SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as Permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ULTRAMAR DIAMOND SHAMROCK CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
----------------------------------------------------------
Ultramar Diamond Shamrock
C o r p o r a t i o n
NOTICE OF ANNUAL MEETING
AND PROXY STATEMENT
For Annual Meeting to be held May 2, 2000
NOTICE OF ANNUAL MEETING
May 2, 2000
To the Stockholders of Ultramar Diamond Shamrock Corporation:
The Annual Meeting of Stockholders (the "Annual Meeting") of Ultramar Diamond
Shamrock Corporation (the "Company") will be held at The Four Seasons Hotel,
1300 Lamar Street, Houston, Texas 77010 on Tuesday, May 2, 2000 at 10:00 a.m.
central daylight savings time, for the following purposes:
1. To elect four directors to serve for a three-year term expiring in 2003
(Proxy Item 1);
2. To approve amendments to the Company's Non-Employee Director Equity Plan
(Proxy Item 2);
3. To ratify the appointment of independent accountants for 2000 (Proxy
Item 3); and
4. To transact any other business which may be properly brought before the
Annual Meeting.
Holders of record of the Company's common stock ("Common Stock") at the close
of business on March 7, 2000 are entitled to notice of and to vote at the
Annual Meeting.
March 22, 2000
BY ORDER OF THE BOARD OF DIRECTORS
CURTIS V. ANASTASIO
Vice President, General Counsel, and
Secretary
Ultramar Diamond Shamrock Corporation
6000 N Loop 1604 W
P.O. Box 696000
San Antonio, Texas 78269-6000
Telephone: (210) 592-2000
Whether or not you plan to attend the Annual Meeting, please date and sign the
enclosed proxy, and return it in the envelope provided. Any person giving a
proxy has the power to revoke it at any time prior to its exercise and, if
present at the Annual Meeting, may withdraw it and vote in person. Attendance
at the Annual Meeting is limited to stockholders, their proxies, and invited
guests of the Company.
PROXY STATEMENT
GENERAL INFORMATION
Introduction
The Board of Directors (the "Board") of the Company is soliciting proxies to
be voted at the 2000 Annual Meeting to be held in Houston, Texas on May 2,
2000, and at any adjournment thereof. This Proxy Statement and the enclosed
proxy are first being mailed to stockholders on or about March 22, 2000.
Shares Voting
Holders of shares of Common Stock at the close of business on March 7, 2000
(the "Record Date") are entitled to notice of the Annual Meeting and to vote
shares held on that date at the Annual Meeting. As of the close of business on
the Record Date, there were 90,435,445 shares of Common Stock outstanding and
entitled to vote at the Annual Meeting. Each share of Common Stock is entitled
to one vote at the Annual Meeting. A majority of such outstanding shares of
Common Stock, represented in person or by proxy, is necessary to provide a
quorum at the Annual Meeting.
Voting of Proxies
This proxy solicitation is intended to afford stockholders the opportunity to
vote regarding the election of directors, the amendment of the Company's Non-
Employee Director Equity Plan, the appointment of the Company's independent
accountants for 2000, and in respect of such other matters, if any, as may be
properly brought before the Annual Meeting.
It is the Company's policy for the Annual Meeting that all returned proxies,
ballots, and other voting materials used in connection with the Annual Meeting
that identify the votes of specific stockholders will be kept confidential and
made available only to certain persons involved in the receipt, counting,
tabulation, or solicitation of proxies who have agreed to maintain stockholder
confidentiality. Access to voted proxies, ballots, and other voting materials
will not be restricted where stockholders seek to communicate with management
by writing comments on their proxy cards or otherwise disclose their vote to
management or where disclosure may be required by applicable law. In limited
circumstances, such as proxy solicitation based on an opposition proxy
statement or a proxy solicitation on a matter requiring a vote of more than a
majority of the shares represented at the Annual Meeting, this policy could be
suspended by the Board.
A proxy may be revoked either by a written notice duly signed and delivered
to the Secretary of the Company prior to the Annual Meeting, by execution of a
subsequent proxy, or by voting in person at the Annual Meeting. Abstentions and
broker non-votes will be counted for purposes of determining the presence of a
quorum for the transaction of business at the Annual Meeting, but not
otherwise. Where a stockholder's proxy specifies a choice with respect to a
matter, the shares will be voted accordingly. If no such specification is made,
the shares will be voted FOR the nominees for director identified below, FOR
the amendments to the Company's Non-Employee Director Equity Plan, FOR the
ratification of the appointment of Arthur Andersen LLP as the Company's
independent accountants, and in the manner that the appointed proxies determine
with respect to other matters properly brought before the Annual Meeting.
Annual Report
The Company's Annual Report on Form 10-K for the year ended December 31, 1999
is being furnished with this Proxy Statement to stockholders of record as of
the Record Date. The Company's Annual Report on Form 10-K for the year ended
December 31, 1999 that is being furnished to stockholders along with this proxy
statement contains a list of exhibits filed therewith, but does not include
copies of the exhibits. Copies of those exhibits may be obtained without charge
through the office of the corporate secretary at the address shown above.
ELECTION OF DIRECTORS PROPOSAL
(Item 1 on the Proxy)
The Company's bylaws provide that the directors will be classified into three
classes. The directors of each class serve for a term of three years and until
their successors are elected and qualified.
Information regarding the nominees proposed by the Company's Board for
election at the Annual Meeting and the other directors of the Company whose
terms expire after the Annual Meeting is set forth below. Byron Allumbaugh, E.
Glenn Biggs, Katherine D. Ortega, and Madeleine Saint-Jacques have been
nominated for election to the class of directors whose terms expire at the 2003
Annual Meeting. Each nominee is presently serving as a director of the Company.
A majority of the votes of the Common Stock cast at the Annual Meeting is
required to elect directors. Each nominee has consented to being named in this
Proxy Statement and to serve if elected. If a nominee should for any reason
become unavailable for election, proxies may be voted with discretionary
authority by the persons named therein for a substitute designated by the
Company's Board.
The persons named in the proxy will vote FOR the nominees listed below except
where authority has been withheld.
Nominees for Election at the Annual Meeting
Byron Allumbaugh, age 68, is the former Chairman and Chief Executive Officer
of Ralphs Grocery Company in Los Angeles, California. Mr. Allumbaugh is a
member of the board of directors of El Paso Energy Company, C.K.E. Restaurants,
Penn Traffic Corporation, and the Automobile Club of Southern California. He is
Chairman of the Compensation Committee and serves on the Public Responsibility
Committee. He has been a director of the Company since 1992.
E. Glenn Biggs, age 66, is President of Biggs & Co., a corporation engaged in
developmental projects and financial planning. He has been involved in
commercial banking beginning with his service as Chairman of the Board of First
National Bank of San Antonio. He later served as Vice Chairman and Chairman of
the Executive Committee of Interfirst Bank, San Antonio. He serves as Chairman
of Hester Asset Management Corp. and Southwestern Bancorp. He is a former
Chairman and Director of Bolivian Power Corporation. He has served as Chairman
and is a Director of the University of Texas Health Science Center.
Additionally, he has served as Chairman of the Board of Regents of Baylor
University. Mr. Biggs serves on the Audit Review Committee and the Finance and
Planning Committee. He was a director of Diamond Shamrock, Inc. ("Diamond")
from 1987 until he became a director of the Company in December 1996 effective
with the merger between Ultramar Corporation and Diamond in December 1996 ("U-
DS Merger.").
Katherine D. Ortega, age 65, was an alternate representative of the United
States to the 45th General Assembly of the United Nations 1990-1991. She served
as the 38th Treasurer of the United States from 1983 to 1989. Prior to joining
the Treasury Department as Treasurer, Ms. Ortega served as a Commissioner on
the Copyright Royalty Tribunal, and was a member of the President's Advisory
Committee on Small and Minority Business. Ms. Ortega is a director of Ralston
Purina Company, Rayonier, Inc., and the Kroger Co. She also serves as a
director of Catalyst, and is a member of the United States Comptroller
General's Consultant Panel. Ms. Ortega is a member of the Washington Mutual
Investors Fund Advisory Board. Before entering government, Ms. Ortega practiced
as a certified public accountant. Ms. Ortega is Vice Chairwoman of the Public
Responsibility Committee and serves on the Audit Review Committee. She was a
director of Diamond from 1989 until she became a director of the Company in
December 1996 effective with the U-DS Merger.
Madeleine Saint-Jacques, age 64, is Chairman of the Board of Saint-Jacques
Vallee Young and Rubicam Inc. in Montreal, Canada. From 1990 through 1994, she
was President of Young & Rubicam in Montreal, Canada, and from 1978 through
1990, she served as its Executive Vice President and Managing Director.
2
Ms. Saint-Jacques is a member of the board of directors of Groupe TVA inc. Ms.
Saint-Jacques is also a member of the Board of Governors, Inno-Centre Quebec, a
member of the Board of Associate Governors, University of Montreal, and
Chairman of the Board of Societe d'edition de la revue Forces. Ms. Saint-
Jacques is Chairwoman of the Public Responsibility Committee and serves on the
Compensation Committee. She has been a director of the Company since 1992.
Directors Whose Terms Expire at the 2001 Annual Meeting
W.E. "Bill" Bradford, age 65, is the retired Chairman of Halliburton Company.
He became Chairman of Halliburton Company effective upon its merger in 1998
with Dresser Industries, Inc. Prior to that, Mr. Bradford was Chairman and
Chief Executive Officer of Dresser Industries, Inc. Mr. Bradford had been with
Dresser Industries, Inc. since 1963, holding various positions in production
and management. In 1988 Mr. Bradford was appointed President and Chief
Executive Officer of Dresser-Rand Company. He was elected President and Chief
Operating Officer of Dresser Industries, Inc. in March 1992, President and
Chief Executive Officer in November 1995, and Chairman and Chief Executive
Officer in December 1996. Mr. Bradford serves on the Board of Directors of Oryx
Energy Company. He is Vice Chairman of the Audit Review Committee and serves on
the Compensation Committee. He was a director of Diamond from 1992 until he
became a director of the Company in December 1996 effective with the U-DS
Merger.
Russel H. Herman, age 69, is a former owner and principal of International
Energy Consultants Ltd., a firm that provided consulting services to senior
management in the international energy industry. Prior to that, Mr. Herman was
employed by Exxon Corporation as President and Chief Executive Officer for the
Asia-Pacific area and Executive Vice President for Exxon's petroleum business
in Europe. Mr. Herman is a member of the board of the Leonhard Center for the
Enhancement of Engineering Education at Pennsylvania State University and was
named an Honor Engineering Alumnus and also an Alumni Fellow of that
university. He is on the national board of directors of Recording for the Blind
& Dyslexic, serving on its executive committee. He has been a director of the
Company since 1992, and is currently Chairman of its Finance and Planning
Committee and a member of the Public Responsibility Committee.
C. Barry Schaefer, age 61, is an Executive Director of The Beacon Group, an
investment and financial advisory firm. Prior to joining Beacon in April 1997,
he had been a Managing Director with The Bridgeford Group, a merger and
acquisition subsidiary of the Industrial Bank of Japan, since 1992. From 1989
through 1991 he was a senior advisor with Dillon Read & Co., Inc., an
investment banking group, and prior to that he served as an Executive Vice
President of Union Pacific Corporation. Mr. Schaefer serves on the Audit Review
Committee and the Public Responsibility Committee. He has been a director of
the Company since 1992.
Directors Whose Terms Expire at the 2002 Annual Meeting
H. Frederick Christie, age 66, is a consultant specializing in strategic and
financial planning. He retired, effective January 1, 1991, as Chairman and
Chief Executive Officer of The Mission Group, the non-utility subsidiary of SCE
Corp. Prior to that he served as President of Southern California Edison
Company. Mr. Christie is a director or trustee of 19 mutual funds under the
Capital Research and Management Company and a director of AECOM Technology
Corporation, International House of Pancakes, Inc., Ducommon, Incorporated and
Southwest Water Company. He is Vice Chairman of the Compensation Committee and
serves on the Finance and Planning Committee. He has been a director of the
Company since 1992.
W.H. Clark, age 67, is the retired Chief Executive Officer and Chairman of
the Board of Directors of Nalco Chemical Company. He was the President and
Chief Executive Officer of Nalco Chemical Company from 1982 until 1990, and
Chairman of the Board of Directors and Chief Executive Officer of that company
from 1984 until 1994. Mr. Clark is President of W. "H" Clark Associates, Ltd.,
and is a member of the Board of Directors of Merrill Lynch Corporation, USG
Corporation and its subsidiary, United States Gypsum Company, Fort James
Corporation, Bethlehem Steel Corporation, and Millennium Chemicals Corp. Mr.
Clark is Vice Chairman of the Finance and Planning Committee and serves on the
Compensation Committee. He
3
served as a director of Diamond from 1994 until he became a director of the
Company in December 1996 effective with the U-DS Merger.
