunder does not permit export of
the Licensed Programs without the prior written consent of Cadence. The Licensed
Programs, Documentation and all related technical information or materials are
subject to export controls and (are or may be) licensable under the U. S.
Government export regulations. Customer will not export, re-export, divert,
transfer or disclose, directly or indirectly the Licensed Programs,
Documentation and any related technical information or materials without
complying strictly with all legal requirements including without limitation
obtaining the prior approval of the U. S., Department of Commerce and, if
necessary, other agencies or departments of the U.S. Government. Licensee will
execute and deliver to Cadence such "Letters of Assurance" as may be required
under applicable export regulations. Customer shall indemnify Cadence against
any loss related Customer's failure to conform to these requirements.

        13.3 ASSIGNMENT

        (a) NO ASSIGNMENT: Customer may not delegate, assign or transfer this
Agreement, nor any of its rights and obligations under this Agreement, without
the prior written consent of Cadence, which consent shall not be unreasonably
withheld or delayed. Customer agrees that this Agreement binds Customer and each
of its affiliates and the employees, agents, representatives and persons
associated with any of them. Without limitation of the foregoing, in the event
of a sale of substantially all the assets of Customer, a merger, a
re-organization, or change in control of fifty percent (50%) or more of the
equity of Customer (a "Change in Control"), no transfer or assignment
(including, without limitation, an assignment by operation of law) of this
Agreement may be made without the prior written consent of Cadence, which
consent shall not be unreasonably withheld or delayed. As used in this
Agreement, assignment shall not include, and no consent shall be required, (1)
if Customer raises additional capital through sale of equity (either privately
or through a public offering) or debt instruments, provided that the additional
equity issued does not change the equity percentage held by existing owners
immediately prior to such offering more than 50%, (2) if Customer changes its
state of incorporation, (3) if Customer acquires a third party that does not
compete with Cadence, or (4) otherwise reorganizes its corporate structure
without a change in its equity structure. If Customer is acquired by or acquires
an unrelated third party or through merger forms a new corporation, Customer
shall notify Cadence no later than five business days following conclusion of
the merger providing such details as Cadence reasonably requests. Cadence shall
either (a) provide its consent to the

                                       6
<PAGE>   7

acquisition, the provision of which shall not be unreasonably withheld or
delayed, (b) notify Customer in writing that it wishes a six month period to
evaluate the results of the acquisition, or (c) notify Customer within ten
business days that it objects to the acquisition setting forth the business
reasons therefor and any corrective action that it would consider mitigation of
its concerns. If Customer is unable to reasonably mitigate the concerns
expressed within 30 days following its receipt of such notice, Cadence shall
have the right to request alterations to the Agreement that would make it
acceptable, or if no alterations can be agreed upon, then the parties agree to
resolve such dispute in accordance with the dispute resolution provisions of
this Agreement. Customer and Cadence agree that legitimate concerns by Cadence
include, but are not limited to, (i) acquisition of Customer by a competitor of
Cadence, and (ii) acquisition of Customer at a price that is substantially less
than the value of the Cadence Software licenses held by Customer.

        (b) ASSIGNMENT OF LICENSE FEES: Cadence may sell or assign the License
Fees owing under this Agreement to third-parties ("Assignee"). Upon written
notice to Customer that the right to the License Fees hereunder has been
assigned, in whole or in part, Customer shall, if requested, pay all assigned
amounts directly to Assignee. Customer waives and agrees it will not assert
against Assignee any abatement, set-off, claim, counterclaim, adjustment,
reduction, or defense for any reason, including, but not limited to, any claims
that Cadence failed to perform under this Agreement or termination of this
Agreement, it may have against Cadence. Customer waives all rights to make any
claim against Assignee for any loss or damage to the Licensed Programs or breach
of any warranty, express or implied, as to any matter whatsoever, including but
not limited to the Licensed Programs and service performance, functionality,
features, merchantability or fitness for a particular purpose, or any indirect,
incidental or consequential damages or loss of business.

        (c) OBLIGATIONS: Customer shall pay Assignee all License Fees due and
payable under this Agreement, but shall pursue any claims under this Agreement
against Cadence. Except as provided in SECTION 5, neither Cadence nor its
Assignees will interfere with Customer's quiet enjoyment or use of the Licensed
Programs in accordance with this Agreement's terms and conditions.
Notwithstanding any assignment by Cadence, Cadence shall remain obligated to
perform all of its obligations under this Agreement.

