<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(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
[X] Definitive Proxy Statement RULE 14C-5(D)(2))
[X] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Diamond Shamrock, Inc.
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Diamond Shamrock, Inc.
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] 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:
Pursuant to Item 10 of Schedule 14(a), the Commission is hereby advised that
the additional Common Stock to be issued under the Company's amended Long-Term
Incentive Plan as described in the attached Proxy Statement will be registered
under the Securities Act of 1933, as amended, on or before May 2, 1995.
The Company acknowledges its obligation under Regulation 14A, Rule 14a-6(c)
to file with the Commission any written instructions or other material which
discusses, reviews, or comments upon the merits of any matter to be acted upon
and which is furnished to persons soliciting proxies for their use in connection
with the solicitation.
<PAGE>
[LOGO OF DIAMOND SHAMROCK, INC. APPEARS HERE]
NOTICE OF ANNUAL MEETING
AND PROXY STATEMENT
MAY 2, 1995
<PAGE>
NOTICE OF ANNUAL MEETING
MAY 2, 1995
TO THE STOCKHOLDERS OF DIAMOND SHAMROCK, INC.
The Annual Meeting of Stockholders of Diamond Shamrock, Inc. will be held at
the Camino Real Paso Del Norte Hotel, 101 South El Paso Street, El Paso, Texas
79901 on Tuesday, May 2, 1995 at 10:00 a.m. El Paso time, for the following
purposes:
1. To elect three directors to serve for a three-year term expiring in 1998
(Proxy Item 1);
2. To approve amendments to the Company's Long Term Incentive Plan (Proxy
Item 2);
3. To ratify the appointment of independent accountants for 1995 (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 at the close of business on
March 17, 1995 are entitled to notice of and to vote at the Annual Meeting.
March 23, 1995
BY ORDER OF THE BOARD OF DIRECTORS
JERRY D. KING
Secretary
DIAMOND SHAMROCK, INC.
9830 Colonnade Boulevard
P.O. Box 696000
San Antonio, Texas 78269-6000
Telephone: (210) 641-6800
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.
<PAGE>
PROXY STATEMENT
--------------------------------------------------------------------------------
GENERAL INFORMATION
INTRODUCTION
The Board of Directors (the "Board") of Diamond Shamrock, Inc. (the "Company")
is soliciting proxies to be voted at the 1995 Annual Meeting of Stockholders
(the "Annual Meeting") to be held in El Paso, Texas on May 2, 1995, and at any
adjournment thereof. This Proxy Statement and the enclosed proxy are first
being mailed to stockholders on or about March 23, 1995.
SHARES VOTING
Holders of shares of the Common Stock of the Company at the close of business
on March 17, 1995 are entitled to notice of the Annual Meeting and to vote
shares held on that date at the Meeting. As of the close of business on March
17, 1995, there were 29,012,293 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 Long-
Term Incentive Plan, the appointment of independent accountants, and 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 that identify the votes of specific
stockholders will be kept confidential, and will be 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 or otherwise disclose their vote to management, and where disclosure may
be required by applicable law. In limited circumstances, such as a 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 meeting, this policy may 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 exercise of the proxy, by execution
of a subsequent proxy, or by voting in person at the Annual Meeting. 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 AMENDMENT OF THE
COMPANY'S LONG-TERM INCENTIVE PLAN, AND FOR THE RATIFICATION OF THE APPOINTMENT
OF THE COMPANY'S INDEPENDENT ACCOUNTANTS.
Abstentions and broker non-votes will be included in determining the number of
shares present or represented at the Annual Meeting, or any adjournment
thereof, for purposes of determining whether a quorum exists. However,
abstentions and broker non-votes with respect to any matter brought to a vote
at the Annual
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1
<PAGE>
PROXY STATEMENT
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Meeting, or any adjournment thereof, will be treated as shares not voted for
purposes of determining whether the requisite vote has been obtained, and
therefore will have no effect on the outcome of the vote on any such matter.
ELECTION OF DIRECTORS
(ITEM 1 ON THE PROXY)
The By-Laws of the Company (the "By-Laws") 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 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. Messrs. Biggs, Bradford, and Marbut have
been nominated for election to the class of directors whose terms expire at the
1998 Annual Meeting of Stockholders. Each nominee is presently serving as a
director of the Company.
A plurality of the votes of the Common Stock cast at the Annual Meeting, or any
adjournment thereof, 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 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
E. GLENN BIGGS, 61, is President of Biggs & Co., (a corporation engaged in
developmental projects and financial planning). He was the Chairman and Chief
Executive Officer of Gill Companies until July 1989. Mr. Biggs served as the
Vice Chairman of the Board and Chairman of the Executive Committee of
InterFirst Bank San Antonio, N.A. until May 1987. Mr. Biggs is a director of
Central and Southwest Corporation, Southwestern Bancorp, Inc. and Zachry, Inc.
Mr. Biggs is Chairman of the Compensation Committee, and serves on the
Executive and Public Responsibility Committees. He has been a director of the
Company since April 1987.
W. E. "BILL" BRADFORD, 60, is President and Chief Operating Officer of Dresser
Industries, Inc. Mr. Bradford has been with Dresser Industries, Inc. since 1970
and has held various positions in production and management. In 1988 Mr.
Bradford was appointed President and Chief Executive Officer of Dresser-Rand
Company. He was elected to his present position in March 1992. Mr. Bradford
serves on the Board of Trustees of the Manufacturers' Alliance for Productivity
and Innovation, is a member of the Board of Directors of the Petroleum
Equipment Suppliers Association, and is a member of the American Petroleum
Institute. Mr. Bradford serves on the Board of Directors of Dresser Industries,
Inc. and on the Board of Directors of Oryx Energy Company. Mr. Bradford serves
on the Compensation Committee and has been a director of the Company since
December 1992.
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<PAGE>
PROXY STATEMENT
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BOB MARBUT, 59, has been Chairman and Chief Executive Officer of Argyle
Communications, Inc. since January 1992, Chief Executive Officer of Argyle
Television Holding, Inc. since June 1993, and Chairman and Chief Executive
Officer of Argyle Television Holding, II since August 1994. Prior to 1992, Mr.
Marbut was President and Chief Executive Officer of Harte-Hanks Communications,
Inc. and served one year as Vice Chairman of that Company. He is a director of
Premark International, Inc., Tracor, Inc., Argyle Television Holding, Inc.,
Argyle Television Holding II, and Katz Media Corporation. He serves on the
Compensation and Executive Committees and has been a director of the Company
since March 1990.
DIRECTORS WHOSE TERMS EXPIRE AT THE 1996 ANNUAL MEETING
B. CHARLES AMES, 69, is a partner of Clayton & Dubilier, Inc. (an investment
firm). Mr. Ames served as Chairman and Chief Executive Officer of The Uniroyal
Goodrich Tire Company until May 1990 and as Chairman and/or Chief Executive
Officer of Acme-Cleveland Corporation until October 1987. Mr. Ames is a
director of M.A. Hanna Company, The Progressive Corporation, and Warner-Lambert
Company. Mr. Ames serves on the Audit Committee and has been a director of the
Company since April 1987.
LAURO F. CAVAZOS, PH.D., 68, is adjunct Professor of Community Health and
acting Chairman, Tufts University School of Medicine. He has been a management
and education consultant since 1991. Dr. Cavazos was the United States
Secretary of Education from September 1988 to December 1990. Prior to being
appointed Secretary of Education, he served as President and Chief Executive
Officer of Texas Tech University and Texas Tech University Health Sciences
Center. Dr. Cavazos is a director of Luby's Cafeterias, Inc. Dr. Cavazos serves
on the Audit and Public Responsibility Committees. Dr. Cavazos served on the
Company's Board from December 1987 to September 1988 and was re-elected to the
Board in January 1991.
ROGER R. HEMMINGHAUS, 58, is Chairman of the Board and Chief Executive Officer
of the Company. Mr. Hemminghaus served as President of the refining and
marketing unit of the Company's predecessor from March 1985 until April 1987.
Mr. Hemminghaus is a director of Luby's Cafeterias, Inc. and Southwestern
Public Service Co. and is the Deputy Chairman of the board of directors of the
Federal Reserve Bank of Dallas. Mr. Hemminghaus is Chairman of the Executive
Committee and serves on the Public Responsibility Committee. He has been a
director of the Company since April 1987.
DIRECTORS WHOSE TERMS EXPIRE AT THE 1997 ANNUAL MEETING
W. H. CLARK, 62, 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 from 1984 until 1994. Mr.
Clark is a member of the Board of Directors of Northern Trust Corporation and
its principal banking subsidiary, The Northern Trust Company; NICOR, Inc. and
its principal subsidiary, Northern Illinois Gas Company; USG Corporation and
its subsidiary, United States Gypsum Co.; James River Corporation; and
Bethlehem Steel Corporation. Mr. Clark has been a director of the Company since
March 1994.
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PROXY STATEMENT
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WILLIAM L. FISHER, PH.D., 62, is Professor and the Leonidas T. Banous chair in
Mineral Resources at the University of Texas at Austin. Dr. Fisher served as
the Director of the Bureau of Economic Geology from 1970 to 1994, with the
exception of 1975-1977, when he served as Assistant Secretary for Energy and
Minerals in the Department of the Interior. Dr. Fisher is a member of the
National Academy of Engineering and is a director of Pogo Producing Company.
Dr. Fisher is Chairman of the Audit Committee and serves on the Executive
Committee. He has been a director of the Company since April 1987.
KATHERINE D. ORTEGA, 60, 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, Long Island Lighting Company, The Paul Revere Corporation,
Rayonier, Inc., and 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 Chairman of the Public Responsibility Committee and serves on the
Compensation Committee. She has been a director of the Company since August
1989.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The management of the Company is under the direction of its Board. The Board
has established Audit, Compensation, Executive, and Public Responsibility
Committees. The Board held a total of seven meetings in 1994. Attendance at the
meetings of the Board and Board Committees was approximately 98%.
BOARD COMMITTEES
Audit Committee. During the last fiscal year, William L. Fisher (Chairman), B.
Charles Ames, and Lauro F. Cavazos, served as members of the Audit Committee.
The Audit Committee reviews the professional services to be provided by the
Company's independent auditors and the independence of such firm from
management of the Company. This Committee also reviews the scope of the audit
by the Company's independent auditors, the annual financial statements of the
Company, the annual audit report of the independent auditors, the adequacy of
the Company's internal accounting controls, and such other matters with respect
to the accounting, auditing, and financial reporting practices and procedures
of the Company as it may find appropriate or as may be brought to its
attention. The Audit Committee held two meetings in 1994.
Compensation Committee. During the last fiscal year, E. Glenn Biggs (Chairman),
W. E. Bradford, W. H. Clark, Bob Marbut, and Katherine D. Ortega served on the
Compensation Committee. The Compensation Committee establishes executive
compensation policy, administers the 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 three meetings in 1994.
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PROXY STATEMENT
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Executive Committee. During the last fiscal year, Roger R. Hemminghaus
(Chairman), E. Glenn Biggs, William L. Fisher, and Bob Marbut served on the
Executive Committee. The Executive Committee has all authority, consistent with
the Delaware General Corporation Law, granted to it by the Board. Accordingly,
the Executive Committee can exercise all the powers and authority of the Board
in the management of the business and affairs of the Company, including
financial matters, except that the Executive Committee does not have the power
to amend the By-Laws or the Certificate of Incorporation of the Company (except
to fix the designations, preferences, and other terms of any preferred stock of
the Company), adopt an agreement of merger or consolidation, or recommend to
the stockholders of the Company the sale, lease, or exchange of all or
substantially all of the Company's property and assets, a dissolution of the
Company, or a revocation of a dissolution. The Executive Committee held no
meetings in 1994.