Jean R. Gaulin, age 57, is Chairman of the Board, President, and Chief
Executive Officer of the Company. Prior to the U-DS Merger, he had been the
Chairman of the Board and Chief Executive Officer of the Company since its
formation in 1992. From July 1989 through January 1992, Mr. Gaulin was Chief
Executive Officer of Ultramar PLC, a leading international integrated oil and
gas company, engaged in exploration, production, development, and refining and
marketing, which was the Company's predecessor. Prior to that, Mr. Gaulin was
President of Ultramar Canada, Inc. Mr. Gaulin serves on the board of directors
of Quebec Telephone, Inc. He has been a director of the Company since 1992.
Bob Marbut, age 64, has been Chairman and Chief Executive Officer of Argyle
Communications, Inc. since January 1992, and Chairman and Co-Chief Executive
Officer of Hearst-Argyle Television, Inc. since August 1997. He was Chairman
and Chief Executive Officer of Argyle Television, Inc. from August 1994 until
its merger with Hearst Broadcasting in August 1997. He was Chairman and Chief
Executive Officer of Argyle Television Holding, Inc. from its founding in March
1993 until April 1994. Prior to 1992, Mr. Marbut was President and Chief
Executive Officer of Harte-Hanks Communications, Inc. for 20 years and served
one year as Vice Chairman of that company. He is a director of Tupperware
Corporation and Hearst-Argyle Television, Inc. He is Chairman of the Audit
Review Committee and serves on the Finance and Planning Committee. He served as
a director of Diamond from 1990 until he became a director of the Company in
December 1996 effective with the U-DS Merger.
Board Committees
The management of the Company is under the direction of the Board. The
Company's Board has established Audit Review, Compensation, Finance and
Planning, and Public Responsibility Committees. The Company's Board held a
total of 10 meetings in 1999. Attendance at the meetings of the Company's Board
was 98%. Attendance at the meetings of the Audit Review Committee was 93%.
Attendance at the meetings of the Compensation Committee was 100%. Attendance
at the meetings of the Finance and Planning Committee was 100%. Attendance at
the meetings of the Public Responsibility Committee was 93%.
Audit Review Committee. Bob Marbut (Chairman), W.E. Bradford (Vice Chairman),
E. Glenn Biggs, Katherine D. Ortega and C. Barry Schaefer serve on the Audit
Review Committee. The Audit Review Committee reviews the professional services
provided by the Company's outside auditor. The Committee's review includes the
scope of the audit by the Company's outside auditor, the annual financial
statements of the Company, the annual audit report of the outside auditor,
Company's system of internal accounting controls, and certain other matters
with respect to the accounting, auditing, and financial reporting practices and
procedures of the Company. The Audit Review Committee held three meetings in
1999.
Compensation Committee. Byron Allumbaugh (Chairman), H. Frederick Christie
(Vice Chairman), W.E. Bradford, W.H. Clark, and Madeleine Saint-Jacques serve
on the Compensation Committee. The Compensation Committee establishes executive
compensation policy, administers incentive compensation, stock options, and
certain benefit plans of the Company, and approves the salaries and other
benefits of the executive officers. In addition, this Committee advises and
consults with the Company's management regarding the compensation policies and
practices of the Company applicable to other employees. The Compensation
Committee held six meetings in 1999.
Finance and Planning Committee. Russel H. Herman (Chairman), W.H. Clark (Vice
Chairman), E. Glenn Biggs, H. Frederick Christie, and Bob Marbut serve on the
Finance and Planning Committee. The Finance and Planning Committee reviews and
makes recommendations to the Board with regard to the financial structure,
financial condition, and financial capacity of the Company, including
consideration of such financial matters as material corporate borrowings,
investments, capital expenditures, and long-term commitments. In addition, it
4
reviews and makes recommendations to the Board with respect to the Company's
annual budget and five-year business plan. The Finance and Planning Committee
held two meetings in 1999.
Public Responsibility Committee. Madeleine Saint-Jacques (Chairwoman),
Katherine D. Ortega (Vice Chairwoman), Byron Allumbaugh, Russel H. Herman, and
C. Barry Schaefer serve on the Public Responsibility Committee. The Public
Responsibility Committee reviews and monitors the Company's policies, programs,
and practices which significantly affect such responsibilities as environmental
protection, safety and health, equal employment opportunity, and business
conduct. The Committee, after consultation with management, recommends
policies, practices, and programs to the Company Board regarding the Company's
relationships with its various constituencies. In addition, this Committee has
responsibility for considering the composition, structure and functioning of
the Company Board, and for selecting nominees for election as directors of the
Company. The Public Responsibility Committee held three meetings in 1999.
Nominations for Director
The Public Responsibility Committee is responsible for considering the
composition, structure, and functioning of the Company Board and for selecting
nominees for election as directors of the Company. Stockholders may make
nominations to the Company Board by following the procedures set out in the
Company bylaws, and not otherwise. The Company bylaws provide generally that
stockholders wishing to nominate director candidates for consideration by the
Public Responsibility Committee may do so by writing the Secretary of the
Company and giving the candidate's name, biographical information,
qualifications, and class or series and number of shares of capital stock of
the Company owned by the nominee. Such notice must also set out the name and
address of the stockholder giving the notice, the class or series and number of
shares of capital stock of the Company beneficially owned by such stockholder,
a description of any arrangements relating to the nomination between the
stockholder and the nominee or any other person, and a representation that the
stockholder intends to appear in person to make the nomination. Such notice
must be accompanied by the consent of the nominee to serve if elected. The
Company bylaws require that notice of nominations by the stockholders of
persons for election as directors at annual meetings of the Company be
delivered not less than 60 nor more than 90 days prior to the anniversary date
of the mailing of the proxy for the immediately preceding annual meeting;
provided, that if the annual meeting is called for a date that is not within 30
days of the anniversary date of the prior year's annual meeting, notice by the
stockholder in order to be timely must be so received not later than the close
of business on the tenth day following the first to occur of the day on which
the notice of such annual meeting was mailed or the date of the public
disclosure of the date of the annual meeting. A copy of the Company bylaws has
been filed with the SEC or may be obtained upon request from the Company. See
"Where You Can Find More Information."
5
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Summary Compensation Table
The following table presents the compensation of the Company's Chief
Executive Officer and each of the Company's four most highly compensated
executive officers in each of 1999, 1998, and 1997.
Annual Compensation Long-Term Compensation Awards
------------------------------------------ ---------------------------------------------
Number of
Securities
Restricted Underlying
Name and Other Annual Stock Options LTIP All Other
Principal Position Year Salary(1) Bonus(1)(2) Compensation(3) Awards(4) Granted(5) Payouts Compensation(6)
------------------ ---- --------- ----------- --------------- ---------- ---------- ------- ---------------
Jean R. Gaulin.......... 1999 $725,000 $900,000 $2,785 0 0 0 $ 59,902
Chairman, President, 1998 725,000 363,300 6,258 0 175,000 0 58,850
and Chief Executive 1997 725,000 507,600 6,596 0 35,425 0 58,850
Officer
Timothy J. Fretthold.... 1999 $335,000 $360,000 $4,793 0 0 0 $ 37,863
Executive Vice 1998 335,000 140,300 6,191 0 76,318 0 36,182
President, Chief 1997 335,000 214,400 3,792 0 1,419 0 50,059
Administrative and
Legal Officer
Christopher Havens...... 1999 $283,333 $275,000 $1,636 0 0 0 $ 17,905
Executive Vice 1998 265,000 147,500 6,739 0 75,000 0 18,268
President, Marketing 1997 265,000 106,000 4,600 0 0 0 165,866
and Retail Operations
William R. Klesse....... 1999 $362,500 $400,000 $3,277 0 0 0 $ 42,358
Executive Vice 1998 335,000 140,300 6,739 0 100,000 0 40,386
President, Operations 1997 335,000 217,400 4,600 0 1,957 0 54,104
H. Pete Smith........... 1999 $370,000 $300,000 $4,865 0 0 0 $ 18,829
Executive Vice 1998 335,000 140,300 8,088 0 75,000 0 18,151
President and Chief 1997 335,000 214,400 5,367 0 0 0 167,490
Financial Officer
- --------
(1) Includes amounts which have been deferred under the Company's 401(k) plan
and nonqualified 401(k) plan. Under the nonqualified 401(k) plan,
participants are permitted to defer receipt of compensation in addition to
deferrals under the 401(k) plan.
(2) Reflects incentive-based cash bonuses awarded under the Company's annual
incentive plan. Awards under that plan are reported as compensation in the
year with respect to which the award was earned, even if actually paid in
the following year. The figures shown include amounts deferred under the
Company's 401(k) plan and nonqualified 401(k) plan. See Note (1) above. Mr.
Havens' award includes $68,749 in lieu of which he received 2,949 shares of
restricted Common Stock of the Company that vests by its terms after two
years, pursuant to the stock ownership guidelines contained in the
Company's 1999 Annual Incentive Plan.
(3) Reimbursement of executive officers for federal income tax and medicare tax
relating to various benefit plans, premiums paid for group life insurance
in excess of $50,000, and financial counseling services. Perquisites and
other personal benefits received by the executive officers are not included
because the aggregate amount of such compensation, if any, does not exceed
the lesser of $50,000 or 10% of the total amount of annual salary and bonus
for any named individual.
(4) Unvested shares of restricted stock may not be sold or transferred. The
shares otherwise carry full voting rights and dividends are paid on
restricted stock awards from the time of grant at the same rate as paid to
all stockholders. The total amount of restricted stock held by each of the
named executive officers and the fair market value of such shares as of
December 31, 1999, without reducing such market value for restrictions on
transfer was as follows: Mr. Fretthold, 459 shares, $10,414; and Mr.
Klesse, 469 shares, $10,640.
(5) Stock options granted in 1998 to Mr. Fretthold include reload options
granted upon exercise of the associated option. Stock options granted in
1997 to Messrs. Gaulin, Fretthold, and Klesse consist of reload options
granted upon exercise of the associated option.
(6) Includes the following compensation paid or accrued under benefit plans
maintained by the Company:
(a) Above-market interest accrued on amounts deferred by Messrs. Fretthold
and Klesse under the Diamond Deferred Compensation Plan: Mr. Fretthold
$5,791 and Mr. Klesse $8,644.
(b) Annual allocations or accruals in the last fiscal year under the
Company's Employee Stock Ownership Plans and related Excess Benefits
Plan: Mr. Fretthold $11,081 and Mr. Klesse $11,305. The Company's
Employee Stock Ownership Plans were terminated in November 1997.
(c) The supplemental disability income program for executive officers of the
Company employed prior to the U-DS Merger provides those executive
officers an amount equal to 60% of base compensation less any amount
received by such officer under any other long-term disability plan
sponsored by the Company for employees generally. The supplemental
disability income program for former Diamond executives provides
participants with an amount equal to 66 2/3% of base compensation less
an amount received by such executive under any other long-term
disability plan sponsored by the Company for employees generally. Annual
premiums paid or accrued in the last fiscal year by the Company to
fulfill its obligations under the supplemental disability income program
relating to the named executive officers were: Mr. Gaulin $9,874, Mr.
Fretthold $1,137, Mr. Havens $830, Mr. Klesse $1,278, and Mr. Smith
$1,273.
6
(d) Premiums paid or accrued in the last fiscal year under the executive
life insurance program for executive officers relating to the named
executive officers were: Mr. Gaulin $12,088, Mr. Fretthold $2,823, Mr.
Havens $3,552, and Mr. Klesse $3,650.
(e) Matching contributions to participants' 401(k) accounts, and amounts
awarded by the Company under its nonqualified 401(k) plan under which
amounts are awarded which may not be awarded under the Company's
qualified 401(k) plan due to limitations imposed by the Internal Revenue
Code of 1986, as amended (the "Code"). Contributions made to the
accounts of the named executive officers in 1999 were: Mr. Gaulin
$37,940, Mr. Fretthold $17,031, Mr. Havens $13,523, Mr. Klesse $17,481,
and Mr. Smith $17,556.
(f) Mr. Smith and Mr. Havens received relocation incentive payments of
$150,000 and $152,000, respectively, in 1997 in connection with their
relocation to the Company's new headquarters after the U-DS Merger was
completed.
Stock Options
No stock options were granted to the Company's Chief Executive Officer and
the named executive officers under the Company's long term incentive plans in
1999. The tables below set forth information regarding stock options exercised
by the named executive officers in 1999, and the value of unexercised stock
options and related rights held by such executive officers at the end of 1999.
Aggregated Option Exercises in 1999
and December 31, 1999 Option Values(1)
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options at
Shares Options at Fiscal Year
Acquired 12/31/99 End
On Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
---- -------- -------- --------------- -------------
Jean R. Gaulin.................. 0 $ 0 524,425/472,500 $492,188/$0
Timothy J. Fretthold............ 1,406 $ 894 144,234/153,818 $ 1,658/$0
Christopher Havens.............. 10,000 $80,000 98,000/102,500 $ 10,313/$0
William R. Klesse............... 1,406 $ 894 152,829/170,000 $ 539/$0
H. Pete Smith .................. 3,000 $ 9,375 156,000/152,500 $378,188/$0
- --------
(1) Year-end value for stock options was calculated based on the market value
of the underlying shares at December 31, 1999.
