EXECUTION COPY
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
DATED AS OF MAY 6, 2001
BY AND BETWEEN
VALERO ENERGY CORPORATION
AND
ULTRAMAR DIAMOND SHAMROCK CORPORATION
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
ARTICLE I CERTAIN DEFINITIONS............................................ 4
ARTICLE II THE MERGER................................................. 12
2.1 The Merger.......................................................... 12
2.2 Effective Time of the Merger........................................ 12
2.3 Effects of the Merger............................................... 12
2.4 Closing............................................................. 12
2.5 Certificate of Incorporation........................................ 12
2.6 By-Laws............................................................. 12
2.7 Directors and Officers.............................................. 12
ARTICLE III CONVERSION OF SECURITIES................................... 13
3.1 Effect of the Merger on Capital Stock............................... 13
3.2 Stock Options....................................................... 16
3.3 Exchange Fund....................................................... 17
3.4 Exchange Procedures................................................. 17
3.5 Distributions with Respect to Unexchanged Shares.................... 18
3.6 No Further Ownership Rights in UDS Common Stock..................... 18
3.7 No Fractional Shares of Valero Common Stock......................... 18
3.8 Termination of Exchange Fund........................................ 19
3.9 No Liability........................................................ 19
3.10 Investment of the Exchange Fund..................................... 19
3.11 Lost Certificates................................................... 19
3.12 Withholding Rights.................................................. 19
3.13 Further Assurances.................................................. 19
3.14 Stock Transfer Books................................................ 20
ARTICLE IV REPRESENTATIONS AND WARRANTIES............................. 20
4.1 Representations and Warranties of UDS............................... 20
4.2 Representations and Warranties of Valero............................ 30
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS.................. 38
5.1 Covenants of UDS.................................................... 38
5.2 Covenants of Valero................................................. 41
5.3 Governmental Filings................................................ 42
5.4 Control of Other Party's Business................................... 42
ARTICLE VI ADDITIONAL AGREEMENTS...................................... 42
6.1 Preparation of Proxy Statement; Stockholders Meetings............... 42
6.2 Valero Board of Directors........................................... 44
6.3 Access to Information............................................... 44
6.4 Reasonable Best Efforts............................................. 44
6.5 Acquisition Proposals............................................... 46
6.6 Fees and Expenses................................................... 47
6.7 Directors' and Officers' Indemnification and Insurance.............. 47
6.8 Employee Benefits................................................... 48
6.9 Public Announcements................................................ 49
6.10 Listing of Shares of Valero Common Stock............................ 50
6.11 Rights Agreements................................................... 50
6.12 Affiliates.......................................................... 50
6.13 Section 16 Matters.................................................. 50
6.14 UDS Indebtedness.................................................... 50
6.15 Accountants' Letter................................................. 51
ARTICLE VII CONDITIONS PRECEDENT....................................... 51
7.1 Conditions to Each Party's Obligation to Effect the Merger.......... 51
7.2 Additional Conditions to Obligations of Valero...................... 51
7.3 Additional Conditions to Obligations of UDS......................... 52
ARTICLE VIII TERMINATION AND AMENDMENT.................................. 53
8.1 Termination......................................................... 53
8.2 Effect of Termination............................................... 54
8.3 Amendment........................................................... 56
8.4 Extension; Waiver................................................... 56
ARTICLE IX GENERAL PROVISIONS......................................... 56
9.1 Non-Survival of Representations, Warranties and Agreements.......... 56
9.2 Notices............................................................. 56
9.3 Interpretation...................................................... 57
9.4 Counterparts........................................................ 58
9.5 Entire Agreement; No Third Party Beneficiaries...................... 58
9.6 Governing Law....................................................... 58
9.7 Severability........................................................ 58
9.8 Assignment.......................................................... 58
9.9 Submission to Jurisdiction; Waivers................................. 58
9.10 Enforcement......................................................... 59
EXHIBIT A - Form of Affiliate Letter
AGREEMENT AND PLAN OF MERGER, dated as of May 6, 2001 (this
"Agreement"), by and between VALERO ENERGY CORPORATION, a Delaware corporation
("Valero") and ULTRAMAR DIAMOND SHAMROCK CORPORATION, a Delaware corporation
("UDS").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Valero and UDS have
approved the transactions contemplated by this Agreement and have recommended
the adoption of this Agreement by their respective shareholders; and
WHEREAS, for Federal income tax purposes, it is intended that
the Merger shall qualify as a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations promulgated thereunder.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth in
this Agreement, and intending to be legally bound hereby, the parties hereto
agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the
respective meanings set forth below:
"Acquisition Proposal" shall have the meaning set forth in
Section 6.5(a)(i).
"Affiliate" shall have the meaning given such term in Rule
12b-2 under the Exchange Act.
"Affiliate Agreement" shall have the meaning set forth in
Section 6.12.
"Agreement" shall have the meaning set forth in the preamble.
"Assumed Indentures" shall have the meaning set forth in
Section 6.14.
"beneficial ownership" or "beneficially own" shall have the
meaning ascribed to such terms under Section 13(d) of the Exchange Act and the
rules and regulations thereunder.
"Benefit Plan" means, with respect to any entity, any employee
compensation, benefit plan, program, policy, practice, agreement, contract or
other arrangement providing benefits to any current or former employee, officer
or director of such entity or any of its Subsidiaries or any beneficiary or
dependent thereof that is sponsored or maintained by such entity or any of its
Subsidiaries or to which such entity or any of its Subsidiaries contributes or
is obligated to contribute, whether or not written, including without
limitation, any employee welfare benefit plan within the meaning of Section 3(1)
of ERISA, any employee pension benefit plan within the meaning of Section 3(2)
of ERISA (whether or not such plan is subject to ERISA) and any bonus,
incentive, deferred compensation, vacation, stock purchase, stock option,
severance, employment, change of control or fringe benefit plan, program, policy
or agreement and any related trusts or other funding vehicles.
"Benefit Protection Period" shall have the meaning set forth
in Section 6.8(a).
"Business Day" means any day on which banks are not required
or authorized to close in the City of New York.
"Cash Consideration" shall have the meaning set forth in
Section 3.1(b).
"Cash Consideration Formula" shall have the meaning set forth
in Section 3.1(b).
"Cash Election" shall have the meaning set forth in Section
3.1(f)(i).
"Cash Election Shares" shall have the meaning set forth in
Section 3.l(g).
"Cash Election Number" shall mean, subject to Section 3.1(k),
the quotient, rounded to the nearest whole share, obtained by dividing (x) the
product of 27.5 and the UDS Closing Share Number by (y) the Cash Consideration;
provided, however, that, if the Cash Election Number as so determined exceeds
50% of the UDS Closing Share Number, Valero may in its discretion set a maximum
Cash Election Number at any lesser number so long as such maximum Cash Election
Number equals or exceeds 50% of the UDS Closing Share Number.
"Cash Fraction" shall have the meaning set forth in Section
3.1(g).
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
"Certificate of Merger" shall have the meaning set forth in
Section 2.2.
"Change in the UDS Recommendation" shall have the meaning set
forth in Section 6.1(b).
"Change in the Valero Recommendation" shall have the meaning
set forth in Section 6.1(c).
"Closing" shall have the meaning set forth in Section 2.4.
"Closing Date" shall have the meaning set forth in Section
2.4.
"Code" shall have the meaning set forth in the recitals.
"Confidentiality Agreement" shall have the meaning set forth
in Section 6.3.
"DGCL" means the Delaware General Corporation Law.
"Dissenting Shares" shall have the meaning set forth in
Section 3.1(e).
"DOJ" means the Antitrust Division of the U.S. Department of
Justice.
"Effective Time" shall have the meaning set forth in Section
2.2.
"Election Deadline" shall have the meaning set forth in
Section 3.1(j).
"Employee Grantor Trust" shall mean the UDS Employee Benefits
Trust created by the Trust Agreement, effective as of November 9, 1999, between
UDS and Sterling National Bank, a national banking association, as Trustee.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" means, with respect to any entity, trade or
business, any other entity, trade or business that is a member of a group
described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1)
of ERISA that includes the first entity, trade or business, or that is a member
of the same "controlled group" as the first entity, trade or business pursuant
to Section 4001(a)(14) of ERISA.
"ESOP" has the meaning set forth in Section 4.1(l)(xi).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Agent" shall have the meaning set forth in Section
3.3.
"Exchange Fund" shall have the meaning set forth in Section
3.3.
"Exchange Ratio" shall mean the quotient, rounded to the
nearest ten-thousandth, obtained by dividing (i) the sum of (a) $27.50 and (b)
the product of (I) 0.614 and (II) the Valero Average Closing Price) by (ii) the
Valero Average Closing Price.
"Expenses" means all out-of-pocket expenses (including all
fees and expenses of counsel, accountants, investment bankers, experts and
consultants to a party and its affiliates) incurred by a party or on its behalf
in connection with or related to the authorization, preparation, negotiation,
execution and performance of this Agreement and the transactions contemplated
hereby, including the preparation, printing, filing and mailing of the Joint
Proxy Statement/Prospectus and the Form S-4 and the solicitation of stockholder
approvals and all other matters related to the transactions contemplated hereby
and thereby.
"Form S-4" shall have the meaning set forth in Section
4.1(d)(iii).
"Form of Election" shall have the meaning set forth in Section
3.1(f).
"FTC" means the U.S. Federal Trade Commission.
"GAAP" means U.S. generally accepted accounting principles.
"Governmental Entity" shall have the meaning set forth in
Section 4.1(d)(vii).
"GSOP" shall have the meaning set forth in Section 3.1(d).
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Intellectual Property" means all patents, trademarks, trade
names, service marks, copyrights, and any applications therefor, technology,
know-how, computer software programs or applications, and tangible or intangible
proprietary information or materials.
"Joint Proxy Statement/Prospectus" shall have the meaning set
forth in Section 4.1(d)(iii).
"knowledge" or "known" means, with respect to any entity, the
knowledge of such entity's executive officers after reasonable inquiry.
"Letter of Transmittal" shall have the meaning set forth in
Section 3.4(a).
"Liens" shall have the meaning set forth in Section
4.1(b)(ii).
"Loan" shall have the meaning set forth in Section 4.1(l)(xi).
"Material Adverse Effect" means, with respect to any entity, a
material adverse effect on (i) the business, operations, results of operations
or financial condition of such entity and its Subsidiaries taken as a whole or
(ii) the ability of such entity to timely consummate the transactions
contemplated by this Agreement, except, in each case, to the extent such effect
is reasonably attributable to (x) general economic conditions in the United
States (including prevailing interest rate and stock market levels), (y) the
general state of the industries in which such entity operates or (z) the
negotiation, announcement, execution, delivery or consummation of the
transactions contemplated by, or in compliance with, this Agreement.
"Merger" shall have the meaning set forth in Section 2.1.
"Merger Consideration" shall have the meaning set forth in
Section 3.1(b).
"Multiemployer Plan" means any "multiemployer plan" within the
meaning of Section 4001(a)(3) of ERISA.
"Multiple Employer Plan" shall have the meaning set forth in
Section 4.1(l)(vi).
"Necessary Consents" shall have the meaning set forth in
Section 4.1(d)(vi).
"New Plans" shall have the meaning set forth in Section
6.8(b).
"Non-Election" shall have the meaning set forth in Section
3.1(f).
"Non-Election Cash Fraction" shall have the meaning set forth
in Section 3.1(i).
"Non-Election Shares" shall have the meaning set forth in
Section 3.l(g).
"Non-Subsidiary Affiliate" shall have the meaning set forth in
Section 4.1(b)(ii).
"NYSE" means the New York Stock Exchange, Inc.
"Old Plans" shall have the meaning set forth in Section
6.8(b).
"Other Approvals" shall have the meaning set forth in Section
4.1(d)(ii).
"other party" means, with respect to Valero, UDS, and with
respect to UDS, Valero.
"Partial Cash Election" shall have the meaning set forth in
Section 3.1(f)(ii).
"Person" means an individual, corporation, limited liability
company, partnership, association, trust, unincorporated organization, other
entity or group (as defined in the Exchange Act).
"PBGC" shall have the meaning set forth in Section 4.1(l)(v).
"Regulatory Law" means the HSR Act, and all other federal,
state and foreign, if any, statutes, rules, regulations, orders, decrees,
administrative and judicial doctrines and other laws that are designed or
intended to prohibit, restrict or regulate (i) mergers, acquisitions or other
business combinations, (ii) foreign investment, or (iii) actions having the
purpose or effect of monopolization or restraint of trade or lessening of
competition.
"Required Approvals" shall have the meaning set forth in
Section 6.4(a)(i).
"SEC" means the U.S. Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Significant Subsidiary" shall have the meaning ascribed to
such term in Rule 1-02 of Regulation S-X of the SEC.
"Stock Consideration" shall have the meaning set forth in
Section 3.1(b)(i).
"Stock Election" shall have the meaning set forth in Section
3.1(f)(iii).
"Stock Election Number" shall mean the UDS Closing Share
Number minus the Cash Election Number.
"Stock Election Shares" shall have the meaning set forth in
Section 3.l(g).
"Stock Fraction" shall have the meaning set forth in Section
3.1(h).
"Subsidiary" shall have the meaning ascribed to such term in
Rule 1-02 of Regulation S-X of the SEC.
"Superior Proposal" means, with respect to UDS, a bona fide
written proposal made by a Person other than a party to this Agreement which is
(i) an Acquisition Proposal involving UDS and (ii) is on terms which UDS's Board
of Directors in good faith concludes (following receipt of the advice of its
financial advisors and outside counsel), taking into account, among other
things, all legal, financial, regulatory and other aspects of the proposal and
the Person making the proposal, (x) would, if consummated, result in a
transaction that is more favorable to its stockholders (in their capacities as
stockholders), from a financial point of view, than the transactions
contemplated by this Agreement and (y) is reasonably capable of being completed.
"Surviving Corporation" shall have the meaning set forth in
Section 2.1.
"Taxes" means any and all federal, state, local, foreign or
other taxes or charges of any kind (together with any and all interest,
penalties, additions to tax and additional amounts imposed with respect thereto)
imposed by any taxing authority, including taxes or other charges on or with
respect to income, franchises, windfall or other profits, gross receipts,
property, sales, use, capital stock, payroll, employment, social security,
workers' compensation, unemployment compensation, or net worth, and taxes or
other charges in the nature of excise, withholding, ad valorem or value added.
"Tax Return" means any return, report or similar statement
(including any attached schedules) required to be filed with respect to any Tax,
including any information return, claim for refund, amended return or
declaration of estimated Tax.
"Termination Date" shall have the meaning set forth in Section
8.1(b).
"UDS" shall have the meaning set forth in the preamble.
"UDS 2000 10-K" means UDS's Annual Report on Form 10-K for the
fiscal year ended December 31, 2000, as filed with the SEC.
"UDS Benefit Plan" means each UDS Stock Plan and any other
Benefit Plan maintained or contributed to by UDS or a Subsidiary of UDS, or to
which UDS or any Subsidiary of UDS is required to contribute.
"UDS Plan" means any UDS Benefit Plan other than a
Multiemployer Plan.
"UDS Board Designees" shall have the meaning set forth in
Section 6.2.
"UDS Capital Stock" shall have the meaning set forth in
Section 4.1(b)(i)(B).
"UDS Certificate" shall have the meaning set forth in Section
3.1(b).
"UDS Closing Share Number" shall mean the number of shares of
UDS Common Stock issued and outstanding immediately prior to the Effective Time,
other than such shares that are to be cancelled in the Merger pursuant to
Section 3.1(a) hereof.
"UDS Common Stock" means common stock, par value $0.01 per
share, of UDS.
"UDS Contract" shall have the meaning set forth in Section
4.1(j)(i).
"UDS Converted Option" shall have the meaning set forth in
Section 3.2(a).
"UDS Disclosure Schedule" shall have the meaning set forth in
Section 4.1.
"UDS Employees" shall have the meaning set forth in Section
6.8(a).
"UDS Indebtedness" shall have the meaning set forth in Section
5.1(g)(ii).
"UDS Preferred Stock" shall have the meaning set forth in
Section 4.1(b)(i)(B).
"UDS Qualified Plans" shall have the meaning set forth in
Section 4.1(l)(iii).
"UDS Recommendation" shall have the meaning set forth in
Section 6.1(b).
"UDS Restricted Stock" shall mean all shares of restricted
stock outstanding under the terms of any UDS Benefit Plan immediately prior to
the Effective Time that continue to be subject to restrictions on transfer or
otherwise remain unvested pursuant to the terms thereof immediately following
the merger.
"UDS Right" means any of the Rights, as such term is defined
in the UDS Rights Agreement.
"UDS Rights Agreement" means the Rights Agreement, dated as of
June 25, 1992, as amended on October 26, 1992, May 10, 1994, and September 22,
1996, between UDS and First City, Texas-Houston, National Association, as rights
agent.
"UDS SEC Documents" shall have the meaning set forth in
Section 4.1(e).
"UDS Stock Option" shall have the meaning set forth in Section
3.2(a).
"UDS Stock Plans" shall have the meaning set forth in Section
4.1(b)(i).
"UDS Stockholder Approval" shall have the meaning set forth in
Section 4.1(c)(i).
"UDS Stockholders Meeting" shall have the meaning set forth in
Section 4.1(c)(i).
"UDS Toprs" means the 8.32% Trust Originated Preferred
Securities of UDS Capital I, a wholly owned subsidiary of UDS.
"UDS Termination Fee" means $125,000,000.
"Valero" shall have the meaning set forth in the preamble.
"Valero 2000 10-K" means Valero's Annual Report on Form 10-K
for the fiscal year ended December 31, 2000, as filed with the SEC.
"Valero Average Closing Price" means the average of the daily
last sale prices of Valero Common Stock as reported on the NYSE (as reported in
the Wall Street Journal or, if not reported therein, in another mutually agreed
upon authoritative source) for the ten consecutive full trading days in which
such shares are traded on the NYSE ending at the close of trading on the third
business day prior to the Closing Date.
"Valero Benefit Plan" means each Valero Stock Plan and any
other Benefit Plan maintained or contributed to by Valero or a Subsidiary of
Valero, or to which Valero or any Subsidiary of Valero is required to
contribute.
"Valero Plan" means any Valero Benefit Plan other than a
Multiemployer Plan.
"Valero Capital Stock" shall have the meaning set forth in
Section 4.2(b)(i)(B).
"Valero Common Stock" means common stock, par value $0.01 per
share, of Valero.
"Valero Contract" shall have the meaning set forth in Section
4.2(j).
"Valero Disclosure Schedule" shall have the meaning set forth
in Section 4.2.
"Valero Preferred Stock" shall have the meaning set forth in
Section 4.2(b)(i)(B).
"Valero Qualified Plans" shall have the meaning set forth in
Section 4.2(l)(i).
"Valero Recommendation" shall have the meaning set forth in
Section 6.1(c).
"Valero Rights" shall have the meaning set forth in Section
3.1(b).
"Valero Rights Agreement" shall have the meaning set forth in
Section 3.1(b).
"Valero SEC Documents" shall have the meaning set forth in
Section 4.2(e).