Public Responsibility Committee. During the last fiscal year, Katherine D.
Ortega (Chairman), E. Glenn Biggs, Lauro F. Cavazos, and Roger R. Hemminghaus
served 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 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 Board, and for
selecting nominees for election as directors of the Company. The Public
Responsibility Committee held three meetings in 1994.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the last fiscal year, none of the individuals serving on the
Compensation Committee has ever been an officer or employee of the Company. 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 Company.
NOMINATIONS FOR DIRECTOR
The By-Laws provide that nominations for director will be made by the Board, or
a committee appointed by the Board, or by any stockholder entitled to vote in
the election of directors generally. The By-Laws require that stockholders
intending to nominate candidates for election as directors deliver written
notice thereof to the Secretary of the Company not later than 80 days in
advance of the annual meeting of stockholders. However, if the date of the
meeting is not publicly announced by the Company by mail, press release, or
otherwise more than 90 days prior to the meeting, notice by the stockholder to
be timely must be delivered to the Secretary of the Company not later than the
close of business on the tenth day following the day on which such announcement
of the date of the meeting was communicated to stockholders. The By-Laws
further require that the notice set forth the names and addresses of such
stockholder and the stockholder's nominees, a representation that the
stockholder is entitled to vote at such meeting and intends to appear in person
or by proxy at the meeting to nominate the person or persons specified in the
notice, a description of all arrangements or understandings between the
stockholder and each nominee, such other information as would be required to be
included in a proxy statement soliciting proxies for the election of the
nominees of
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PROXY STATEMENT
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such stockholder, and the consent of each nominee to serve as a director of the
Company if so elected. The chairman of the meeting may refuse to acknowledge
the nomination of any person not made in compliance with these requirements.
Similar procedures prescribed by the By-Laws are applicable to stockholders
desiring to bring any other business before an annual meeting of stockholders.
Nominations for director of the Company are currently made by the Board. The
Public Responsibility Committee recommends to the Board criteria for the
selection of nominees and selects candidates for presentation to the Board.
DIRECTORS' FEES AND RELATED INFORMATION
Directors who are not employees of the Company receive an annual retainer of
$15,000 plus $1,800 per day for attendance at each meeting of the Board. Non-
employee directors who serve on committees of the Board also receive $1,000 per
day for committee meetings attended. In addition, each non-employee director
who serves as chairman of either the Audit, Compensation, or Public
Responsibility Committee receives an annual retainer of $3,000. Directors and
members of Board committees who are employees of the Company are not
compensated for their Board and committee service. Directors are reimbursed for
travel expenses incurred in attending Board and committee meetings.
All non-employee directors receive at least one-third of their annual retainer
("Minimum Grant"), and may elect to receive up to 100% of their retainer
("Elective Grant"), in restricted shares of Common Stock ("restricted stock")
under either the Diamond Shamrock, Inc. 1987 Long-Term Incentive Plan (the
"1987 Plan") or the Diamond Shamrock, Inc. Long-Term Incentive Plan adopted in
1990 (the "1990 Plan"). Prior to May 5, 1992 grants were made under the 1987
Plan, and after that date grants were made under the 1990 Plan. Unvested shares
of restricted stock may not be sold or transferred. The shares granted to each
director otherwise carry full voting and dividend rights from the time of
grant. If service of a director is terminated for any reason, shares which have
not vested are forfeited to the Company.
Grants of restricted stock under the 1987 Plan and the 1990 Plan (collectively,
the "Long-Term Incentive Plans") are for a five year period. Under the 1987
Plan, directors received shares of restricted stock upon the date of their
election. Such shares vest annually based upon the portion of the retainer the
director elected to receive in restricted stock allocable to that year, with
the first vesting occurring as of the date of grant. If service as a director
is terminated for any reason prior to the fifth year of service, all unvested
shares are forfeited to the Company.
Under the 1990 Plan, Minimum Grants are issued to current non-employee
directors on the first Tuesday in May which immediately follows the vesting of
the final portion of any earlier restricted stock grant and are issued to new
directors on the day of election to the Board. Restricted stock representing
Elective Grants is issued on the first business day that is at least six months
and one day following the date of the corresponding Minimum Grant. Twenty
percent of the restricted stock subject to a Minimum Grant or an Elective Grant
vests upon completion of the director's initial annual term of service for
which the restricted stock award was granted; provided, however, that the
shares may not be sold until at least six months after the date of vesting. An
additional twenty percent vests upon the completion of each subsequent annual
term of service.
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PROXY STATEMENT
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The amount of restricted stock that vests upon completion of the director's
initial annual term is adjusted in respect of any person who first becomes a
director other than in the month of May. If service as a director is terminated
for any reason prior to the completion of the fifth year of service, the shares
attributable to the portion of the annual term completed by such director, pro-
rated on a quarterly basis, vest and all remaining unvested shares are
forfeited to the Company.
In May 1989, the Company established a retirement plan for all non-employee
directors. Pursuant to such plan, any non-employee director who has five or
more years of service on the Board or who retires from the Board at or after
age 72 is eligible to participate. Upon retirement from the Board a
participating director will receive an annual benefit of $10,000. This benefit
will be paid for a period of time equal to the shorter of the length of service
on the Board completed by the participating director or the life of such
director. At December 31, 1994, non-employee directors were credited with
service for participation in such retirement plan as follows: B. Charles Ames,
92 months; E. Glenn Biggs, 92 months; W. E. Bradford, 25 months; Lauro F.
Cavazos, 56 months; W.H. Clark, 10 months; William L. Fisher, 92 months; Bob
Marbut, 57 months; and Katherine D. Ortega, 64 months.
Directors are also eligible to participate in the Company's Deferred
Compensation Plan for Executives and Directors (the "Deferred Compensation
Plan") pursuant to which they may elect to defer the receipt, in whole or in
part, of their annual retainer and meeting fees. See "Compensation of Executive
Officers--Footnote 1 to the Summary Compensation Table."
At the Company's request, Mr. Biggs assisted management in its review of its
South American investments. For the services he provided, he was paid $15,000
at the rate of $1,000 per day.
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PROXY STATEMENT
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BENEFICIAL OWNERSHIP OF SECURITIES
The table below sets forth the share ownership of the Company's directors and
executive officers. As of March 1, 1995, no director or executive officer
beneficially owned 1% or more of the Common Stock, and all directors and
executive officers as a group beneficially owned approximately 1.4% of the
Common Stock. As of March 1, 1995, no shares of the Company's 5% Cumulative
Convertible Preferred Stock were beneficially owned by any director or
executive officer. 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.
<TABLE>
<CAPTION>
Shares
Beneficially
Name Position Owned(1)(2)
---- -------- ------------
<S> <C> <C>
B. Charles Ames......... Director 9,799
E. Glenn Biggs.......... Director 8,506
W. E. Bradford.......... Director 3,244
Lauro F. Cavazos........ Director 2,071
W. H. Clark............. Director 1,719
William L. Fisher....... Director 8,506
Bob Marbut.............. Director 13,722
Katherine D. Ortega..... Director 3,092(/3/)
Roger R. Hemminghaus.... Chairman, President, and C. E. O. 139,603(/4/)
T. J. Fretthold......... Sr. V.P./Group Executive and General Counsel 40,624
W. R. Klesse............ Executive V.P. 51,512(/5/)
J. Robert Mehall........ Executive V.P. 38,900
A. W. O'Donnell......... President/Marketing and Sr. V.P. 36,480
J. E. Prater............ President/Refining and Sr. V.P. 37,501
All directors and
executive officers
as a group (16
persons)............... 395,810
</TABLE>
--------
(1) Includes shares of restricted stock issued under the Long-Term Incentive
Plans the vesting of which is contingent on the passage of time, continued
service, or performance criteria as follows: B. Charles Ames, 1,570
shares; E. Glenn Biggs, 1,570 shares; W. E. Bradford, 1,469 shares; W. H.
Clark, 518 shares; William L. Fisher, 1,570 shares; R. R. Hemminghaus,
24,510 shares; Bob Marbut, 2,178 shares; Katherine D. Ortega, 756 shares;
T. J. Fretthold, 7,602 shares; W. R. Klesse, 7,527 shares; J. R. Mehall,
7,602 shares; A. W. O'Donnell, 7,612 shares; J. E. Prater, 7,482 shares;
and all directors and executive officers as a group (16 persons), 80,774
shares. See " The Board of Directors and Its Committees--Directors' Fees
and Related Information" and "Compensation of Executive Officers."
(2) Includes shares of Common Stock which may be acquired within 60 days
through the exercise of options granted under the Long-Term Incentive
Plans as follows: R. R. Hemminghaus, 41,737 shares; T. J. Fretthold,
13,594 shares; W. R. Klesse, 14,940 shares; J. R. Mehall, 5,660 shares; A.
W. O'Donnell, 10,860 shares; J. E. Prater, 11,513 shares; and all
directors, and executive officers as a group (16 persons), 110,098 shares.
See "Compensation of Executive Officers."
(3) Includes 500 shares of Common Stock with respect to which Ms. Ortega
shares voting and investment power.
(4) Includes 672 shares of Common Stock with respect to which Mr. Hemminghaus
acts as trustee. Mr. Hemminghaus disclaims beneficial ownership of such
shares.
(5) Includes 372 shares of Common Stock with respect to which Mr. Klesse acts
as trustee. Mr. Klesse disclaims beneficial ownership of such shares.
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PROXY STATEMENT
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The following table contains certain information regarding persons who the
Company has been advised are beneficial owners of 5% or more of the Common
Stock as of the dates indicated in the footnotes to the table.
<TABLE>
<CAPTION>
Amount and Nature
Name and Address of Beneficial
of Beneficial Owner Owner Percent of Class
------------------- ----------------- ----------------
<S> <C> <C>
Forstmann-Leff Associates, Inc. ..... 2,836,860(/1/) 9.8%
55 East 52nd Street
New York, NY 10055
The Equitable Companies Incorporated
.................................... 1,918,100(/2/) 6.6%
787 Seventh Avenue
New York, NY 10019
FMR Corp. ........................... 2,159,204(/3/) 7.3%
82 Devonshire Street
Boston, MA 02109
Diamond Shamrock, Inc. .............. 3,574,691(/4/) 12.4%
Employee Stock Ownership Plans
9830 Colonnade Blvd.
San Antonio, TX 78230.
</TABLE>
--------
(1) According to Schedule 13G filed as of December 31, 1994 with the Securities
and Exchange Commission by Forstmann-Leff Associates, Inc. ("Forstmann-
Leff"), Forstmann-Leff had sole voting power with respect to 1,380,310
shares, sole dispositive power with respect to 2,017,585 shares, and
together with Stamford Advisors Corp. and a subsidiary, FLA Asset
Management, Inc., shared voting power with respect to 352,000 shares and
shared dispositive power with respect to 819,275 shares.