The Company's Benefit Plans
Qualified Benefit Plan. The Company maintains a tax-qualified defined benefit
pension plan (the "Qualified Plan") for participating Company employees working
in the United States. Benefits are based upon formulae that take into account
(i) the participant's years of service with the Company (and its prior
controlled group for some participants), (ii) the average of a participant's
compensation (consisting of salary and bonus) during such participant's three
highest-paid consecutive years of service out of the participant's most recent
five years of service with the Company (or the prior controlled group, if
higher), and (iii) for certain participants, the benefit formula in effect
under pension plans maintained by businesses acquired by the Company. In
general, a participant accrues a benefit of 1.6% of plan compensation for each
year of service. Retirement benefits payable under the Qualified Plan are
offset by pensions paid by other employers if the participant's years of
service with that employer are taken into account in determining such
participant's benefits under the Qualified Plan.
UDS Supplemental Non-Qualified Retirement Plans. The Company maintains a
supplemental nonqualified defined benefit pension plan (the "Nonqualified
Plan") to provide supplemental retirement benefits to certain executives
designated by the Compensation Committee, including Messrs. Gaulin, Havens, and
Smith out of the named executives. The Nonqualified Plan provides participants
with benefits not payable from the Qualified Plan because of limits imposed by
the Code. A participant who retires at or after age 62 receives a benefit of no
less than 60% of average annual compensation for the three highest-paid
consecutive years of service out of the most recent five, less the amount of
any other retirement benefits payable from any other source.
7
The following table illustrates the yearly pension commencing at age 62
(which is not offset for social security), assuming a two-thirds joint annuity
with ten years certain, that may become payable to an employee in the higher
salary classifications out of the Qualified Plan and the Nonqualified Plan.
Pension Plan Table
Years of Service
------------------------------------------------
Earnings Credited (1) 15 20 25 30 35
--------------------- -------- -------- -------- ---------- ----------
$ 300,000..................... $ 81,000 $108,000 $135,000 $ 162,000 $ 189,000
400,000..................... 108,000 144,000 180,000 216,000 252,000
500,000..................... 135,000 180,000 225,000 270,000 315,000
600,000..................... 162,000 216,000 270,000 324,000 378,500
700,000..................... 189,000 252,000 315,000 378,000 441,000
800,000..................... 216,000 288,000 360,000 432,000 504,000
900,000..................... 243,000 324,000 405,000 486,000 567,000
1,000,000..................... 270,000 360,000 450,000 540,000 630,000
1,100,000..................... 297,000 396,000 495,000 594,000 693,000
1,200,000..................... 324,000 432,000 540,000 648,000 756,000
1,300,000..................... 351,000 468,000 585,000 702,000 819,000
1,400,000..................... 378,000 504,000 630,000 756,000 882,000
1,500,000..................... 405,000 540,000 675,000 810,000 945,000
1,600,000..................... 432,000 576,000 720,000 864,000 1,008,000
1,700,000..................... 459,000 612,000 765,000 918,000 1,071,000
1,800,000..................... 486,000 648,000 810,000 972,000 1,134,000
1,900,000..................... 513,000 684,000 855,000 1,026,000 1,197,000
2,000,000..................... 540,000 720,000 900,000 1,080,000 1,260,000
- --------
(1) As of December 31, 1999, the average highest compensation received for any
three consecutive years of service of the most recent five, and credited
years of service for the executives named in the Summary Compensation Table
entitled to receive benefits under both the Qualified Plan and the
Nonqualified Plan, were Mr. Gaulin $1,234,600, 26 years; Mr. Havens
$397,400, 11 years; and Mr. Smith, $548,033, 19 years.
Diamond Retirement Plans. Former Diamond executives, including Messrs.
Fretthold and Klesse, continue to accrue benefits under certain executive
retirement programs of Diamond which were in place prior to the U-DS Merger.
The plans under which such executives continue to accrue benefits are the
Diamond Supplemental Executive Retirement Plan and the Company's Restoration
Plan.
The Supplemental Executive Retirement Plan provides additional benefits to
eligible former Diamond executives and Diamond employees. The Supplemental
Executive Retirement Plan benefit is calculated on the basis of 60% of the
average of the highest compensation the executive officer received over any
three years during the last ten years of employment with the Company and
Diamond. A reduction is made to eliminate benefits payable under the Qualified
Plan and under any defined benefit plan of previous employers. Benefits under
the Supplemental Executive Retirement Plan are secured under a trust
arrangement subject to claims of general creditors of the Company.
8
The table below estimates the combined annual benefits payable by operation
of such plans to a participant upon retirement based on the specified
compensation and years of service combinations indicated without reduction for
benefits payable by previous employers.
Pension Plan Table
(Diamond Retirement Plans)
Years of Service
------------------------------------------------------
Earnings Credited (1) 15 20 25 30 35
--------------------- ---------- ---------- ---------- ---------- ----------
$ 250,000............... $ 150,000 $ 150,000 $ 150,000 $ 150,000 $ 150,000
300,000............... 180,000 180,000 180,000 180,000 180,000
400,000............... 240,000 240,000 240,000 240,000 240,000
500,000............... 300,000 300,000 300,000 300,000 300,000
600,000............... 360,000 360,000 360,000 360,000 360,000
700,000............... 420,000 420,000 420,000 420,000 420,000
800,000............... 480,000 480,000 480,000 480,000 480,000
900,000............... 540,000 540,000 540,000 540,000 540,000
1,000,000............... 600,000 600,000 600,000 600,000 600,000
1,100,000............... 660,000 660,000 660,000 660,000 660,000
1,200,000............... 720,000 720,000 720,000 720,000 720,000
1,300,000............... 780,000 780,000 780,000 780,000 780,000
1,400,000............... 840,000 840,000 840,000 840,000 840,000
1,500,000............... 900,000 900,000 900,000 900,000 900,000
1,600,000............... 960,000 960,000 960,000 960,000 960,000
1,700,000............... 1,020,000 1,020,000 1,020,000 1,020,000 1,020,000
1,800,000............... 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000
1,900,000............... 1,140,000 1,140,000 1,140,000 1,140,000 1,140,000
2,000,000............... 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000
- --------
(1) Earnings credited include salary and bonus paid within a calendar year. At
December 31, 1999, the average of the highest compensation received by the
executive officers named in the Summary Compensation Table currently
entitled to benefits under the Diamond Retirement Plans over any three
years during the last ten years of employment with the Company and Diamond
and their credited years of service were Mr. Fretthold, $548,033, 23
years; and Mr. Klesse, $560,033, 31 years.
(2) Amounts shown in the table represent the maximum defined benefit values
payable under the executive retirement program. Benefits are calculated
without offset for social security benefits or reduction for benefits
payable by previous employers. Whether these amounts actually become
payable in whole or in part depends on the contingencies and conditions
governing such plans, including the individual's age, date of hire, term
of service as an executive officer, career earnings, amount of certain
other pension plan payments, and related supplemental retirement payments
received from former employers.
The Company's Restoration Plan provides non-qualified benefits to executives
and employees in place of reductions of qualified ESOP benefits resulting from
various statutory limitations imposed by the Code and the deferral of
compensation through the Diamond Deferred Compensation Plan and the Company's
nonqualified 401(k) plan. Until November 1997 most former Diamond employees
were entitled to receive distributions under two ESOPs created by Diamond
prior to the U-DS Merger. To the extent a portion of such employees'
compensation was ineligible for consideration in the annual calculation of
distributions under the ESOPs, an allocation equivalent to that attributable
to the ineligible compensation was made under the Company's Restoration Plan.
Both ESOPs were terminated in November 1997. Benefits are secured under a
trust arrangement which is subject to claims of general creditors of the
Company.
Employment Agreements and Change-in-Control Arrangements
The Company has entered into employment agreements with each of the named
executive officers for a term of three years, except for Mr. Gaulin, with whom
the Company has entered into an employment
9
agreement providing for a five-year term, as described below (collectively the
"Executive Employment Agreements"). Under the Executive Employment Agreements,
termination of an executive without "cause," or voluntary termination for "good
reason," will result in a lump sum payment equal to three times his highest
annual base salary and annual incentive compensation during the three years
prior to termination.
The Executive Employment Agreements define "cause" as a finding that the
executive (i) committed an illegal act intended to and which did defraud the
Company, (ii) engaged in gross negligence or gross misconduct in carrying out
his duties, or (iii) breached certain noncompete, no solicitation, or
confidentiality covenants. The Executive Employment Agreements define "good
reason" as (a) a breach by the Company of a material provision of the Executive
Employment Agreement, (b) certain material reductions of the executive's
aggregate benefits, and (c) following a change in control, termination of
employment for any reason during the 13 months following the change.
Under the terms of Mr. Smith's Executive Employment Agreement and the related
Relocation Agreement, Mr. Smith was permitted to voluntarily terminate his
employment effective June 1, 2000 by giving written notice to the Company on or
before March 1, 2000, and he has given such notice. Such termination will be
treated as a termination for "good reason" under Mr. Smith's Executive
Employment Agreement, except that, instead of a lump sum equal to three times
his highest annual base salary and annual incentive compensation during the
three years prior to termination, Mr. Smith will be entitled to receive a lump
sum payment equal to three times his highest annual base salary and annual
incentive compensation for 1995, 1996 and 1997, less $150,000.
Under the Executive Employment Agreement of Mr. Gaulin (the "CEO Agreement"),
Mr. Gaulin became Chief Executive Officer of the Company on January 1, 1999.
The CEO Agreement will be automatically renewed, subject to any prior
termination, for successive one-year periods on December 3, 2001 and each
anniversary thereafter unless either party gives at least three months' prior
notice of non-renewal. The other terms of the CEO Agreement, including
severance benefits, are substantially the same as those in the other Executive
Employment Agreements (other than that of Mr. Smith), except that the CEO
Agreement (i) provides for enhanced retirement benefits under the Company's
nonqualified and qualified retirement plans upon an involuntary termination of
employment without cause (including a voluntary termination with good reason),
and (ii) "good reason," in the absence of a change in control, includes non-
renewal of the CEO Agreement by the Company, a significant reduction in Mr.
Gaulin's duties, and any addition of inconsistent duties.
Directors' Fees and Related Information
Directors who are not employees of the Company receive an annual retainer of
$44,000 plus $2,000 per day for attendance at each meeting of the Company's
Board. Non-employee directors who serve on committees of the Board also receive
$1,000 per day for committee meetings attended with the chairpersons receiving
$1,500 per day for chairing meetings of those committees. Directors who are
employees of the Company are not compensated for their Board and committee
service.
Under the Company's Non-Employee Director Equity Plan, all non-employee
directors receive at least $25,000 of their annual retainer, with an election
to receive up to 100% of such retainer, in restricted Company Common Stock. The
shares vest in 20% increments each year over five years and carry full voting
and dividend rights from the time of grant.
In addition to the grant of Company Common Stock, all non-employee directors
receive an annual grant of options to purchase 2,000 shares of Common Stock.
Except in certain situations, 100% of the stock options become exercisable one
year from the date they are granted and expire ten years from the date granted.
The exercise price of the stock options is equal to the closing price of the
Company's Common Stock as reported on the New York Stock Exchange ("NYSE") on
the date of grant.
10
Compensation Committee Interlocks and Insider Participation
Byron Allumbaugh (Chairman), H. Frederick Christie (Vice Chairman), W.E.
Bradford, W.H. Clark, and Madeleine Saint-Jacques served on the Company's
Compensation Committee in 1999. None of those individuals has ever been an
officer or employee of the Company or its subsidiaries. No executive officer of
the Company has served as a member of the board of directors or the
compensation committee of any company whose executive officers include a member
of the Board or the Compensation Committee of the Board.
11
Stock Performance Graph
The Company has altered the composition of its peer group this year. Its
objective in selecting the New Peer Group, as it was in selecting the Former
Peer Group, is to select a group that reflects the Company's business, risks,
and markets. The criteria applied in making the selection include (i) whether a
company operates one or more refineries; (ii) a company's refining and
marketing sales as a percentage of its total sales; (iii) a company's gasoline
and distillate production as a percentage of its total refinery production; and
(iv) a company's refining and marketing assets as a percentage of total company
assets.
The Company has removed USX-Marathon Group from the New Peer Group because a
significantly lower percentage of its total sales are refining and marketing
sales and a significantly lower percentage of its total assets are refining and
marketing assets as compared to the other companies that were included in the
Company's Former Peer Group. The cumulative total return on the common stock of
the new peer group ("the "New Peer Group"), which, other than the removal of
USX-Marathon Group, is identical to the former peer group (the "Former Peer
Group") is shown in the following graph. The New Peer Group includes Crown
Central Petroleum Corporation, Giant Industries, Inc., Holly Corporation, Sun
Company, Inc., Tesoro Petroleum Corporation, Tosco Corporation, and Valero
Energy Corporation. The following graph compares the cumulative total return on
the Common Stock of the Company with that of the Standard & Poor's 500 Stock
Index, the Former Peer Group, and the New Peer Group, assuming an initial
investment of $100 on December 31, 1994 and the reinvestment of all dividends.