"Valero Stock Option" shall have the meaning set forth in
Section 3.2(a).
"Valero Stock Plans" shall have the meaning set forth in
Section 4.2(b)(i).
"Valero Stockholder Approval" shall have the meaning set forth
in Section 4.2(c)(i).
"Valero Stockholders Meeting" shall have the meaning set forth
in Section 4.2(c)(i).
"Valero Termination Fee" means $125,000,000.
"Voting Debt" means any bonds, debentures, notes or other
indebtedness having the right to vote on any matters on which holders of capital
stock of the same issuer may vote.
"Withdrawal Liability" means liability to a Multiemployer Plan
as a result of a complete or partial withdrawal from such Multiemployer Plan, as
those terms are defined in Part I of Subtitle E of Title IV of ERISA.
ARTICLE II
THE MERGER
2.1 The Merger. Upon the terms and subject to the conditions hereof, at the
Effective Time, UDS shall be merged (the "Merger") with and into Valero, with
Valero as the surviving corporation in the Merger (the "Surviving Corporation"),
and the separate existence of UDS shall thereupon cease.
2.2 Effective Time of the Merger. The Merger shall become effective as set forth
in a properly executed certificate of merger duly filed with the Secretary of
State of the State of Delaware (the "Certificate of Merger"), which filing shall
be made on the Closing Date. As used in this Agreement, the term "Effective
Time" shall mean the date and time when the Merger becomes effective, as set
forth in the Certificate of Merger.
2.3 Effects of the Merger. The Merger shall have the effects set forth in the
applicable provisions of the DGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, except as otherwise
provided herein, all of the property, rights, privileges, powers and franchises
of UDS shall vest in the Surviving Corporation, and all debts, liabilities and
duties of UDS shall become the debts, liabilities and duties of the Surviving
Corporation.
2.4 Closing. Upon the terms and subject to the conditions set forth in Article
VII and the termination rights set forth in Article VIII, the closing of the
transactions contemplated by this Agreement (the "Closing") will take place at
the offices of Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York,
New York, 10019 at 10:00 A.M. on the second Business Day following the
satisfaction or waiver (subject to applicable law) of the conditions (excluding
conditions that, by their nature, cannot be satisfied until the Closing Date)
set forth in Article VII, unless this Agreement has been theretofore terminated
pursuant to its terms or unless another place, time or date is agreed to in
writing by the parties hereto (the date of the Closing being referred to herein
as the "Closing Date").
2.5 Certificate of Incorporation. At the Effective Time, the Certificate of
Incorporation of the Surviving Corporation shall be the Certificate of
Incorporation of Valero, as in effect immediately prior to the Effective Time,
until thereafter changed or amended as provided therein or by applicable law.
2.6 By-Laws. The by-laws of Valero as in effect immediately prior to the
Effective Time shall be the by-laws of the Surviving Corporation.
2.7 Directors and Officers. The directors and officers of Valero immediately
prior to the Effective Time shall be the directors and officers of the Surviving
Corporation, except as provided in Section 6.2.
ARTICLE III
CONVERSION OF SECURITIES
3.1 Effect of the Merger on Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of any holder of any capital stock
of UDS:
(a) All shares of capital stock of UDS that are held by UDS as treasury
stock or that are owned by Valero or any wholly-owned subsidiaries of UDS or
Valero immediately prior to the Effective Time shall cease to be outstanding and
shall be cancelled and retired and shall cease to exist.
(b) Subject to Sections 3.1(a), 3.1(c), 3.1(d), 3.1(e) and 3.7, each
outstanding share of UDS Common Stock (together with any associated UDS Rights)
issued and outstanding immediately prior to the Effective Time shall be
converted into the right to receive, at the option of the holder as contemplated
by Sections 3.1(f) through 3.1(j), either (i) a number of shares of Valero
Common Stock equal to the Exchange Ratio (the "Stock Consideration") or (ii) an
amount in cash equal to the sum of (said formula being referred to herein as the
"Cash Consideration Formula") (x) $27.50 and (y) the product of (I) 0.614 and
(II) the Valero Average Closing Price (the "Cash Consideration" and together
with the Stock Consideration and the shares of Valero Common Stock issued pur-
suant to Section 3.1(d), the "Merger Consideration"). All of the shares of
Valero Common Stock to be issued as Merger Consideration shall be duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights, with no personal liability attaching to the ownership thereof. One
preferred share purchase right issuable pursuant to the Rights Agreement, dated
as of July 17, 1997, between Valero and Computershare Investor Services, LLC, as
successor rights agent to Harris Trust and Savings Bank (the "Valero Rights
Agreement"), or any other purchase right issued in substitution thereof (the
"Valero Rights"), shall be issued together with and shall attach to each share
of Valero Common Stock issued pursuant to this Section 3.1(b) and Section
3.1(d), subject and pursuant to the terms of the Valero Rights Agreement. All
shares of UDS Common Stock converted into the right to receive the Merger
Consideration pursuant to this Section 3.1(b) and Section 3.1(d) shall cease to
be outstanding and shall be canceled and retired and shall cease to exist, and
each holder of a certificate that immediately prior to the Effective Time
represented any such shares of UDS Common Stock (a "UDS Certificate") shall
thereafter cease to have any rights with respect to such shares of UDS Common
Stock, except the right to receive the Merger Consideration to be issued in
consideration therefor and any dividends or other distributions to which holders
of UDS Common Stock become entitled all in accordance with this Article III upon
the surrender of such UDS Certificate.
(c) If, between the date of this Agreement and the Effective Time, there
is a reclassification, recapitalization, stock split, split-up, stock dividend,
combination or exchange of shares with respect to, or rights issued in respect
of, UDS Common Stock or Valero Common Stock, each of the Exchange Ratio and the
Cash Consideration Formula shall be adjusted accordingly, without duplication,
to provide to the holders of UDS Common Stock the same economic effect as
contemplated by this Agreement prior to such event.
(d) Subject to Section 3.7, each share held as of the Effective Time
in the Employee Grantor Trust pursuant to the UDS Grantor Trust Stock Ownership
Program ("GSOP"), each share of UDS Restricted Stock and each share of UDS
Common Stock that is owned by any UDS Benefit Plan shall be converted into the
right to receive a number of fully paid and nonassessable shares of Valero
Common Stock equal to the Exchange Ratio.
(e) Notwithstanding any other provision contained in this Agreement, no
shares of UDS Common Stock that are issued and outstanding as of the Effective
Time and that are held by a stockholder who has properly exercised such
stockholder's appraisal rights (any such shares being referred to herein as
"Dissenting Shares") under the DGCL shall be converted into the right to receive
the Merger Consideration as provided in Section 3.1(b) unless and until such
stockholder shall have failed to perfect, or shall have effectively withdrawn or
lost, such stockholder's right to dissent from the Merger under the DGCL and to
receive such consideration as may be determined to be due with respect to such
Dissenting Shares pursuant to and subject to the requirements of the DGCL. If
any such stockholder shall have failed to perfect or shall have effectively
withdrawn or lost such right prior to the Election Deadline, each of such
holder's shares of UDS Common Stock shall thereupon be deemed to be Non-Election
Shares for all purposes of this Article III. If any holder of Dissenting Shares
shall have so failed to perfect or has effectively withdrawn or lost such
stockholder's right to dissent from the Merger after the Election Deadline, each
of such holder's shares of UDS Common Stock shall thereupon be deemed to have
been converted into and to have become, as of the Effective Time, the right to
receive the Stock Consideration or the Cash Consideration, or a combination
thereof, as determined by Valero in its sole discretion.
(f) Subject to the provisions of this Section 3.1, each record holder of
shares of UDS Common Stock outstanding immediately prior to the Effective Time
to be converted in the Merger pursuant to Section 3.1(b) will be entitled to
elect to receive either (i) the Cash Consideration for all of such holder's
shares ("Cash Election"), (ii) the Cash Consideration for a stated number of
such holder's shares and a number of shares of Valero Common Stock equal to the
Exchange Ratio per share of UDS Common Stock for the balance of such holder's
shares of UDS Common Stock ("Partial Cash Election") or (iii) a number of shares
of Valero Common Stock equal to the Exchange Ratio per share of UDS Common Stock
for all of such holder's shares of UDS Common Stock ("Stock Election"). All Cash
Elections, Partial Cash Elections and Stock Elections shall be unconditional and
made on a form designed for that purpose and mutually agreeable to Valero and
UDS (a "Form of Election"). Any holder of UDS Common Stock who fails to properly
make a Cash Election, Partial Cash Election or Stock Election and any holder who
fails to submit to the Exchange Agent a properly completed and signed and
properly and timely submitted Form of Election shall be deemed to have indicated
no preference as to the receipt of cash or Valero Common Stock with respect to
such holder's shares (a "Non-Election") and will receive for such UDS Common
Stock the Merger Consideration described in Section 3.1(g), 3.1(h) or 3.1(i), as
applicable. Notwithstanding any other provision set forth herein, the aggregate
number of shares of UDS Common Stock to be converted into the right to receive
cash in the Merger (which shall for this purpose be deemed to include Dissenting
Shares, if any) shall be equal to the Cash Election Number.
(g) If the aggregate number of shares of UDS Common Stock for which
cash is elected under a Cash Election or a Partial Cash Election and Dissenting
Shares, if any (collectively, the "Cash Election Shares"), exceeds the Cash
Election Number, then all shares of UDS Common Stock for which Valero Common
Stock was elected under a Stock Election or Partial Cash Election (collectively,
the "Stock Election Shares") and all shares of UDS Common Stock covered by
Non-Elections (the "Non-Election Shares") shall be converted into the right to
receive Valero Common Stock, and the Cash Election Shares (other than Dissenting
Shares) shall be converted into the right to receive cash and Valero Common
Stock in the following manner:
Each Cash Election Share (other than Dissenting
Shares) shall be converted into the right to receive (A) an
amount of cash (rounded to the nearest cent), without
interest, equal to the product of (x) the Cash Consideration
and (y) a fraction (the "Cash Fraction"), the numerator of
which shall be the Cash Election Number and the denominator of
which shall be the total number of Cash Election Shares and
(B) a number of shares of Valero Common Stock equal to the
product of (x) the Exchange Ratio and (y) a fraction equal to
one (1) minus the Cash Fraction.
(h) If the aggregate number of Stock Election Shares exceeds the Stock
Election Number, all Cash Election Shares and all Non-Election Shares shall be
converted into the right to receive cash, and all Stock Election Shares shall be
converted into the right to receive Valero Common Stock and cash in the
following manner:
Each Stock Election Share shall be converted into the
right to receive (A) a number of shares of Valero Common Stock
equal to the product of (x) the Exchange Ratio and (y) a
fraction (the "Stock Fraction"), the numerator of which shall
be the Stock Election Number and the denominator of which
shall be the total number of Stock Election Shares, and (B) an
amount of cash (rounded to the nearest cent), without
interest, equal to the product of (x) the Cash Consideration
and (y) a fraction equal to one (1) minus the Stock Fraction.
(i) In the event that neither Section 3.1(g) or 3.1(h) is applicable,
all Cash Election Shares shall be converted into the right to receive the Cash
Consideration, all Stock Election Shares shall be converted into the right to
receive the Stock Consideration and all Non-Election Shares shall be converted
into the right to receive (A) an amount of cash (rounded to the nearest cent),
without interest, equal to the product of (x) the Cash Consideration and (y) a
fraction (the "Non-Election Cash Fraction"), the numerator of which shall be the
Cash Election Number less the number of Cash Election Shares and the denominator
of which shall be the number of Non-Election Shares, and (B) a number of shares
of Valero Common Stock equal to the product of (x) the Exchange Ratio and (y) 1
minus the Non-Election Cash Fraction.
(j) UDS shall use all reasonable best efforts to cause copies of the
Form of Election (which shall contain a Letter of Transmittal to be mailed with
the Joint Proxy Statement/Prospectus to the record holders of UDS Common Stock
(other than holders of Dissenting Shares) as of the record date for the UDS
Stockholders Meeting) and to make the Form of Election available to all persons
who become record holders of UDS Common Stock during the period between such
record date and the Election Deadline. A properly completed Form of Election
must be received by the Exchange Agent by 5:00 p.m., New York City time, on the
second business day preceding the Closing Date (the "Election Deadline"), which
day shall not be less than 20 days after the initial mailing of the Form of
Election, in order to be effective. An election by a holder of UDS Common Stock
shall be validly made only if the Exchange Agent shall have timely received a
Form of Election properly completed and executed (with the signature or
signatures thereon guaranteed as required by the Form of Election) by that
stockholder accompanied either by the UDS Certificate or UDS Certificates
representing all of the shares of UDS Common Stock owned by that stockholder,
duly endorsed in blank or otherwise in form acceptable for transfer on the books
of UDS, or by an appropriate guarantee of delivery in the form customarily used
in transactions of this nature from a member of a national securities exchange,
a member of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company in the United States. All elections may be
revoked until the Election Deadline in writing by the record holders submitting
Forms of Election. Valero shall have the authority, in its sole discretion, to
make all determinations as to whether or not a Form of Election has been timely
received.
(k) Notwithstanding anything in this Article III to the contrary,
the Cash Election Number shall be not greater than the greatest number that
would permit the satisfaction of the conditions set forth in Sections 7.2(c) and
7.3(c).
3.2 Stock Options. (a) Each option to purchase UDS Common Stock (a "UDS Stock
Option") granted under UDS Stock Plans which is outstanding immediately prior to
the Effective Time shall cease to represent a right to acquire shares of UDS
Common Stock and shall be converted (as so converted, a "UDS Converted Option"),
at the Effective Time and subject to the immediately following sentence, into an
option to purchase Valero Common Stock (a "Valero Stock Option"), on the same
terms and conditions as were applicable under the UDS Stock Option. The number
of shares of Valero Common Stock subject to each such Valero Stock Option shall
be the number of shares of UDS Common Stock subject to the UDS Stock Option
multiplied by the Exchange Ratio, rounded, if necessary, to the nearest whole
share of Valero Common Stock, and such Valero Stock Option shall have an
exercise price per share (rounded to the nearest one-hundredth of a cent) equal
to the per share exercise price specified in such UDS Stock Option divided by
the Exchange Ratio; provided, however, that in the case of any UDS Stock Option
to which Section 421 of the Code as of the Effective Time (after taking into
account the effect of any accelerated vesting thereof) applies by reason of its
qualification under Section 422 of the Code, the exercise price, the number of
shares subject to such option and the terms and conditions of exercise of such
option shall be determined in a manner consistent with the requirements of
Section 424(a) of the Code. As of the Effective Time, Valero shall assume the
obligations of UDS under the UDS Stock Plans, and from and after the Effective
Time, except as otherwise set forth herein, the terms of each UDS Stock Option
and the UDS Stock Plan under which such UDS Stock Option was initially granted,
in each case, as in effect immediately prior to the Effective Time, shall
continue to apply to the corresponding Valero Stock Option.
(b) Prior to the Effective Time, UDS shall take all necessary
action for the adjustment of UDS Converted Options under this Section 3.2.
Valero shall reserve for issuance a number of shares of Valero Common Stock at
least equal to the number of shares of Valero Common Stock that will be subject
to UDS Converted Options. As soon as practicable following the Effective Time,
Valero shall file a registration statement on Form S-8 (or any successor, or if
Form S-8 is not available, other appropriate, forms) with respect to the shares
of Valero Common Stock subject to UDS Converted Options and shall maintain the
effectiveness of such registration statement or registration statements (and
maintain the current status of the prospectus or prospectuses contained therein)
for so long as such options remain outstanding.
3.3 Exchange Fund. Prior to the Effective Time, Valero shall appoint
Computershare Investor Services, LLC, or a commercial bank or trust company, or
a subsidiary thereof, reasonably acceptable to UDS, to act as exchange agent
hereunder for the purpose of exchanging UDS Certificates for the Merger
Consideration (the "Exchange Agent"). At or prior to the Effective Time, Valero
shall deposit with the Exchange Agent, in trust for the benefit of holders of
shares of UDS Common Stock, (a) certificates representing shares of Valero
Common Stock and (b) cash, to be issued and paid pursuant to Sections 3.1(b) and
(d) and Section 3.7 in exchange for outstanding shares of UDS Common Stock upon
due surrender of UDS Certificates pursuant to this Article III. Following the
Effective Time, Valero agrees to make available to the Exchange Agent, from time
to time as needed, cash sufficient to pay any dividends and other distributions
pursuant to Section 3.5. Any cash and certificates representing Valero Common
Stock deposited with the Exchange Agent (including the amount of any dividends
or other distributions payable with respect thereto and cash in lieu of
fractional shares to be paid pursuant to Section 3.7) shall hereinafter be
referred to as the "Exchange Fund".
3.4 Exchange Procedures. Promptly after the Effective Time, Valero shall cause
the Exchange Agent to mail to each holder of a UDS Certificate (other than UDS
Certificates representing Dissenting Shares) that has not timely submitted a
properly completed and executed Form of Election accompanied by an appropriately
endorsed Certificate or Certificates representing all of the shares of Company
Common Stock owned by that shareholder (or, alternatively, by an appropriate
guarantee of delivery) (a) a letter of transmittal (the "Letter of Transmittal")
that shall specify that delivery shall be effected, and risk of loss and title
to the UDS Certificates shall pass, only upon proper delivery of the UDS
Certificates to the Exchange Agent, and which Letter of Transmittal shall be in
customary form and have such other provisions as Valero or UDS may reasonably
specify (such letter to be reasonably acceptable to UDS and Valero prior to the
Effective Time) and (b) instructions for effecting the surrender of such UDS
Certificates in exchange for the Merger Consideration, together with any
dividends and other distributions with respect thereto and any cash in lieu of
fractional shares. Upon surrender of a UDS Certificate to the Exchange Agent
together with such Letter of Transmittal or the Form of Election pursuant to
Section 3.1(j), duly executed and completed in accordance with the instructions
thereto, and such other documents as may reasonably be required by the Exchange
Agent, the holder of such UDS Certificate shall be entitled to receive in
exchange therefor (i) shares of Valero Common Stock (which shall be in
uncertificated book-entry form, unless a physical certificate is requested by
such holder or is otherwise required by applicable law or regulation)
representing, in the aggregate, the whole number of shares that such holder has
the right to receive pursuant to Section 3.1(b) or 3.1(d) (in each case, after
taking into account all shares of UDS Common Stock then held by such holder),
(ii) a check in the amount equal to the cash, if any, that such holder has the
right to receive pursuant to Section 3.1, and (iii) a check in the amount equal
to the cash, if any, that such holder has the right to receive pursuant to the
provisions of this Article III other than Section 3.1, including cash in lieu of
any fractional shares of Valero Common Stock pursuant to Section 3.7 and
dividends and other distributions pursuant to Section 3.5. No interest will be
paid or will accrue on any cash payable pursuant to the provisions of this
Article III. In the event of a transfer of ownership of UDS Common Stock that is
not registered in the transfer records of UDS, one or more shares of Valero
Common Stock evidencing, in the aggregate, the proper number of shares of Valero
Common Stock pursuant to Section 3.1, a check in the proper amount of cash
representing Cash Consideration pursuant to Section 3.1, a check in the proper
amount of cash in lieu of any fractional shares of Valero Common Stock pursuant
to Section 3.7 and any dividends or other distributions to which such holder is
entitled pursuant to Section 3.5, may be issued with respect to such UDS Common
Stock to such a transferee if the UDS Certificate representing such shares of
UDS Common Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid.