(2) According to Schedule 13G filed as of December 31, 1994 with the Securities
and Exchange Commission by The Equitable Companies Incorporated
("Equitable"), Equitable had sole voting power with respect to 1,893,100
shares and sole dispositive power with respect to 1,918,100 shares.
(3) According to Schedule 13G filed as of December 31, 1994 with the Securities
and Exchange Commission by FMR Corp. ("FMR"), FMR holds sole voting power
with respect to 218,332 shares and sole dispositive power with respect to
all 2,159,204 shares.
(4) Shares are held as of December 31, 1994 by the Trustee, Society National
Bank (successor by merger to Ameritrust Company National Association), for
the benefit of participants in the Employee Stock Ownership Plan adopted in
1987 ("ESOP I") and the 1989 Employee Stock Ownership Plan ("ESOP II")
(collectively, the "ESOPs"). Participants are entitled to direct the voting
of the 1,589,582 shares allocated to their accounts. The plan documents
provide that the unallocated 1,985,109 shares are to be voted
proportionately in the manner in which allocated shares are voted. As of
December 31, 1994, ESOP I and ESOP II held 2,128,534 and 1,446,157 shares,
respectively. See "Compensation of Executive Officers--Retirement and Other
Compensation".
--------------------------------------------------------------------------------
9
<PAGE>
PROXY STATEMENT
--------------------------------------------------------------------------------
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL STOCKHOLDER RETURN
This year the Company has altered the composition of the peer group used to
compare the cumulative total return on the Company's Common Stock from that
used in prior Proxy Statements. Its purpose in making the alterations, which
consist of the addition of three companies and the removal of four others, is
to create a peer group which better reflects the Company's business, risks, and
markets. The criteria applied to determine the members of the New Peer Group
(as defined below) included (i) whether the company in question operates a
refinery, (ii) the company's refining and marketing sales as a percentage of
total company sales, (iii) gasoline and distillate production as a percentage
of total refinery production, and (iv) the company's refining and marketing
assets as a percentage of total company assets. Diamond Shamrock, Inc. has also
been removed from the New Peer Group, to eliminate duplication.
The following graph compares the cumulative total stockholder return on the
Common Stock of the Company with the Standard & Poor's 500 Stock Index, a peer
group (the "Former Peer Group") of 12 industry-related companies (including the
Company), and a peer group (the "New Peer Group") of 11 industry-related
companies for the period January 1, 1990 to December 31, 1994, assuming an
initial investment of $100, and the reinvestment of all dividends.
[GRAPH APPEARS HERE]
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG DIAMOND SHAMROCK, INC., THE S & P 500 INDEX,
NEW PEER GROUP INDEX AND FORMER PEER GROUP INDEX
<CAPTION>
DIAMOND
Measurement period SHAMROCK, NEW PEER FORMER
(Fiscal Year Covered) INC. GROUP PEER GROUP S & P
--------------------- -------- -------- ---------- ------
<S> <C> <C> <C> <C>
Measurement PT -
12/89 100 100 100 100
12/90 79 81 78 97
12/91 81 89 91 126
12/92 79 73 82 136
12/93 107 83 99 150
12/94 117 85 102 152
</TABLE>
--------------------------------------------------------------------------------
10
<PAGE>
PROXY STATEMENT
--------------------------------------------------------------------------------
The Former Peer Group includes the stock of 12 industry-related companies:
Ashland Oil, Inc., Crown Central Petroleum Corporation, Diamond Shamrock, Inc.,
Fina, Inc., Getty Petroleum Corp., Holly Corporation, Quaker State Corporation,
Sun Company, Tesoro Petroleum Corporation, Tosco Corporation, Total Petroleum
(North America) Ltd., and Valero Energy Corporation.
The New Peer Group includes the stock of 11 industry-related companies:
Ashland, Inc., Crown Central Petroleum Corporation, Giant Industries, Inc.,
Holly Corporation, Sun Company, Inc., Tesoro Petroleum Corporation, Tosco
Corporation, Total Petroleum (North America) Ltd., Ultramar Corporation, USX-
Marathon Group, and Valero Energy Corporation.
The returns of each company in the Former Peer Group and the New Peer Group
have been weighted according to the respective company's stock market
capitalization. No return is attributed to Ultramar Corporation for purposes of
the graph of New Peer Group returns until after June 26, 1992. Ultramar
Corporation became a publicly traded company on that date, and, for purposes of
constructing the graph of New Peer Group returns, an initial investment of $100
in Ultramar Corporation is deemed to have occurred on that date.
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The Summary Compensation Table presents the compensation of the Chief Executive
Officer and each of the five most highly compensated executive officers of the
Company in each of the last three fiscal years. The table includes both annual
and certain long-term compensation paid or accrued for any of the covered years
during which the named executive served as an executive officer of the Company.
Footnotes to the table provide a brief explanation of the elements of
compensation and include a brief description of certain of the compensation and
benefit plans pursuant to which such compensation has been paid or accrued.
--------------------------------------------------------------------------------
11
<PAGE>
PROXY STATEMENT
--------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation Awards
------------------------------ --------------------------------
Number of
Other Restricted Securities
Annual Stock Underlying LTIP All Other
Name and Principal Salary Bonus Compensation Awards Options Payouts Compensation
Position Year (1) (2) (3) (4)(5) Granted(#)(6) ($) (7) (8)
------------------ ---- -------- -------- ------------ ---------- ------------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Roger R. Hemminghaus.... 1994 $508,258 $330,000 $4,532 $ 63,030 39,993 $55,000 $79,862
Chairman, President, and 1993 486,838 275,000 0 100,665 79,941 80,675
Chief Executive Officer 1992 464,000 245,000 0 108,369 23,000 82,931
T. J. Fretthold......... 1994 228,419 101,000 757 13,847 11,625 16,500 24,824
Senior Vice
President/Group 1993 217,835 85,000 0 28,179 18,904 24,346
Executive and General
Counsel 1992 207,004 79,900 0 35,849 6,600 27,134
W. R. Klesse............ 1994 228,419 101,000 1,222 13,847 11,454 16,500 35,536
Executive Vice President 1993 217,835 85,000 0 28,179 18,529 25,322
1992 207,004 77,700 0 34,306 6,600 27,417
J. Robert Mehall........ 1994 228,419 101,000 1,956 13,847 11,529 16,500 26,337
Executive Vice President 1993 217,835 85,000 0 28,179 24,001 25,676
1992 207,004 79,000 0 35,866 6,600 28,695
A. W. O'Donnell......... 1994 228,419 101,000 3,065 13,847 11,628 16,500 35,744
President/Marketing and 1993 217,835 90,000 0 28,414 18,686 32,799
Senior Vice President 1992 207,004 82,500 0 35,357 6,600 33,497
J. E. Prater............ 1994 228,419 101,000 2,552 13,847 11,354 16,500 32,887
President/Refining and 1993 217,835 85,000 0 28,179 19,163 29,988
Senior Vice President 1992 207,004 73,800 0 33,451 6,600 30,142
</TABLE>
--------
(1) Includes amounts which have been deferred under the Company's Deferred
Compensation Plan. The Deferred Compensation Plan permits directors and key
employees of the Company to defer the receipt of fees, salaries, and
bonuses. Compensation so deferred may be denominated in dollars or in
shares of Common Stock. Share-denominated accounts are credited with
dividends and dollar-denominated accounts are credited with interest at 1%
below the prime lending rate of specified banks. If the participant elects
to defer compensation until retirement, and such participant's employment
is not terminated prior to retirement, voluntarily or for cause,
appreciation or depreciation on share-denominated accounts or interest on
dollar-denominated accounts will be enhanced by 4% annually. Payments of
deferrals from share-denominated accounts will be made only in cash.
(2) Reflects incentive-based cash bonuses awarded under the Company's
Performance Incentive Plan. Awards 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
Deferred Compensation Plan. See Footnote 1 above.
(3) The Company reimburses its executive officers for federal income tax and
medicare tax relating to certain benefits, including benefits accrued under
the Company's various benefits plans and premiums paid by the Company for
group life insurance in excess of $50,000.00. Perquisites and other
personal benefits
--------------------------------------------------------------------------------
12
<PAGE>
PROXY STATEMENT
--------------------------------------------------------------------------------
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) The shares of restricted stock, the fair market value of which on the date
of grant is reported in the Summary Compensation Table, are subject to
forfeiture and vest four years after the anniversary of the date of grant.
Shares of restricted stock that are conditioned upon the Company meeting
certain performance goals ("performance restricted stock") are not
reflected in this table, but are included in the "Long-Term Incentive
Plans--Awards in Last Fiscal Year" table. 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 and performance restricted stock held by each of
the named executive officers and the fair market value of such shares as of
December 31, 1994, without reducing such market value for restrictions on
transfer or performance vesting requirements, was as follows: R. R.
Hemminghaus, 26,695 shares, $694,497; T. J. Fretthold, 8,252 shares,
$214,684; W. R. Klesse, 8,212 shares, $213,643; J. R. Mehall, 8,302 shares,
$215,985; A. W. O'Donnell, 8,252 shares, $214,684; and J. E. Prater, 8,117
shares, $211,172. Restricted stock reported in the Summary Compensation
Table for 1994 was earned by the named executive officers in 1994, but not
issued until after December 31, 1994, and, therefore, is not included in
the foregoing.
(5) The restricted stock awards shown in this column for 1994 was made in lieu
of additional cash bonus for that year. Restricted stock awards for 1992
and 1993 shown in this column consisted of a combination of restricted
stock awarded in lieu of additional cash bonus and restricted stock awarded
strictly as a long-term incentive.
(6) Options granted in 1992 and 1993 include reload options granted upon
exercise of the associated option. See Footnote (1) to table entitled
"Option Grants in Last Fiscal Year".
(7) Long-term incentive plan payouts included in this column consist of the
dollar value of performance restricted stock granted in 1990 which vested
in 1994 due to the fact that the Company met related performance goals.
That value was established using the closing price of the Company's Common
Stock on the New York Stock Exchange on the last trading day immediately
preceding the day on which the performance restricted stock vested.
(8) Includes various items of compensation paid or accrued under benefit plans
maintained by the Company in which the executive officers participate. Such
amounts consist of the following items:
(a) Above-market interest or preferential dividends accrued on amounts
deferred under the Deferred Compensation Plan. See Footnote 1 above. Such
interest and dividend accruals may be forfeited if the participant's
employment is terminated voluntarily or for cause before retirement.
Amounts accrued under the Plan attributable to above-market interest and
preferential dividends for the individuals named in the table in the last
fiscal year were: R. R. Hemminghaus $10,660, T. J. Fretthold $959, W. R.
Klesse $10,600, A. W. O'Donnell $4,427, and J. E. Prater $4,470.
(b) Annual allocations or accruals in the last fiscal year under ESOP I and
ESOP II and related Excess Benefits Plan for the accounts of the
individuals named in the table were: R. R. Hemminghaus
--------------------------------------------------------------------------------
13
<PAGE>
PROXY STATEMENT
--------------------------------------------------------------------------------
$43,172, T. J. Fretthold $19,402, W. R. Klesse $19,402, J. R. Mehall
$19,402, A. W. O'Donnell $19,402, and J. E. Prater $19,402. For a
description of these plans see "Retirement and Other Compensation"
below.