The returns for each company in the Former Peer Group and the New Peer Group
have been weighted according to that company's stock market capitalization.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
AMONG ULTRAMAR DIAMOND SHAMROCK CORPORATION,
THE S & P 500 INDEX, A NEW PEER GROUP, AND A FORMER PEER GROUP
[GRAPH]
Cumulative Total Return
----------------------------------------------------
ULTRAMAR DIAMOND
SHAMROCK CORP 12/94 12/95 12/96 12/97 12/98 12/99
- ---------------- ------- ------- ------- ------- ------- -------
ULTRAMAR DIAMOND
SHAMROCK CORPORATION 100.00 105.36 134.44 140.45 110.82 108.70
NEW PEER GROUP 100.00 113.04 152.33 219.54 161.23 144.13
FORMER PEER GROUP 100.00 118.00 153.98 222.50 181.79 158.01
S&P 500 100.00 137.58 169.17 225.61 290.09 351.13
12
Compensation Committee Report on Executive Compensation
The Company's executive compensation and benefit program is administered by
the Board's Compensation Committee. The Compensation Committee is composed of
five independent "non-employee directors" as that term is defined in Section
16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
and related rules, who are also "outside directors" as that term is defined in
Section 162(m) ("Section 162(m)") of the Code.
Compensation Policy and Objectives
The executive compensation program is designed to (i) provide competitive
compensation to attract, motivate, and retain executives with superior skills
and abilities, (ii) align the immediate financial goals of executives with
those of stockholders by linking a significant portion of all executives'
annual compensation directly to stockholders' return and corporate performance
for the year, and (iii) align the long-term economic interests of executives
with those of the Company's stockholders by encouraging executives to become
long-term stockholders by providing a significant portion of their compensation
in stock options.
These goals are achieved through the structuring and integrated
administration of the Company's base salary, annual incentives, and long-term
incentives based on pre-established guidelines and targets.
Elements of Compensation
Base Salary. The Compensation Committee annually reviews competitive base
salary data of an industry group composed of companies comparable in size to
the Company prepared by nationally recognized independent compensation
consultants. In determining the Chief Executive Officer's base salary for 1999,
the Compensation Committee targeted the median base salary for chief executive
officers among the companies used in the competitive base salary data. The base
salary of the Chief Executive Officer was not adjusted in 1999. In determining
the 1999 base salaries for the remainder of the executive officers, the
Compensation Committee reviewed data reflecting the compensation of executives
who hold positions of similar overall scope and level of responsibility,
targeting the median of the competitive market base salaries reflected in the
data. The base salaries of three of the named executive officers were increased
in 1999, in recognition of the expanded responsibilities assumed by each as a
result of the elimination of various positions and layers in the organization,
and the realignment of support services with operating functions.
In 1999 the Chief Executive Officer and three of the named executive officers
elected to forego receipt of all or a portion of their base pay during 1999 in
exchange for a potentially larger award under the 1999 Annual Incentive Plan,
provided the Company's performance warranted such an award. The base pay waived
by such executives in 1999 was given effect for purposes of pension, insurance,
and certain non-qualified retirement benefit calculations.
Annual Incentive Plan. The 1999 Annual Incentive Plan ("AIP") was used by the
Company for 1999 annual incentive compensation in the form of an AIP bonus. For
the Chief Executive Officer, incentive compensation under the 1999 AIP was
based 60% on the Company's Total Shareholder Return ("TSR") versus the TSR of
the Former Peer Group, and 30% on the Company's return on capital employed
("ROCE"), and 10% on the Company's efforts at safety and environmental
excellence. The ROCE component of the award was recalculated at 1997 industry
refining margins to ensure that the Company is measuring how efficiently the
business is managed independent of industry variability and in order to
recognize improvements in the Company's productivity. For other senior
executives, incentive compensation was based 40% on the Company's TSR versus
that of the Former Peer Group, 30% on the ROCE component for the Company, 20%
on individual performance based on pre-agreed objectives, and 10% on the
Company's efforts at safety and environmental excellence.
In 1999 the form in which annual incentive awards were paid was subject to
the Company's minimum share ownership guidelines. Under the guidelines, the
Chief Executive Officer is expected to own Company Common Stock equal in value
to three times his annual base salary, other executive committee members are
13
expected to own Company Common Stock with value equal to two times their annual
base salary, and other annual incentive plan participants are expected to own
Company Common Stock with value equal to their annual base salary. Annual
incentive plan participants are permitted to count Company Common Stock which
they own outright, Company Common Stock they own indirectly (e.g. through
trusts or similar arrangements, including 401(k) plans), and Company Common
Stock they own subject to restriction. Senior managers below the level of vice
president are also permitted to include the value of vested options to purchase
Company Common Stock. As measured by ownership on December 31, 1999, the Chief
Executive Officer and three of the named executive officers met the respective
guidelines for ownership of Company shares. Participants not meeting the
guidelines elected either to (1) use as much as 25% of their gross award to
purchase the Company's Common Stock to address their shortfall in ownership, or
(2) be paid their 1999 AIP awards 75% in cash and 25% in restricted stock.
Long-Term Incentive Plan. The Company's Long-Term Incentive Plan (the "1996
LTIP") was adopted by the Company's Board and approved by the Company's
stockholders at the time of the U-DS Merger. Award levels under the 1996 LTIP
are developed to be competitive with market median long-term incentive values
(on an annualized basis) and to provide opportunity to meet stock ownership
requirements.
In 1999 there were no awards to the executive officers under the 1996 LTIP.
Compensation of Mr. Gaulin as Chief Executive Officer. Mr. Gaulin's
compensation package was designed to encourage short and long-term performance
in line with the interests of the Company's stockholders. The majority of his
compensation was at risk, in the form of Company-earnings-based conditions to
payment of his annual bonus. Mr. Gaulin's annual base salary for 1999 was
$800,000 ($75,000 of which was not paid in 1999 at Mr. Gaulin's election, as
discussed above), which was at the median level for chief executives of
companies included in the industry group base salary data reviewed by the
Compensation Committee, and was consistent with base salaries paid to the Chief
Executive Officers of other corporations comparable in size and complexity to
the Company. He received an AIP Bonus of $ 900,000, based on the Company's TSR,
ROCE, and safety and environmental excellence for 1999, and in recognition of
the Company's performance in 1999. No awards were made to Mr. Gaulin under the
1996 LTIP in 1999.
Internal Revenue Service Rules
The Internal Revenue Service has issued regulations under Section 162(m)
which generally disallow a federal income tax deduction to any publicly-held
corporation for compensation paid in excess of $1 million in any taxable year
to the Chief Executive Officer or any of the four other most highly compensated
executive officers, unless such compensation is paid pursuant to a qualified
"performance-based compensation" plan, the material terms of which are
disclosed to and approved by stockholders.
The Company's Board has considered these requirements and the regulations.
While the tax impact of any compensation arrangement is one factor to be
considered, such impact is evaluated by the Board in light of the Company's
overall compensation philosophy and objectives. The Company has established
incentive plans which permit stock awards that meet the requirements of Section
162(m) and hence will maximize the Company's federal income tax deductions for
compensation expense. However, the Company's Board believes there are
circumstances in which the Company's and stockholders' interests are best
served by providing compensation which may not always be fully deductible, and
that its ability to exercise discretion outweighs the advantages of qualifying
all compensation under Section 162(m).
Compensation Committee of the Board of Directors
Byron Allumbaugh, Chairman
H. Frederick Christie, Vice Chairman
W.E. Bradford
W.H. Clark
Madeleine Saint-Jacques
14
Indebtedness of Management
Employee Stock Purchase Loan Program. This program is intended to encourage
Common Stock purchases by key employees by providing loans to buy Common Stock
on the open market. The interest rate for a loan under the program made prior
to the U-DS Merger is adjusted annually during the term of the loan to the
Applicable Federal Rate (the "AFR") published by the U.S. Internal Revenue
Service as of the date of such adjustment. The weighted average rate of all
loans, as adjusted annually, is compared monthly to the initial AFR rate on all
loans and the lower rate is used. Loans under the program made since the U-DS
Merger bear interest at a rate equal to the AFR for short-term loans, as
effective month-to-month during the term of the loan, not to exceed 8%. As of
February 29, 2000, rates of interest on loans to executive officers ranged from
5.51% to 6.2% with the AFR being 6.2%. Interest is payable annually and
principal is repayable in five annual installments of 20% commencing on the
February 15th following the fifth anniversary of the borrowing. The highest
amounts outstanding at any time since the beginning of the last fiscal year
under the Program and the amount outstanding on March 15, 2000 on loans to
executive officers and directors of the Company which at any time since January
1, 1999 exceeded $60,000 were: Mr. Beadle, the Company's Senior Vice President,
Strategy, Strategic Issues, and Development: $214,310 and $203,575,
respectively; Mr. Eisman, Senior Vice President, Supply Chain Management:
$196,794 and $196,794, respectively; Mr. Fretthold, Executive Vice President,
Chief Administrative and Legal Officer: $201,850 and $193,950, respectively;
Mr. Klesse, Executive Vice President, Operations: $359,003 and $352,141,
respectively; and Mr. Smith, Executive Vice President and Chief Financial
Officer, $188,719 and $188,719, respectively.
Other Indebtedness of Management. In order to assist certain key executives
of the Company in relocating to the various areas in which the Company
maintains offices, the Company has provided ten-year, secured, non-interest-
bearing loans to be used to purchase a primary residence. During 1992, in
connection with his relocation, the Company made such a loan to Mr. Smith. The
highest amount outstanding on Mr. Smith's loan since January 1, 1999 was
$165,000, and $123,750 was outstanding on Mr. Smith's loan on March 15, 2000.
In 1997, in connection with his relocation, the Company made a similar loan to
Christopher Havens, the Company's Executive Vice President-Marketing and Retail
Operations. The highest amount outstanding on Mr. Havens' loan since January 1,
1999 was $318,000, and $278,300 was outstanding on Mr. Havens' loan on March
15, 2000. In 1998 the Company made a loan to Alain Ferland, the Company's
former Senior Vice President, Refining, Product Supply, and Logistics--
Northeast of $395,279 in connection with his relocation to Canada from the
Company's headquarters. The highest amount outstanding on Mr. Ferland's loan
since January 1, 1999 was $416,822, and $402,059 was outstanding on March 15,
2000.
Certain Transactions Between the Company and its Chairman Emeritus
Under a Separation and Non-Competition Agreement dated December 10, 1999
between the Company and Roger R. Hemminghaus, the Company's former Chairman of
the Board and Chief Executive Officer, the Company and Mr. Hemminghaus mutually
agreed to terminate the Employment and Consulting Agreement dated September 22,
1996, also between the Company and Mr. Hemminghaus. Under such Separation and
Non-Competition Agreement, Mr. Hemminghaus resigned from the Company's Board of
Directors effective January 1, 2000, and immediately thereafter began serving
in the non-Director position of Chairman Emeritus. In exchange for his
agreement to refrain from competition with the Company until after December 31,
2001, the Company agreed to accelerate certain payments to Mr. Hemminghaus
under said Employment and Consulting Agreement, and to treat certain of his
outstanding stock options as if he had remained an employee of the Company
through December 31, 2001 and retired upon such date (except that no option may
be exercised after the expiration of its maximum term as set out in its Stock
Option Agreement). Such payments totaled $982,500. In addition, the Company
agreed to provide Mr. Hemminghaus with various other perquisites befitting his
position as Chairman Emeritus and former Chairman of the Board, including
reimbursement of office expense, provision of secretarial assistance, and
maintenance of certain club memberships.
15
OWNERSHIP OF THE COMPANY'S COMMON STOCK
BY MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
Directors and Executive Officers
The table below sets forth the Common Stock ownership of the Company's
directors and executive officers as of the Record Date. As of that date, no
director or executive officer beneficially owned 1% or more of the Company's
Common Stock and all directors and executive officers as a group beneficially
owned approximately 2% of the Company's Common Stock. Unless otherwise
indicated in the footnotes to such table, each of the named persons and members
of the group has sole voting and investment power with respect to the shares
shown:
Shares
Subject
to Total Shares
Shares Options Beneficially
Name Owned (1) (2) Owned (3)
---- --------- --------- ------------
Byron Allumbaugh........................... 10,493(4) 3,000 13,493
E. Glenn Biggs............................. 13,111 6,060 19,171
W. E. Bradford............................. 8,374 6,060 14,434
H. Frederick Christie...................... 9,295(5) 3,000 12,295
W. H. Clark................................ 5,382 6,060 11,442
Timothy J. Fretthold....................... 48,484 145,552 194,036
Jean R. Gaulin............................. 122,577 524,425 647,002
Christopher Havens......................... 26,327 98,000 124,327
Russel H. Herman........................... 16,695 3,000 19,695
William R. Klesse.......................... 59,534 152,829 212,363
Bob Marbut................................. 16,619 6,060 22,679
Katherine D. Ortega........................ 6,254 6,060 12,314
Madeleine Saint-Jacques.................... 8,273 3,000 11,273
C. Barry Schaefer.......................... 6,858(6) 3,000 9,858
H. Pete Smith.............................. 36,076 156,000 192,076
All directors and executive officers as a
group (17 persons)........................ 442,719 1,333,045 1,775,764
- --------
(1) Includes shares of restricted Company Common Stock issued under the
Company's long-term incentive plans, the vesting of which is contingent on
the passage of time or continued service, as follows: Byron Allumbaugh,
2,705 shares; E. Glenn Biggs, 2,705 shares; W. E. Bradford, 2,705 shares;
H. Frederick Christie, 1,764 shares; W. H. Clark, 1,764 shares; Timothy J.
Fretthold, 9,500 shares; Jean R. Gaulin, 34,300 shares; Christopher Havens,
14,549 shares; Russel H. Herman, 1,764 shares; William R. Klesse, 12,300
shares; Bob Marbut, 1,883 shares; Katherine D. Ortega, 1,764 shares;
Madeleine Saint-Jacques, 1,529 shares; C. Barry Schaefer, 1,823 shares; H.