3.5 Distributions with Respect to Unexchanged Shares. No dividends or other
distributions with a record date after the Effective Time shall be paid to the
holder of any unsurrendered UDS Certificate with respect to the shares of Valero
Common Stock that such holder would be entitled to receive upon surrender of
such UDS Certificate, and no cash payment in lieu of fractional shares of Valero
Common Stock shall be paid to any such holder pursuant to Section 3.7 until such
holder shall surrender such UDS Certificate in accordance with Section 3.1(j) or
Section 3.4. Subject to the effect of applicable laws, following the later of
the surrender of any such UDS Certificate and the Effective Time, there shall be
paid to the record holder thereof without interest, (a) promptly after such
time, the amount of any cash payable in lieu of fractional shares of Valero
Common Stock to which such holder is entitled pursuant to Section 3.7 and the
amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Valero
Common Stock and (b) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time and a payment
date subsequent thereto and to such surrender payable with respect to such
shares of Valero Common Stock.
3.6 No Further Ownership Rights in UDS Common Stock. All shares of Valero Common
Stock issued and cash paid upon conversion of shares of UDS Common Stock in
accordance with the terms of this Article III (including any cash paid pursuant
to Section 3.5 or 3.7) shall be deemed to have been issued or paid in full
satisfaction of all rights pertaining to the shares of UDS Common Stock.
3.7 No Fractional Shares of Valero Common Stock. No certificates or scrip or
shares of Valero Common Stock representing fractional shares of Valero Common
Stock or book-entry credit of the same shall be issued upon the surrender for
exchange of UDS Certificates, and such fractional share interests will not
entitle the owner thereof to vote or to have any rights of a stockholder of
Valero or a holder of shares of Valero Common Stock. In lieu of any such
fractional share, each holder of shares of UDS Common Stock who would otherwise
have been entitled to a fraction of a share of Valero Common Stock upon
surrender of UDS Certificates (determined after taking into account all UDS
Certificates delivered by such holder) shall be paid upon such surrender cash
(without interest) in an amount equal to the value (determined with reference to
the closing price of a share of Valero Common Stock as reported on the NYSE
Composite Tape on the last full trading day immediately prior to the Closing
Date) of such fractional interest. Such payment with respect to fractional
shares is merely intended to provide a mechanical rounding off of, and is not a
separately bargained for, consideration.
3.8 Termination of Exchange Fund. Any portion of the Exchange Fund that remains
undistributed to the holders of UDS Certificates one year after the Effective
Time shall, at Valero's request, be delivered to Valero or otherwise on the
instruction of Valero, and any holders of UDS Certificates who have not
theretofore complied with this Article III shall after such delivery look only
to Valero for the Merger Consideration with respect to the shares of UDS Common
Stock formerly represented thereby to which such holders are entitled pursuant
to Sections 3.1 and 3.4, any cash in lieu of fractional shares of Valero Common
Stock to which such holders are entitled pursuant to Section 3.7 and any
dividends or distributions with respect to shares of Valero Common Stock to
which such holders are entitled pursuant to Section 3.5. Any such portion of the
Exchange Fund remaining unclaimed by holders of shares of UDS Common Stock
immediately prior to such time as such amounts would otherwise escheat to or
become property of any Governmental Entity shall, to the extent permitted by
law, become the property of Valero free and clear of any claims or interest of
any Person previously entitled thereto.
3.9 No Liability. None of Valero, UDS or the Exchange Agent shall be liable to
any Person in respect of any Merger Consideration from the Exchange Fund
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
3.10 Investment of the Exchange Fund. The Exchange Agent shall invest any cash
included in the Exchange Fund as directed by Valero on a daily basis; provided
that no such investment or loss thereon shall affect the amounts payable or the
timing of the amounts payable to UDS stockholders pursuant to the other
provisions of this Article III. Any interest and other income resulting from
such investments shall promptly be paid to Valero.
3.11 Lost Certificates. If any UDS Certificate (other than any UDS Certificate
representing Dissenting Shares) shall have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the Person claiming such UDS
Certificate to be lost, stolen or destroyed and, if required by Valero, the
posting by such Person of a bond in such reasonable amount as Valero may direct
as indemnity against any claim that may be made against it with respect to such
UDS Certificate, following the Effective Time the Exchange Agent will deliver in
exchange for such lost, stolen or destroyed UDS Certificate the Merger
Consideration with respect to the shares of UDS Common Stock formerly
represented thereby, any cash in lieu of fractional shares of Valero Common
Stock, and unpaid dividends and distributions on shares of Valero Common Stock
deliverable in respect thereof, pursuant to this Agreement.
3.12 Withholding Rights. Valero shall be entitled to deduct and withhold from
the consideration otherwise payable pursuant to this Agreement such amounts as
it is required to deduct and withhold with respect to the making of such payment
under the Code and the rules and regulations promulgated thereunder, or any
provision of state, local or foreign Tax law. To the extent that amounts are so
withheld or paid over to or deposited with the relevant Governmental Entity by
Valero, such amounts shall be treated for all purposes of this Agreement as
having been paid to the Person in respect of which such deduction and
withholding was made by Valero.
3.13 Further Assurances. At and after the Effective Time, the officers and
directors of the Surviving Corporation shall be authorized to execute and
deliver, in the name and on behalf of the Surviving Corporation or UDS, any
deeds, bills of sale, assignments or assurances and to take and do, in the name
and on behalf of the Surviving Corporation or UDS, any other actions and things
necessary to vest, perfect or confirm of record or otherwise in the Surviving
Corporation any and all right, title and interest in, to and under any of the
rights, properties or assets acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger.
3.14 Stock Transfer Books. The stock transfer books of UDS shall be closed
immediately upon the Effective Time, and there shall be no further registration
of transfers of shares of UDS Common Stock thereafter on the records of UDS. On
or after the Effective Time, any UDS Certificates presented to the Exchange
Agent, Valero or the Surviving Corporation for any reason shall be converted
into the right to receive the Merger Consideration with respect to the shares of
UDS Common Stock formerly represented thereby (including any cash in lieu of
fractional shares of Valero Common Stock to which the holders thereof are
entitled pursuant to Section 3.7 and any dividends or other distributions to
which the holders thereof are entitled pursuant to Section 3.5).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of UDS. Except as disclosed in a section of
the UDS disclosure schedule delivered to Valero concurrently herewith (the "UDS
Disclosure Schedule") corresponding to the subsection of this Section 4.1 to
which such disclosure applies, UDS hereby represents and warrants to Valero as
follows:
(a) Corporate Organization. (i) UDS is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
UDS has the corporate power and authority to own or lease all of its properties
and assets and to carry on its business as it is now being conducted, and is
duly licensed or qualified to do business in each jurisdiction in which the
nature of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed or qualified
would not, either individually or in the aggregate, have a Material Adverse
Effect on UDS. True and complete copies of the Certificate of Incorporation and
the By-Laws of UDS, as in effect as of the date of this Agreement, have
previously been made available by UDS to Valero.
(ii) Each Subsidiary of UDS (A) is duly organized and
validly existing under the laws of its jurisdiction of
organization, (B) is duly qualified to do business and in good
standing in all jurisdictions (whether federal, state, local
or foreign) where its ownership or leasing of property or the
conduct of its business requires it to be so qualified and in
which the failure to be so qualified would have a Material
Adverse Effect on UDS, and (C) has all requisite corporate
power and authority to own or lease its properties and assets
and to carry on its business as now conducted.
(b) Capitalization. (i) The authorized capital stock of UDS consists
of (A) 250,000,000 shares of UDS Common Stock (each of which includes one UDS
Right), of which, as of May 1, 2001, 71,524,496 shares were issued and
outstanding, 2,234,812 shares were held in the GSOP and 17,116,837 shares were
held in treasury and (B) 25,000,000 shares of preferred stock, par value $0.01
per share, of UDS ("UDS Preferred Stock," together with the UDS Common Stock,
the "UDS Capital Stock"), of which no shares are issued and outstanding. From
May 1, 2001 to the date of this Agreement, no shares of UDS Capital Stock have
been issued except pursuant to employee and director stock plans of UDS in
effect as of the date hereof (the "UDS Stock Plans"). Except pursuant to the
terms of options, stock and restricted units issued pursuant to UDS Stock Plans
and outstanding as of the date hereof or issued thereafter as expressly
permitted hereby, and pursuant to the UDS Rights, UDS does not have and is not
bound by any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any shares
of UDS Capital Stock or any other equity securities of UDS or any securities of
UDS representing the right to purchase or otherwise receive any shares of UDS
Capital Stock. As of May 1, 2001, no shares of UDS Capital Stock were reserved
for issuance, except for 12,525,465 shares of UDS Common Stock reserved for
issuance upon the exercise of stock options pursuant to the UDS Stock Plans and
in respect of the employee and director savings, compensation and deferred
compensation plans described in the UDS 2000 10-K, and no shares of UDS Common
Stock reserved for issuance in connection with the UDS Rights Agreement. UDS has
no Voting Debt issued or outstanding.
(ii) Except for immaterial amounts of directors'
qualifying shares in foreign Subsidiaries of UDS, UDS owns,
directly or indirectly, all of the issued and outstanding
shares of capital stock or other equity ownership interests of
each Subsidiary of UDS, free and clear of any liens, pledges,
charges, encumbrances and security interests whatsoever
("Liens"), and all of such shares or equity ownership
interests are duly authorized and validly issued and are fully
paid, nonassessable and free of preemptive rights, with no
personal liability attaching to the ownership thereof. No
Subsidiary of UDS has or is bound by any outstanding
subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or
issuance of any shares of capital stock or any other equity
security of such Subsidiary or any securities representing the
right to purchase or otherwise receive any shares of capital
stock or any other equity security of such Subsidiary. Section
4.2(b)(ii) of the UDS Disclosure Schedule sets forth a list of
each material investment of UDS in any corporation, joint
venture, partnership, limited liability company or other
entity other than its Subsidiaries, which, individually or
taken together in the aggregate, would be considered a
Significant Subsidiary if such investment constituted control
of such entity (each a "Non-Subsidiary Affiliate").
(c) Authority; No Violation. (i) UDS has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
approved by the Board of Directors of UDS. The Board of Directors of UDS has
directed that this Agreement be submitted to UDS stockholders for approval at a
meeting of UDS stockholders for the purpose of approving the Merger and this
Agreement (the "UDS Stockholders Meeting"), and, except for the approval of the
Merger and of this Agreement by the affirmative vote of the holders of a
majority of the outstanding shares of UDS Common Stock (the "UDS Stockholder
Approval"), no other corporate proceedings on the part of UDS are necessary to
approve this Agreement and to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by UDS and
(assuming due authorization, execution and delivery by Valero) constitutes a
valid and binding obligation of UDS, enforceable against UDS in accordance with
its terms.
(ii) Neither the execution and delivery of this
Agreement by UDS, nor the consummation by UDS of the
transactions contemplated hereby, nor compliance by UDS with
any of the terms or provisions hereof, will (A) violate any
provision of the Certificate of Incorporation or By-Laws of
UDS, each as amended, or (B) assuming that the consents and
approvals referred to in Section 4.1(d) are duly obtained, (x)
violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to UDS,
any of its Subsidiaries or Non-Subsidiary Affiliates or any of
their respective properties or assets or (y) violate, conflict
with, result in a breach of any provision of or the loss of
any benefit under, constitute a default (or an event which,
with notice or lapse of time, or both, would constitute a
default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance
required by, accelerate any right or benefit provided by, or
result in the creation of any Lien upon any of the respective
properties or assets of UDS, any of its Subsidiaries or its
Non-Subsidiary Affiliates under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or
obligation to which UDS, any of its Subsidiaries or
Non-Subsidiary Affiliates is a party, or by which they or any
of their respective properties or assets may be bound or
affected, except (in the case of clause (B)(y) above) for such
violations, conflicts, breaches or defaults which either
individually or in the aggregate will not have a Material
Adverse Effect on UDS or the Surviving Corporation.
(d) Consents and Approvals. Except for (i) the filing of a notification and
report form under the HSR Act and the termination or expiration of the waiting
period under the HSR Act, (ii) the filing of any other required applications or
notices with any state or foreign agencies and approval of such applications and
notices (the "Other Approvals"), (iii) the filing with the SEC of a joint proxy
statement/prospectus relating to the matters to be submitted to Valero's
stockholders at the Valero Stockholders Meeting and the matters to be submitted
to UDS's stockholders at the UDS Stockholders Meeting (such joint proxy
statement/prospectus, and any amendments or supplements thereto, the "Joint
Proxy Statement/Prospectus") and a registration statement on Form S-4 with
respect to the issuance of Valero Common Stock in the Merger (such Form S-4, and
any amendments or supplements thereto, the "Form S-4"), (iv) the filing of the
Certificate of Merger, (v) any consents, authorizations, approvals, filings or
exemptions in connection with compliance with the rules of the NYSE, (vi) such
filings and approvals as are required to be made or obtained under the
securities or "Blue Sky" laws of various states in connection with the issuance
of Valero Common Stock pursuant to this Agreement (the consents, approvals,
filings and registration required under or in relation to the foregoing clauses
(ii) though (vi) being referred to as "Necessary Consents") and (vii) such other
consents, approvals, filings and registrations the failure of which to obtain or
make would not reasonably be expected to have a Material Adverse Effect on UDS
or the Surviving Corporation, no consents or approvals of or filings or
registrations with any supranational, national, state, municipal, local or
foreign government, any instrumentality, subdivision, court, administrative
agency or commission or other authority thereof, or any quasi-governmental or
private body exercising any regulatory, taxing, importing or other governmental
or quasi-governmental authority (each, a "Governmental Entity") are necessary in
connection with (A) the execution and delivery by UDS of this Agreement and (B)
the consummation by UDS of the transactions contemplated by this Agreement.
(e) Financial Reports and SEC Documents. The UDS 2000 10-K and all other
reports, registration statements, definitive proxy statements or information
statements filed or to be filed by UDS or any of its Subsidiaries subsequent to
December 31, 1998 under the Securities Act or under Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act in the form filed, or to be filed (collectively,
the "UDS SEC Documents"), with the SEC, (i) complied or will comply in all
material respects as to form with the applicable requirements under the
Securities Act or the Exchange Act, as the case may be, and (ii) as of its
filing date, did not or will not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which they
were made, not misleading; and each of the balance sheets contained in or
incorporated by reference into any such UDS SEC Document (including the related
notes and schedules thereto) fairly presents or will fairly present the
financial position of the entity or entities to which it relates as of its date,
and each of the statements of operations and changes in stockholders' equity and
cash flows or equivalent statements in such UDS SEC Documents (including any
related notes and schedules thereto) fairly presents or will fairly present the
results of operations, changes in stockholders' equity and changes in cash
flows, as the case may be, of the entity or entities to which it relates for the
periods to which it relates, in each case in accordance with GAAP consistently
applied during the periods involved, except, in each case, as may be noted
therein, subject to normal year-end audit adjustments in the case of unaudited
statements.
(f) Absence of Undisclosed Liabilities. Except as disclosed in the audited
financial statements (or notes thereto) included in the UDS 2000 10-K, neither
UDS nor any of its Subsidiaries had at December 31, 2000, or has incurred since
that date through the date hereof, any liabilities or obligations (whether
absolute, accrued, contingent or otherwise) of any nature, except (a)
liabilities, obligations or contingencies which (i) are accrued or reserved
against in the financial statements in the UDS 2000 10-K or reflected in the
notes thereto or (ii) were incurred in the ordinary course of business and
consistent with past practices, (b) liabilities, obligations or contingencies
which (i) would not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect on UDS, or (ii) have been discharged or paid in
full prior to the date hereof, and (c) liabilities, obligations and
contingencies which are of a nature not required to be reflected in the
consolidated financial statements of UDS and its Subsidiaries prepared in
accordance with GAAP consistently applied.
(g) Absence of Certain Changes or Events. (i) Since December 31, 2000, except as
set forth in UDS SEC Documents filed since December 31, 2000 and prior to the
date hereof, no event or events have occurred that has had or would reasonably
be expected to have, either individually or in the aggregate, a Material Adverse
Effect on UDS.
(ii) Since December 31, 2000, UDS and its Subsidiaries have
carried on their respective businesses in all material
respects in the ordinary course.
(iii) Since December 31, 2000, neither UDS nor any of its
Subsidiaries has (A) except for such actions as were in the
ordinary course of business consistent with past practice or
except as required by applicable law, (I) increased the wages,
salaries, compensation, pension, or other fringe benefits or
perquisites payable to any executive officer or director from
the amount thereof in effect as of December 31, 2000, or (II)
granted any severance or termination pay, entered into any
contract to make or grant any severance or termination pay, or
paid any bonuses, to any executive officer or director or (B)
suffered any strike, work stoppage, slowdown, or other labor
disturbance which would be reasonably be expected to have, (in
the case of clause (A) or (B) above) either individually or in
the aggregate, a Material Adverse Effect on UDS.
(iv) Since December 31, 2000, UDS has not declared any dividends on UDS Common
Stock other than its regular quarterly dividends.
(h) Legal Proceedings. There is no suit, action or proceeding or investigation
pending or, to the knowledge of UDS, threatened, against or affecting UDS or any
of its Subsidiaries that would, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on UDS, nor is there any judgment,
decree, injunction, rule or order of any Governmental Entity or arbitrator
outstanding against UDS or its Subsidiaries having, or which would reasonably be
expected to have, individually or in the aggregate, any such effect.
(i) Compliance with Applicable Law. UDS and each of its Subsidiaries hold all
licenses, franchises, permits and authorizations necessary for the lawful
conduct of their respective businesses under and pursuant to each, and have
complied in all respects with and are not in default under any, applicable law,
statute, order, rule or regulation of any Governmental Entity relating to UDS or
any of its Subsidiaries, except where the failure to hold such license,
franchise, permit or authorization or such noncompliance or default would not,
either individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on UDS.
(j) Contracts. (i) Neither UDS nor any of its Subsidiaries is a party to or
bound by any contract, arrangement, commitment or understanding (whether written
or oral) (A) with respect to the employment of any directors, officers or
employees other than in the ordinary course of business consistent with past
practice, (B) which, upon the consummation or stockholder approval of the
transactions contemplated by this Agreement, will (either alone or upon the
occurrence of any additional acts or events) result in any payment (whether of
severance pay or otherwise) becoming due from Valero, UDS, the Surviving
Corporation or any of their respective Subsidiaries to any director officer or
employee thereof, (C) which is a "material contract" (as such term is defined in
Item 601(b)(10) of Regulation S-K of the SEC) to be performed after the date of
this Agreement that has not been filed or incorporated by reference in the UDS
SEC Documents filed prior to the date hereof, or (D) which materially restricts
the conduct of any line of business by UDS or upon consummation of the Merger
will materially restrict the ability of Valero or the Surviving Corporation to
engage in any line of business. Each contract, arrangement, commitment or
understanding of the type described in this Section 4.1(j), whether or not set
forth in the UDS Disclosure Schedule or in such UDS SEC Documents, is referred
to herein as a "UDS Contract".