(c) The executive life insurance program provides that if an executive
officer dies, such officer's beneficiary will receive a lump-sum
amount, after federal income taxes, equal to two and one-half times
such officer's annual salary, excluding bonuses, less the aggregate
amount of the lump sum equivalent of all payments payable upon such
officer's death under other group life insurance plans sponsored by the
Company for employees generally. Premiums paid or accrued in the last
fiscal year by the Company to fulfill its obligations under the
executive life insurance program relating to the named executive
officers were: R. R. Hemminghaus $20,758, T. J. Fretthold $3,326, W. R.
Klesse $4,256, J. R. Mehall $5,396, A. W. O'Donnell $9,886, and J. E.
Prater $7,130.
(d) The supplemental disability income program provides executive officers
an amount equal to 66 2/3% of base compensation less any amount
received by such officer 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: R. R. Hemminghaus $5,272, T. J.
Fretthold $1,137, W. R. Klesse $1,278, J. R. Mehall $1,539, A. W.
O'Donnell $2,029, and J. E. Prater $1,885.
LONG-TERM INCENTIVE PLANS
The Board believes that the Company's long-term incentive plans are important
in attracting, retaining, and rewarding executives and other key employees, and
in encouraging director and employee ownership of the Company's stock. Through
the use of stock options, restricted stock, performance units, and other
awards, such plans are intended to provide incentives to directors and
employees to remain associated with the Company and to maintain and enhance the
Company's long-term performance and return to stockholders. The 1990 Plan and
the 1987 Plan are substantially similar except as described below. No new
grants have been made under the 1987 Plan since 1992.
The Long-Term Incentive Plans are administered by the Compensation Committee,
none of the members of which is an employee of the Company. The Compensation
Committee is authorized to grant stock options, stock appreciation rights
("SARs"), restricted stock awards, performance awards, and security awards to
the officers and salaried employees of the Company and its majority-owned
subsidiaries. The Long-Term Incentive Plans also provide for the grant of
restricted stock awards to non-employee directors as described above in
"Directors' Fees and Related Information." As of March 1, 1995, 265 employees
participated in the Long-Term Incentive Plans. Apart from restricted stock
awards, non-employee directors are not eligible to receive awards from the
Long-Term Incentive Plans.
The exercise price of options to purchase Common Stock granted under the Long-
Term Incentive Plans is determined by reference to (i) the closing sale price
per share of the Common Stock as reported in the New York Stock Exchange
Composite Transactions Report for the trading day immediately preceding the
date of grant or (ii) the average closing sale price per share of the Common
Stock as so reported for a period of not less than 10 nor greater than 60 days,
as determined by the Compensation Committee in its sole discretion,
--------------------------------------------------------------------------------
14
<PAGE>
PROXY STATEMENT
--------------------------------------------------------------------------------
provided that such period shall not commence on a date more than 60 days prior
to the date of grant nor end on a date more than 60 days after the date of
grant.
Options granted under the Long-Term Incentive Plans may include both incentive
stock options intended to qualify for special treatment under certain
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), and
non-qualified options. The exercise price of incentive stock options, and of
non-qualified options granted under the 1987 Plan, may not be less than 100% of
the fair market value of the shares covered thereby. The exercise price of any
non-qualified options granted under the 1990 Plan may be equal to or less than
the fair market value of the shares of Common Stock covered thereby, but not
less than 50% of the fair market value of such shares.
Options must be exercised within a period established as of the date of grant
(which may not exceed 10 years and one day), although options may expire
earlier because of termination of employment, retirement, permanent disability
or death of the optionee. Shares of Common Stock subject to options granted
under the 1987 Plan which expire unexercised or which are otherwise surrendered
or canceled become available for future issuance under such plans, provided
that the forfeiting participant received no benefit of ownership from the
forfeited shares.
Options or rights granted pursuant to the Long-Term Incentive Plans become
exercisable at such times and in such amounts as are determined by the
Compensation Committee at the time of grant. Under such plans, the Compensation
Committee may specify in the instrument granting such options or rights events
which accelerate the dates upon which such options and rights would otherwise
become exercisable.
The options become exercisable in three annual installments on the anniversary
date of grant of 40%, 30%, and 30%, respectively. Options held by certain
employees, including certain of the options held by executive officers, become
exercisable to the extent of 100% of the shares of Common Stock covered thereby
upon a "change in control" as defined in such option agreements.
Most options outstanding under the Long-Term Incentive Plans granted prior to
1994 have reload rights. A reload option is granted when previously-owned
shares are used to exercise an option and is granted for a number of shares
equal to the number of shares tendered to pay the exercise price of the related
option. The reload option becomes exercisable on the second anniversary after
the date of grant and expires no later than the date on which the underlying
option in respect of which the reload option was granted would have expired or
terminated. A reload option is forfeited if within the two years following the
date of grant the shares acquired upon exercise of the underlying options are
sold. Reload options are issued without related reload rights. The reload
option price is the closing price of the Common Stock on the trading day prior
to the exercise date of the underlying option.
The Long-Term Incentive Plans also authorize the Compensation Committee to
grant performance units, which are rights to receive a predetermined amount,
payable in cash or shares of Common Stock, on such terms and subject to such
conditions as may be determined by the Compensation Committee in its
discretion. The Compensation Committee may also make awards of restricted
stock, junior stock, convertible debentures, or discounted stock, as well as
other types of awards that utilize corporate securities. Such awards of
securities
--------------------------------------------------------------------------------
15
<PAGE>
PROXY STATEMENT
--------------------------------------------------------------------------------
may be absolute or contingent upon various factors, may provide for payment by
the recipient of amounts that are less than the fair market value of securities
or for no consideration, and may provide for repurchase of such securities by
the Company in specified circumstances. Awards may be payable over a specified
period, and may be vested in whole or in part on the date of grant thereof, as
determined from time to time by the Compensation Committee in its discretion.
STOCK OPTIONS
The tables below set forth information regarding stock options, including
options granted upon exercise of reload rights, granted to and exercised by the
named executive officers in the last fiscal year, and the value of unexercised
options and related rights held by such executive officers at the end of the
fiscal year.
--------------------------------------------------------------------------------
16
<PAGE>
PROXY STATEMENT
--------------------------------------------------------------------------------
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants Grant Date Value
----------------------------------------------------------- --------------------
Number of
Securities Percent of Total
Underlying Options Granted
Options to Employees in Exercise or Base Expiration Grant Date
Name Granted (#)(1) Fiscal Year Price ($/Sh)(2) Date Present Value ($)(3)
---- -------------- ---------------- ---------------- ---------- --------------------
<S> <C> <C> <C> <C> <C>
Roger R. Hemminghaus.... 23,000 9.26% $27.750 1/31/04 $224,664
7,283 2.93 29.375 2/01/03 72,097
5,270 2.12 27.250 5/06/01 47,965
4,440 1.79 27.250 5/04/02 42,830
T. J. Fretthold......... 6,600 2.66 27.750 1/31/04 64,469
2,090 0.84 29.375 2/01/03 20,690
1,593 0.64 25.875 5/06/01 13,767
1,342 0.54 25.875 5/04/02 12,292
W. R. Klesse............ 6,600 2.66 27.750 1/31/04 64,469
2,117 0.85 29.000 2/01/03 20,689
1,486 0.60 27.750 5/06/01 13,773
1,251 0.50 27.750 5/04/02 12,289
J. Robert Mehall........ 6,600 2.66 27.750 1/31/04 64,469
2,192 0.88 28.000 2/01/03 20,684
1,486 0.60 27.750 5/06/01 13,773
1,251 0.50 27.750 5/04/02 12,289
A. W. O'Donnell......... 6,600 2.66 27.750 1/31/04 64,469
2,090 0.84 29.375 2/01/03 20,690
1,432 0.58 24.250 5/04/02 12,293
1,506 0.61 27.375 5/06/01 13,770
J. E. Prater............ 6,600 2.66 27.750 1/31/04 64,469
2,090 0.84 29.375 2/01/03 20,690
1,446 0.58 28.500 5/06/01 13,764
1,218 0.49 28.500 5/04/02 12,288
</TABLE>
--------
(1) Options were granted under the 1990 Plan by the Compensation Committee on
January 31, 1994 with an exercise price of $27.75 per share. All other
option grants listed in the Table are reload options granted upon exercise
of reload rights relating to already existing options. The options granted
in 1994 did not include reload rights.
(2) The exercise price for options reported in the table was determined by
reference to the closing sales price per share of the Common Stock on the
trading day prior to the date of grant.
--------------------------------------------------------------------------------
17
<PAGE>
PROXY STATEMENT
--------------------------------------------------------------------------------
(3) The amounts shown in this column represent a calculation of the value of
the options on the date of grant using the Black-Scholes model option
pricing formula. This is a mathematical formula often used to value
exchange traded options. The calculation requires that assumptions be made
with respect to a number of factors to estimate the option's value. For
purposes of the Black-Scholes calculation, assumptions have been made as to
the annualized volatility of the stock's rate of return and the annual
dividend yield on the stock. The volatility and dividend yield assumptions
are based upon the actual experience in Diamond Shamrock's stock price
change and dividends paid during the 3-year period leading up to the option
grant date, measured month by month. For regular options with 10 year
terms, the assumptions are .2772 and 2.49% for the annualized volatility
and annual dividend yield, respectively. For reload options with terms less
than 10 years, the assumptions range from .2738 to .2772 for annualized
volatility, and from 2.45% to 2.49% for the annual dividend yield. The
risk-free rate of interest assumed for purposes of calculating each
option's value was the yield on the U.S. Treasury STRIPS obligation whose
term corresponded most closely to the term of the option on the date of
grant. This created an assumed risk-free rate of interest for options with
10 year terms of 5.9%. The risk-free rate of interest for reload options
with terms less than 10 years range from 7.06% to 5.74%. The term of the
option, measured from the date of grant, has been used to calculate each
option's value shown in this column. The calculation fails to take into
account the fact that unlike exchange traded options, employee stock
options may not be transferred and are subject to certain vesting
requirements. Accordingly, it is possible that the Black-Scholes model
overstates the value of options awarded by the Company pursuant to the Long
Term Incentive Plans. The ultimate value of a stock option will depend on
the market value of the Company's stock at a future date.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES(1)
<TABLE>
<CAPTION>
Value of Unexercised
Shares Number of Securities In-The-Money
Acquired Underlying Unexercised Options
on Value Options at 12/31/94 at Fiscal Year End ($)
Name Exercise Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
---- -------- ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Roger R. Hemminghaus.... 24,564 $213,736 24,464/116,070 $15,681/$263,021
T. J. Fretthold......... 7,048 55,880 8,637/ 29,421 6,195/ 73,195
W. R. Klesse............ 7,048 62,147 9,983/ 28,875 7,071/ 63,022
J. Robert Mehall........ 7,048 59,059 703/ 34,422 2,648/ 72,258
A. W. O'Donnell......... 7,048 55,633 5,903/ 29,206 4,818/ 71,676
J. E. Prater............ 7,048 66,275 6,556/ 29,409 2,563/ 69,148
</TABLE>
--------
(1) No SARs were held in tandem with options by the named executive officers at
December 31, 1994.
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18
<PAGE>
PROXY STATEMENT
--------------------------------------------------------------------------------
LONG-TERM INCENTIVE AWARDS
Performance Units have been granted to executive officers and other key
employees under the Long-Term Incentive Plans. The following table sets forth
information regarding Performance Units granted in the last fiscal year by the
Company to the named executive officers.