Pete Smith, 9,500 shares; and all directors and executive officers as a
group (17 persons) 109,755 shares.
(2) Includes Company Common Stock which may be acquired within 60 days through
the exercise of stock options granted under the Company's long-term
incentive plans.
(3) Consisting of the total shares of Common Stock owned outright or indirectly
and shares of Common Stock which may be acquired within 60 days through the
exercise of stock options.
(4) Includes 2,546 shares of Company Common Stock registered in the name of
Byron E. and Sharon K. Allumbaugh Revocable Trust as to which Mr.
Allumbaugh shares voting and investment power.
(5) Includes 5,531 shares of Company Common Stock registered in the name of the
Christie Family Trust as to which Mr. Christie shares voting and investment
power.
(6) Includes 500 shares of Company Common Stock registered in the name of the
Evelyn G. Schaefer Trust as to which Mr. Schaefer shares voting and
investment power.
16
Certain Beneficial Owners
The following table contains certain information regarding persons or
entities whom the Company has been advised are beneficial owners of 5% or more
of the Company's Common Stock as of the dates indicated in the footnotes to the
table.
Amount and
Name and Address Nature of Beneficial Percent of
of Beneficial Owner Ownership Class
------------------- -------------------- ----------
Capital Research and Management Company........ 11,076,100(1) 12.8%
333 South Hope Street
Los Angeles, CA 90071
Total Finance/TOTAL............................ 7,049,853(2) 8.04%
Tour Total
24 cours Michelet
92069 Paris, La Defense, France
Vanguard/Windsor Funds, Inc. -- Windsor Fund.. 4,547,400(3) 5.25%
100 Vanguard Bld.
P. O. Box 2600
Valley Forge, PA 19482
- --------
(1) According to a Schedule 13G filed on February 11, 2000 with the SEC by
Capital Research and Management Company, it holds sole dispositive power
with respect to these shares and disclaims beneficial ownership of these
shares.
(2) According to a Schedule 13D filed jointly on September 30, 1997 with the
SEC by TOTAL and Total Finance, a wholly-owned subsidiary of TOTAL, TOTAL
holds sole voting and dispositive power with respect to 49,050 shares of
Company Common Stock, and shares voting and dispositive power with Total
Finance with respect to 7,000,803 Company Common Stock.
(3) According to a Schedule 13G/A filed on February 8, 2000 with the SEC by
Vanguard/Windsor Funds, Inc., it holds sole voting and shares dispositive
power with respect to these shares.
17
AMENDMENT OF NON-EMPLOYEE DIRECTOR EQUITY PLAN
(Item 2 on the Proxy)
At the Annual Meeting of Shareholders held May 6, 1997, the shareholders
approved the Company's Non-Employee Director Equity Plan (the "Director Equity
Plan"). The Company believes it to be in the best interests of the stockholders
to attract and retain highly qualified directors who take an active and ongoing
interest in the Company and its affairs, and that the Director Equity Plan has
helped achieve that objective by creating a means by which non-employee
directors can accumulate a significant equity stake in the Company, thereby
more fully aligning their interests with that of the Company's other
stockholders. To further the objectives and effectiveness of the Director
Equity Plan, the Board voted to amend the plan in certain respects effective
January 1, 2000, subject to shareholder approval, and the amendments are hereby
submitted for such approval. The amendments authorize 250,000 additional shares
of the Company's Common Stock for issuance under the plan, raise the minimum
portion of each non-employee director's annual retainer required to be paid in
restricted Common Stock to $25,000, raise the number of stock options to be
granted to each non-employee director at the time of each Annual Meeting of
Shareholders to 2,000, make stock options issued under the plan transferable
under certain circumstances, and impose a requirement that shareholder approval
be obtained before any stock options issued under the plan are repriced subject
to certain exceptions. The following is a summary of the amended Director
Equity Plan, and is qualified by reference to the full text of the amended
Director Equity Plan which is set forth as Appendix A to this Proxy Statement.
As of March 13, 2000, the closing price on the NYSE of a share of the Company's
Common Stock (the security underlying awards granted under the Director Equity
Plan) was $24.25.
Vote Required
Under Delaware law, the approval of the amendments to the Director Equity
Plan requires the affirmative vote of the holders of a majority of the shares
of the Company's Common Stock present or represented by proxy and entitled to
vote at the Company's 2000 Annual Meeting. The Board recommends that the
stockholders vote FOR the approval of the amendments to the Director Equity
Plan.
Purpose
The purpose of the amended Director Equity Plan is to promote the long-term
success of the Company by providing the non-employee directors of the Company,
its subsidiaries, and affiliates with incentives to continue their association
with the Company and to view the Company from a stockholder's perspective.
Eligibility
Persons eligible to participate in the Director Equity Plan are non-employee
members of the Board and of the boards of the Company's subsidiaries and
affiliates. There are ten such members as of the date of this Proxy Statement.
Shares Reserved
Subject to adjustment in the event of a stock dividend, extraordinary cash
dividend, recapitalization, reorganization, merger, consolidation, split-up,
spin-off, combination, exchange of shares, issuance of warrants or rights
offering to purchase shares of the Company's Common Stock at substantially
below fair market value, or other similar event, a total of 350,000 shares of
the Company's Common Stock have been reserved for issuance under the Director
Equity Plan.
Types of Awards
The Director Equity Plan provides for the automatic formula grant of awards
in the form of stock options. Restricted shares are granted to non-employee
directors based on their election, subject to a minimum amount, as set forth
below.
18
Terms and Conditions of Stock Options
Individuals who are non-employee directors at the time of the Company's 2000
Annual Meeting will receive a stock option with respect to 2,000 shares of the
Company's Common Stock at the time of the 2000 Annual Meeting, and on the date
of each subsequent Annual Meeting. All non-employee director stock options have
an exercise price per share equal to the fair market value of a share of the
Company's Common Stock as of the date of grant and will generally vest and
become 100% exercisable on the first anniversary of the date of grant. Non-
employee director stock options are subject to accelerated vesting in the event
of death, disability, a change in control of the Company or, to a limited
degree, upon retirement. The term of each stock option is ten years from the
date of grant after which the option will expire. In the event a non-employee
director ceases to be a member of the Board, any option then held by him or her
will expire on the date that is five years from the date of such separation.
After the holder of an option ceases to be a member of the Board, stock options
held by him or her may be exercised only to the degree that they were vested
and exercisable at the time of his or her separation. Non-employee director
stock options may be transferred without consideration to a member of the
immediate family of the non-employee director, a trust set up solely for the
benefit of one or more such immediate family members, or to a partnership in
which the only partners are members of the non-employee director's immediate
family. Any such transfer may take place only after reasonable notice is given
to the Company. Following such a transfer, the stock options transferred to the
immediate family member of the non-employee director remain subject to the same
terms and conditions as were applicable prior to the transfer.
Terms and Conditions of Restricted Shares
Effective January 1, 2000, each non-employee director will be granted a
number of restricted shares upon his or her election to the Board, based on his
or her election submitted in writing, with a value equal to at least $25,000
("Minimum Grant") of the amount of annual retainer to which such director would
be entitled for the five years following election, without regard to committee
or meeting fees. Directors elected on a date other than the date of the
Company's annual meeting will receive, based on his or her elections, a
prorated amount of restricted shares representing the partial year prior to the
next annual meeting, along with restricted shares with a value equal to at
least $25,000 of the annual retainer to which such director would be entitled
for the four years following such annual meeting. Non-employee directors may
elect to receive up to 100% ("Elective Grant") of their annual retainer for the
period covered by the Minimum Grant in restricted shares. Such election is made
at the time the Minimum Grant is received. Restricted Common Stock of the
Company awarded under the Director's Equity Plan may not be sold, transferred
(by gift or otherwise), pledged, or encumbered prior to the date the
restrictions lapse. The owner of restricted shares will otherwise be the owner
of such shares for all purposes, entitled to all voting, dividend, and other
ownership rights pertaining to such shares. Restrictions lapse on 20% of the
total Minimum and Elective Grant at the time of each of the five annual
meetings following the grant date, provided that, in the case of non-employee
directors elected on a date other than the date of an annual meeting,
restrictions will lapse on the prorated amount of shares granted with respect
to the first partial year of service at the time of the annual meeting first
following the date of grant. New Minimum and Elective Grants will be made to a
non-employee director at the time restrictions lapse on the final increment of
that director's preceding Minimum and Elective Grant. Any increase in annual
retainer which occurs during the term of a grant will be reflected, if
appropriate, in a new Elective Grant, covering the additional annual retainer
for the remaining terms of the Minimum Grant then in effect.
Effective Date
If approved by the stockholders, the amendments to the Director Equity Plan
will be effective as of January 1, 2000, and remain in effect until May 6,
2007; provided, however, that all awards of either restricted shares or stock
options under the amended plan shall be null and void and of no effect if the
amendments to the Director's Equity Plan are not approved by the stockholders.
19
Amendment and Termination
The Board may wholly or partially amend or otherwise modify the Director
Equity Plan, provided that, except as necessary to preserve the economic value
of the shares subject to the plan in the event of a stock dividend,
recapitalization, reorganization, merger, consolidation, split-up, spin-off,
combination, exchange of shares, warrant or rights offering to sell shares at
below market value, or similar event, no such amendment will without
stockholder approval increase the number of shares subject to the plan, reprice
previously issued stock options (other than in connection with a stock
dividend, extraordinary cash dividend, recapitalization, reorganization,
merger, consolidation, split-up, spin-off, combination, exchange of shares,
issuance of warrants or rights offering to purchase shares of the Company's
Common Stock at substantially below fair market value, or other similar event),
or make any other change which may require stockholder approval under the rules
of any exchange on which the Company's Common Stock is traded.
New Plan Benefits
Insofar as non-employee directors may in their sole discretion elect to
receive the Elective Grants, benefits under the Director Equity Plan cannot be
fully determined. The following chart shows the minimum grants that would have
been received by the non-employee directors of the Company during the fiscal
year ended December 31, 1999 had the proposed amendments been in effect
throughout the year, valued as of the date of grant.
AMENDED PLAN BENEFITS
Non-Employee Director Equity Plan
Name and Position Dollar Value ($) Number of Units
----------------- ---------------- --------------------------
Non-Executive Director Group....... $24,026 1,059 restricted shares,
Company Common Stock
$92,734(1) 20,000 options to purchase
Company Common Stock
- --------
(1) This value is calculated as of the date of grant using the Black-Scholes
model option pricing formula. Volatility and dividend yield assumptions are
based upon actual experience in the Company's Common Stock price change and
dividends paid. These calculations assume an annualized volatility of
.2548, an annual dividend yield of 3.80%, and a risk free rate of interest,
based on the yield of U.S. Treasury STRIPS obligations with maturities
comparable to the term of the stock options, of 5.31%.
Tax Treatment
U.S. Residents. Under present U.S. federal income tax law, upon the grant of
a stock option, generally no taxable income will result to the holder of such
stock option, and there will be no tax effect on the Company. Upon exercise of
a stock option, the holder generally realizes as ordinary income for federal
income tax purposes an amount equal to the excess of the fair market value of
the shares purchased on the exercise date over the exercise price. Generally,
for awards to non-employee directors the Company is entitled to a deduction in
the amount of the holder's income from the award. In a subsequent taxable
disposition of shares received upon exercise of a nonqualified option, the
original basis of the shares is their fair market value at the time income is
realized by the holder, and any capital gain or loss is determined by that
basis. As a result of the rules under Section 16(b) of the Exchange Act, and
depending upon the particular exemption from the provisions of Section 16(b)
utilized, non-employee directors may not receive the same tax treatment as set
forth above with respect to the grant and/or exercise of stock options.
Generally, non-employee directors will not be subject to taxation until the
expiration of any period during which they are subject to the liability
provisions of Section 16(b) with respect to any particular grant of stock
options.