(ii) (A) Each UDS Contract is valid and binding on
UDS and any of its Subsidiaries that is a party thereto, as
applicable, and in full force and effect, (B) UDS and each of
its Subsidiaries has in all material respects performed all
obligations required to be performed by it to date under each
UDS Contract, except where such noncompliance, either
individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on UDS, and (C)
neither UDS nor any of its Subsidiaries knows of, or has
received notice of, the existence of any event or condition
which constitutes, or, after notice or lapse of time or both,
will constitute, a material default on the part of UDS or any
of its Subsidiaries under any such UDS Contract, except where
such default, either individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect
on UDS.
(k) Environmental Liability. There are no legal, administrative, arbitral or
other proceedings, claims, actions, causes of action, private environmental
investigations or remediation activities or governmental investigations of any
nature seeking to impose, or that could reasonably result in the imposition of,
on UDS, any liability or obligation arising under common law or under any local,
state or federal environmental statute, regulation or ordinance including
CERCLA, pending or threatened in writing against UDS, which liability or
obligation, either individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect on UDS. UDS is not subject to any
agreement, order, judgment, decree, letter or memorandum by or with any court,
governmental authority, regulatory agency or third party imposing any liability
or obligation with respect to the foregoing that, either individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect on
UDS.
(l) Employee Benefit Plans; Labor Matters. (i) Section 4.1(l)(i) of the UDS
Disclosure Schedule includes a complete list of all UDS Benefit Plans.
(ii) With respect to each UDS Plan, UDS has delivered or made
available to Valero a true, correct and complete copy of: (A)
each UDS Plan document or a summary of any unwritten UDS Plan,
trust agreement and insurance contract or other funding
vehicle; (B) the most recent Annual Report (Form 5500 Series)
and accompanying schedule, if any; (C) the current summary
plan description and any material modifications thereto,
if any (in each case, whether or not required to be furnished
under ERISA); (D) the most recent annual financial report, if
any; (E) the most recent actuarial report, if any; and (vi)
the most recent determination letter from the Internal Revenue
Service, if any. Except as specifically provided in the fore-
going documents delivered or made available to Valero, there
are no amendments to any UDS Plan that have been adopted or
approved nor has UDS or any of its Subsidiaries undertaken to
make any such amendments or to adopt or approve any new UDS
Plan.
(iii) Section 4.1(l)(iii) of the UDS Disclosure Schedule identifies
each UDS Plan that is intended to be a "qualified plan" within
the meaning of Section 401(a) of the Code ("UDS Qualified
Plans"). The Internal Revenue Service has issued a favorable
determination letter with respect to each UDS Qualified Plan
and the related trust, and such determination letter has not
been revoked. No circumstances exist and no events have
occurred that could adversely affect the qualified status of
any UDS Qualified Plan or the related trust, which could not
be corrected under the Internal Revenue Service's Employee
Plans Compliance Resolution System (Revenue Procedure 2001-17)
without material liability. No UDS Plan is intended to meet
the requirements of Code Section 501(c)(9).
(iv) All contributions required to be made to any UDS Plan by
applicable law or regulation or by any plan document or other
contractual undertaking, and all premiums due or payable with
respect to insurance policies funding any UDS Plan, for any
period through the date hereof have been timely made.
(v) With respect to each UDS Plan that is subject to Title IV or
Section 302 of ERISA or Section 412 or 4971 of the Code: (A)
there does not exist any accumulated funding deficiency within
the meaning of Section 412 of the Code or Section 302 of
ERISA, whether or not waived; (B) the fair market value of the
assets of such UDS Plan equals or exceeds the actuarial
present value of all accrued benefits under such UDS Plan
(whether or not vested) on an accumulated benefits obligation
basis based on the most recent actuarial report for each such
plan; (C) no reportable event within the meaning of Section
4043(c) of ERISA for which the 30-day notice requirement has
not been waived has occurred, and the consummation of the
transactions contemplated by this Agreement will not result in
the occurrence of any such reportable event; (D) all premiums
to the Pension Benefit Guaranty Corporation (the "PBGC") have
been timely paid in full; (E) no liability (other than for
premiums to the PBGC) under Title IV of ERISA has been or is
expected to be incurred by UDS or any of its Subsidiaries; and
(F) the PBGC has not instituted proceedings to terminate any
such UDS Plan and, to UDS's knowledge, no condition exists
that presents a risk that such proceedings will be instituted
or which would constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to
administer, any such UDS Plan.
(vi) (A) No UDS Benefit Plan is a Multiemployer Plan or a plan that
has two or more contributing sponsors at least two of whom are
not under common control, within the meaning of Section 4063
of ERISA (a "Multiple Employer Plan"); and (B) none of UDS and
its Subsidiaries nor any ERISA Affiliates has incurred any
Withdrawal Liability that has not been satisfied in full. With
respect to each UDS Benefit Plan that is a Multiemployer Plan,
none of UDS and its Subsidiaries, nor any of their respective
ERISA Affiliates has received any notification, nor has any
reason to believe, that any such Multiemployer Plan is in
reorganization, has been terminated, is insolvent, or may
reasonably be expected to be in reorganization, to be
insolvent, or to be terminated.
(vii) Except as would not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect on UDS, (A)
each of the UDS Plans has been operated and administered in
all material respects in accordance with applicable law and
administrative rules and regulations of any Governmental
Entity, including, but not limited to, ERISA and the Code, and
(B) there are no pending or threatened claims (other than
claims for benefits in the ordinary course), lawsuits or
arbitrations which have been asserted or instituted against
the UDS Plans, any fiduciaries thereof with respect to their
duties to the UDS Plans or the assets of any of the trusts
under any of the UDS Plans which could reasonably be expected
to result in any material liability of UDS or any of its
Subsidiaries to the PBGC, the U.S. Department of the Treasury,
the U.S. Department of Labor, any UDS Plan, any participant in
a UDS Plan, or any other party.
(viii) UDS and its Subsidiaries have no liability for life, health,
medical or other welfare benefits to former employees or
beneficiaries or dependents thereof, except for health
continuation coverage as required by Section 4980B of the Code
or Part 6 of Title I of ERISA and at no expense to UDS and its
Subsidiaries. To the knowledge of UDS, UDS and each of its
Subsidiaries has reserved the right to amend, terminate or
modify at any time all plans or arrangements providing for
retiree health or life insurance coverage.
(ix) Section 4.1(l)(ix) of the UDS Disclosure Schedule sets forth
(A) an accurate and complete list of each UDS Plan under which
the execution and delivery of this Agreement or the consumma-
tion of the transactions contemplated hereby could (either
alone or in conjunction with any other event), result in,
cause the accelerated vesting, funding or delivery of, or
increase the amount or value of, any payment or benefit
(including the forgiveness of indebtedness) to any employee,
officer or director of UDS or any of its Subsidiaries, or
could limit the right of UDS or any of its Subsidiaries to
amend, merge, terminate or receive a reversion of assets from
any UDS Plan or related trust or any material employment
agreement or related trust, (B) a reasonable good faith
estimate of the maximum amount of the severance benefits that
could become payable to officers and senior management of UDS
if their employment were terminated at the Effective Time, and
(C) a reasonable good faith estimate of the maximum amount of
the "excess parachute payments" within the meaning of Section
280G of the Code that could become payable by UDS and its
Subsidiaries in connection with the execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby.
(x) Except as would not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect on UDS, all
UDS Benefit Plans subject to the laws of any jurisdiction
outside of the United States (A) have been maintained in
accordance with all applicable requirements; (B) if they are
intended to qualify for special tax treatment meet all
requirements for such treatment; and (C) if they are intended
to be funded and/or book-reserved are fully funded and/or book
reserved, as appropriate, based upon reasonable actuarial
assumptions.
(xi) With respect to any UDS Benefit Plan that is an "employee
stock ownership plan" within the meaning of Section 4975(e)(7)
of the Code (an "ESOP"), (A) each loan under which the ESOP
was a borrower (each, a "Loan") has been fully repaid, and (B)
all of the securities of UDS that were acquired with such Loan
have been released from the pledge made in connection with the
Loan and fully allocated to the accounts of participants in
the ESOP in accordance with the requirements of Treasury
Regulations Sections 54.4975-7 and 54.4975-11.
(m) Intellectual Property. Except as would not reasonably be expected to have a
Material Adverse Effect on UDS, (i) UDS and its Subsidiaries own, or are
licensed to use, all Intellectual Property used in and necessary for the conduct
of their business as it is currently conducted, (ii) to the knowledge of UDS,
the use of Intellectual Property by UDS and its Subsidiaries does not infringe
on or otherwise violate the rights of any third party, and, to the extent such
Intellectual Property is licensed, its use is in accordance in all material
respects with the applicable license pursuant to which UDS acquired the right to
use such Intellectual Property, (iii) to the knowledge of UDS, no third party is
challenging, infringing on or otherwise violating any right of UDS in the
Intellectual Property, (iv) neither UDS nor any of its Subsidiaries has received
any written notice of any pending claim, order or proceeding with respect to any
Intellectual Property used in and necessary for the conduct of UDS's and its
Subsidiaries' business as it is currently conducted, and (v) to the knowledge of
UDS, no Intellectual Property is being used or enforced by UDS or its
Subsidiaries in a manner that would reasonably be expected to result in the
abandonment, cancellation or unenforceability of any Intellectual Property used
in and necessary for the conduct of UDS's and its Subsidiaries' business as it
is currently conducted.
(n) State Takeover Laws; Rights Plan. (i) The Board of Directors of UDS has
approved this Agreement and the transactions contemplated by this Agreement as
required under Section 203 of the DGCL and any other applicable state takeover
laws and any applicable provision of the UDS Certificate of Incorporation so
that any such state takeover laws and such provisions will not apply to this
Agreement or any of the transactions contemplated hereby.
(ii) UDS has taken all action, if any, necessary or
appropriate so that the entering into of this Agreement, and
the consummation of the transactions contemplated hereby, do
not and will not result in the ability of any person to
exercise any UDS Rights under the UDS Rights Agreement or
enable or require the UDS Rights to separate from the shares
of UDS Common Stock to which they are attached or to be
triggered or become exercisable. No "Distribution Date" or
"Stock Acquisition Date" (as such terms are defined in the UDS
Rights Agreement) has occurred.
(o) Opinion of Financial Advisor. UDS has received the opinion of Banc of
America Securities LLC, dated the date hereof, to the effect that the Merger
Consideration to be received by holders of UDS Common Stock in the Merger is
fair to such stockholders from a financial point of view.
(p) Board Approval. The Board of Directors of UDS, at a meeting duly called and
held, has by unanimous vote of those directors present (i) determined that this
Agreement and the transactions contemplated hereby are advisable, fair to and in
the best interests of the stockholders of UDS, (ii) approved and adopted this
Agreement and (iii) recommended that the plan of merger contained in this
Agreement be adopted by the holders of UDS Common Stock.
(q) Broker's Fees. Neither UDS nor any of its Subsidiaries nor any of their
respective officers or directors has employed any broker or finder or incurred
any liability for any broker's fees, commissions or finder's fees in connection
with the transactions contemplated by this Agreement, excluding fees to be paid
to Banc of America Securities LLC.
(r) Taxes. (i) Except as would not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect on UDS, (A) each of UDS and its
Subsidiaries has duly and timely filed all Tax Returns required to be filed by
it, and all such Tax Returns are true, complete and accurate in all respects;
(B) UDS and each of its Subsidiaries has paid all Taxes required to be paid by
it, and has paid all Taxes that it was required to withhold from amounts owing
to any employee, creditor or third party; (C) there are no pending or, to the
knowledge of UDS, threatened audits, examinations, investigations, deficiencies,
claims or other proceedings in respect of Taxes relating to UDS or any
Subsidiary of UDS; (D) there are no liens for Taxes upon the assets of UDS or
any Subsidiary of UDS, other than liens for current Taxes not yet due and liens
for Taxes that are being contested in good faith by appropriate proceedings; (E)
neither UDS nor any of its Subsidiaries has requested any extension of time
within which to file any Tax Returns in respect of any taxable year which have
not subsequently been filed when due (pursuant to such extension), nor provided
or been requested to provide any waivers of the time to assess any Taxes that
are pending or outstanding; (F) the consolidated federal income Tax Returns of
UDS have been examined, or the statute of limitations has closed, with respect
to all taxable years through and including 1994; (G) neither UDS nor any of its
Subsidiaries has any liability for Taxes of any Person (other than UDS and its
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any comparable
provision of state, local or foreign law); and (H) neither UDS nor any
Subsidiary of UDS is a party to any agreement (with any Person other than UDS
and/or any of its Subsidiaries) relating to the allocation or sharing of Taxes
which is currently in force.
(ii) UDS has not constituted either a "distributing
corporation" or a "controlled corporation" within the meaning
of Section 355(a)(1)(A) of the Code in a distribution of stock
intended to qualify under Section 355(a) of the Code (i) in
the two years prior to the date of this Agreement (or will
constitute such a corporation in the two years prior to the
Closing Date) or (ii) in a distribution which otherwise
constitutes part of a "plan" or "series of related
transactions" within the meaning of Section 355(e) of the Code
in conjunction with the Merger.
(s) Reorganization under the Code. As of the date of this Agreement, neither UDS
nor any of its Subsidiaries has taken any action or knows of any fact that is
reasonably likely to prevent the Merger from qualifying as a "reorganization"
within the meaning of Section 368(a) of the Code.
(t) Form S-4; Joint Proxy Statement/Prospectus. None of the information to be
supplied by UDS or its Subsidiaries in the Form S-4 or the Joint Proxy
Statement/Prospectus will, at the time of the mailing of the Joint Proxy
Statement/Prospectus and any amendments or supplements thereto, and at the time
of each of the Valero Stockholders Meeting and the UDS Stockholders Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. The Joint Proxy Statement/Prospectus will comply, as of its mailing
date, as to form in all material respects with all applicable laws, including
the provisions of the Exchange Act and the rules and regulations promulgated
thereunder, except that no representation is made by UDS with respect to
information supplied by Valero for inclusion therein.
(u) Labor Relations; Collective Bargaining Agreements. Neither UDS nor any
Subsidiary of UDS is a party to any collective bargaining or other labor union
contract applicable to persons employed by UDS or any Subsidiary of UDS, and no
collective bargaining agreement or other labor union contract is being
negotiated by UDS or any Subsidiary of UDS. No labor organization or group of
employees of UDS or any of its Subsidiaries has made a pending demand for
recognition or certification, and there are no representation or certification
proceedings or petitions seeking a representation proceeding presently pending
or threatened to be brought or filed, with the National Labor Relations Board or
any other labor relations tribunal or authority. To the knowledge of UDS, except
as would not reasonably be expected to have a Material Adverse Effect on UDS,
(i) there is no labor dispute, strike, slowdown or work stoppage against UDS or
any Subsidiary of UDS pending or, to the knowledge of UDS, threatened against
UDS or any Subsidiary of UDS and (ii) no unfair labor practice or labor charge
or complaint has occurred with respect to UDS or any Subsidiary of UDS.
4.2 Representations and Warranties of Valero. Except as disclosed in a section
of the Valero disclosure schedule delivered to UDS concurrently herewith (the
"Valero Disclosure Schedule") corresponding to the subsection of this Section
4.2 to which such disclosure applies, Valero hereby represents and warrants to
UDS as follows:
(a) Corporate Organization. (i) Valero is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Valero
has the corporate power and authority to own or lease all of its properties and
assets and to carry on its business as it is now being conducted, and is duly
licensed or qualified to do business in each jurisdiction in which the nature of
the business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary,
except where the failure to be so licensed or qualified would not, either
individually or in the aggregate, have a Material Adverse Effect on Valero. True
and complete copies of the Restated Certificate of Incorporation and By-Laws of
Valero, as in effect as of the date of this Agreement, have previously been made
available by Valero to UDS.
(ii) Each Subsidiary of Valero (A) is duly organized
and validly existing under the laws of its jurisdiction of
organization, (B) is duly qualified to do business and in good
standing in all jurisdictions (whether federal, state, local
or foreign) where its ownership or leasing of property or the
conduct of its business requires it to be so qualified and in
which the failure to be so qualified would have a Material
Adverse Effect on Valero and (C) has all requisite corporate
power and authority to own or lease its properties and assets
and to carry on its business as now conducted.
(b) Capitalization. (i) The authorized capital stock of Valero consists of (A)
150,000,000 shares of Valero Common Stock (each of which includes one Valero
Right), of which, as of March 31, 2001, 61,016,165 shares were issued and
outstanding and 1,295,001 shares were held in treasury and (B) 20,000,000 shares
of preferred stock, par value $0.01 per share, of Valero (the "Valero Preferred
Stock," together with the Valero Common Stock, the "Valero Capital Stock"), of
which no shares are issued and outstanding. From January 31, 2001 to the date of
this Agreement, no shares of Valero Capital Stock have been issued except
pursuant to employee and director stock plans of Valero in effect as of the date
hereof (the "Valero Stock Plans"). All of the issued and outstanding shares of
Valero Common Stock have been duly authorized and validly issued and are fully
paid, nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. As of the date of this Agreement, except
pursuant to the terms of options and stock issued pursuant to Valero Stock Plans
and pursuant to the Valero Rights, Valero does not have and is not bound by any
outstanding subscriptions, options, warrants, calls, commitments or agreements
of any character calling for the purchase or issuance of any shares of Valero
Capital Stock or any other equity securities of Valero or any securities
representing the right to purchase or otherwise receive any shares of Valero
Capital Stock. As of March 31, 2001, no shares of Valero Capital Stock were
reserved for issuance, except for shares of Valero Common Stock reserved for
issuance upon the exercise of stock options pursuant to the Valero Stock Plans
and in respect of the employee and director savings, compensation and deferred
compensation plans described in the Valero 2000 10-K and 1,500,000 shares of
Junior Participating Preferred Stock, Series I, reserved for issuance in
connection with the Valero Rights Agreement. Valero has no Voting Debt issued or
outstanding. Except for immaterial amounts of directors' qualifying shares in
foreign Subsidiaries of Valero, Valero owns, directly or indirectly, all of the
issued and outstanding shares of capital stock or other equity ownership
interests of each Subsidiary of Valero, free and clear of any Liens, and all of
such shares or equity ownership interests are duly authorized and validly issued
and are fully paid, nonassessable and free of preemptive rights, with no
personal liability attaching to the ownership thereof. No Subsidiary of Valero
has or is bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the purchase or issuance
of any shares of capital stock or any other equity security of such Subsidiary
or any securities representing the right to purchase or otherwise receive any
shares of capital stock or any other equity security of such Subsidiary.