        13.4 U. S. GOVERNMENT CONTRACT PROVISIONS

        This Agreement is for Customer's temporary acquisition of Licensed
Programs for its internal Use. No Government procurement regulation or contract
clauses or provision shall be deemed a part of any transaction between the
parties under this Agreement unless its inclusion is required by law, or
mutually agreed upon in writing by the parties in connection with a specific
transaction. Customer acknowledges that Cadence represents that: (i) the
Licensed Programs are unpublished, "Commercial Computer Software and Commercial
Computer Software Documentation" subject to "Restricted Rights" usage
limitations, as such italicized terms are discussed in 48 CFR Section 227.401
and any other equivalent Government regulation; (ii) that the Licensed Programs
were developed exclusively at private expense, that no part was developed with
Government funds, nor is any part in the public domain; and (iii) that such
items constitute trade secrets of Cadence for all purposes of the Freedom of
Information Act.

        13.5 FORCE MAJEURE

        Except for Customer's obligation pursuant to Section 4, neither party
shall be liable to the other party for delay in performing its obligations, or
failure to perform any such obligations under this Agreement, if the delay or
failure results from circumstances beyond the reasonable control of the party,
including but not limited to, any acts of God, governmental act, fire,
explosion, accident, war, armed conflict or civil commotion. In the event of any
such delay the time for performance shall be extended by the amount of time lost
by reason of such delay provided however should an event of force majeure
described in this section delay either party's performance in any material
respect for a period of more than 90 days, then the other party shall have the
option, upon giving written notice, to terminate this Agreement or the relevant
order or portion thereof affected by the delay.

        13.6 WAIVER AND SEVERABILITY

        Failure by either party to enforce at any time any of the provisions of
this Agreement, or to exercise any election of options provide herein, shall not
constitute a waiver of such provision or option, nor affect the validity of this
Agreement or any part thereof, or the right of the waiving party to thereafter
enforce each and every such provision. If any provision of this Agreement is
held invalid or unenforceable, the remainder of the Agreement shall continue in
full force and effect.

                                       7
<PAGE>   8

        13.7 GOVERNING LAW

        This Agreement will be governed by the procedural and substantive laws
of the State of California, U.S.A., without regard to its conflicts of laws
principles. This Agreement is prepared and executed and shall be interpreted in
the English language only, and no translation of the Agreement into another
language shall have any effect. The parties agree that the United Nations
Convention on Contracts for the International Sale of Goods (1980) is
specifically excluded from and shall not apply to this Agreement.

        13.8 DISPUTE RESOLUTION

        The parties shall attempt in good faith to resolve any issues arising in
connection with Maintenance Services provided under this Agreement informally
according to the following procedure. Upon written request of a party
identifying an issue to be resolved, each party will designate a management
representative with the responsibility and authority to resolve the dispute. The
designated management representatives shall meet preliminarily within seven (7)
days after the request is received from the requesting party. At this first
meeting, the designated management representatives shall identify the scope of
the issue and the information needed to discuss and attempt to resolve the
issue. These management representatives shall then gather relevant information
regarding the dispute and shall meet to discuss the issues and negotiate in good
faith to resolve the dispute. Such second meeting shall occur within fifteen
(15) days of the first meeting. If no resolution is reached following such
second meeting, designated executives from Cadence and Customer shall meet
within fifteen (15) days and negotiate in good faith to resolve the issue.

        13.9 ENTIRE AGREEMENT

        This Agreement and the Attachments hereto is the complete and exclusive
statement of the agreement between the parties and supersedes all proposals,
oral or written, and all other communications between the parties relating to
the subject matter of this Agreement. Only a written instrument duly executed by
authorized representatives of Cadence and Customer may modify this Agreement.

IN WITNESS WHEREOF, THE PARTIES HERETO HAVE ENTERED INTO THIS AGREEMENT AS OF
THE EFFECTIVE DATE.

CUSTOMER:

By: _____________________________________

Name: ___________________________________

Title: __________________________________

Date: ___________________________________

CADENCE DESIGN SYSTEMS, INC.

By: _____________________________________

Name: ___________________________________

Title: __________________________________

Date: ___________________________________

                                       8

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