20
Canadian Residents. Under present Canadian federal income tax law, upon the
grant of any type of option, generally no taxable income will result to the
holder of such option and there will be no tax effect on the Company.
Upon exercise of an option, an amount equal to the excess of the fair market
value of the shares purchased on the exercise date over the exercise price will
be included in the employment income of the holder. Provided the exercise price
is not less than the fair market value of the shares on the date the option was
granted, 25% of the amount so included in employment income may be deducted by
the holder in the year the option is exercised. The February 28, 2000 Federal
Budget proposes that stock options be subject to tax only when the underlying
shares are sold. Consequently, the gain normally realized upon exercise of the
option would be delayed until the shares are sold. This measure will be subject
to a $100,000 annual vesting limit. It is further proposed that the 25%
deduction currently available be increased to one third. These measures if
adopted would be effective February 28, 2000.
Upon the grant of a restricted stock award, Revenue Canada is of the view
that the fair market value of the restricted shares, taking into account an
appropriate discount to reflect the transfer and forfeiture conditions, must be
included in computing the employment income of the holder.
For the purposes of determining a capital gain or capital loss on a
subsequent disposition of shares received upon exercise of an option or upon
the grant of a restricted stock award, the cost of the shares is the amount
included in employment income (before any applicable deduction of 25% thereof)
plus the amount, if any, paid to acquire the shares. If restricted shares are
forfeited and provided the shares have been held by a trustee, the holder may
deduct the amount that had been included in income from employment upon the
acquisition thereof and the holder will be deemed not to realize a capital gain
or capital loss thereon.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
(Item 3 on the Proxy)
The Board has selected Arthur Andersen LLP ("Arthur Andersen") to serve as
the Company's independent accountants to audit the consolidated financial
statements of the Company for 2000. Stockholders are being asked to ratify this
appointment. The Company has been informed that neither Arthur Andersen nor any
of its partners has any direct financial interest or any material indirect
financial interest in the Company or has had any connection during the past
three years with the Company or its predecessors in the capacity of promoter,
underwriter, voting trustee, director, officer, or employee.
A representative of Arthur Andersen is expected to be present at the Annual
Meeting with the opportunity to make a statement, if such representative
desires to do so, and to be available to respond to appropriate questions.
The affirmative vote of the holders of a majority of the shares of Common
Stock represented at the Annual Meeting and voting on this proposal is required
to ratify the appointment of Arthur Andersen as independent accountants for
2000.
The Board recommends that stockholders vote FOR such ratification. Proxies
solicited by the Board will be so voted unless stockholders specify in their
proxies a contrary choice.
21
WHERE YOU CAN FIND MORE INFORMATION
The Company files annual, quarterly, and special reports, proxy statements,
and other information with the SEC. Company stockholders may read and copy any
reports, statements, or other information the Company files at the SEC's public
reference rooms in Washington, D.C., New York, New York and Chicago, Illinois.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. The Company's SEC filings are also available to the public
from commercial document retrieval services and at the web site maintained by
the SEC at "http://www.sec.gov." In addition, the Company's filings can be
inspected at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
The Company's stockholders may rely on the information contained in this
Proxy Statement and in the Annual Report on Form 10-K for the year ended
December 31, 1999 delivered along with this proxy statement to vote on the
director nominees, amendments to the Non-Employee Director Equity Plan, and the
approval of Arthur Andersen LLP as the Company's independent public
accountants. The Company has not authorized anyone to provide Company
stockholders with information that is different from what is contained in this
Proxy Statement. This Proxy Statement is dated March 22, 2000. Company
stockholders should not assume that the information contained in this Proxy
Statement is accurate as of any date other than that date, and the mailing of
this Proxy Statement to Company stockholders does not create any implication to
the contrary.
MISCELLANEOUS
Compliance with Section 16(a) of the Exchange Act
The rules of the Securities and Exchange Commission require that the Company
disclose late filings of reports pertaining to ownership of and transactions in
Common Stock of the Company by the Company's directors and executive officers.
In 1999 it was discovered that Mr. Klesse, the Company's Executive Vice
President, Operations inadvertently reported ownership of an incorrect number
of shares of the Company's Common Stock in his Report on Form 3, filed at the
time of the U-DS Merger in 1996. Mr. Klesse reported ownership of 32,909 shares
of Common Stock of the company, which overstated his total holdings by
5,311 shares. It was also discovered that Mr. Havens, the Company's Executive
Vice President, Marketing and Retail Operations, inadvertently failed to report
on Form 5 the acquisition of 2,599 shares of the Company's Common Stock in 1998
through the Company's nonqualified 401(k) plan.
Submission of Proposals by Stockholders; Discretionary Authority
In order to be eligible for inclusion in the Company's proxy statement for
the 2001 Annual Meeting of Stockholders any proposal of a stockholder must be
received by the Company at its principal executive offices in San Antonio,
Texas by November 21, 2000. Proxies appointed by the Shareholders may exercise
discretionary voting authority at the 2000 Annual Meeting with respect to
matters brought before the 2000 Annual Meeting, other than those described
above, as to which the Company has not received notice in writing at its
principal executive offices not less than sixty nor more than ninety days prior
to the anniversary of the date on which the Company first mailed its proxy
materials for the immediately preceding annual meeting.
22
Proxy Solicitation
In addition to soliciting proxies by mail, directors, executive officers, and
employees of the Company, without receiving additional compensation, may
solicit proxies by telephone, by email, by telecopy, or in person. Arrangements
will also be made with brokerage firms and other custodians, nominees, and
fiduciaries to forward solicitation materials to the beneficial owners of
shares of Common Stock, and the Company will reimburse such brokerage firms and
other custodians, nominees, and fiduciaries for reasonable out-of-pocket
expenses incurred by them in connection with forwarding such materials. The
Company has retained Morrow & Company, Inc. to aid in the solicitation of
proxies. The fee to be paid by the Company to such firm is estimated to be
$10,000 plus reimbursement for out-of-pocket costs and expenses.
BY ORDER OF THE BOARD OF DIRECTORS
Curtis V. Anastasio
Vice President, General Counsel, and
Secretary
San Antonio, Texas
March 22, 2000
23
APPENDIX "A"
ULTRAMAR DIAMOND SHAMROCK CORPORATION
NON-EMPLOYEE DIRECTOR EQUITY PLAN
As amended effective January 1, 2000
1. Purpose; Definitions. The purposes of the Plan is to promote the long-term
success of the Company by providing the non-employee directors of the Company,
its subsidiaries and its affiliates with incentives to continue their
association with the Company and view the Company from a stockholder's
perspective. To accomplish such purpose, the Plan provides that the Company
shall grant Options and Restricted Shares.
Whenever the following terms are used in the Plan, they shall have the
meaning specified below unless the context clearly indicates to the contrary.
"Annual Meeting" shall mean an annual meeting of the stockholders of the
Company.
"Board" shall mean the Board of Directors of the Company.
"Change in Control" shall have the meaning set forth in Section 6.
"Committee" shall mean the Compensation Committee of the Board appointed as
provided in Section 2.1.
"Company" shall mean Ultramar Diamond Shamrock Corporation, a Delaware
corporation, and any successor corporation.
"Effective Date" shall have the meaning set forth in Section 8.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Fair Market Value" of a Share as of a given date shall mean (a) the closing
sale price per Share as reported on the principal exchange on which Shares are
then trading, if any, on such date, or if there are no sales on such date, on
the next preceding trading day during which a sale occurred, or (b) if clause
(a) does not apply, the fair market value of the Share as determined by the
Committee from time to time in good faith.
"Merger" shall have the meaning set forth in Section 8.1.
"Option" shall mean an option to purchase Shares granted pursuant to Section
5.
"Participant" shall mean a non-employee director of the Company to whom an
award is granted under the Plan.
"Plan" shall mean this Ultramar Diamond Shamrock Corporation Non-Employee
Director Equity Plan, as amended effective January 1, 2000 and from time to
time thereafter.
"Restricted Shares" shall mean Shares that are awarded to a Participant that
are subject to the restrictions described in Section 4.
"Restricted Share Amount" shall mean the dollar amount of the annual retainer
to be paid in Restricted Shares to a Participant.
"Rule 16b-3" shall mean Rule 16b-3 adopted by the Securities and Exchange
Commission under the Exchange Act.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Share" shall mean a share of the Company's Common Stock, $.01 par value.
A-1
2. Administration
2.1 Compensation Committee. The Plan shall be administered by the Committee,
which shall consist of two or more individuals appointed by the Board and
holding office at the pleasure of the Board. All Committee members shall be
members of the Board, and must be "Non-Employee Directors," as such term is
defined in Rule 16b-3, if and as such Rule is in effect. Appointment of
Committee members shall be effective on acceptance of appointment. Committee
members may resign at any time by delivering written notice to the Board.
Vacancies in the Committee shall be filled by the Board.
2.2 Duties and Powers of Committee. It shall be the duty of the Committee to
conduct the general administration of the Plan in accordance with its terms and
provisions. The Committee shall have the power to interpret the Plan and to
adopt such rules for the administration, interpretation and application of the
Plan as are consistent therewith and to interpret, amend or revoke any such
rules. All actions taken and all interpretations and determinations made by the
Committee shall be binding upon all affected persons. The Committee may
delegate ministerial decisions, including, without limitation, the calculation
of amounts to be included in particular awards, to any officer of the Company.
2.3 Majority Rule. The Committee shall act by a majority of its members in
office. The Committee may act either by vote at a telephonic or other meeting
or by a memorandum or other written instrument signed by a majority of the
Committee.
2.4 Compensation; Professional Assistance; Good Faith Actions. Members of the
Committee shall receive such compensation for their services as members as may
be determined by the Board. All expenses and liabilities incurred by members of
the Committee in connection with the administration of the Plan shall be borne
by the Company. The Committee may, with the approval of the Board, employ
attorneys, consultants, accountants, appraisers or other persons. The
Committee, the Company and its officers and directors shall be entitled to rely
upon the advice, opinions or valuations of any such persons. No member of the
Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or the awards
hereunder, and all members of the Committee shall be fully protected by the
Company in respect to any such action, determination or interpretation.
3. Shares Subject to the Plan.
3.1 Total Shares Reserved. Subject to adjustment pursuant to Section 3.3, the
total number of Shares that are issued or transferred under the Plan, as
amended, shall not in the aggregate exceed 350,000 Shares. Such Shares may be
treasury Shares or Shares of original issue or a combination of the foregoing.
3.2 Reissuance of Certain Shares. If the term of an Option expires with all
or a portion of such Option unexercised, any Shares that were covered by the
unexercised portion of such Option shall again be available for issuance or
transfer hereunder. Upon full or partial payment of the exercise price of any
Option by transfer to the Company of Shares, there shall be deemed to have been
issued or transferred under this Plan only the net number of Shares actually
issued or transferred by the Company determined by subtracting the number of
Shares so transferred or relinquished. If Restricted Shares are forfeited, the
corresponding Shares shall again be available for issuance or transfer
hereunder.
3.3 Changes in Company's Shares. In the event of any stock dividend,
extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination, exchange of shares, warrants or
rights offering to purchase Shares at a price substantially below fair market
value, or other similar corporate event that affects the Restricted Shares or
the Options such that an adjustment is required in order to preserve the
benefits of potential benefits intended to be made available under this Plan,
then the Committee shall, in such manner as the Committee may deem equitable,
adjust any or all of (i) the number and kind of shares which thereafter may be
granted or optioned and sold in the aggregate or to any non-employee director,
(ii) the number and kind of shares subject to outstanding Options and
Restricted Shares, and (iii) the grant,
A-2
exercise or conversion price with respect to any of the foregoing and/or, if
deemed appropriate, make provision for a cash payment to a non-employee
director; provided, however, that the number of Shares subject to any Option or
Restricted Shares will always be a whole number.
4. Restricted Shares.
4.1 Award of Restricted Shares.
(i) Grant of Restricted Shares. Subject to Section 4.1(iii), effective
January 1, 2000, each non-employee director elected to the Board shall be
granted Restricted Shares on the date of his or her election to the Board.
Such Restricted Shares shall be in lieu of at least $25,000.00 of the non-
employee director's annual retainer, without regard to amounts paid as
committee or meeting fees, to which he or she would otherwise be entitled
during the five years following the date of grant; provided however, that
if a non-employee director is elected to the Board on a date other than the
date of an Annual Meeting, such non-employee director's grant of Restricted
Shares will respect to the amount of his or her first year's annual
retainer shall be prorated to reflect his or her partial year of Board
membership. The non-employee director shall indicate the applicable
Restricted Share Amount by an election in writing made prior to the
commencement of the relevant period of service or prior to the initial
grant made pursuant to Section 4.1(iii), as the case may be.
(ii) Additional Grants. Each non-employee director shall be granted
additional Restricted Shares on the date of the fifth Annual Meeting that
follows the initial date of grant of Restricted Shares made pursuant to
this Section, and on each succeeding fifth Annual Meeting thereafter.