(c) Authority; No Violation. (i) Valero has full corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
approved by the Board of Directors of Valero. The Board of Directors of Valero
has directed that this Agreement be submitted to Valero stockholders for
approval at a meeting of Valero stockholders for the purpose of approving the
Merger and this Agreement (the "Valero Stockholders Meeting"), and, except for
the approval of the Merger and this Agreement by majority vote at a meeting of
Valero's stockholders at which a quorum is present (the "Valero Stockholder
Approval"), no other corporate proceedings on the part of Valero are necessary
to approve this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by
Valero and (assuming due authorization, execution and delivery by UDS)
constitutes a valid and binding obligation of Valero, enforceable against Valero
in accordance with its terms.
(ii) Neither the execution and delivery of this
Agreement by Valero, nor the consummation by Valero of the
transactions contemplated hereby, nor compliance by Valero
with any of the terms or provisions hereof, will (A) violate
any provision of the Restated Certificate of Incorporation or
By-Laws of Valero or (B) assuming that the consents and
approvals referred to in Section 4.2(d) are duly obtained, (x)
violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to
Valero, any of its Subsidiaries or Non-Subsidiary Affiliates
or any of its properties or assets or (y) violate, conflict
with, result in a breach of any provision of or the loss of
any benefit under, constitute a default (or an event which,
with notice or lapse of time, or both, would constitute a
default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance
required by, accelerate any right or benefit provided by, or
result in the creation of any Lien upon any of the properties
or assets of Valero, any of its Subsidiaries or Non-Subsidiary
Affiliates under any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which
Valero, any of its Subsidiaries or Non-Subsidiary Affiliates
is a party, or by which they or any of their properties or
assets may be bound or affected, except (in the case of clause
(y) above) for such violations, conflicts, breaches or
defaults which, either individually or in the aggregate, will
not have a Material Adverse Effect on Valero.
(d) Consents and Approvals. Except for (i) the filing of a notification and
report form under the HSR Act and the termination or expiration of the waiting
period under the HSR Act, (ii) the Other Approvals, (iii) the filing with the
SEC of the Joint Proxy Statement/Prospectus and the Form S-4, (iv) the filing of
the Certificate of Merger, (v) any consents, authorizations, approvals, filings
or exemptions in connection with compliance with the rules of the NYSE, (vi)
such filings and approvals as are required to be made or obtained under the
securities or "Blue Sky" laws of various states in connection with the issuance
of the shares of Valero Common Stock pursuant to this Agreement and (vii) such
other consents, approvals, filings and registrations the failure of which to
obtain or make would not reasonably be expected to have a Material Adverse
Effect on Valero, no consents or approvals of or filings or registrations with
any Governmental Entity are necessary in connection with (A) the execution and
delivery by Valero of this Agreement and (B) the consummation by Valero of the
transactions contemplated by this Agreement.
(e) Financial Reports and SEC Documents. The Valero 2000 10-K and all other
reports, registration statements, definitive proxy statements or information
statements filed or to be filed by Valero or any of its Subsidiaries subsequent
to December 31, 1998 under the Securities Act or under Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act, in the form filed, or to be filed (collectively,
the "Valero SEC Documents"), with the SEC (i) complied or will comply in all
material respects as to form with the applicable requirements under the
Securities Act or the Exchange Act, as the case may be, and (ii) as of its
filing date, did not or will not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which they
were made, not misleading; and each of the balance sheets contained in or
incorporated by reference into any such Valero SEC Document (including the
related notes and schedules thereto) fairly presents or will fairly present the
financial position of the entity or entities to which it relates as of its date,
and each of the statements of income and changes in stockholders' equity and
cash flows or equivalent statements in such Valero SEC Documents (including any
related notes and schedules thereto) fairly presents or will fairly present the
results of operations, changes in stockholders' equity and changes in cash
flows, as the case may be, of the entity or entities to which it relates for the
periods to which it relates, in each case in accordance with GAAP consistently
applied during the periods involved, except, in each case, as may be noted
therein, subject to normal year-end audit adjustments in the case of unaudited
statements.
(f) Absence of Undisclosed Liabilities. Except as disclosed in the audited
financial statements (or notes thereto) included in the Valero 2000 10-K,
neither Valero nor any of its Subsidiaries had at December 31, 2000, or has
incurred since that date through the date hereof, any liabilities or obligations
(whether absolute, accrued, contingent or otherwise) of any nature, except (a)
liabilities, obligations or contingencies which (i) are accrued or reserved
against in the financial statements in the Valero 2000 10-K or reflected in the
notes thereto or (ii) were incurred in the ordinary course of business and
consistent with past practices, (b) liabilities, obligations or contingencies
which (i) would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Valero, or (ii) have been discharged or
paid in full prior to the date hereof, and (c) liabilities, obligations and
contingencies which are of a nature not required to be reflected in the
consolidated financial statements of Valero and its Subsidiaries prepared in
accordance with GAAP consistently applied.
(g) Absence of Certain Changes or Events. (i) Since December 31, 2000, except as
set forth in Valero SEC Documents filed since December 31, 2000 and prior to the
date hereof, no event or events have occurred that has had or would reasonably
be expected to have, either individually or in the aggregate, a Material Adverse
Effect on Valero.
(ii) Since December 31, 2000, Valero and its
Subsidiaries have carried on their respective businesses in
all material respects in the ordinary course.
(iii) Since December 31, 2000, Valero has not
declared any dividends on Valero Common Stock other than its
regular quarterly dividends.
(h) Legal Proceedings. There is no suit, action or proceeding or investigation
pending or, to the knowledge of Valero, threatened, against or affecting Valero
or any of its Subsidiaries that would, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Valero, nor is there
any judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against Valero or its Subsidiaries having, or which would
reasonably be expected to have, individually or in the aggregate, any such
effect.
(i) Compliance with Applicable Law. Valero and each of its Subsidiaries hold all
licenses, franchises, permits and authorizations necessary for the lawful
conduct of their respective businesses under and pursuant to each, and have
complied in all respects with and are not in default under any, applicable law,
statute, order, rule or regulation of any Governmental Entity relating to Valero
or any of its Subsidiaries, except where the failure to hold such license,
franchise, permit or authorization or such noncompliance or default would not,
either individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Valero.
(j) Contracts. (i) Neither Valero nor any of its Subsidiaries is a party to or
bound by any contract, arrangement, commitment or understanding (whether written
or oral) (A) which, upon the consummation or stockholder approval of the
transactions contemplated by this Agreement, will (either alone or upon the
occurrence of any additional acts or events) result in any payment (whether of
severance pay or otherwise) becoming due from UDS, Valero, the Surviving
Corporation or any of their respective Subsidiaries to any director officer or
employee thereof, (B) which is a "material contract" (as such term is defined in
Item 601(b)(10) of Regulation S-K of the SEC) to be performed after the date of
this Agreement that has not been filed or incorporated by reference in the
Valero SEC Documents filed prior to the date hereof, or (C) which materially
restricts the conduct of any line of business by Valero or upon consummation of
the Merger will materially restrict the ability of UDS or the Surviving
Corporation to engage in any line of business. Each contract, arrangement,
commitment or understanding of the type described in this Section 4.2(j),
whether or not set forth in the Valero Disclosure Schedule or in such Valero SEC
Documents, is referred to herein as a "Valero Contract".
(ii) (A) Each Valero Contract is valid and binding on
Valero and any of its Subsidiaries that is a party thereto, as
applicable, and in full force and effect, (B) Valero and each
of its Subsidiaries has in all material respects performed all
obligations required to be performed by it to date under each
Valero Contract, except where such noncompliance, either
individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on Valero, and (C)
neither Valero nor any of its Subsidiaries knows of, or has
received notice of, the existence of any event or condition
which constitutes, or, after notice or lapse of time or both,
will constitute, a material default on the part of Valero or
any of its Subsidiaries under any such Valero Contract, except
where such default, either individually or in the aggregate,
would not reasonably be expected to have a Material Adverse
Effect on Valero.
(k) Environmental Liability. There are no legal, administrative, arbitral or
other proceedings, claims, actions, causes of action, private environmental
investigations or remediation activities or governmental investigations of any
nature seeking to impose, or that could reasonably result in the imposition of,
on Valero, any liability or obligation arising under common law or under any
local, state or federal environmental statute, regulation or ordinance including
CERCLA, pending or threatened in writing against Valero, which liability or
obligation, either individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect on Valero. Valero is not subject to
any agreement, order, judgment, decree, letter or memorandum by or with any
court, governmental authority, regulatory agency or third party imposing any
liability or obligation with respect to the foregoing that, either individually
or in the aggregate, would reasonably be expected to have a Material Adverse
Effect on Valero.
(l) Employee Benefit Plans; Labor Matters. (i) The Internal Revenue Service has
issued a favorable determination letter with respect to each Valero Plan that is
intended to be a "qualified plan" within the meaning of Section 401(a) of the
Code ("Valero Qualified Plans") and the related trust, and such determination
letter has not been revoked. No circumstances exist and no events have occurred
that could adversely affect the qualified status of any Valero Qualified Plan or
the related trust which could not be corrected under the Internal Revenue
Service's Employee Plans Compliance Resolution System (Revenue Procedure
2001-17) without material liability to Valero. No Valero Plan is intended to
meet the requirements of Code Section 501(c)(9).(i)
(ii) With respect to each Valero Plan that is subject to Titl IV
or Section 302 of ERISA or Section 412 or 4971 of the Code:(A)
there does not exist any accumulated funding deficiency within
the meaning of Section 412 of the Code or Section 302 of
ERISA, whether or not waived; (B) the fair market value of the
assets of such Valero Plan equals or exceeds the actuarial
present value of all accrued benefits under such Valero Plan
(whether or not vested) on an accumulated benefit obligation
basis, based on the most recent actuarial report for such
plan; (C) no reportable event within the meaning of Section
4043(c) of ERISA for which the 30-day notice requirement has
not been waived has occurred, and the consummation of the
transactions contemplated by this Agreement will not result in
the occurrence of any such reportable event; (D) all premiums
to the PBGC have been timely paid in full; (E) no liability
(other than for premiums to the PBGC) under Title IV of ERISA
has been or is expected to be incurred by Valero or any of its
Subsidiaries; and (F) the PBGC has not instituted proceedings
to terminate any such Valero Plan and, to Valero's knowledge,
no condition exists that presents a risk that such proceedings
will be instituted or which would constitute grounds under
Section 4042 of ERISA for the termination of, or the appoint-
ment of a trustee to administer, any such Valero Plan.
(iii) Except as would not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect on Valero,
(A) each of the Valero Plans has been operated and
administered in all material respects in accordance with
applicable law and administrative rules and regulations of any
Governmental Entity, including, but not limited to, ERISA and
the Code, and (B) there are no pending or threatened claims
(other than claims for benefits in the ordinary course),
lawsuits or arbitrations which have been asserted or
instituted against the Valero Benefit Plans, any fiduciaries
thereof with respect to their duties to the Valero Benefit
Plans or the assets of any of the trusts under any of the
Valero Benefit Plans which could reasonably be expected to
result in any material liability of Valero or any of its
Subsidiaries to the PBGC, the U.S. Department of the Treasury,
the U.S. Department of Labor, any Valero Benefit Plan, any
participant in a Valero Benefit Plan, or any other party.
(iv) No Valero Benefit Plan is a Multiemployer Plan or a Multiple
Employer Plan.
(m) Intellectual Property. Except as would not reasonably be expected to have a
Material Adverse Effect on Valero, (i) Valero and its Subsidiaries own, or are
licensed to use, all Intellectual Property used in and necessary for the conduct
of their business as it is currently conducted, (ii) to the knowledge of Valero,
the use of Intellectual Property by Valero and its Subsidiaries does not
infringe on or otherwise violate the rights of any third party, and, to the
extent such Intellectual Property is licensed, its use is in accordance in all
material respects with the applicable license pursuant to which Valero acquired
the right to use such Intellectual Property, (iii) to the knowledge of Valero,
no third party is challenging, infringing on or otherwise violating any right of
Valero in the Intellectual Property, (iv) neither Valero nor any of its
Subsidiaries has received any written notice of any pending claim, order or
proceeding with respect to any Intellectual Property used in and necessary for
the conduct of Valero's and its Subsidiaries' business as it is currently
conducted, and (v) to the knowledge of Valero, no Intellectual Property is being
used or enforced by Valero or its Subsidiaries in a manner that would reasonably
be expected to result in the abandonment, cancellation or unenforceability of
any Intellectual Property used in and necessary for the conduct of Valero's and
its Subsidiaries' business as it is currently conducted.
(n) State Takeover Laws; Rights Plan. (i) The Board of Directors of Valero has
approved this Agreement and the transactions contemplated by this Agreement as
required under Section 203 of the DGCL and any other applicable state takeover
laws so that any such state takeover laws will not apply to this Agreement or
any of the transactions contemplated hereby.
(ii) Valero has taken all action, if any, necessary
or appropriate so that the entering into of this Agreement,
and the consummation of the transactions contemplated hereby,
do not and will not result in the ability of any person to
exercise any Valero Rights under the Valero Rights Agreement
or enable or require the Valero Rights to separate from the
shares of Valero Common Stock to which they are attached or to
be triggered or become exercisable. No "Distribution Date" or
"Shares Acquisition Date" (as such terms are defined in the
Valero Rights Agreement) has occurred.
(o) Opinion of Financial Advisor. Valero has received the opinion of Credit
Suisse First Boston Corporation and Morgan Stanley & Co. Incorporated, in each
case dated the date hereof, to the effect that the Merger Consideration is fair
to Valero from a financial point of view.
(p) Board Approval. The Board of Directors of Valero, at a meeting duly called
and held, has by unanimous vote of those directors present (i) determined that
this Agreement and the transactions contemplated hereby are advisable, fair to
and in the best interests of the stockholders of Valero, (ii) approved and
adopted this Agreement, and (iii) recommended that the plan of merger contained
in this Agreement be adopted by the holders of Valero Common Stock.
(q) Broker's Fees. Neither Valero nor any of its Subsidiaries nor any of its
respective officers or directors has employed any broker or finder or incurred
any liability for any broker's fees, commissions or finder's fees in connection
with the transactions contemplated by this Agreement, excluding fees to be paid
to Morgan Stanley & Co. Incorporated and Credit Suisse First Boston Corporation.
(r) Taxes. (i) Except as would not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect on Valero, (A) each of Valero
and its Subsidiaries has duly and timely filed all Tax Returns required to be
filed by it, and all such Tax Returns are true, complete and accurate in all
respects; (B) Valero and each of its Subsidiaries has paid all Taxes required to
be paid by it, and has paid all Taxes that it was required to withhold from
amounts owing to any employee, creditor or third party; (C) there are no pending
or, to the knowledge of Valero, threatened audits, examinations, investigations,
deficiencies, claims or other proceedings in respect of Taxes relating to Valero
or any Subsidiary of Valero; (D) there are no liens for Taxes upon the assets of
Valero or any Subsidiary of Valero, other than liens for current Taxes not yet
due and liens for Taxes that are being contested in good faith by appropriate
proceedings; (E) neither Valero nor any of its Subsidiaries has requested any
extension of time within which to file any Tax Returns in respect of any taxable
year which have not subsequently been filed when due (pursuant to such
extension), nor provided or been requested to provide any waivers of the time to
assess any Taxes that are pending or outstanding; (F) the consolidated federal
income Tax Returns of Valero have been examined, or the statute of limitations
has closed, with respect to all taxable years through and including July 31,
1997; (G) neither Valero nor any of its Subsidiaries has any liability for Taxes
of any Person (other than Valero and its Subsidiaries) under Treasury Regulation
Section 1.1502-6 (or any comparable provision of state, local or foreign law);
and (H) neither Valero nor any Subsidiary of Valero is a party to any agreement
(with any Person other than Valero and/or any of its Subsidiaries) relating to
the allocation or sharing of Taxes which is currently in force.
(ii) Valero has not constituted either a
"distributing corporation" or a "controlled corporation"
within the meaning of Section 355(a)(1)(A) of the Code in a
distribution of stock intended to qualify under Section 355(a)
of the Code (i) in the two years prior to the date of this
Agreement (or will constitute such a corporation in the two
years prior to the Closing Date) or (ii) in a distribution
which otherwise constitutes part of a "plan" or "series of
related transactions" within the meaning of Section 355(e) of
the Code in conjunction with the Merger.
(s) Reorganization under the Code. As of the date of this Agreement, neither
Valero nor any of its Subsidiaries has taken any action or knows of any fact
that is reasonably likely to prevent the Merger from qualifying as a
"reorganization" within the meaning of Section 368(a) of the Code.
(t) Form S-4; Joint Proxy Statement/Prospectus. None of the information to be
supplied by Valero or its Subsidiaries in the Form S-4 or the Joint Proxy
Statement/Prospectus will, at the time of the mailing of the Joint Proxy
Statement/Prospectus and any amendments or supplements thereto, and at the time
of each of the Valero Stockholders Meeting and the UDS Stockholders Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. The Joint Proxy Statement/Prospectus will comply, as of its mailing
date, as to form in all material respects with all applicable laws, including
the provisions of the Exchange Act and the rules and regulations promulgated
thereunder, except that no representation is made by Valero with respect to
information supplied by UDS for inclusion therein.
(u) Neither Valero nor any Subsidiary of Valero is a party to any collective
bargaining or other labor union contract applicable to persons employed by
Valero or any Subsidiary of Valero, and no collective bargaining agreement or
other labor union contract is being negotiated by Valero or any Subsidiary of
Valero. No labor organization or group of employees of Valero or any of its
Subsidiaries has made a pending demand for recognition or certification, and
there are no representation or certification proceedings or petitions seeking a
representation proceeding presently pending or threatened to be brought or
filed, with the National Labor Relations Board or any other labor relations
tribunal or authority. To the knowledge of Valero, except as would not
reasonably be expected to have a Material Adverse Effect on Valero, (i) there is
no labor dispute, strike, slowdown or work stoppage against Valero or any
Subsidiary of Valero pending or, to the knowledge of Valero, threatened against
Valero or any Subsidiary of Valero and (ii) no unfair labor practice or labor
charge or complaint has occurred with respect to Valero or any Subsidiary of
Valero.
(v) Financing. Valero will have available on the Closing Date sufficient funds
to enable it to consummate the transactions contemplated by this Agreement.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Covenants of UDS. During the period from the date of this Agreement and
continuing until the Effective Time, UDS agrees as to itself and its
Subsidiaries that (unless Valero shall otherwise agree in writing and except as
expressly contemplated or permitted by this Agreement or a correspondingly
numbered subsection of the UDS Disclosure Schedule):
(a) Ordinary Course. (i) UDS and its Subsidiaries shall carry on their
respective businesses in the ordinary course consistent with past practices in
all material respects, in substantially the same manner as heretofore conducted,
and shall use its reasonable best efforts consistent with the other provisions
of this Agreement to keep available the services of their respective present
officers and key employees, preserve intact their present lines of business,
maintain their rights and franchises and preserve their relationships with
customers, suppliers and others having business dealings with them to the end
that their ongoing businesses shall not be impaired in any material respect at
the Effective Time.
