==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Diamond Shamrock, Inc.
9830 Colonnade Boulevard
San Antonio, Texas 78230
(210) 641-6800
--------------------------------------------------
(Name, address and telephone number of Registrant)
September 26, 1996
------------------
(Date of Report)
Delaware 1-9409 74-2456753
-------------- --------- --------------
(State of (Commission (IRS Employer
incorporation) File Number) Identification No.)
==============================================================================
Item 5. Other Events.
Diamond Shamrock, Inc., a Delaware corporation ("Diamond Shamrock"), and
Ultramar Corporation, a Delaware corporation ("Ultramar"), have entered into an
Agreement and Plan of Merger, dated as of September 22, 1996 (the "Merger
Agreement"). The Merger Agreement provides for the merger of Diamond Shamrock
with and into Ultramar (the "Merger"). The combined company will be named
"Ultramar Diamond Shamrock Corp." The Merger is expected to be (i) accounted
for under the pooling-of-interests method and (ii) a "reorganization" under the
Internal Revenue Code of 1986, as amended.
In the Merger, each share of Diamond Shamrock's Common Stock, other than
shares owned by Diamond Shamrock, Ultramar or any of their wholly owned
subsidiaries, issued and outstanding immediately prior to the effective time of
the Merger (the "Effective Time") will be converted into the right to receive
1.02 shares of Ultramar Common Stock. Also, in the Merger, each share of
Diamond Shamrock 5% Cumulative Convertible Preferred Stock, other than shares
owned by Ultramar, Diamond Shamrock or any of their wholly owned subsidiaries,
issued and outstanding immediately prior to the effective time of the Merger
will be converted into the right to receive one share of 5% Cumulative
Convertible Preferred Stock of Ultramar (the "Ultramar Convertible Preferred
Stock"), which Ultramar Convertible Preferred Stock will have terms that are
identical to the Diamond Shamrock Convertible Preferred Stock, except for
certain changes to reflect the Merger in accordance with the Merger Agreement
and the terms of the Diamond Shamrock Convertible Preferred Stock.
Consummation of the Merger is subject to a number of conditions, including
(i) receipt of the approval of the holders of a majority of the outstanding
shares of Diamond Shamrock Common Stock, (ii) receipt of the approval of the
holders of a majority of the outstanding shares of Ultramar Common Stock, and
(iii) termination of applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
The Merger Agreement provides for the payment by either party to the other
of a termination fee of $45 million if the Merger Agreement is terminated in
certain circumstances. These circumstances generally involve the receipt of an
unsolicited takeover proposal, termination of the Merger Agreement and the
subject party agreeing to or consummating a takeover proposal within 18 months
following termination of the Merger Agreement.
As an inducement and condition to Ultramar's entering into the Merger
Agreement, Diamond Shamrock, as issuer, and Ultramar, as grantee, entered into a
Stock Option Agreement (the "Diamond Shamrock Stock Option Agreement"), whereby
Diamond Shamrock granted to Ultramar an option to purchase, at a price per share
equal to $27.55, subject to adjustment (the "Diamond Shamrock Option Exercise
Price"), 5,858,500 Shares of Diamond Shamrock Common Stock, representing
slightly less than 20% of the outstanding shares of Diamond Shamrock Common
Stock, but subject to a cap on such number of shares equal to $60 million
divided by the difference between the price of Diamond Shamrock Common Stock on
the date that notice is given of exercise and the Diamond Shamrock Option
Exercise Price. The same circumstances which give rise to the payment of the
termination fee also trigger Ultramar's right to exercise the Diamond Shamrock
Stock Option Agreement. Ultramar and Diamond Shamrock have also entered into a
substantially identical stock option agreement (the "Ultramar Stock Option
Agreement") pursuant to which Ultramar has granted to Diamond Shamrock an option
to purchase, at a price per share equal to $27.20, subject to adjustment,
8,927,500 shares, of Ultramar Common Stock, representing slightly less than 20%
of the
-2-
outstanding shares of Diamond Shamrock Common Stock, but subject to a cap on
such number of shares substantially similar to the cap in the Diamond Shamrock
Stock Option Agreement. Each of the Diamond Shamrock Stock Option Agreement and
the Ultramar Stock Option Agreement provides (i) the grantee with the right to
require the issuer to register the Common Stock acquired by or issuable upon
exercise of the option under the Securities Act of 1933, as amended and (ii) the
grantee with the right to assign or transfer its rights or obligations under the
Stock Option Agreement once the option has been triggered.
In connection with the Merger Agreement, Diamond Shamrock has entered into
an amendment (the "Amendment to Rights Agreement") to its Rights Agreement,
dated as of March 6, 1990 (the "Diamond Shamrock Rights Agreement"), in order to
exclude Ultramar from the definition of "Acquiring Person" and the definition of
"Adverse Person" (each as defined in the Diamond Shamrock Rights Agreement) as a
result of Ultramar's beneficial ownership of Diamond Shamrock Common Stock
pursuant to the Merger Agreement, the Diamond Shamrock Stock Option Agreement or
the transactions contemplated thereby. Accordingly, the transaction
contemplated by the Merger Agreement and the Diamond Shamrock Stock Option
Agreement will not result in a "Distribution Date," "Share Acquisition Date," or
"Triggering Event" under the Diamond Shamrock Rights Agreement. Ultramar has
entered into a similar amendment to the Rights Agreement, dated as of June 25,
1992, as amended by First Amendment dated as of October 26, 1992, and Amendment
dated as of May 10, 1994 (the "Ultramar Rights Agreement"), in order to exclude
Diamond Shamrock from the definition of "Acquiring Person" (as defined in the
Ultramar Rights Agreement) as a result of Diamond Shamrock's acquisition of
Beneficial Ownership of Ultramar pursuant to the Ultramar Stock Option Agreement
or the Merger.
In connection with the Merger, Diamond Shamrock has also entered into an
Employment and Consulting Agreement, dated September 22, 1996 and effective as
of the effective time of the Merger, with Roger R. Hemminghaus (the "Hemminghaus
Employment Agreement").
The Merger Agreement, the Diamond Shamrock Stock Option Agreement, the
Ultramar Stock Option Agreement, the Amendment to Rights Agreement and Diamond
Shamrock's press release, dated September 23, 1996, regarding the Merger and the
Hemminghaus Employment Agreement appear as exhibits to this Report and are
incorporated herein by reference. The foregoing summary is qualified in its
entirety by reference to such documents, as well as the Diamond Shamrock Rights
Agreement.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits
(a)-(b) Not applicable.
(c) Exhibits Required by Item 601 of Regulation S-K.
Exhibit No. Description
---------- -----------
2 The Merger Agreement
4(a) Diamond Shamrock Rights Agreement (incorporated herein
by reference from Exhibit 2 to Diamond Shamrock's Form
8-K registration statement dated March 6, 1990, filed
under Commission File No. 1-9409).
4(b) Amendment to Rights Agreement
10(a) The Diamond Shamrock Stock Option Agreement
-3-
10(b) The Ultramar Stock Option Agreement
10(c) Hemminghaus Employment Agreement
20 A Press Release of Diamond Shamrock, issued September
23, 1996, regarding the Merger
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, Diamond Shamrock has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
DIAMOND SHAMROCK, INC.
By /s/ Timothy J. Fretthold
----------------------------------------------
Timothy J. Fretthold,
Senior Vice President and General Counsel
Date: September 26, 1996
-4-