(iii) Initial Grant of Restricted Shares Under the Plan. The initial
grant of Restricted Shares under this Plan shall be made on the Effective
Date to each individual serving as a non-employee director of the Company
as of the close of the Effective Date. Such grant shall be determined as if
the non-employee director had first been elected to the Board on such date,
without regard to whether or not the director was so elected.
(iv) Written Agreement. Each grant of Restricted Shares shall be
evidenced by a written agreement in such form as approved by the Committee,
and shall be subject to the additional terms and conditions set forth in
this Section 4.
4.2 Increase in Annual Retainer. Any increase in annual retainer fees paid to
a non-employee director by the Company shall be reflected in an additional
grant for the balance of the vesting period remaining on such non-employee
director's outstanding grant made pursuant to this Section. The number of
Restricted Shares to be included in such grant and the vesting of such
Restricted Shares shall be determined in a manner consistent with the
provisions of Sections 4.1 and 4.4.
4.3 Calculation of Award of Restricted Shares. The total number of Restricted
Shares included in each grant shall be equal to: (i) the Restricted Share
Amount of the non-employee director's annual retainer for the five-year period
(or pro-rated period pursuant to Section 4.1), (ii) with the amount in clause
(i) divided by the Fair Market Value per Share on the date of grant of the
Restricted Shares, and (iii) with the result in clause (ii) rounded up to the
next whole number of Restricted Shares.
4.4 Lapse of Restrictions. Restricted Shares shall be forfeited or become
nonforfeitable on the following basis.
(i) One-fifth (20%) of the Restricted Shares subject to each grant shall
become transferable and nonforfeitable as of the first Annual Meeting
following the date of such grant. An additional one-fifth (20%) shall
become transferable and nonforfeitable as of the next four Annual Meetings
following the date of grant. If Restricted Shares are granted pursuant to
Section 4.2, those Restricted Shares shall vest, become transferable and
non-forfeitable over the balance of the vesting period remaining on such
non-employee director's outstanding grant. If a non-employee director is
elected to the Board on a date other
A-3
than the date of an Annual Meeting, the number of Restricted Shares that
become transferable and nonforfeitable on the date of the Annual Meeting
following the date of such election shall be equal to the prorated number
of Restricted Shares granted with respect to the partial year of service as
a member of the Board for the period ending on the date of the Annual
Meeting that immediately follows the date of election; the remaining
Restricted Shares in the grant shall become transferable and nonforfeitable
ratably over the remainder of the vesting period of the grant as of each
succeeding Annual Meeting. A grant made pursuant to Section 4.1(iii) shall
be treated for purposes of this Section 4.4 as if the non-employee director
had first been elected to the Board on the date of such grant, without
regard to whether or not the director was so elected.
(ii) Upon termination of service as a non-employee director, (a) if
termination occurs other than as of an Annual Meeting, the number of
Restricted Shares that would have become vested and nonforfeitable at the
Annual Meeting that immediately follows such termination shall be reduced
ratably to reflect the number of months during which the non-employee
director was serving as a Board member during the period commencing on the
date of the immediately preceding Annual Meeting, and (b) any balance of
the Restricted Shares shall be forfeited.
4.5 Terms and Conditions of Awards of Restricted Shares.
(i) Rights as Stockholder. Each award of Restricted Shares shall
constitute a transfer of the ownership of Shares to the non-employee
director in consideration of the performance of services, entitling such
non-employee director to voting, dividend and other ownership rights, but
subject to the forfeiture and transfer restrictions provided in this
Section and in Section 8.1. No additional consideration shall be due in
connection with any such award.
(ii) Transfer Restrictions. Restricted Shares that have not yet become
non-forfeitable may not be sold, transferred (including, without
limitation, transfer by gift or donation), pledged or encumbered prior to
the date, if any, on which they become nonforfeitable and shall bear
appropriate legends.
(iii) Additional Securities. Any new or additional Shares or other
securities to which a non-employee director, by virtue of awards of
Restricted Shares hereunder, becomes entitled due to a stock dividend,
stock split, recapitalization, merger or other event shall be subject to
all terms and conditions of the Plan, including this Section.
5. Options.
5.1 Grant of Options.
(i) Number of Shares Subject to Grant. Each Option shall be with respect
to 2,000 Shares effective January 1, 2000.
(ii) Grant Dates. An Option shall be granted on the date of each Annual
Meeting after 1999 to each individual serving as a non-employee director of
the Company as of the close of such Annual Meeting.
(iii) Initial grant of Options Under the Plan. The initial grant of
Options under this Plan shall be made (a) on the Effective Date to each
individual serving as a non-employee director of the Company as of the
close of the Effective Date, and (b) with respect to a non-employee
director not described in clause (a) who is initially elected to the Board
prior to the 2000 Annual Meeting of the Company, on the date of the 2000
Annual Meeting of the Company.
(iv) Written Agreement. Each grant of Options shall be evidenced by a
written agreement in such form as approved by the Committee and shall be
subject to the additional terms and conditions set forth in this Section.
A-4
5.2 Terms and Exercise Options.
(i) Exercisability of Options. Except as provided in Section 5.2(iii)
below, 100% of the Option shall become exercisable (a) at the Annual
Meeting following the date of grant, or (b) in the case of an Option
granted pursuant to Section 5.1(iii)(a), on the first anniversary of the
date of grant.
(ii) Term. An Option shall expire ten years from the date the Option is
granted and shall be subject to earlier termination as hereinafter
provided. Once an Option becomes exercisable, it may thereafter be
exercised, wholly or in part, at any time prior to its expiration or
termination. In the event of the non-employee director's termination from
service on the Board, other than as provided in Section 5.2(iii), an
outstanding Option may be exercised only to the extent it was exercisable
on the date of such termination and shall expire five years after such
termination, or on its stated expiration date, whichever occurs first.
(iii) Early Vesting. Upon the occurrence of any of the following events,
the Option shall become immediately and fully exercisable:
(a) the death of the non-employee director;
(b) the disability of the non-employee director; or
(c) a Change in Control.
Upon the retirement of the non-employee director from the Board after
attaining age 70, the Option shall become immediately and fully exercisable
in proportion to the director's actual period of service during the vesting
period of the Option.
5.3 Exercise Price. The exercise price of an Option granted to a non-employee
director shall be equal to the Fair Market Value per Share on the date of
grant.
5.4 Payment. An Option may be exercised by a non-employee director only upon
payment to the Company in full of the exercise price of the Option
corresponding to the portion of the Option to be exercised. Such payment shall
be made in cash or in Shares previously owned by the non-employee director for
more than six months, or in a combination of cash and such Shares.
6. Change in Control. For purposes of this Plan, a "Change in Control" shall be
deemed to occur upon the occurrence of any of the following events:
6.1 The Company is merged, consolidated or reorganized into or with another
corporation or other legal person, and as a result of such merger,
consolidation or reorganization, less than 50% of the combined voting power of
the then-outstanding securities of such corporation or person immediately after
such transactions is held in the aggregate by the holders of Voting Stock (as
that term is hereafter defined) of the company immediately prior to such
transaction;
6.2 The Company sells or otherwise transfers all or substantially all of its
assets to any other corporation or other legal person, and as a result of such
sale or transfer, less than 50% of the combined voting power of the the-
outstanding voting securities of such corporation or person are held in the
aggregate by the holder of Voting Stock of the Company immediately prior to
such sale;
6.3 There is a report filed on Schedule 13D or Schedule 14D-1 (or any
successor schedule, form or report), each as promulgated pursuant to the
Exchange Act, disclosing that any person (as the term "person" is used in
Section 13(d)(3) or Section 14(d)(2) o the Exchange Act) has become the
beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or
any successor rule or regulation promulgated under the Exchange Act) of
securities representing 20% or more of the combined voting power of the then-
outstanding securities of the Company entitled to vote generally in the
election of Directors of the Company ("Voting Stock");
A-5
6.4 The Company files a report or proxy statement with the Securities and
Exchange Commission pursuant to the Exchange Act disclosing in response to Form
8-K or Schedule 14A (or any successor schedule, form or report or item therein)
that a change in control of the Company has or may have occurred or will or may
occur in the future pursuant to any then-existing contract or transaction; or
6.5 If during the period of two consecutive years individuals who at the
beginning of any such period constitute the directors of the Company cease for
any reason to constitute at least a majority thereof unless the election, or
the nomination for election by the Company's shareholders, of each director of
the Company first elected during such period was approved by a vote of at least
two-thirds of the directors of the Company then still in office who were
directors of the Company at the beginning of any such period (excluding for
this purpose the election of any new director in connection with an actual or
threatened election or proxy contest).
Notwithstanding the foregoing provisions of Section 6.3 or 6.4 hereof, a
"Change in Control" shall not be deemed to have occurred for purposes of this
Plan solely because the Company, an entity in which the Company directly or
beneficially owns 50% or more of the voting securities of such entity, any
Company-sponsored employee stock ownership plan or any other employee benefit
plan of the Company either files or becomes obligated to file a report or a
proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K
or Schedule 14A (or any successor schedule, form or report or item therein)
under the Exchange Act, disclosing beneficial ownership by it of shares of
voting securities of the Company, whether in excess of 20% or otherwise, or
because the Company reports that a change in control of the Company has or may
have occurred or will or may occur in the future by reason of such beneficial
ownership. Notwithstanding the foregoing provisions of this Section, the merger
shall not constitute a Change in Control.
7. Stock Ownership Guidelines. It is recommended that each non-employee
director own Shares with a Fair Market Value of not less than 300% of the non-
employee director's annual retainer (without regard to amounts paid as
committee or meeting fees). It is further recommended that each non-employee
director attain such level of ownership of Shares not later than the third
anniversary of his or her initial election to the Board (or of the Effective
Date, in the case of an individual serving as a non-employee director at the
close of the Effective Date), and maintain such level of stock ownership
thereafter while serving as a non-employee director of Company. For purposes of
applying the foregoing guidelines, a non-employee director shall be considered
as owning: (i) Shares personally or beneficially held; (ii) Shares held in a
Company-sponsored program; and (iii) Restricted Shares.
8. Miscellaneous
8.1 Effective Date. The Plan shall become effective (the "Effective Date") as
of January 1, 2000 subject to approval of the Plan by the stockholders of the
Company at the next annual stockholders meeting and shall continue in effect
until the tenth anniversary of such approval. Any award made under the Plan
shall be null and void and of no effect and any distributions theretofore made
with respect to Restricted Shares shall be forfeited if the Plan is not so
approved.
8.2 Amendment, Suspension or Termination of the Plan. This Plan may be wholly
or partially amended or otherwise modified, suspended or terminated at any time
or from time to time by the Board. An amendment to the Plan shall become
effective the date ratified by the Board; provided, however, that except as
provided in Section 3.3, no such amendment shall, without the further approval
of the stockholders of the Company, (a) increase the maximum number of Shares
specified in Section 3.1, (b) reprice previously issued stock options (other
than in connection one of the events described in Section 3.3) or (c) make such
other change as may require stockholder approval under the rules of any
exchange on which Shares are traded. Neither the amendment, suspension nor
termination of the Plan shall, without the consent of the Participant alter or
impair any rights or obligations under any award therefore granted. No awards
may be granted under the Plan during any period of suspension nor after
termination of the Plan, and in no event may any awards be granted under
A-6
the Plan after ten years from the date the Plan, or the Plan as amended from
time to time, is approved by stockholders.
8.3 Transferability.
(i) No Option shall be assignable or transferable except by will or the
laws of descent and distribution, and no right or interest of any
Participant shall be subject to any lien, obligation or liability of the
Participant.
(ii) Notwithstanding the provisions of Section 8.3(a), an Option shall be
transferable by a non-employee director, without payment of consideration
therefor by the transferee, to any one or more members of the non-employee
director's Immediate Family (or to one or more trusts established solely
for the benefit of one or more members of the non-employee director's
Immediate Family or to one or more partnerships in which the only partners
are members of the non-employee director's Immediate Family); provided,
however, that (i) no such transfer shall be effective unless reasonable
prior notice thereof is delivered to the Company and such transfer is
thereafter effected in accordance with any terms and conditions that shall
have been made applicable thereto by the Company or the Board and (ii) any
such transferee shall be subject to the same terms and conditions hereunder
as the non-employee director. For this purpose, "Immediate Family" has the
meaning ascribed thereto in General Instruction A to Form S-8 under the
Exchange Act (or any successor provision to the same effect) as in effect
from time to time.
8.4 Effect on Other Compensation. The adoption and implementation of the Plan
shall not in any way limit the authority of the Company to make other awards of
Shares or rights related to Shares to its non-employee directors or other
persons on terms that are similar or dissimilar to those of the Plan.
8.5 Regulations and Other Approvals; Governing Law.
(i) The obligation of the Company to sell or deliver Shares with respect
to any award granted under the Plan shall be subject to all applicable
laws, rules and regulations, including all applicable federal and sate
securities laws, and the obtaining of all such approvals by governmental
agencies as may be deemed necessary or appropriate by the Committee.
(ii) The Committee may make such changes as may be necessary or
appropriate to comply with the rules and regulations of any government
authority.