(ii) UDS shall not, and shall not permit any of its
Subsidiaries to, (A) enter into any new material line of
business or (B) without the prior written consent of Valero,
which will not be unreasonably withheld, incur or commit to
any capital expenditures or any obligations or liabilities in
connection therewith, other than capital expenditures and
obligations or liabilities in connection therewith (I) not
exceeding $25 million individually, or $100 million in the
aggregate, or (II) contemplated by the 2001 capital budget
approved by the UDS Board of Directors and previously
disclosed to Valero.
(b) Dividends; Changes in Share Capital. UDS shall not, and shall not permit any
of its Subsidiaries to, and shall not propose to, (i) declare or pay any
dividends on or make other distributions in respect of any of its capital stock,
except (x) the declaration and payment of regular quarterly cash dividends not
in excess of $0.125 per share of UDS Common Stock with usual record and payment
dates for such dividends in accordance with past dividend practice, (y) the
payment of accrued amounts on any UDS Toprs pursuant to the terms of, and in
connection with the redemption of, such UDS Toprs as required by their terms as
in effect as of the date hereof and (z) the declaration and payment of regular
dividends from a wholly owned Subsidiary of UDS to UDS or to another wholly
owned Subsidiary of UDS in accordance with past dividend practice, (ii) split,
combine or reclassify any of its capital stock or issue or authorize or propose
the issuance of any other securities in respect of, in lieu of or in
substitution for, shares of its capital stock, except for any such transaction
by a wholly owned Subsidiary of UDS which remains a wholly owned Subsidiary
after consummation of such transaction, or (iii) repurchase, redeem or otherwise
acquire any shares of its capital stock or any securities convertible into or
exercisable for any shares of its capital stock.
(c) Issuance of Securities. UDS shall not, and shall not permit any of its
Subsidiaries to, issue, deliver, sell, pledge or dispose of, or authorize or
propose the issuance, delivery, sale, pledge or disposition of, any shares of
its capital stock of any class, any Voting Debt or any securities convertible
into or exercisable for, or any rights, warrants, calls or options to acquire,
any such shares or Voting Debt, or enter into any commitment, arrangement,
undertaking or agreement with respect to any of the foregoing, other than (i)
the issuance of UDS Common Stock (and the associated UDS Rights) upon the
exercise of UDS Stock Options outstanding as of the date hereof in accordance
with their present terms, (ii) issuances, sales or deliveries by a wholly-owned
Subsidiary of UDS of capital stock to such Subsidiary's parent or another
wholly-owned Subsidiary of UDS or (iii) issuances in accordance with the UDS
Rights Agreement. UDS shall not contribute any additional shares of capital
stock to any trust associated with the GSOP.
(d) Governing Documents. Except to the extent required to comply with its
obligations hereunder or with applicable law, UDS shall not and shall cause each
of its Subsidiaries not to amend or propose to so amend its certificate of
incorporation or by-laws or similar organizational documents.
(e) No Acquisitions. Except for acquisitions in the ordinary course of business
consistent with past practice that do not exceed $25 million individually or
$100 million in the aggregate, without the prior written consent of Valero,
which will not be unreasonably withheld, UDS shall not, and shall not permit any
of its Subsidiaries to, acquire or agree to acquire by merger or consolidation,
or by purchasing a substantial equity interest in or a substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof or
otherwise acquire or agree to acquire any assets (excluding the acquisition of
assets used in the operations of the business of UDS and its Subsidiaries in the
ordinary course, which assets do not constitute a business unit, division or all
or substantially all of the assets of the transferor and which acquisitions are
in the ordinary course of business consistent with past practice).
(f) No Dispositions. UDS shall not, and shall not permit any of its Subsidiaries
to, sell, lease or otherwise dispose of, or agree to sell, lease or otherwise
dispose of, any of its assets (including capital stock of Subsidiaries of UDS)
other than in the ordinary course of business consistent with past practice.
(g) Investments; Indebtedness. UDS shall not, and shall not permit any of its
Subsidiaries to, (i) make any loans, advances or capital contributions to, or
investments in, any other Person, other than (x) loans or investments by UDS or
a wholly owned Subsidiary of UDS to or in UDS or any wholly owned Subsidiary of
UDS, (y) in the ordinary course of business consistent with past practice which
are not, individually or in the aggregate, material to UDS and its Subsidiaries
taken as a whole (provided that none of such transactions referred to in this
clause (y) presents a material risk of making it more difficult to obtain any
approval or authorization required in connection with the Merger under
Regulatory Law) or (ii) except in the ordinary course consistent with past
practice under UDS's existing authorized commercial paper program, incur any
indebtedness for borrowed money or guarantee any such indebtedness of another
Person, issue or sell any debt securities or warrants or other rights to acquire
any debt securities of UDS or any of its Subsidiaries, guarantee any debt
securities of another person, enter into any "keep well" or other agreement to
maintain any financial statement condition of another Person (other than any
wholly owned Subsidiary) or enter into any arrangement having the economic
effect of any of the foregoing (collectively, "UDS Indebtedness").
(h) Tax-Free Qualification. UDS shall use its reasonable best efforts not to,
and shall use its reasonable best efforts not to permit any of its Subsidiaries
to, take any action (including any action otherwise permitted by this Section
5.1) that would reasonably be expected to prevent the Merger from qualifying as
a "reorganization" within the meaning of Section 368(a) of the Code.
(i) Compensation. Except (x) as required by law or by the terms of any
collective bargaining agreement or other agreement currently in effect between
UDS or any Subsidiary of UDS and any director, officer or employee thereof or
(y) in the ordinary course of business consistent with past practice, UDS shall
not (A) increase the amount of compensation of, or pay any severance to, any
director or employee of UDS or any material Subsidiary or business unit of UDS
(and UDS shall consult with Valero before effecting or proposing any such
increase with respect to any director, officer or key employee of the
foregoing), or (B) make any increase in or commitment to increase any employee
benefits, grant any additional UDS Stock Options, adopt or amend or make any
commitment to adopt or amend any UDS Benefit Plan or fund or make any
contribution to any UDS Benefit Plan or any related trust or other funding
vehicles (provided that, in any event, any such increase, commitment, grant,
adoption, amendment, funding or contribution contemplated by this clause (B)
shall only be made after prior consultation with Valero), other than regularly
scheduled contributions to trusts funding qualified plans. No UDS Stock Options
that are issued after the date hereof and prior to the Effective Time shall
include "reload" features or "change in control" provisions that would be
triggered by the transactions contemplated by this Agreement.
(j) Accounting Methods; Tax Elections. Except as disclosed in UDS SEC Documents
filed prior to the date of this Agreement, or as required by a Governmental
Entity, UDS shall not change in any material respect its methods of accounting
in effect at December 30, 2000, except as required by changes in GAAP as
concurred in by UDS's independent public accountants. UDS shall not (i) change
its fiscal year or any method of tax accounting, (ii) make any Tax election or
(iii) settle or compromise any liability for Taxes, except in each case for any
such actions that, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on UDS or as required by law.
(k) Certain Actions. UDS and its Subsidiaries shall not take any action or omit
to take any action that would reasonably be expected to prevent or materially
delay or impede the consummation of the Merger or the other transactions
contemplated by this Agreement or, except in the ordinary course of business
consistent with past practice, terminate, amend or modify any material provision
of, or waive any material rights under, any UDS Contract.
(l) No Related Actions. UDS shall not, and shall not permit any of its
Subsidiaries to, agree or commit to do any of the foregoing.
5.2 Covenants of Valero. During the period from the date of this Agreement and
continuing until the Effective Time, Valero agrees as to itself and its
Subsidiaries that (unless UDS shall otherwise agree in writing and except as
expressly contemplated or permitted by this Agreement or a correspondingly
numbered subsection of the Valero Disclosure Schedule):
(a) Ordinary Course. Valero and its Subsidiaries shall carry on their respective
businesses in the ordinary course consistent with past practices in all material
respects, in substantially the same manner as heretofore conducted, and shall
use their reasonable best efforts to preserve intact their present lines of
business, maintain their rights and franchises and preserve their relationships
with customers, suppliers and others having business dealings with them to the
end that their ongoing businesses shall not be impaired in any material respect
at the Effective Time.
(b) Dividends; Changes in Share Capital. Valero shall not, and shall not permit
any of its Subsidiaries to, and shall not propose to, (i) declare or pay any
dividends on or make other distributions in respect of any of its capital stock,
except (x) the declaration and payment of regular quarterly cash dividends with
usual record and payment dates for such dividends in accordance with past
dividend practice and (y) the declaration and payment of regular dividends from
a Subsidiary of Valero to Valero or to another Subsidiary of Valero in
accordance with past dividend practice or (ii) split, combine or reclassify any
of its capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for, shares of its
capital stock, except for any such transaction by a wholly owned Subsidiary of
Valero which remains a wholly owned Subsidiary after consummation of such
transaction.
(c) Governing Documents. Except (i) to the extent required to comply with their
respective obligations hereunder or with applicable law or (ii) to increase the
number of shares of capital stock authorized by its certificate of
incorporation, Valero shall not amend or propose to so amend its certificate of
incorporation or by-laws.
(d) Tax-Free Qualification. Valero shall use its reasonable best efforts not to,
and shall use its reasonable best efforts not to permit any of its Subsidiaries
to, take any action (including any action otherwise permitted by this Section
5.2) that would reasonably be expected to prevent the Merger from qualifying as
a "reorganization" within the meaning of Section 368(a) of the Code.
(e) Certain Actions. Valero and its Subsidiaries shall not take any action or
omit to take any action that would reasonably be expected to prevent or
materially delay or impede the consummation of the Merger or the other
transactions contemplated by this Agreement.
(f) No Related Actions. Valero shall not, and shall not permit any of its
Subsidiaries to, agree or commit to do any of the foregoing.
5.3 Governmental Filings. UDS and Valero shall (A) confer on a reasonable basis
with each other and (B) report to each other (to the extent permitted by law or
regulation or any applicable confidentiality agreement) on operational matters.
UDS and Valero shall file all reports required to be filed by each of them with
the SEC (and all other Governmental Entities) between the date of this Agreement
and the Effective Time and shall, if requested by the other and (to the extent
permitted by law or regulation or any applicable confidentiality agreement)
deliver to the other party copies of all such reports, announcements and
publications promptly upon request.
5.4 Control of Other Party's Business. Nothing contained in this Agreement shall
give UDS, directly or indirectly, the right to control or direct Valero's
operations or give Valero, directly or indirectly, the right to control or
direct UDS's operations prior to the Effective Time. Prior to the Effective
Time, each of UDS and Valero shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision over its
respective operations.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Preparation of Proxy Statement; Stockholders Meetings. (a) As promptly as
reasonably practicable following the date hereof, Valero and UDS shall cooperate
in preparing and each shall cause to be filed with the SEC mutually acceptable
proxy materials which shall constitute the Joint Proxy Statement/Prospectus and
Valero shall prepare and file with the SEC the Form S-4. The Joint Proxy
Statement/Prospectus will be included as a prospectus in and will constitute a
part of the Form S-4 as Valero's prospectus. Each of Valero and UDS shall use
reasonable best efforts to have the Joint Proxy Statement/Prospectus cleared by
the SEC and the Form S-4 declared effective by the SEC and to keep the Form S-4
effective as long as is necessary to consummate the Merger and the transactions
contemplated hereby. Valero and UDS shall, as promptly as practicable after
receipt thereof, provide each other with copies of any written comments, and
advise each other of any oral comments, with respect to the Joint Proxy
Statement/Prospectus or Form S-4 received from the SEC. The parties shall
cooperate and provide the other party with a reasonable opportunity to review
and comment on any amendment or supplement to the Joint Proxy
Statement/Prospectus and the Form S-4 prior to filing such with the SEC and will
provide each other with a copy of all such filings made with the SEC.
Notwithstanding any other provision herein to the contrary, no amendment or
supplement (including by incorporation by reference) to the Joint Proxy
Statement/Prospectus or the Form S-4 shall be made without the approval of both
Valero and UDS, which approval shall not be unreasonably withheld or delayed;
provided that, with respect to documents filed by a party which are incorporated
by reference in the Form S-4 or Joint Proxy Statement/Prospectus, this right of
approval shall apply only with respect to information relating to the other
party or its business, financial condition or results of operations. Valero will
use reasonable best efforts to cause the Joint Proxy Statement/Prospectus to be
mailed to Valero stockholders, and UDS will use reasonable best efforts to cause
the Joint Proxy Statement/Prospectus to be mailed to UDS stockholders, in each
case, as promptly as practicable after the Form S-4 is declared effective under
the Securities Act. Each party will advise the other party, promptly after it
receives notice thereof, of the time when the Form S-4 has become effective, the
issuance of any stop order, the suspension of the qualification of the Valero
Common Stock issuable in connection with the Merger for offering or sale in any
jurisdiction, or any request by the SEC for amendment of the Joint Proxy
Statement/Prospectus or the Form S-4. If, at any time prior to the Effective
Time, any information relating to Valero or UDS, or any of their respective
affiliates, officers or directors, is discovered by Valero or UDS and such
information should be set forth in an amendment or supplement to any of the Form
S-4 or the Joint Proxy Statement/Prospectus so that any of such documents would
not include any misstatement of a material fact or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, the party discovering such
information shall promptly notify the other party hereto and, to the extent
required by law, rules or regulations, an appropriate amendment or supplement
describing such information shall be promptly filed with the SEC and
disseminated to the stockholders of Valero and UDS.
(b) UDS shall duly take all lawful action to call, give notice
of, convene and hold the UDS Stockholders Meeting as soon as practicable on a
date determined in accordance with the mutual agreement of Valero and UDS for
the purpose of obtaining the UDS Stockholder Approval and, subject to Section
6.5, shall take all lawful action to solicit the UDS Stockholder Approval. The
Board of Directors of UDS shall, subject to the proper exercise of its fiduciary
duties, recommend the adoption of the plan of merger contained in this Agreement
by the stockholders of UDS to the effect as set forth in Section 4.1(p) (the
"UDS Recommendation"), and shall not, unless Valero makes a Change in the Valero
Recommendation, (x) withdraw, modify or qualify (or propose to withdraw, modify
or qualify) in any manner adverse to Valero the UDS Recommendation or (y) take
any action or make any statement in connection with the UDS Stockholders Meeting
inconsistent with such recommendation (collectively, a "Change in the UDS
Recommendation"); provided, however, that the Board of Directors of UDS may make
a Change in the UDS Recommendation pursuant to Section 6.5 hereof.
(c) Valero shall duly take all lawful action to call, give
notice of, convene and hold the Valero Stockholders Meeting as soon as
practicable on a date determined in accordance with the mutual agreement of
Valero and UDS for the purpose of obtaining the Valero Stockholder Approval and
shall take all lawful action to solicit the Valero Stockholder Approval. The
Board of Directors of Valero shall, subject to the proper exercise of its
fiduciary duties, recommend the adoption of the plan of merger contained in this
Agreement by the stockholders of Valero to the effect set forth in Section
4.2(p) and the approval of the issuance of Valero Common Stock in the Merger by
the stockholders of Valero (the "Valero Recommendation"), and shall not, unless
UDS makes a Change in the UDS Recommendation, (x) withdraw, modify or qualify
(or propose to withdraw, modify or qualify) in any manner adverse to UDS the
Valero Recommendation or (y) take any action or make any statement in connection
with the Valero Stockholders Meeting inconsistent with such recommendation
(collectively, a "Change in the Valero Recommendation").
6.2 Valero Board of Directors. At the Effective Time, Valero shall take all
requisite action to (i) if necessary to give effect to the succeeding clause
(ii), expand its Board of Directors by up to four members and (ii) cause four of
the current members of the UDS Board of Directors, as shall be mutually
determined by UDS and Valero, to be appointed to its Board of Directors
(collectively, the "UDS Board Designees"). At the annual meeting of the
stockholders of Valero immediately following the Effective Time, Valero will
take all action necessary to nominate and recommend each UDS Board Designee for
reelection to the Valero Board of Directors, with at least one UDS Board
Designee serving in each class of directors and no more than two UDS Board
Designees serving in the same class of directors.
6.3 Access to Information. Upon reasonable notice, each party shall (and shall
cause its Subsidiaries to) afford to the officers, employees, accountants,
counsel, financial advisors and other representatives of the other party
reasonable access during normal business hours, during the period prior to the
Effective Time, to all its properties, books, contracts, commitments, records,
officers and employees and, during such period, such party shall (and shall
cause its Subsidiaries to) furnish promptly to the other party (a) a copy of
each report, schedule, registration statement and other document filed,
published, announced or received by it during such period pursuant to the
requirements of Federal or state securities laws or the HSR Act, as applicable
(other than documents which such party is not permitted to disclose under
applicable law), and (b) all other information concerning it and its business,
properties and personnel as such other party may reasonably request; provided,
however, that either party may restrict the foregoing access to the extent that
(i) any law, treaty, rule or regulation of any Governmental Entity applicable to
such party or any contract requires such party or its Subsidiaries to restrict
or prohibit access to any such properties or information or (ii) the information
is subject to confidentiality obligations to a third party. The parties will
hold any information obtained pursuant to this Section 6.3 in confidence in
accordance with, and shall otherwise be subject to, the provisions of the
confidentiality agreement dated April 23, 2001, between UDS and Valero (the
"Confidentiality Agreement"), which Confidentiality Agreement shall continue in
full force and effect. Any investigation by either Valero or UDS shall not
affect the representations and warranties of the other.
6.4 Reasonable Best Efforts. (a) Subject to the terms and conditions of this
Agreement, each party hereto will use its reasonable best efforts to take, or
cause to be taken, all actions, and do, or cause to be done, all things
necessary, proper or advisable under this Agreement and applicable laws and
regulations to consummate the Merger and the other transactions contemplated by
this Agreement as soon as practicable after the date hereof, including (i)
preparing and filing as promptly as practicable all documentation to effect all
necessary applications, notices, petitions, filings, and other documents and to
obtain as promptly as practicable all Necessary Consents and all other consents,
waivers, licenses, orders, registrations, approvals, permits, rulings,
authorizations and clearances necessary or advisable to be obtained from any
third party and/or any Governmental Entity in order to consummate the Merger or
any of the other transactions contemplated by this Agreement (collectively, the
"Required Approvals") and (ii) using its reasonable best efforts to obtain all
such Necessary Consents and the Required Approvals. In furtherance and not in
limitation of the foregoing, each of Valero and UDS agrees (i) to make (A) prior
to May 31, 2001, an appropriate filing of a Notification and Report Form
pursuant to the HSR Act with respect to the transactions contemplated hereby,
(B) as promptly as practicable, appropriate filings with the European
Commission, if required, in accordance with applicable competition, merger
control, antitrust, investment or similar laws, and (C) as promptly as
practicable, all other necessary filings with other Governmental Entities
relating to the Merger, and, to supply as promptly as practicable any additional
information or documentation that may be requested pursuant to such laws or by
such authorities and to use reasonable best efforts to cause the expiration or
termination of the applicable waiting periods under the HSR Act and the receipt
of Required Approvals under such other laws or from such authorities as soon as
practicable and (ii) not to extend any waiting period under the HSR Act or enter
into any agreement with the FTC or the DOJ not to consummate the transactions
contemplated by this Agreement, except with the prior written consent of the
other parties hereto (which shall not be unreasonably withheld or delayed).