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Estimated Future
Payouts(2)
Performance or(1) --------------------------
Other Period Target
Nunber of until Maturation Threshold ($ or Maximum
Name Units (#) or Payout ($ or #) #) ($ or #)
---- --------- ----------------- --------- ------- --------
<S> <C> <C> <C> <C> <C>
Roger R. Hemminghaus.... 95,000 12/31/96 $38,000 $95,000 $190,000
95,000 12/31/96 28,500 95,000 190,000
T. J. Fretthold......... 27,500 12/31/96 11,000 27,500 55,000
27,500 12/31/96 8,250 27,500 55,000
W. R. Klesse............ 27,500 12/31/96 11,000 27,500 55,000
27,500 12/31/96 8,250 27,500 55,000
J. R. Mehall............ 27,500 12/31/96 11,000 27,500 55,000
27,500 12/31/96 8,250 27,500 55,000
A. W. O'Donnell......... 27,500 12/31/96 11,000 27,500 55,000
27,500 12/31/96 8,250 27,500 55,000
J. E. Prater............ 27,500 12/31/96 11,000 27,500 55,000
27,500 12/31/96 8,250 27,500 55,000
</TABLE>
--------
(1) Payout of one-half of the Performance Units awarded in 1994 is based upon
attaining a specified level of return to Company shareholders relative to
the average return to shareholders of the New Peer Group over the three-
year period beginning January 1, 1994 and ending December 31, 1996. Payout
of the other half of the Performance Units awarded in 1994 is based upon
the Company's reaching certain goals for improving the Company's
"controllable earnings per share" over the same period. Controllable
earnings per share is a measure of the Company's earnings performance after
adjusting for certain factors that affect earnings but that are beyond the
control of the Company and its employees, e.g. crude oil price
fluctuations, refining margin fluctuations, and retail margin fluctuations.
(2) The target payout of all of the Performance Units awarded in 1994 is $1.00.
Performance Units with payout based on return to Company shareholders could
be worth as little as $.40 each (the lowest possible payout) and
Performance Units awarded with payout based on controllable earnings per
share could be worth as little as $.30 each (the lowest possible payout).
All Performance Units could be worth as much as $2.00 each, (the highest
possible payout), depending upon the level of Company shareholder return
and controllable earnings per share for the three years ended December 31,
1996. Payouts on Performance Units awarded in 1994 will be made in a
combination of the Company's common stock and cash. One third of the payout
will consist of common stock valued at the common stock's closing price on
the New York Stock Exchange on December 31, 1996. The balance of the payout
will be in cash.
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19
<PAGE>
PROXY STATEMENT
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COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board approves all compensation programs
affecting the executive officers. This Committee Report discusses the
components of the executive compensation program and describes the basis on
which the Committee made compensation decisions in 1994 with regard to the
Chief Executive Officer.
Philosophy and Overall Objectives
The Compensation Committee believes that executive compensation should be
linked to corporate performance and stockholder value. In making executive
compensation decisions, the Compensation Committee considers five specific
issues. The objective of the Committee is to address these issues in a manner
that will provide appropriate rewards and future incentives to the executive
officers to enhance long-term value while being responsive to other stockholder
interests.
These issues are:
1. How does the executive compensation program compare to compensation
practices of companies with which the Company competes in attracting
executives, and does the program include an appropriate risk/reward
relationship?
2. How sensitive is the program to corporate financial and stock market
performance?
3. Are executive officers building a significant ownership stake in the
Company?
4. Do equity incentive components operate as intended without resulting in
excessive dilution of stockholders equity?
5. Is the Company's overall program consistent with the Company's stated
strategic and compensation objectives and clearly communicated to
participants?
Executive Compensation Program Components
The executive compensation program consists of base salary and benefits, annual
performance-driven incentives, and long-term incentives. In making its
compensation decisions, the Committee utilizes surveys prepared by several
nationally recognized independent compensation consulting organizations. The
groups of companies (the "Survey Groups") analyzed by these consulting
organizations consist of companies which are comparable in size to the Company
and/or which have significant refining and marketing operations. Data from
companies in the New Peer Group is included in survey samples when available.
Compensation data from all of the companies included in the New Peer Group is
not available to the consulting organizations employed by the Company, and the
Compensation Committee has concluded that the best information with respect to
relevant compensation practices can be gained by reviewing data from a broader
spectrum of companies than those included in the New Peer Group. The Survey
Groups range in size from 12 to 120 companies. Each of the key elements of the
executive compensation program is discussed below:
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Base Salary - Base salary and benefit levels for the executive officers are
reviewed each year by the Compensation Committee. When determining base
salary levels, the Committee examines data from the Survey Groups
reflecting the compensation and benefits of executives who hold positions
of similar overall responsibility. Adjustments are based on general
movement in external salary levels, individual performance, potential, and
changes in duties and responsibilities.
The Compensation Committee targets the median of the relevant Survey Group
when reviewing base salaries and benefits. Use of median data will
generally result in a base salary target that is less than the average base
salary of the relevant Survey Group. This result, however, is in keeping
with the Committee's philosophy that the non-variable portion of an
executive officer's pay should be relatively modest. The Committee believes
that the executive officer's opportunity to surpass the median compensation
level paid by the relevant Survey Group should only arise from performance-
driven variable plans. The similarity in level of base salaries of the five
executive officers other than the Chief Executive Officer shown in the
Summary Compensation Table is primarily attributable to the fact that a
team approach is used in the management of the Company. Acting in concert
with the Chief Executive Officer, these five executive officers comprise
the Company's Executive Committee and are jointly responsible for the
overall management of the Company under the direction of the Board.
Annual Incentive Compensation - Participation in the Performance Incentive
Plan is limited to those people that play key roles in carrying out the
Company's annual operating plans, modified to some extent by competitive
practice. The executive officers are eligible for annual incentive payments
under the Plan. Each executive officer's award is based 50% on the
attainment of certain key pre-determined corporate financial objectives,
including earnings, cash flow, and stock performance relative to the New
Peer Group. Each of these criterias are weighted equally and all three
targets were exceeded in 1994. The other 50% is based on operating
objectives and other performance goals which are developed for the
executive officers. Because of the team approach which is being used in the
management of the Company, the executive officers' performance as a group
with respect such operating objectives and performance goals is evaluated
by the Compensation Committee, resulting in similarity in the executive
officers incentive compensation. The actual awards are further subject to
the Compensation Committee's discretion in that, within Plan parameters,
the Committee may take into consideration significant events which took
place during the course of the year which were not considered at the time
goals were established.
The Plan is designed to deliver competitive levels of pay at or slightly
above the median of the relevant Survey Group to executive officers when
they achieve annual goals which the Compensation Committee deems critical
to building long-term value. Targeted award levels among the executive
officers range from 30% to 60% of base salary. These levels are believed to
be consistent with typical target levels at other companies of similar
size. To the extent that the annual goals are not fully achieved or are
exceeded, the award will be adjusted based upon a formula resulting in a
payout ranging from 0% to 150% of targeted award levels. All awards are
paid in a combination of cash and restricted stock, with restricted stock
ranging from 12% to 33% of the total award. The portion of the award which
is paid in restricted stock is based on grade levels. In 1994, the value of
the restricted stock portion of the awards was equal to 25.1% of the amount
of the awards paid in cash, based on the closing market price of the Common
Stock on the day the restricted stock was granted.
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Long-Term Incentive - The Long-Term Incentive Plan authorizes the
Compensation Committee to provide various types of grants (e.g. restricted
stock, performance units, stock options) to the executive officers and
other eligible employees. The terms of the grants are designed to encourage
the executive officers to focus on the Company's long-term profitability
and to encourage each executive officer to build a significant level of
stock ownership over time. Target grant levels were established in 1994
based on competitive practices midway between the median and the third
quartile of the relevant Survey Group.
The payment of compensation to executive officers and other employees in
the form of restricted stock and stock options through the Long-Term
Incentive Plans, including the payment of a portion of the annual incentive
bonus in the form of restricted stock, and other benefit programs that are
stock based, such as the ESOPs and Employee Stock Purchase Loan Program, is
intended to encourage executive officers and other employees to build
significant stock ownership over a period of time. The Compensation
Committee believes that such ownership of Common Stock by the executive
officers integrates compensation with the stockholders' long-term interests
in realizing stock price appreciation.
The issuance of performance units to the executive officers and other
employees through the Long-Term Incentive Plans is intended to encourage
the executive officers and other employees to focus on the Company's
performance over a longer time period than that covered by the Performance
Incentive Plan. The Compensation Committee believes that the issuance of
performance units to Company employees serves to further align the
interests of those employees with those of long-term investors in the
Company.
In summary, the Compensation Committee believes the Company's executive
compensation package is competitive relative to the Company's peers, while
emphasizing pay vehicles which place a significant portion of the executive
officer's pay at risk. Both the annual and long-term incentive plans are
sensitive to operational, financial, and market performance and encourage
increasing levels of executive stock ownership without undue dilution.
The Compensation Committee considers the net cost to the Company in making all
compensation decisions. However, the Compensation Committee does not have a
policy that requires the executive officers' compensation to qualify for
deductibility under Section 162(m) of the Code.
1994 Compensation of Chairman of the Board, President, and Chief Executive
Officer
After consideration of survey data, and review of financial and operating
results of the Company, the Compensation Committee made the following decisions
regarding Mr. Hemminghaus' compensation during 1994:
. Base salary was increased by 4.23%. The average 1994 base salary
increase among all of the Company's salaried employees was 4.25%.
. Annual incentives earned for 1994 performance, including 2,640 shares of
restricted stock paid as part of such award, were equal to 77.3% of base
salary if the restricted stock is valued at the closing price of the
Common Stock on the day the restricted stock was granted. The targeted
award level was 60% of base salary.
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. 190,000 performance units and 23,000 stock options were awarded to Mr.
Hemminghaus as long-term incentives in 1994. The projected value of Mr.
Hemminghaus' long-term incentives were increased by 57% over 1993 levels
to bring the total value of Mr. Hemminghaus' long-term incentive award
for 1994 to a point midway between the median and third quartile of the
relevant Survey Group.
The Compensation Committee believes that Mr. Hemminghaus' base salary is
conservative for the Chairman of the Board, President, and Chief Executive
Officer for a corporation of the Company's size and complexity, being at or
below median levels for the relevant Survey Group. The Committee prefers to
maintain this position and emphasize those compensation elements which are most
sensitive to Company performance. Accordingly, Mr. Hemminghaus received annual
incentives slightly greater than target levels due primarily to significant
improvement in both reported and underlying earnings over 1993 levels,
completion of a 1.2 million barrel crude oil terminal at Corpus Christi, Texas
and of a related 120,000 barrel per day crude oil pipeline from Corpus Christi
to the Three Rivers Refinery, completion of a 32,000 barrel per day products
pipeline from the McKee Refinery to Colorado Springs, Colorado and of a related
products terminal in Colorado Springs, and the acquisition or construction of
43 new retail units during 1994. In the view of the Committee, Mr. Hemminghaus'
accomplishments with respect to each of these items plus his involvement with
many other projects and programs not mentioned above will contribute
significantly to long-term value.