(iii) Each award under the Plan is subject to the requirement that, if at
any time the Committee determines, in its sole discretion, that the
listing, registration or qualification of Shares issuable pursuant to the
Plan is required by any securities exchange or under any state or federal
law, or the consent or approval of any governmental regulatory body is
necessary or desirable as a condition of, or in connection with, the grant
of an Option or the issuance off Shares, no Options shall be granted or
payment made or Shares issues, in whole or in part, unless listing,
registration, qualification, consent or approval has been effected or
obtained free of any conditions as acceptable to the Committee.
(iv) In the event that the disposition of Shares acquired pursuant to the
Plan is not covered by a then current registration statement under the
Securities Act, and is not otherwise exempt from such registration, such
Shares shall be restricted against transfer to the extent required by the
Securities Act or regulations thereunder, and the Committee may require any
individual receiving Shares pursuant to the Plan, as condition precedent to
receipt of such Shares, to represent to the Company in writing that the
Shares acquired by such individual are acquired for investment only and not
with a view to distribution. The certificate for any Shares acquired
pursuant to the Plan shall include any legend that the Committee deems
appropriate to reflect any restrictions on transfer.
8.6 Governing Law. The Plan and the rights of all person claiming hereunder
will be construed and determined in accordance with the laws o the State of
Delaware without giving effect to the choice of law principles thereof.
A-7
8.7 Right to Continued Service. Nothing contained herein shall be construed
to confer upon any non-employee director the right to continue to serve as a
director of the Company or in any other capacity.
8.8 Titles; Construction. Titles are provided herein for convenience only and
are not to serve as a basis for interpretation or construction of the Plan. The
masculine pronoun shall include the feminine and neuter and the singular shall
include the plural, when the context so indicates. Any reference to a section
other than to a section of the Plan) shall also include a successor to such
section.
A-8
[X] PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE ULTRAMAR DIAMOND SHAMROCK CORPORATION
Proxy Solicited on Behalf of the Board of Directors
for the Annual Meeting on May 2, 2000
The undersigned hereby appoints Timothy J. Fretthold, Curtis V. Anastasio, and
Todd Walker, and any of them, each with full power of substitution and
resubstitution, as proxies to represent and to vote all shares which the
undersigned may be entitled to vote as of March 7, 2000, the record date, at the
Annual Meeting of Stockholders of Ultramar Diamond Shamrock Corporation to be
held on May 2, 2000, and any adjournment thereof.
The following items of business to be acted upon are listed in the Notice of
Annual Meeting and described in the Proxy Statement:
1. Election of 4 directors, each for a FOR WITH- FOR ALL
three-year term expiring in 2003: HOLD EXCEPT
[ ] [ ] [ ]
Nominees: Byron Allumbaugh, E. Glenn Biggs,
Katherine D. Ortega and Madeleine Saint-Jacques
INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For
All Except" and write that nominee's name in the space provided below.
- --------------------------------------------------------------------------------
2. Approval of Amendments to the Company's FOR AGAINST ABSTAIN
Non-Employee Director Equity Plan. [ ] [ ] [ ]
3. Ratification of appointment of Arthur FOR AGAINST ABSTAIN
Andersen, L.L.P. as independent accountants. [ ] [ ] [ ]
The Board of Directors recommends a vote FOR items 1, 2 and 3. You may
specify your choices on the items by marking the appropriate boxes. You need not
mark any boxes if you wish to vote in accordance with the Board of Directors'
recommendations.
Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
------------------------
Please be sure to sign and date Date
this Proxy in the box below.
- ------------------------------------------------------------------
- ----Stockholder sign above-----Co-holder (if any) sign above------
Detach above card, sign, date and mail in postage paid envelope provided.
ULTRAMAR DIAMOND SHAMROCK CORPORATION
- --------------------------------------------------------------------------------
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
- --------------------------------------------------------------------------------
REVOCABLE PROXY
ULTRAMAR DIAMOND SHAMROCK CORPROATION
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
The Solicitation of these Confidential Voting Instructions
is made on behalf of the Board of Directors
The undersigned as a participant in the Ultramar Diamond Shamrock
Corporation 401(k) Plans (the "Plans") hereby instructs the Trustee of the Plans
to appoint Timothy J. Fretthold, Curtis V. Anastasio, and Todd Walker, and each
of them, with full power of substitution, the attorney and proxy of the said
Trustee to represent the interests of the undersigned in Ultramar Diamond
Shamrock Corporation Common Stock held under the terms of the Plans, at the
Annual Meeting of Shareholders of Ultramar Diamond Shamrock Corporation to be
held on May 2, 2000 and any adjournment thereof, and to vote, with all powers
the Trustee would possess if present, all shares of Common Stock ("Common
Stock") credited to the undersigned's account(s) under the Plans as of March 7,
2000, the record date for the Annual Meeting, upon the following matters and
upon any other business that may properly come before the meeting or any
adjournment thereof.
1. Election of 4 directors, each for a With- For All
three-year term expiring in 2003: For hold Except
[ ] [ ] [ ]
4 Nominees: Byron Allumbaugh, E. Glenn Biggs,
0 Katherine D. Ortega and Madeleine Saint-Jacques
1
(K) INSTRUCTION: To withhold authority to vote for any individual nominee,
mark "For All Except" and write that nominee's name in the space
provided below.
--------------------------------------------------------------------------
2. Approval of Amendments to the For Against Abstain
Company's Non-Employee Director [ ] [ ] [ ]
Equity Plan.
3. Ratification of appointment of Arthur For Against Abstain
Andersen, L.L.P. as independent [ ] [ ] [ ]
accountants.
The Board of Directors recommends a vote FOR items 1, 2 and 3. You may
specify your choices on the items by marking the appropriate boxes. You need not
mark any boxes if you wish to vote in accordance with the Board of Director's
recommendations.
---------------------------
Please be sure to sign and date Date
this Proxy in the box below.
- --------------------------------------------------------------------------
- ------ Shareholder sign above ----Co-holder (if any) sign above ------
Detach above card, sign, date and mail in postage paid envelope provided
ULTRAMAR DIAMOND SHAMROCK CORPORATION
- --------------------------------------------------------------------------------
Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
- -------------------------------------------------------------------------------
[X] PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE ULTRAMAR DIAMOND SHAMROCK CORPORATION
The Solicitation of these Confidential Voting Instructions is made on behalf of
the Board of Directors
The undersigned as a participant in the Ultramar Diamond Shamrock
Corporation 401(k) Plan (the "Plan") hereby instructs the Trustee of the Plan to
appoint Timothy J. Fretthold, Curtis V. Anastasio, and Todd Walker, and each of
them, with full power of substitution, the attorney and proxy of the said
Trustee to represent the interests of the undersigned in Ultramar Diamond
Shamrock Corporation Common Stock held under the terms of the Plan, at the
Annual Meeting of Shareholders of Ultramar Diamond Shamrock Corporation to be
held on May 2, 2000 and any adjournment thereof, and to vote, with all powers
the Trustee would possess if present, all shares of Common Stock ("Common
Stock") credited to the undersigned's account(s) under the Plan as of March 7,
2000, the record date for the Annual Meeting, upon the following matters and
upon any other business that may properly come before the meeting or any
adjournment thereof.
F O R M E R E S O P I
1. Election of 4 directors, each for a three-year term expiring in 2003:
For Withhold For All Except
[_] [_] [_]
Nominees: Byron Allumbaugh, E. Glenn Biggs, Katherine D. Ortega and
Madeleine Saint-Jacques
INSTRUCTION: To withhold authority to vote for any individual nominee, mark
"For All Except" and write that nominee's name in the space provided below.
- --------------------------------------------------------------------------------
2. Approval of Amendments to the Company's Non-Employee Director Equity Plan.
For Against Abstain
[_] [_] [_]
3. Ratification of appointment of Arthur Andersen, L.L.P., as independent
accountants.
For Against Abstain
[_] [_] [_]
The Board of Directors recommends a vote FOR items 1, 2 and 3. You may
specify your choices on the items by marking the appropriate boxes. You need not
mark any boxes if you wish to vote in accordance with the Board of Directors'
recommendations.
Please be sure to sign and date this Proxy in the box below. -----------------
Date
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shareholder sign above Co-holder (if any) sign above
Detach above card, sign, date and mail in postage paid envelope provided.
ULTRAMAR DIAMOND SHAMROCK CORPORATION
- --------------------------------------------------------------------------------
Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
- --------------------------------------------------------------------------------
[X] PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE ULTRAMAR DIAMOND SHAMROCK CORPORATION
The Solicitation of these Confidential Voting Instructions is made on
behalf of the Board of Directors
The undersigned as a participant in the Ultramar Diamond Shamrock Corporation
401(k) Plan (the "Plan") hereby instructs the Trustee of the Plan to appoint
Timothy J. Fretthold, Curtis V. Anastasio, and Todd Walker, and each of them,
with full power of substitution, the attorney and proxy of the said Trustee to
represent the interests of the undersigned in Ultramar Diamond Shamrock
Corporation Common Stock held under the terms of the Plan, at the Annual
Meeting of Shareholders of Ultramar Diamond Shamrock Corporation to be held on
May 2, 2000 and any adjournment thereof, and to vote, with all powers the
Trustee would possess if present, all shares of Common Stock ("Common Stock")
credited to the undersigned's account(s) under the Plan as of March 7, 2000,
the record date for the Annual Meeting, upon the following matters and upon any
other business that may properly come before the meeting or any adjournment
thereof.
With- For All
F 1. Election of 4 directors, each for a For hold Except
three-year term expiring in 2003: [ ] [ ] [ ]
O
Nominees: Byron Allumbaugh, E. Glenn Biggs,
R Katherine D. Ortega and Madeleine Saint-Jacques
M INSTRUCTION: To withhold authority to vote for any individual nominee,
mark "For All Except" and write that nominee's name in the space
E provided below.
R ------------------------------------------------------------------------
2. Approval of Amendments to the For Against Abstain
Company's Non-Employee Director [ ] [ ] [ ]
E Equity Plan.
S
3. Ratification of appointment of Arthur For Against Abstain
O Anderson, L.L.P. as independent [ ] [ ] [ ]
accountants.
P
II The Board of Directors recommends a vote FOR Items 1, 2 and 3. You
may specify your choices on the items by marking the appropriate
boxes. You need not mark any boxes if you wish to vote in accordance
with the Board of Directors' recommendations.
---------------------
Please be sure to sign and date Date
this Proxy in the box below.
- ----------------------------------------------------------------
- ----Shareholder sign above---- Co-holder (if any) sign above----
Detach above card, sign, date and mail in postage paid envelope provided.
ULTRAMAR DIAMOND SHAMROCK CORPORATION
- -------------------------------------------------------------------------------
Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
- --------------------------------------------------------------------------------
[X] PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE ULTRAMAR DIAMOND SHAMROCK CORPORATION
The Solicitation of these Confidential Voting Instructions
is made on behalf of the Board of Directors
The undersigned as a participant in the Ultramar Diamond Shamrock
Corporation 401(k) Plan and a current employee of Ultramar Diamond
Shamrock Corporation hereby instructions the Trustee of the Ultramar
Diamond Shamrock Corporation Employee Benefits Trust ("Benefits Trust")
to appoint Timothy J. Fretthold, Curtis V. Anastasio, and Todd Walker, G
and each of them, with full power of substitution, the attorney and S
proxy of the said Trustee, at the Annual Meeting of Shareholders of O
Ultramar Diamond Shamrock Corporation to be held on May 2, 2000 and P
any adjournment thereof, and to vote, with all powers the Trustee would
possess if present, a proportionate amount of the Common Stock held in
the Benefits Trust, upon the following matters and upon any other
business that may properly come before the meeting or any adjournment
thereof.
1. Election of 4 directors, each for a FOR WITH- FOR ALL
three-year term expiring in 2003: HOLD EXCEPT
[ ] [ ] [ ]
Nominees: Byron Allumbaugh, E. Glenn Biggs,
Katherine D. Ortega and Madeleine Saint-Jacques
INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For
All Except" and write that nominee's name in the space provided below.
- --------------------------------------------------------------------------------
2. Approval of Amendments to the Company's FOR AGAINST ABSTAIN
Non-Employee Director Equity Plan. [ ] [ ] [ ]
3. Ratification of appointment of Arthur FOR AGAINST ABSTAIN
Andersen, L.L.P. as independent accountants. [ ] [ ] [ ]
The Board of Directors recommends a vote FOR items 1, 2 and 3. You may
specify your choices on the items by marking the appropriate boxes. You need not
mark any boxes if you wish to vote in accordance with the Board of Directors'
recommendations.
------------------------
Please be sure to sign and date Date
this Proxy in the box below.
- ------------------------------------------------------------------
- ----Stockholder sign above-----Co-holder (if any) sign above------
Detach above card, sign, date and mail in postage paid envelope provided.
ULTRAMAR DIAMOND SHAMROCK CORPORATION
- --------------------------------------------------------------------------------
Please sign exactly as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
- --------------------------------------------------------------------------------