(b) Each of UDS and Valero shall, in connection with the
efforts referenced in Section 6.4(a) to obtain all Required Approvals, use its
reasonable best efforts to (i) cooperate in all respects with each other in
connection with any filing or submission and in connection with any
investigation or other inquiry, including any proceeding initiated by a private
party, (ii) subject to applicable law, permit the other party to review in
advance any proposed written communication between it and any Governmental
Entity, (iii) promptly inform each other of (and, at the other party's
reasonable request, supply to such other party) any communication (or other
correspondence or memoranda) received by such party from, or given by such party
to, the DOJ, the FTC or any other Governmental Entity and of any material
communication received or given in connection with any proceeding by a private
party, in each case regarding any of the transactions contemplated hereby, and
(iv) consult with each other in advance to the extent practicable of any meeting
or conference with the DOJ, the FTC or any other Governmental Entity or, in
connection with any proceeding by a private party, with any other Person, and to
the extent permitted by the DOJ, the FTC or such other applicable Governmental
Entity or other Person, give the other party the opportunity to attend and
participate in such meetings and conferences.
(c) In furtherance and not in limitation of the covenants of
the parties contained in Section 6.4(a) and 6.4(b), if any administrative or
judicial action or proceeding, including any proceeding by a private party, is
instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any regulatory law, or if any
statute, rule, regulation, executive order, decree, injunction or administrative
order is enacted, entered, promulgated or enforced by a Governmental Entity
which would make the Merger or the other transactions contemplated hereby
illegal or would otherwise prohibit or materially impair or delay the
consummation of the Merger or the other transactions contemplated hereby, UDS
shall cooperate with Valero in all respects in responding thereto, and each
shall use its respective reasonable best efforts in responding thereto,
including (i) contesting and resisting any such action or proceeding and to have
vacated, lifted, reversed or overturned any decree, judgment, injunction or
other order, whether temporary, preliminary or permanent, that is in effect and
that prohibits, prevents or restricts consummation of the Merger or the other
transactions contemplated by this Agreement and to have such statute, rule,
regulation, executive order, decree, injunction or administrative order
repealed, rescinded or made inapplicable so as to permit consummation of the
transactions contemplated by this Agreement and (ii) holding separate or
otherwise disposing of or conducting their business in a specified manner, or
agreeing to sell, hold separate or otherwise dispose of or conduct their
business in a specified manner or permitting the sale, holding separate or other
disposition of, assets of Valero, UDS or their respective Subsidiaries or the
conducting of their business in a specified manner. Notwithstanding the
foregoing or any other provision of this Agreement, nothing in this Section 6.4
shall limit a party's right to terminate this Agreement pursuant to Section
8.1(b) or 8.1(c) so long as such party has up to then complied with its
obligations under this Section 6.4.
(d) Each of Valero and UDS and their respective Boards of
Directors shall, if any state takeover statute or similar statute (including,
without limitation, Section 203 of the DGCL) becomes applicable to this
Agreement, the Merger or any other transactions contemplated hereby, take all
action reasonably necessary to ensure that the Merger and the other transactions
contemplated by this Agreement may be consummated as promptly as practicable on
the terms contemplated hereby and otherwise to minimize the effect of such
statute or regulation on this Agreement, the Merger and the other transactions
contemplated hereby.
6.5 Acquisition Proposals. (a) UDS agrees that neither it nor any of its
Subsidiaries nor any of the officers and directors of UDS or its Subsidiaries
shall, and that it shall use its reasonable best efforts to cause its and its
Subsidiaries' employees, agents and representatives (including any investment
banker, attorney or accountant retained by it or any of its Subsidiaries) not
to, directly or indirectly, (i) initiate, solicit, encourage or knowingly
facilitate any inquiries or the making of any proposal or offer with respect to,
or a transaction to effect, a merger, reorganization, share exchange,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving UDS or any of its Significant Subsidiaries, or
any purchase or sale of 20% or more of the consolidated assets (including stock
of its Subsidiaries) of it and its Subsidiaries, taken as a whole, or any
purchase or sale of, or tender or exchange offer for, its equity securities
that, if consummated, would result in any Person (or the stockholders of such
Person) beneficially owning securities representing 20% or more of its total
voting power (or of the surviving parent entity in such transaction) or the
voting power of any of its Significant Subsidiaries (any such proposal, offer or
transaction (other than a proposal or offer made by any other party to this
Agreement or an Affiliate thereof) being hereinafter referred to as an
"Acquisition Proposal"), (ii) have any discussion with or provide any
confidential information or data to any Person relating to an Acquisition
Proposal, or engage in any negotiations concerning an Acquisition Proposal, or
knowingly facilitate any effort or attempt to make or implement an Acquisition
Proposal, (iii) approve or recommend, or propose publicly to approve or
recommend, any Acquisition Proposal or (iv) approve or recommend, or propose to
approve or recommend, or execute or enter into, any letter of intent, agreement
in principle, merger agreement, acquisition agreement, option agreement or other
similar agreement or propose publicly or agree to do any of the foregoing
related to any Acquisition Proposal.
(b) Notwithstanding anything in this Agreement to the contrary, UDS (and its
Board of Directors) shall be permitted to (A) comply with Rule 14d-9 and Rule
14e-2 promulgated under the Exchange Act with regard to an Acquisition Proposal
(to the extent applicable), (B) effect a Change in the UDS Recommendation, or
(C) engage in discussions or negotiations with, or provide any information to,
any Person in response to an unsolicited bona fide written Acquisition Proposal
by any such Person, if and only to the extent that, in any such case referred to
in clause (B) or (C), (I) the UDS Stockholders Meeting shall not have occurred
other than as a result of a breach by UDS of its obligations pursuant to Section
6.1, (II) (x) in the case of clause (B) above, it has received an unsolicited
bona fide written Acquisition Proposal from a third party and its Board of
Directors concludes in good faith that such Acquisition Proposal constitutes a
Superior Proposal and (y) in the case of clause (C) above, its Board of
Directors concludes in good faith that there is a reasonable likelihood that
such Acquisition Proposal could constitute a Superior Proposal, (III) in the
case of clause (B) or (C) above, its Board of Directors, after receipt of the
advice of UDS's outside counsel, determines in good faith that there is a
reasonable probability that the failure to take such action would be
inconsistent with its fiduciary duties under applicable law, (IV) prior to
providing any information or data to any Person in connection with an
Acquisition Proposal by any such Person, its Board of Directors receives from
such Person an executed confidentiality agreement having provisions that are
customary in such agreements, as advised by counsel, provided that if such
confidentiality agreement contains provisions that are less restrictive than the
comparable provision, or omits restrictive provisions, contained in the
Confidentiality Agreement, then the Confidentiality Agreement will be deemed to
be amended to contain only such less restrictive provisions or to omit such
restrictive provisions, as the case may be, and (V) prior to providing any
information or data to any Person or entering into discussions or negotiations
with any Person, it notifies Valero promptly of such inquiries, proposals or
offers received by, any such information requested from, or any such discussions
or negotiations sought to be initiated or continued with, any of its
representatives indicating, in connection with such notice, the name of such
Person and the material terms and conditions of any inquiries, proposals or
offers. UDS agrees that it will promptly keep Valero reasonably informed of the
status and terms of any inquiries, proposals or offers and the status and terms
of any discussions or negotiations, including the identity of the party making
such inquiry, proposal or offer. UDS agrees that it will, and will cause its
officers, directors and representatives to, immediately cease and cause to be
terminated any activities, discussions or negotiations existing as of the date
of this Agreement with any parties (other than the parties to this Agreement)
conducted heretofore with respect to any Acquisition Proposal. UDS agrees that
it will use reasonable best efforts to promptly inform its directors, officers,
key employees, agents and representatives of the obligations undertaken in this
Section 6.5. Nothing in this Section 6.5 shall (x) permit UDS to terminate this
Agreement (except as specifically provided in Article VIII hereof) or (y) affect
or limit any other obligation of Valero or UDS under this Agreement.
6.6 Fees and Expenses. Subject to Section 8.2, whether or not the Merger is
consummated, all Expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
Expenses, except Expenses incurred in connection with the filing, printing and
mailing of the Joint Proxy Statement/Prospectus and Form S-4, which shall be
shared equally by Valero and UDS.
6.7 Directors' and Officers' Indemnification and Insurance. Following the
Effective Time, Valero shall (i) indemnify and hold harmless, and provide
advancement of expenses to, all past and present directors, officers and
employees of UDS and its Subsidiaries (in all of their capacities) (A) to the
same extent such persons are indemnified or have the right to advancement of
expenses as of the date of this Agreement by UDS pursuant to UDS's Certificate
of Incorporation, By-laws and indemnification agreements, if any, in existence
on the date hereof with, or for the benefit of, any directors, officers and
employees of UDS and its Subsidiaries and (B) without limitation to clause (A),
to the fullest extent permitted by law, in each case for acts or omissions
occurring at or prior to the Effective Time (including for acts or omissions
occurring in connection with the approval of this Agreement and the consummation
of the transactions contemplated hereby), (ii) include and cause to be
maintained in effect in the Surviving Corporation's (or any successor to the
business of the Surviving Corporation) certificate of incorporation and by-laws
for a period of six years after the Effective Time, provisions regarding
elimination of liability of directors, indemnification of officers, directors
and employees and advancement of expenses which are, in the aggregate, no less
advantageous to the intended beneficiaries than the corresponding provisions
contained in the current Certificate of Incorporation and By-laws of UDS and
(iii) cause to be maintained by the Surviving Corporation (or any successor to
the business of the Surviving Corporation) for a period of six years after the
Effective Time the current policies of directors' and officers' liability
insurance and fiduciary liability insurance maintained by UDS (provided that
Valero (or any such successor) may substitute therefor one or more policies of
at least the same coverage and amounts containing terms and conditions which
are, in the aggregate, no less advantageous to the insured) with respect to
claims arising from facts or events that occurred on or before the Effective
Time; provided, however, that in no event shall Valero (or any such successor)
be required to expend in any one year an amount in excess of 200% of the annual
premiums currently paid by UDS for such insurance; and, provided further that if
the annual premiums of such insurance coverage exceed such amount, Valero (or
any such successor) shall obtain a policy with the greatest coverage available
for a cost not exceeding such amount. The obligations of Valero (or any such
successor) under this Section 6.7 shall not be terminated or modified in such a
manner as to adversely affect any indemnitee to whom this Section 6.7 applies
without the consent of such affected indemnitee (it being expressly agreed that
the indemnitees to whom this Section 6.7 applies and their respective heirs and
other representatives shall be third-party beneficiaries of, and entitled to
enforce, this Section 6.7).
6.8 Employee Benefits. (a) Following the Effective Time until the first to occur
of (i) the first anniversary of the Effective Time and (ii) December 31, 2002
(such shorter period referred to herein as the "Benefit Protection Period"),
Valero shall provide, or shall cause to be provided, to individuals who are
employees of UDS and its Subsidiaries immediately before the Effective Time and
who continue to be employed by Valero and its Subsidiaries after the Effective
Time (the "UDS Employees") Benefit Plans (other than any equity-based UDS
Benefit Plans) that are, in the aggregate, not less favorable than those
generally provided to UDS Employees as of the date hereof, as disclosed by UDS
to Valero immediately prior to the date of this Agreement. After the expiration
of the Benefit Protection Period, Valero shall provide, or cause to be provided,
to UDS Employees compensation and employee benefit plans and programs that are,
in the aggregate, not less favorable than those generally provided to other
similarly situated employees of Valero and its Subsidiaries. After the Effective
Time, the equity-based benefits to be provided to an eligible UDS Employee shall
be pursuant to the equity-based benefit plans and programs provided to similarly
situated employees of Valero. Nothing contained herein shall be construed to
prevent the termination of employment of any UDS Employee; provided, however,
that in the event of a qualifying termination of any UDS Employee during the
Benefit Protection Period, Valero shall provide, or cause to be provided, to
such terminated UDS Employee severance benefits that are not less than the
amount of severance benefits that would have been payable under the terms of the
UDS severance plan or policy listed on Section 6.8(a) of the Company Disclosure
Letter as in effect as of the date hereof that is applicable to any such UDS
Employee. Notwithstanding anything contained herein to the contrary, UDS
Employees who are covered under a collective bargaining agreement shall be
provided the benefits that are required by such collective bargaining agreement
from time to time.
(a) (b) For all purposes under the employee benefit plans of Valero and its
Subsidiaries providing benefits to any UDS Employee after the Effective Time
(the "New Plans"), each UDS Employee shall be credited with his or her years of
service with UDS and its Subsidiaries and predecessor employers before the
Effective Time, to the same extent as such UDS Employee was entitled, before the
Effective Time, to credit for such service under any similar UDS Benefit Plans,
except to the extent such credit would result in a duplication of benefits. In
addition, and without limiting the generality of the foregoing: (i) each UDS
Employee shall be immediately eligible to participate, without any waiting time,
in any and all New Plans to the extent coverage under such New Plan replaces
coverage under a UDS Benefit Plan in which such UDS Employee participated
immediately before the Effective Time (such plans, collectively, the "Old
Plans"); (ii) for purposes of each New Plan providing medical, dental,
pharmaceutical and/or vision benefits to any UDS Employee, Valero shall cause
all pre-existing condition exclusions and actively-at-work requirements of such
New Plan to be waived for such employee and his or her covered dependents, and
Valero shall cause any eligible expenses incurred by such employee and his or
her covered dependents during the portion of the plan year of the Old Plan
ending on the date such employee's participation in the corresponding New Plan
begins to be taken into account under such New Plan for purposes of satisfying
all deductible, coinsurance and maximum out-of-pocket requirements applicable to
such employee and his or her covered dependents for the applicable plan year as
if such amounts had been paid in accordance with such New Plan; and (iii) for
purposes of each New Plan providing long-term or short-term disability, life
insurance or other welfare benefits (other than medical, dental, pharmaceutical
and/or vision benefits) to any UDS Employee, Valero shall cause all pre-existing
condition exclusions of such New Plan to be waived for such employee and his or
her covered dependents.
(c) Valero will honor, in accordance with their terms, all vested and accrued
benefit obligations to, and contractual rights of, current and former employees
of UDS and its Subsidiaries which are disclosed on UDS's Disclosure Schedules,
including, without limitation, the "change of control" provisions contained in
the UDS Benefit Plans listed on the Section 6.8(c) of the Valero Disclosure
Schedule. Nothing in this Agreement shall be interpreted as preventing Valero
from amending, modifying or terminating any UDS Benefit Plan or other contract,
arrangement, commitment or understanding, in accordance with their terms and
applicable law.(d)
6.9 Public Announcements. Valero and UDS shall use reasonable best efforts to
develop a joint communications plan and each shall use reasonable best efforts
(i) to ensure that all press releases and other public statements with respect
to the transactions contemplated hereby shall be consistent with such joint
communications plan and (ii) unless otherwise required by applicable law or by
obligations pursuant to any listing agreement with or rules of any securities
exchange, to consult with each other before issuing any press release or, to the
extent practical, otherwise making any public statement with respect to this
Agreement or the transactions contemplated hereby. In addition to the foregoing,
except to the extent disclosed in or consistent with the Joint Proxy
Statement/Prospectus in accordance with the provisions of Section 6.1, and
subject to Section 6.5(b), neither Valero nor UDS shall issue any press release
or otherwise make any public statement or disclosure concerning the other party
or the other party's business, financial condition or results of operations
without the consent of the other party, which consent shall not be unreasonably
withheld or delayed.
6.10 Listing of Shares of Valero Common Stock. Valero shall use its reasonable
best efforts to cause the shares of Valero Common Stock to be issued in the
Merger and the shares of Valero Common Stock to be reserved for issuance upon
exercise of the UDS Stock Options to be approved for listing on the NYSE,
subject to official notice of issuance, prior to the Closing Date.
6.11 Rights Agreements. (a) The Board of Directors of Valero shall take all
action to the extent necessary (including amending the Valero Rights Agreement)
in order to render the Valero Rights inapplicable to the Merger and the other
transactions contemplated by this Agreement.
(b) The Board of Directors of UDS shall take all action to the
extent necessary (including amending the UDS Rights Agreement) in order to
render the UDS Rights inapplicable to the Merger and the other transactions
contemplated by this Agreement. Except in connection with the foregoing
sentence, the Board of Directors of UDS shall not, without the prior written
consent of Valero, (i) amend or waive any provision of the UDS Rights Agreement
or (ii) take any action with respect to, or make any determination under, the
UDS Rights Agreement, including a redemption of the UDS Rights, in each case in
order to facilitate any Acquisition Proposal with respect to UDS.
6.12 Affiliates. Not less than 45 days prior to the date of the UDS Stockholders
Meeting, UDS shall deliver to Valero a letter identifying all persons who, in
the judgment of UDS, may be deemed at the time this Agreement is submitted for
adoption by the stockholders of UDS, "affiliates" of UDS for purposes of Rule
145 under the Securities Act and applicable SEC rules and regulations, and such
list shall be updated as necessary to reflect changes from the date thereof. UDS
shall use reasonable best efforts to cause each person identified on such list
to deliver to Valero not later than ten days prior to the Effective Time, a
written agreement substantially in the form attached as Exhibit A hereto (an
"Affiliate Agreement").
6.13 Section 16 Matters. Prior to the Effective Time, Valero and UDS shall take
all such steps as may be required to cause any dispositions of UDS Common Stock
(including derivative securities with respect to UDS Common Stock) or
acquisitions of Valero Common Stock (including derivative securities with
respect to Valero Common Stock) resulting from the transactions contemplated by
Article II or Article III of this Agreement by each individual who is subject to
the reporting requirements of Section 16(a) of the Exchange Act with respect to
UDS or will become subject to such reporting requirements with respect to
Valero, to be exempt under Rule 16b-3 promulgated under the Exchange Act.
6.14 UDS Indebtedness. With respect to UDS Indebtedness issued under indentures
qualified under the Trust Indenture Act of 1939, and any other UDS Indebtedness
the terms of which require Valero to assume such debt in order to avoid default
thereunder (collectively, the "Assumed Indentures"), Valero shall execute and
deliver to the trustees or other representatives in accordance with the terms of
the respective Assumed Indentures, supplemental indentures or other instruments,
in form satisfactory to the respective trustees or other representatives,
expressly assuming the obligations of UDS with respect to the due and punctual
payment of the principal of (and premium, if any) and interest, if any, on, and
conversion obligations under, all debt securities issued by UDS under the
Assumed Indentures and the due and punctual performance of all the terms,
covenants and conditions of the Assumed Indentures to be kept or performed by
UDS and shall deliver such supplemental indentures or other instruments to the
respective trustees or other representatives under the Assumed Indentures.
6.15 Accountants' Letter. UDS shall use its reasonable best efforts to cause to
be delivered to Valero a letter from its independent public accountants
addressed to Valero, dated a date within two Business Days before the date on
which the Form S-4 shall become effective, in form and substance reasonably
satisfactory to Valero and customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the Form S-4.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation to Effect the Merger. The respective
obligations of UDS and Valero to effect the Merger are subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. (i) UDS shall have obtained the UDS Stockholder
Approval and (ii) Valero shall have obtained the Valero Stockholder Approval.