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
E. Glenn Biggs, Chairman
W. E. Bradford
W. H. Clark
Bob Marbut
Katherine D. Ortega
RETIREMENT AND OTHER COMPENSATION
Retirement Program. The executive retirement program of the Company consists of
several plans, including a Retirement Income Plan, an Excess Benefits Plan, and
a Supplemental Executive Retirement Plan. Each of such plans is described in
more detail below. Subject to certain vesting requirements, the Supplemental
Executive Retirement Plan provides a participant with an aggregate benefit
equal to 60% of the average of the highest compensation received by such
participant over any three years during the last ten years of employment with
the Company, offset by any benefits the participant receives under the
Retirement Income Plan, the Excess Benefits Plan, and certain benefits paid by
previous employers. The Pension Table 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.
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PENSION TABLE
<TABLE>
<CAPTION>
Estimated Annual Combined Benefits Credited
for Years of Service Indicated ($)(2)
--------------------------------------------
Earnings Credited ($)(1) 15 20 25 30 35
------------------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 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
</TABLE>
--------
(1) Earnings credited include salary and bonus paid within a calendar year. At
December 31, 1994, the average of the highest compensation received by each
of the executive officers named in the Summary Compensation Table over any
three years during the last ten years of employment with the Company and
their credited years of service were R. R. Hemminghaus, $858,446, 11 years;
T. J. Fretthold, $328,803, 18 years; W. R. Klesse, $326,830, 26 years; J.
Robert Mehall, $333,043, 22 years; A. W. O'Donnell, $329,309, 9 years; and
J. E. Prater, $322,169, 33 years.
(2) Amounts shown in the Pension 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.
Retirement Income Plan. Pursuant to the Retirement Income Plan, eligible
employees, including executive officers, acquire a right upon retirement to a
yearly amount equal to 2% of the employee's career average earnings from
February 1, 1987 through May 31, 1989 without offset for social security
benefits. After the formation of ESOP II, the Retirement Income Plan benefit
was reduced from 2% to 1% of the employee's career average earnings from June
1, 1989 forward, plus, for certain employees, a potential adjustment based upon
the future performance of ESOP II. Benefits under the Retirement Income Plan
become vested after five years of service.
Supplemental Executive Retirement Plan. The Supplemental Executive Retirement
Plan provides additional benefits to eligible employees, including the
executive officers. 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 10 years of
employment with the Company. A reduction is made to eliminate benefits payable
under the Company's Retirement Income Plan and Excess Benefits Plan and under
any defined benefit plan of previous employers. In addition, benefits payable
under the Supplemental
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Executive Retirement Plan will be reduced ten percent per year for each year
less than ten that the participant is in the plan. At December 31, 1994, the
executive officers named in the Summary Compensation Table were credited with
the following years of participation in the plan: R. R. Hemminghaus, 10.6
years; T. J. Fretthold, 10.6 years; W. R. Klesse, 7.6 years, J. Robert Mehall,
7.6 years; A. W. O'Donnell, 7.6 years; and J. E. Prater, 7.6 years. The Board
has approved a trust arrangement pursuant to which benefits under the
Supplemental Executive Retirement Plan may be secured, subject to claims of
general creditors of the Company. For the year ended December 31, 1994, a total
of $672,468 was placed in such trust to fund vested benefits under the plan.
Excess Benefits Plan. The Excess Benefits Plan provides non-qualified benefits
in place of reductions of qualified benefits resulting from various statutory
limitations imposed by the Internal Revenue Code and the deferral of
compensation through the Deferred Compensation Plan. For the year ended
December 31, 1994, the Company expensed $285,000 under the Excess Benefits Plan
for eligible employees, including the executive officers. The Board has
approved a trust arrangement pursuant to which benefits under the Excess
Benefits Plan may be secured, subject to claims of general creditors of the
Company. At December 31, 1994 funds had not been placed in such trust for such
purpose.
Employee Stock Ownership Plans. The Company maintains two employee stock
ownership plans, ESOP I and ESOP II. The Company has made loans to the ESOPs
totaling $65.8 million, which the ESOPs used to buy 3,519,164 shares of Common
Stock, and the Company has contributed a total of 321,994 treasury shares of
Common Stock to ESOP I as part of the Company's Success Sharing and special
award programs. Annually, as the Company's loans to the ESOPs are repaid, the
shares are allocated to the accounts of participants.
All employees of the Company who have attained a minimum length of service and
satisfied other plan requirements are eligible to participate in the ESOPs,
except that ESOP II excludes employees covered by any collective bargaining
agreement. At December 31, 1994, there were 3,946 participants in ESOP I and
3,611 participants in ESOP II. Participants obtain vested interests in the
ESOPs after five years of service, giving effect to service with the Company's
predecessors. Participants are entitled to direct the voting of the shares held
in their ESOP accounts. Unallocated shares are voted proportionately in the
manner in which allocated shares are voted.
Shares are allocated to the participants' accounts in the ratio that each
participant's salary and bonus for the plan year bears to the total eligible
compensation of all participants for the plan year, subject to a maximum
eligibility limitation in 1994 of $150,000 imposed by the Internal Revenue
Code. However, the Company has established non-qualified excess benefits plan
for the ESOPs to provide like benefits for the executive officers and other
employees in place of reductions resulting from such compensation cap. See
Footnote 8(b) to "Compensation of Executive Officers--Summary Compensation
Table".
Success Sharing Program. The Success Sharing Program was initiated in 1993 and
is available to all Company employees who satisfy ESOP I eligibility
requirements. Under the Success Sharing Program, for each $.50 per share of
Common Stock earned by the Company during a fiscal year in excess of the amount
necessary to fund regular dividend payments on the Common Stock, an eligible
employee will receive an allocation of
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additional shares Common Stock to the employee's ESOP I account equal to one-
fourth of a share for each $1,000 in salary and bonus the employee earned
during the year.
EMPLOYEE STOCK PURCHASE LOAN PROGRAM
The Employee Stock Purchase Loan Program encourages Common Stock purchases by
key employees. Under the Program, executive officers may borrow the lesser of
$300,000 or 100% of their annual base salary to buy Common Stock on the open
market. Interest on loans is charged at the applicable federal rate for short-
term loans (compounded annually) (the "AFR"), in effect on the date the funds
are borrowed. The interest rate is adjusted annually during the term of the
loan to the lesser of the AFR as of the date of such adjustment, the initial
AFR, or the weighted average initial AFR rate for all loans outstanding. As of
March 1, 1995 rates of interest on loans to executive officers ranged from
3.81% to 7.19% with the AFR being 7.43%. Interest is payable annually and
principal is repayable in five annual installments of 20% commencing on the
fifth anniversary of the borrowing. The Board has fixed $3 million as the
maximum amount to be outstanding under the Stock Loan Program. As of March 1,
1995, 32 employees participated in the Program. The highest amounts outstanding
at any time during the last fiscal year under the Program and the amount
outstanding on March 1, 1995 on loans to the executive officers named in the
Summary Compensation Table were: R. R. Hemminghaus $217,425 and $188,838,
respectively; T. J. Fretthold $50,500 and $39,500, respectively; W. R. Klesse
$190,300 and $137,400, respectively; J. R. Mehall $188,150 and $218,140,
respectively; A. W. O'Donnell $45,350 and $33,900, respectively; and J. E.
Prater $76,363 and $66,108, respectively. In addition, R. C. Becker, Vice
President and Treasurer, participated in the Employee Stock Loan Program during
the last fiscal year. The highest amount outstanding on Mr. Becker's loan
during the last fiscal year and the amount outstanding at March 1, 1995 were
$69,750 and $67,378, respectively.
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
The Company has entered into an employment agreement with each of its executive
officers. Such agreements provide for the continued employment of each
executive officer for a period of three years (or, if earlier, until age 65)
after the occurrence of a change in control. For this purpose, a "change in
control" of the Company occurs when (i) 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 Securities Exchange Act of 1934, as amended (the
"Exchange Act"), disclosing that any person has become the beneficial owner of
securities representing more than 25% of the combined voting power of the then-
outstanding voting securities of the Company, and such acquisition has not been
authorized, approved or recommended by majority vote of the Board prior to the
date of the filing of such report; or (ii) such other event occurs as the Board
may, in its sole discretion, by majority vote determine to constitute a change
in control of the Company. The agreements had an initial term of five years and
are automatically extended for an additional year on each anniversary date
unless either the Company or the executive officer gives written notice of the
non-extension prior to an anniversary date. The agreement automatically
terminates if, prior to a change in control, the executive officer ceases to be
an employee of the Company.
Under these agreements, an executive officer who is terminated without cause or
who terminates his employment under certain circumstances, is entitled to
receive separation pay in an amount equal to the
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PROXY STATEMENT
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discounted present value of all cash compensation that the executive officer
would have received for the remainder of the employment period (based upon his
then-current salary, and the highest incentive payment that he received within
the three years prior to the change in control), as well as the continuation of
certain employee welfare benefits for the remainder of such period. The
agreements also provide that the executive officer will receive an additional
amount which will be sufficient (on an after-tax basis) to pay all excise taxes
that may be applicable to amounts deemed to be paid by reason of the change in
control. In addition, the executive officers are entitled to reimbursement from
the Company for the costs and expenses incurred by them in enforcing the
agreements.
Pursuant to the Company's Long-Term Incentive Plans, if termination of
employment of an executive officer results other than for cause following a
change in control, then 100% of the restricted stock awards and performance
restricted stock awards made in 1990 and in following years, and which have not
been forfeited prior to such termination, immediately vest and become
nonforfeitable. In addition, stock options granted to the executive officers
under these Long-Term Incentive Plans become exercisable immediately in the
event of a "change in control."
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the
Securities and Exchange Commission, and the New York Stock Exchange, Inc.
initial reports of ownership and reports of changes in ownership of Common
Stock and other equity securities of the Company. Executive officers,
directors, and greater than ten percent shareholders are required by regulation
to furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of Section
16(a) forms furnished to the Company during the fiscal year ended December 31,
1994 and written representations of all the directors and executive officers to
the effect that no other reports were required with respect to the fiscal year
ended December 31, 1994, none of the Company's directors, executive officers,
and greater than ten percent beneficial owners failed to file on a timely basis
the reports required by Section 16(a).
APPROVAL OF AMENDMENTS TO THE 1990 PLAN
(ITEM 2 ON THE PROXY)
General. At the Annual meeting of Shareholders held May 1, 1990, the 1990 Plan
was approved by shareholders. The purpose of the 1990 Plan is to promote the
long-term success of the Company and increase shareholder value by providing
officers and other salaried employees of the Company, its subsidiaries, and
affiliates, with incentive awards that reward performance and continued service
with the Company. In addition, the 1990 Plan operates to encourage such
employees and Company directors to become stockholders of the Company.
Additionally, the Company believes the 1990 Plan will assist in attracting and
retaining employees of the highest caliber.
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To further the objectives of the 1990 Plan, and in view of tax legislation
which imposes certain limits on the Company's ability to deduct executive
compensation, in February 1995 the Board voted to amend the 1990 Plan in
certain respects, subject to approval by the Company's stockholders. These
amendments include the authorization of 1,000,000 additional shares of Common
Stock to be issued under the 1990 Plan, the authorization of grants of stock
options to non-employee directors, and certain other amendments made primarily
in response to regulatory changes promulgated under the Code and the Exchange
Act described below. The following is a summary of the amendments to the 1990
Plan and is qualified by reference to the full text of such amended and
restated 1990 Plan which is set forth as Appendix A to this Proxy Statement.