(b) No Injunctions or Restraints; Illegality. No law shall have been adopted or
promulgated, and no temporary restraining order, preliminary or permanent
injunction or other order issued by a court or other Governmental Entity of
competent jurisdiction shall be in effect, having the effect of making the
Merger illegal or otherwise prohibiting consummation of the Merger.
(c) HSR Act; Other Approvals. (i) The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired, and (ii) all Other Approvals shall have been obtained, except
those Other Approvals the failure of which to obtain would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect on
Valero or UDS.
(d) NYSE Listing. The shares of Valero Common Stock to be issued in the Merger
and such other shares of Valero Common Stock to be reserved for issuance in
connection with the Merger shall have been approved for listing on the NYSE,
subject to official notice of issuance.
(e) Effectiveness of the Form S-4. The Form S-4 shall have been declared
effective by the SEC under the Securities Act and no stop order suspending the
effectiveness of the Form S-4 shall have been issued by the SEC and no
proceedings for that purpose shall have been initiated or threatened by the SEC.
7.2 Additional Conditions to Obligations of Valero. The obligations of Valero to
effect the Merger are subject to the satisfaction, or waiver by Valero, on or
prior to the Closing Date, of the following conditions:
(a) Representations and Warranties. Each of the representations and warranties
of UDS set forth in this Agreement that is qualified as to materiality or
Material Adverse Effect shall be true and correct, and each of the
representations and warranties of UDS set forth in this Agreement that is not so
qualified shall be true and correct in all material respects, in each case as of
the date of this Agreement and as of the Closing Date as though made on and as
of the Closing Date (except to the extent that such representations and
warranties speak as of another date, in which case such representations and
warranties shall be so true and correct as of such other date); provided,
however, that no such representations or warranties shall be deemed to have
failed to be true and correct for purposes of this Section 7.2(a) unless the
failure of such representations and warranties to be true and correct,
disregarding for this purpose all qualifications and exceptions contained
therein relating to materiality or Material Adverse Effect, would, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect on
UDS; and Valero shall have received a certificate of an executive officer of UDS
to such effect.
(b) Performance of Obligations of UDS. UDS shall have performed or complied in
all material respects with all agreements and covenants required to be performed
by it under this Agreement at or prior to the Closing Date; and Valero shall
have received a certificate of an executive officer of UDS to such effect.
(c) Tax Opinion. Valero shall have received from Wachtell, Lipton, Rosen & Katz,
counsel to Valero, a written opinion dated the Closing Date to the effect that
for federal income tax purposes the Merger will constitute a "reorganization"
within the meaning of Section 368(a) of the Code. In rendering such opinion,
counsel to Valero shall be entitled to rely upon customary assumptions and
representations reasonably satisfactory to such counsel, including
representations set forth in certificates of officers of Valero and UDS.
7.3 Additional Conditions to Obligations of UDS. The obligations of UDS to
effect the Merger are subject to the satisfaction, or waiver by UDS, on or prior
to the Closing Date, of the following additional conditions:
(a) Representations and Warranties. Each of the representations and warranties
of Valero set forth in this Agreement that is qualified as to materiality or
Material Adverse Effect shall be true and correct, and each of the
representations and warranties of Valero set forth in this Agreement that is not
so qualified shall be true and correct in all material respects, in each case as
of the date of this Agreement and as of the Closing Date as though made on and
as of the Closing Date (except to the extent that such representations and
warranties speak as of another date, in which case such representations and
warranties shall be so true and correct as of such other date); provided,
however, that no such representations or warranties shall be deemed to have
failed to be true and correct for purposes of this Section 7.3(a) unless the
failure of such representations and warranties to be true and correct,
disregarding for this purpose all qualifications and exceptions contained
therein relating to materiality or Material Adverse Effect, would, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect on
Valero; and UDS shall have received a certificate of an executive officer of
Valero to such effect.
(b) Performance of Obligations of Valero. Valero shall have performed or
complied in all material respects with all agreements and covenants required to
be performed by it under this Agreement at or prior to the Closing Date; and UDS
shall have received a certificate of an executive officer of Valero to such
effect.
(c) Tax Opinion. UDS shall have received from Jones, Day, Reavis & Pogue,
counsel to UDS, a written opinion dated the Closing Date to the effect that for
federal income tax purposes the Merger will constitute a "reorganization" within
the meaning of Section 368(a) of the Code. In rendering such opinion, counsel to
UDS shall be entitled to rely upon customary assumptions and representations
reasonably satisfactory to such counsel, including representations set forth in
certificates of officers of Valero and UDS.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, by action taken or authorized by the Board of Directors of the
terminating party or parties, and except as specifically provided below, whether
before or after the Valero Stockholders Meeting or the UDS Stockholders Meeting:
(a) By mutual written consent of Valero and UDS;
(b) By either Valero or UDS, if the Effective Time shall not have occurred on or
before May 3, 2002 (the "Termination Date"); provided, however, that the right
to terminate this Agreement under this Section 8.1(b) shall not be available to
any party whose failure to fulfill any obligation under this Agreement
(including such party's obligations set forth in Section 6.4) has been the
primary cause of, or resulted in, the failure of the Effective Time to occur on
or before the Termination Date;
(c) By either Valero or UDS, if any Governmental Entity (i) shall have issued an
order, decree or ruling or taken any other action (which the parties shall have
used their reasonable best efforts to resist, resolve or lift, as applicable, in
accordance with Section 6.4) permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement, and such order,
decree, ruling or other action shall have become final and nonappealable or (ii)
shall have failed to issue an order, decree or ruling or to take any other
action which is necessary to fulfill the conditions set forth in Sections
7.1(c), (d) or (e), as applicable, and such denial of a request to issue such
order, decree, ruling or the failure to take such other action shall have become
final and nonappealable (which order, decree, ruling or other action the parties
shall have used their reasonable best efforts to obtain, in accordance with
Section 6.4); provided, however, that the right to terminate this Agreement
under this Section 8.1(c) shall not be available to any party whose failure to
comply with Section 6.4 has been the primary cause of such action or inaction;
(d) By either Valero or UDS, if either the Valero Stockholder Approval or the
UDS Stockholder Approval has not been obtained by reason of the failure to
obtain the required vote at the Valero Stockholders Meeting or the UDS
Stockholders Meeting, as applicable;
(e) By Valero, if UDS shall have breached or failed to perform any of its
representations, warranties, covenants or other agreements contained in this
Agreement, such that the conditions set forth in Section 7.2(a) or (b) are not
capable of being satisfied on or before the Termination Date;
(f) By UDS, if Valero shall have breached or failed to perform any of its
representations, warranties, covenants or other agreements contained in this
Agreement, such that the conditions set forth in Section 7.3(a) or (b) are not
capable of being satisfied on or before the Termination Date;
(g) By UDS, if the Board of Directors of UDS has provided written notice to
Valero that UDS intends to enter into a binding written agreement for a Superior
Proposal (with such termination becoming effective, if Valero does not make the
offer contemplated by clause (iii) below, on the business day immediately
following the five business day period contemplated thereby, or otherwise, upon
UDS entering into such binding written agreement); provided, however, that (i)
UDS shall have complied with Section 6.5 hereof in all material respects; (ii)
UDS shall have (A) notified Valero in writing of its receipt of such Superior
Proposal, (B) further notified Valero in such writing that UDS intends to enter
into a binding agreement with respect to such Superior Proposal subject to
clause (iii) below and (C) attached the most current written version of such
Superior Proposal (or a summary containing all material terms and conditions of
such Superior Proposal) to such notice; (iii) Valero does not make, within five
business days after receipt of UDS's written notice pursuant to clause (ii)
above, an offer that the Board of Directors of UDS shall have reasonably
concluded in good faith (following consultation with its financial advisor and
outside counsel) is as favorable to the stockholders of UDS as such Superior
Proposal; and (iv) UDS pays the UDS Termination Fee in accordance with Section
8.2(d) concurrently with such termination;
(h) By UDS, if Valero shall have (i) failed to make the Valero Recommendation or
effected a Change in the Valero Recommendation (or resolved to take any such
action), whether or not permitted by the terms hereof, or (ii) materially
breached its obligations under this Agreement by reason of a failure to call the
Valero Stockholders Meeting in accordance with Section 6.1(c) or a failure to
prepare and mail to its stockholders the Joint Proxy Statement/Prospectus in
accordance with Section 6.1(a); or
(i) By Valero, if UDS shall have (i) failed to make the UDS Recommendation or
effected a Change in the UDS Recommendation (or resolved to take any such
action), whether or not permitted by the terms hereof, or (ii) materially
breached its obligations under this Agreement by reason of a failure to call the
UDS Stockholders Meeting in accordance with Section 6.1(b) or a failure to
prepare and mail to its stockholders the Joint Proxy Statement/Prospectus in
accordance with Section 6.1(a).
8.2 Effect of Termination. (a) In the event of termination of this Agreement by
either UDS or Valero as provided in Section 8.1, this Agreement shall forthwith
become void and there shall be no liability or obligation on the part of any
party to this Agreement or their respective officers or directors except with
respect to Section 4.1(q), Section 4.2(o), the second sentence of Section 6.3,
Section 6.6, this Section 8.2 and Article IX, which provisions shall survive
such termination; provided that, notwithstanding anything to the contrary
contained in this Agreement, neither Valero nor UDS shall be relieved or
released from any liabilities or damages arising out of its willful and material
breach of this Agreement.
(b) If (A) (I) (x) either UDS or Valero terminates this
Agreement pursuant to Section 8.1(d) (provided that the basis for such
termination is the failure to obtain the UDS Stockholder Approval) or pursuant
to Section 8.1(b) without the UDS Stockholders Meeting having occurred or (y)
Valero terminates this Agreement pursuant to Section 8.1(e), (II) at any time
after the date of this Agreement and before such termination an Acquisition
Proposal with respect to UDS shall have been publicly announced or otherwise
communicated to the senior management, Board of Directors or stockholders of
UDS, or UDS shall have breached in any material respect its obligations under
Section 6.5, and (III) within twelve months of such termination UDS or any of
its Subsidiaries enters into any definitive agreement with respect to, or
consummates, or the Board of Directors of UDS or any of its Subsidiaries
recommends that its respective stockholders approve, adopt or accept, any
Acquisition Proposal, or (B) Valero shall terminate this Agreement pursuant to
Section 8.1(i), then UDS shall promptly, but in no event later than one Business
Day after the date of such termination (or, in the case of clause (A), if later,
the date UDS or its Subsidiary enters into such agreement with respect to or
consummates such Acquisition Proposal), pay Valero an amount equal to the UDS
Termination Fee, by wire transfer of immediately available funds.
(c) If (A) (I) (x) either UDS or Valero terminates this
Agreement pursuant to Section 8.1(d) (provided that the basis for such
termination is the failure to obtain the Valero Stockholder Approval) or
pursuant to Section 8.1(b) without the Valero Stockholders Meeting having
occurred or (y) UDS terminates this Agreement pursuant to Section 8.1(f), (II)
at any time after the date of this Agreement and before such termination there
shall have been publicly announced or otherwise communicated to the senior
management, Board of Directors or stockholders of Valero a proposal for the
acquisition by a third party of 50% or more of the consolidated assets
(including stock of its Subsidiaries) of Valero and its Subsidiaries, taken as a
whole, or of 50% or more of its total voting power, whether by merger,
reorganization, share exchange, consolidation, business combination,
recapitalization, liquidation, dissolution, tender offer or exchange offer or
similar transaction and (III) within twelve months of such termination Valero or
any of its Subsidiaries enters into any definitive agreement with respect to, or
consummates, or the Board of Directors of Valero or any of its Subsidiaries
recommends that its respective stockholders approve, adopt or accept, a
transaction contemplated by clause (II), or (B) UDS shall terminate this
Agreement pursuant to Section 8.1(h), then Valero shall promptly, but in no
event later than one Business Day after the date of such termination (or, in the
case of clause (A), if later, the date Valero or its Subsidiary enters into such
agreement with respect to or consummates the transaction contemplated by clause
(II)), pay UDS an amount equal to the Valero Termination Fee, by wire transfer
of immediately available funds.
(d) If UDS terminates this Agreement pursuant to Section
8.1(g), UDS shall pay Valero in an amount equal to the UDS Termination Fee, by
wire transfer of immediately available funds, concurrently with such
termination.
(e) The parties hereto acknowledge that the agreements
contained in this Section 8.2 are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, neither
party would enter into this Agreement; accordingly, if either party fails
promptly to pay any amount due pursuant to this Section 8.2, and, in order to
obtain such payment, the other party commences a suit which results in a
judgment against such party for the fee set forth in this Section 8.2, such
party shall pay to the other party its costs and expenses (including attorneys'
fees and expenses) in connection with such suit, together with interest on the
amount of the fee at the prime rate of Citibank, N.A. in effect on the date such
payment was required to be made, notwithstanding the provisions of Section 6.6.
The parties hereto agree that any remedy or amount payable pursuant to this
Section 8.2 shall not preclude any other remedy or amount payable hereunder, and
shall not be an exclusive remedy, for any willful and material breach of any
representation, warranty, covenant or agreement contained in this Agreement.
8.3 Amendment. This Agreement may be amended by the parties hereto, by action
taken or authorized by their respective Boards of Directors, at any time before
or after the Valero Stockholder Approval or the UDS Stockholder Approval, but,
after any such approval, no amendment shall be made which by law or in
accordance with the rules of any relevant stock exchange requires further
approval by such stockholders without such further approval. This Agreement may
not be amended except by an instrument in writing signed on behalf of each of
the parties hereto.
8.4 Extension; Waiver. At any time prior to the Effective Time, the parties
hereto, by action taken or authorized by their respective Boards of Directors,
may, to the extent legally allowed, (i) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party. The failure of any party to
this Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of those rights.
ARTICLE IX
GENERAL PROVISIONS
9.1 Non-Survival of Representations, Warranties and Agreements. None of the
representations, warranties, covenants and other agreements in this Agreement or
in any instrument delivered pursuant to this Agreement, including any rights
arising out of any breach of such representations, warranties, covenants,
agreements and other provisions, shall survive the Effective Time, except for
those covenants, agreements and other provisions contained herein that by their
terms apply or are to be performed in whole or in part after the Effective Time
and this Article IX.
9.2 Notices. All notices and other communications hereunder shall be in writing
and shall be deemed duly given (a) on the date of delivery if delivered
personally, or by telecopy or facsimile, upon verbal confirmation of receipt,
(b) on the first Business Day following the date of dispatch if delivered by a
recognized next-day courier service, or (c) on the fifth Business Day following
the date of mailing if delivered by registered or certified mail, return receipt
requested, postage prepaid. All notices hereunder shall be delivered as set
forth below, or pursuant to such other instructions as may be designated in
writing by the party to receive such notice:
(i) if to Valero to:
Valero Energy Corporation
One Valero Place
San Antonio, Texas 78212
Attention: General Counsel
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Edward D. Herlihy, Esq.
(ii) if to UDS to:
Ultramar Diamond Shamrock Corporation
6000 North Loop
1604 West
San Antonio, Texas 78249-1112
Attn: Chief Administrative & Legal Officer
with a copy to:
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114-1190
Attention: Lyle Ganske, Esq.
9.3 Interpretation. When a reference is made in this Agreement to Articles,
Sections, Exhibits or Schedules, such reference shall be to an Article or
Section of or Exhibit or Schedule to this Agreement unless otherwise indicated.
The table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include," "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation." In addition, each Section of this Agreement is qualified by the
matters set forth with respect to such Section on the Valero Disclosure
Schedule, the UDS Disclosure Schedule and the other Schedules to this Agreement,
and such other Sections of this Agreement to the extent that the matter in such
Section of such Schedule is disclosed in such a way as to make its relevance
called for by such other Section of this Agreement readily apparent.
9.4 Counterparts. This Agreement may be executed in one or more counterparts,
all of which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other party, it being understood that both parties need not
sign the same counterpart.
9.5 Entire Agreement; No Third Party Beneficiaries. (a) This Agreement, the
Confidentiality Agreement and the exhibits and schedules hereto and the other
agreements and instruments of the parties delivered in connection herewith
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, except that, for purposes of the definition of "best
efforts" as used in Sections 6.4(a) and 6.4(c) and interpreting the right of UDS
to terminate this Agreement under Section 8.1(f) upon breach by Valero of
Sections 6.4(a) and 6.4(c), the parties agree that it is proper to refer to the
course of their discussions prior to entering into this Agreement.
(b) This Agreement shall be binding upon and inure solely to
the benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person any right, benefit
or remedy of any nature whatsoever under or by reason of this Agreement, other
than Section 6.7 (which is intended to be for the benefit of the Persons covered
thereby).
9.6 Governing Law. This Agreement shall be governed and construed in accordance
with the laws of the State of Delaware (without giving effect to choice of law
principles thereof).
9.7 Severability. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any law or public policy, all other
terms and provisions of this Agreement shall nevertheless remain in full force
and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible.
9.8 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto, in whole
or in part (whether by operation of law or otherwise), without the prior written
consent of the other party, and any attempt to make any such assignment without
such consent shall be null and void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
9.9 Submission to Jurisdiction; Waivers. Each of Valero and UDS irrevocably
agrees that any legal action or proceeding with respect to this Agreement or for
recognition and enforcement of any judgment in respect hereof brought by the
other party hereto or its successors or assigns may be brought and determined in
the Chancery or other Courts of the State of Delaware, and each of Valero and
UDS hereby irrevocably submits with regard to any such action or proceeding for
itself and in respect to its property, generally and unconditionally, to the
nonexclusive jurisdiction of the aforesaid courts. Each of Valero and UDS hereby
irrevocably waives, and agrees not to assert, by way of motion, as a defense,
counterclaim or otherwise, in any action or proceeding with respect to this
Agreement, (a) any claim that it is not personally subject to the jurisdiction
of the above-named courts for any reason other than the failure to lawfully
serve process, (b) that it or its property is exempt or immune from jurisdiction
of any such court or from any legal process commenced in such courts (whether
through service of notice, attachment prior to judgment, attachment in aid of
execution of judgment, execution of judgment or otherwise), (c) to the fullest
extent permitted by applicable law, that (i) the suit, action or proceeding in
any such court is brought in an inconvenient forum, (ii) the venue of such suit,
action or proceeding is improper and (iii) this Agreement, or the subject matter
hereof, may not be enforced in or by such courts and (d) any right to a trial by
jury.
9.10 Enforcement. The parties hereto agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms. It is accordingly agreed that the parties
hereto shall be entitled to specific performance of the terms hereof, this being
in addition to any other remedy to which they are entitled at law or in equity.
IN WITNESS WHEREOF, Valero and UDS have caused this Agreement
to be signed by their respective officers thereunto duly authorized, all as of
the date first written above.
VALERO ENERGY CORPORATION
By: /s/ William E. Greehey
Name: William E. Greehey
Title: Chief Executive Officer and President
ULTRAMAR DIAMOND SHAMROCK CORPORATION
By: /s/ Jean R. Gaulin
Name: Jean R. Gaulin
Title: Chief Executive Officer and President