See "Long-Term Incentive Plans" for additional information concerning
compensation and benefit plans of the Company, including the 1990 Plan, as
currently in effect.
Increase in Authorized Shares.
In order that the 1990 Plan contains sufficient shares to provide the intended
incentives, the Board adopted an amendment authorizing an additional 1,000,000
shares of Common Stock to be issued under the 1990 Plan. The 1990 Plan
initially had 1,000,000 shares of Common Stock authorized for issuance. In
1992, the stockholders approved an amendment authorizing an addition 1,500,000
shares to be issued under the 1990 Plan. As of February 7, 1995, 665,457 shares
remained available for grant pursuant to the 1990 Plan. Accordingly, the Board
believes it is advisable to increase the number of shares available for grant
under the 1990 Plan at this time.
Grant of Stock Options to Directors.
The proposed amendments provide for the annual grant of stock options to non-
employee directors. Each non-employee director would receive an option to
purchase 1,500 shares of Common Stock annually at the close of business on the
first Tuesday in May. Except in certain situations described below, 100% of the
option would become exercisable three years from the date it is granted. The
option would expire ten years from the date it is granted. If service on the
Company's Board terminates, other than as described below, an outstanding
option would be exercisable only to the extent it was exercisable on the date
of such termination and would expire three years after such termination, or on
its stated expiration date, whichever occurs first.
If any of the following events occurs before the option expires, the option
would become immediately and fully exercisable:
(i) death of the optionee;
(ii) resignation or removal of the optionee as a director of the Company
because of a physical or mental impairment which prevents the optionee
from performing the duties of a director for a period of six months or
more;
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(iii) optionee retires as a director of the Company and is eligible to
participate in the Diamond Shamrock, Inc. Retirement Plan for
Directors; or,
(iv) a "change in control" of the Company. For this purpose, a "change in
control" will be deemed to have occurred when a report is filed on
Schedule 13D or Schedule 14D-1 (or any successor schedule, form or
report), each as promulgated pursuant to the Exchange Act, disclosing
that any person (as the term "person" is used in Section 13(d)(3) or
Section 14(d)(2) of 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 more than 25% of the combined voting power of
the then-outstanding voting securities of the Company.
The exercise price of any option granted to a non-employee director shall be
equal to the closing price of the Common Stock as reported in the New York
Stock Exchange Composite Transactions Report.
An option could be exercised by a non-employee director only upon payment to
the Company in full of the option price of the Common Stock to be delivered.
Payment could be made in cash or in Common Stock previously owned by the
optionee for more than six months, or in any combination of cash and such
Common Stock.
Other Amendments.
The 1990 Plan was further amended by the Board partly in response to tax
legislation which imposes limits on the Company's ability to deduct executive
compensation and with regulations issued pursuant to the Exchange Act. These
amendments are discussed in greater detail below.
Limitations on Awards. The number of shares of Common Stock issued or
transferred as restricted shares that become non-forfeitable contingent solely
upon the participant attaining a certain length of service with the Company
shall not in the aggregate exceed 314,000 shares, subject to adjustment as
provided in the 1990 Plan.
No participant shall be granted under the 1990 Plan in any fiscal year:
(i) options and SARs, in the aggregate, for more than 200,000 shares of
Common Stock;
(ii) performance awards and securities awards, in the aggregate, for more
than 200,000 shares of Common Stock; and
(iii) performance awards, in the aggregate, for more than $1,000,000,
subject to adjustment as provided in the 1990 Plan.
The establishment of such limitations is responsive to the regulations
concerning the tax deductability of executive compensation discussed above.
Subject to these limitations, the Compensation Committee has discretion to
grant awards to executive officers. These special tax deduction rules also
require that the plan must be approved by stockholders. Approval of the amended
1990 Plan shall be deemed the equivalent of approval of the 1990 Plan. If the
requisite approval is not obtained, no additional awards will be made under the
1990 Plan.
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Shares Available For Grant. Upon payment in cash of any award granted under the
1990 Plan, any shares of Common Stock that related to that grant, shall again
be available for issuance or transfer. Upon the full or partial payment of the
price of any option, SAR, or other award (collectively, a "Right"), by the
transfer to the Company of shares of Common Stock, or upon satisfaction of tax
withholding obligations in connection with any such exercise by the transfer or
relinquishment of shares of Common Stock, or any other payment made or benefit
realized under the 1990 Plan by the transfer or relinquishment of shares of
Common Stock, there shall be deemed to have been issued or transferred under
the 1990 Plan only the net number of shares of Common Stock actually issued or
transferred by the Company determined by subtracting the number of shares of
Common Stock so transferred or relinquished.
Performance Criteria. When so determined by the Compensation Committee, Rights
will be subject to such financial or non-financial performance or other
criteria as may be adopted from time-to-time by the Committee in its
discretion. The performance criteria ("Performance Criteria") applicable to any
award to a participant who is, or is determined by the Committee, to be likely
to become, a "covered employee" within the meaning of Section 162(m) of the
Code (or any successor provision) shall be limited to growth, improvement or
attainment of certain levels of:
(i) return on capital, equity, or operating assets;
(ii) margins;
(iii) total stockholder return or market value relative to other companies
selected by the Committee;
(iv) operating profit or net income;
(v) sales, throughput, or product volumes; or
(vi) costs or expenses.
Except in the case of such a covered employee, if the Committee determines that
a change in the business, operations, corporate structure, or capital structure
of the Company, or the manner in which it conducts its business, or other
events or circumstances, render the management performance objectives to be
unsuitable, the Committee may modify such Performance Criteria, or the related
minimum acceptable level of achievement, in whole or in part, as the Committee
deems appropriate and equitable. In addition, at the time the Right is awarded
and performance goals established, the Committee is authorized to determine the
manner in which the Performance Criteria will be calculated or measured to take
into account certain factors over which Participants have limited control,
including market related changes in inventory value, changes in industry
margins, changes in accounting principles, and extraordinary charges to income.
Repricing. The Committee's ability to substitute Rights previously granted with
new Rights has been restricted. The Committee shall not, without the further
approval of the stockholders of the Company, authorize the amendment of any
outstanding option to reduce the option price or authorize the amendment of any
outstanding SAR to reduce the base price. Furthermore, no option or SAR shall
be canceled and replaced with awards having a lower option price or base price
without the approval of the stockholders of the Company. Any grant may provide
for deferred payment of the option price from the proceeds of sale through a
broker of some or all of the shares of Common Stock to which the exercise
relates.
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Transferability. The section relating to transferability of Rights has been
deleted and a new section substituted in its place. No option or other
derivative security (as that term is used in Rule 16b-3 of the Exchange Act)
granted under this 1990 Plan may be transferred by a participant except by will
or the laws of descent and distribution. Options and SARs granted under this
1990 Plan may not be exercised during a participants lifetime except by the
participant or, in the event of the participants legal incapacity, by his
guardian or legal representative, acting in a fiduciary capacity on behalf of
the participant under state law and court supervision. Notwithstanding the
foregoing, the Committee, in its sole discretion, may provide for the
transferability of particular awards under this 1990 Plan so long as such
provisions will not disqualify the exemption of other awards under Rule 16b-3
of the Exchange Act.
Fair Market Value. Formulas to calculate fair market value have been deleted
and the provision allowing the grant of options with an exercise price less
than the fair market value of the Common Stock has been deleted. As amended,
the exercise price of any option may not be less than the fair market value of
the Common Stock covered thereby, as determined by the Committee.
Reorganization. The 1990 Plan was further amended to describe the Committee's
authority to make adjustments in Rights in order to prevent dilution,
enlargement, or other change in the rights of recipients in the event of a
corporate reorganization or similar transaction or event. The Committee may on
or after the date of grant provide in the agreement evidencing any award under
the 1990 Plan that the holder of the award may elect to receive an equivalent
award in respect of securities of the surviving entity of any merger,
consolidation, or other transaction or event having a similar effect, or the
Committee may provide that the holder will automatically be entitled to receive
such an equivalent award. The Committee may also make or provide for such
adjustments in the maximum number of shares of Common Stock specified in the
1990 Plan as the Committee may in good faith determine to be appropriate in
order to reflect any corporate reorganization or similar transaction or event.
Withholding Taxes. To the extent that the Company is required to withhold taxes
in connection with any payment made or benefit realized by a participant, and
the amounts available to the Company for the withholding are insufficient, it
shall be a condition to the receipt of any such payment or the realization of
any such benefit that the participant make arrangements satisfactory to the
Company for payment of the balance of any taxes required to be withheld. At the
discretion of the Committee, any such arrangements may include relinquishment
of a portion of any such payment or benefit or the surrender of outstanding
shares of Common Stock. The Company and any participant may also make similar
arrangements with respect to the payment of any taxes with respect to which
withholding is not required.
Plan Amendments. The section concerning amendments was clarified to provide
that the 1990 Plan may be amended from time-to-time by the Committee; provided,
however, except as expressly authorized by the 1990 Plan, no such amendment
shall increase the maximum number of shares of Common Stock specified in the
1990 Plan, or otherwise cause the 1990 Plan to cease to satisfy any applicable
condition of Rule 16b-3 of the Exchange Act, without the further approval of
the stockholders of the Company. Any Right that may be granted pursuant to an
amendment to the 1990 Plan that shall have been adopted without the approval of
the stockholders of the Company shall be null and void if it is subsequently
determined that such approval
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was required in order for the 1990 Plan to continue to satisfy the applicable
conditions of Rule 16b-3 of the Exchange Act.
Governing Law. The 1990 Plan is governed by the laws of the State of Delaware
and applicable federal law.
Effective Date of Amendment. The 1990 Plan is effective as of May 1, 1990; the
amendments to the 1990 Plan approved by the Company's Board of Directors on
February 7, 1995 will become effective upon approval by the stockholders of the
Company.
ADDITIONAL INFORMATION
Officers and any other salaried employees of the Company, its subsidiaries and
its affiliates selected by the Committee are eligible to receive benefits under
the 1990 Plan. All officers (17) and approximately 248 other salaried employees
of the Company are currently eligible to participate in the 1990 Plan.
The 1990 Plan is intended to comply with and be subject to Rule 16b-3 of the
Exchange Act as in effect prior to May 1, 1991. The Committee may at any time
elect that the 1990 Plan shall be subject to Rule 16b-3 of the Exchange Act as
in effect on and after May 1, 1991.
Federal Income Tax Consequences. The following is a brief summary of certain
federal income tax consequences of certain transactions under the 1990 Plan,
based on federal income tax laws in effect on January 1, 1995. This summary is
not intended to be exhaustive and does not describe state or local tax
consequences.
Non-qualified Options generally will not result in any taxable income to the
optionee at the time of grant, but the holder will realize ordinary income at
the time of exercise of the Option. The amount of ordinary income is measured
by the excess of the fair market value of the optioned shares at the time of
exercise over the Option exercise price. If the Option price of a non-qualified
Option is paid for, in whole or in part, by the delivery of shares of Common
Stock previously owned by the optionee, no gain or loss will be recognized on
the surrendered shares to the extent that the shares of Common Stock received
are equal in value to the shares of Common Stock surrendered. At the time of
sale of shares acquired pursuant to the exercise of a non-qualified Option, any
appreciation (or depreciation) in the value of the shares after the date of
exercise will be treated as either short-term or long-term capital gain (or
loss) depending on how long the shares have been held.
Incentive stock options ("ISOs") normally will not result in any taxable income
to the optionee at the time of grant or exercise. If Common Stock is issued to
an optionee pursuant to the exercise of an ISO and no disqualifying disposition
of the shares is made by the optionee within two years after the date of grant,
or within one year after the transfer of the shares to the optionee, then upon
the sale of the shares any amount realized in excess of the Option price will
be taxed to the optionee as long-term capital gain and any loss sustained will
be a long-term capital loss. If Common Stock acquired upon the exercise of an
ISO is disposed of prior to the expiration of either holding period described
above, the optionee generally will recognize ordinary income in the year of
disposition in an amount equal to any excess of the fair market value of the
shares at the time of exercise (or, if less, the amount realized on the
disposition of the shares in the sale or
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exchange) over the Option price paid for the shares. Any further gain (or loss)
realized by the optionee generally will be taxed as short-term or long-term
capital gain (or loss) depending on the holding period.
The grant of an SAR will not produce taxable income to the recipient. However,
upon exercise of an SAR, the amount of any cash received and the fair market
value on the exercise date of any shares of Common Stock received will be
taxable as ordinary income to the recipient.
No income generally will be recognized upon the grant of performance units.
Upon payment in respect of the earn-out of performance units, the recipient
generally will be required to include as taxable ordinary income in the year of
receipt an amount equal to the amount of cash received and the fair market
value of any nonrestricted shares of Common Stock received.
A recipient of restricted stock generally will be subject to tax at ordinary
income rates on the fair market value of the restricted stock reduced by any
amount paid by the recipient at such time as the shares are no longer subject
to a risk of forfeiture or restrictions on transfer for purposes of Section 83
of the Code. However, a recipient who so elects under Section 83(b) of the Code
within 30 days of the date of transfer of the shares will have taxable ordinary
income on the date of transfer of the shares equal to the excess of the fair
market value of the shares (determined without regard to the risk of forfeiture
or restrictions on transfer) over any purchase price paid for the shares. If a
Section 83(b) election has not been made, any dividends received with respect
to restricted stock that are subject at that time to a risk of forfeiture and
restrictions on transfer generally will be treated as compensation that is
taxable as ordinary income to the recipient.
In limited circumstances where the sale of stock that is received as a result
of a grant of an award could subject an officer or director to suit under
Section 16(b) of the Exchange Act, the tax consequences to the officer or
director may differ from the tax consequences described above. In these
circumstances, unless a special election has been made, the principal
difference usually will be to postpone valuation and taxation of the stock
received so long as the sale of the stock received could subject the officer or
director to suit under Section 16(b) of the Exchange Act, but not longer than
six months.
To the extent that a participant recognizes ordinary income in the
circumstances described above, the Company will be entitled to a corresponding
deduction, provided that, among other things, the income meets the test of
reasonableness, is an ordinary and necessary business expense, is not an
"excess parachute payment" within the meaning of Section 280G of the Code, and
is not disallowed by the $1 million limitation on certain executive
compensation. If the Committee grants ISO's rather than non-qualified options,
the Company may forego tax deductions it might otherwise have obtained.
See "Compensation of Officers--Incentive Plan and Other Arrangements" for
additional information concerning the long-term incentive plans as currently in
effect.
VOTE REQUIRED FOR APPROVAL
Under Delaware law, 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 approve the amendments to the 1990 Plan.
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THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE AMENDMENTS TO
THE 1990 PLAN. PROXIES SOLICITED BY THE BOARD WILL BE SO VOTED UNLESS
STOCKHOLDERS SPECIFY IN THEIR PROXIES A CONTRARY CHOICE.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
(ITEM 3 ON THE PROXY)
The Board, upon the recommendation of its Audit Committee, has appointed Price
Waterhouse as independent accountants to examine the consolidated financial
statements of the Company for 1995. Stockholders are being asked to ratify this
appointment. Price Waterhouse has served the Company and its predecessors in
this capacity since 1932. The Company has been informed that neither Price
Waterhouse 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.
Representatives of Price Waterhouse are expected to be present at the Annual
Meeting with the opportunity to make a statement, if they desire 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 Price Waterhouse as independent accountants for 1995.
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.
OTHER BUSINESS
The Board does not know of any business to be presented for consideration at
the Annual Meeting, or any adjournment thereof, other than as stated in the
Notice of Annual Meeting. It is intended, however, that the persons authorized
under the Board's proxies may, in the absence of instructions to the contrary,
vote or act in accordance with their judgment with respect to any other
proposal properly presented for action at such meeting. The affirmative vote of
the holders of a majority of the shares of Common Stock represented at the
Annual Meeting, or any adjournment thereof, and actually voted would be
required with respect to any such matter brought to a stockholder vote.
MISCELLANEOUS
SUBMISSION OF PROPOSALS BY STOCKHOLDERS
In order to be eligible for inclusion in the Company's proxy statement for the
1996 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 24, 1995.
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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 telegram, 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 & Co. 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
Jerry D. King
Secretary
San Antonio, Texas
March 23, 1995
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APPENDIX "A" TO NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
DIAMOND SHAMROCK, INC.
LONG-TERM INCENTIVE PLAN
AS AMENDED AND RESTATED AS OF MAY 2, 1995
The purpose of this Diamond Shamrock, Inc. Long-Term Incentive Plan (the
"Plan") is to promote the long-term success of Diamond Shamrock, Inc. (the
"Company") by providing the directors, officers, and other salaried employees
of the Company, its subsidiaries, and its affiliates (the "Participants") with
incentives to create excellent performance and to continue their association
with the Company, its subsidiaries, and its affiliates. In addition, the Plan
operates to encourage Participants to become stockholders of the Company and by
providing actual share ownership through Plan awards, it is also intended that
Participants will view the Company from a stockholder's perspective.
1. AGGREGATE LIMITATIONS ON SHARES AVAILABLE UNDER THE PLAN. The total number
of shares of common stock, $.01 par value ("Common Shares"), of the Company
which are issued or transferred under the Plan shall not in the aggregate
exceed 3,500,000 Common Shares, subject to the adjustments authorized by
Section 5; provided, however, that the number of Common Shares issued or
transferred as restricted shares that become nonforfeitable solely
contingent upon the participant attaining a certain length of service with
the Company shall not in the aggregate exceed 314,000 Common Shares, subject
to adjustment as provided in Section 5 of this Plan. For the purposes of
this Section 1:
(a) Upon payment in cash of the award provided by any SAR, Performance
Award, or Securities Award (as hereinafter defined) (together with an
Option, a "Right") granted under this Plan, any Common Shares that were
covered by that Right, shall again be available for issuance or
transfer hereunder.
(b) Upon the full or partial payment of the price of any Right by the
transfer to the Company of Common Shares or upon satisfaction of tax
withholding obligations in connection with any such exercise or any
other payment made or benefit realized under this Plan by the transfer
or relinquishment of Common Shares, there shall be deemed to have been
issued or transferred under this Plan only the net number of Common
Shares actually issued or transferred by the Company determined by
subtracting the number of Common Shares so transferred or relinquished.
If any Securities Awards (as hereinafter defined) are issued or transferred
that pertain to Company stock other than Common Shares, there will be
deemed to have been issued a number of Common Shares equal to the number of
shares of such other stock so issued or transferred. In the event that such
other stock is convertible into Common Shares, there will be deemed to have
been issued a number of Common Shares equal to the number of Common Shares
into which such other stock is convertible.
2. ADMINISTRATION. The Plan will be administered by the Compensation Committee
(or any successor committee) of the Company's Board of Directors (the
"Committee") consisting of not fewer than two
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directors each of whom shall be a "disinterested person" within the meaning
of Rule 16b-3 or any successor rule promulgated pursuant to the Securities
Exchange Act of 1934 (the "Exchange Act").
The Committee, subject to the Company's By-Laws, will from time to time
establish rules for the calling and conduct of its meetings and the taking
of action thereat or otherwise. In addition to the authority prescribed
elsewhere herein, the Committee will have the authority in its sole
discretion from time to time (i) subject to Section 3, to prescribe such
limitations, restrictions, conditions upon, provisions for vesting and
acceleration of, provisions prescribing the nature and amount of legal
consideration to be received upon the award or exercise of any Right and
all other terms and conditions of any award of any Right as the Committee
deems appropriate, provided that none of the foregoing conflicts with any
of the express terms of the Plan and that the foregoing are set forth in
the instrument granting any Right or in the regulations referred to
elsewhere in this Section 2, (ii) to interpret the Plan and to adopt, amend
and rescind rules and regulations for implementing and administering the
Plan, and (iii) to make all other determinations and take all other actions
that the Committee deems necessary or advisable for the implementation and
administration of the Plan. All such actions will be final, conclusive, and
binding. No member of the Committee will be liable for any grant or award
or action taken or decision made in good faith relating to the Plan or any
grant or award thereunder.
3. RIGHTS. The Committee may from time to time, and upon such terms and
conditions as it determines in its discretion, authorize the granting of
Rights to officers (including officers who are directors) and other salaried
employees of the Company or any of its majority-owned subsidiaries who, in
the judgment of the Committee based upon information furnished to it,
individually or by classification are expected to contribute to the
Company's long term business and prospects. Such Rights may include, as the
Committee may determine in its discretion, any of the following Rights or
any combination thereof:
(a) options ("Options") to purchase Common Shares, which may be either
incentive stock Options intended to qualify for treatment under Section
422 of the Internal Revenue Code of 1986, as amended (the "Code")
("ISO's") or non-qualified Options which are not intended to so
qualify;
(b) stock appreciation rights ("SARs") to receive in respect of Common
Shares subject to Options granted under the Plan:
(i) whole Common Shares having an aggregate Fair Market Value (as
hereinafter defined) equal to a percentage (up to 100%) of the
aggregate appreciation in value of the Common Shares in respect of
which the SAR is exercised, measured by the difference between the
aggregate Option price for such Common Shares and their aggregate
Fair Market Value (as hereinafter defined);
(ii) cash in an amount equivalent to that percentage appreciation
determined under clause (a); or
(iii) any combination of cash and whole Common Shares having a Fair
Market Value (as hereinafter defined), in the aggregate, equal to
the percentage appreciation determined under clause (a);
(c) rights ("Performance Awards") to receive, with respect to or unrelated
to Common Shares subject to Options or SARs granted under the Plan, a
predetermined amount, payable in cash or Common
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Shares, on such terms and subject to such conditions including
performance targets as may be determined by the Committee, in its
discretion. Performance Awards may be payable over a specific period,
and may be vested in whole or in part on the date of award thereof, as
determined from time to time by the Committee in its discretion;
and
(d) awards ("Securities Awards") of Common Shares, of other shares of
capital stock, or of other securities of the Company, which awards may
be absolute or contingent upon continuation of employment or
achievement of one or more performance targets, may provide for payment
by the recipient of cash or deferred consideration that is less than
the Fair Market Value of such securities or for no such consideration,
and may provide for repurchase of such securities by the Company in
specific circumstances, all on such terms and subject to such
conditions as may be determined by the Committee in its discretion.
Securities Awards may be payable over a specific period, and may be
vested in whole or in part on the date of the award thereof, as
determined from time to time by the Committee in its discretion.
Rights, when so determined by the Committee, will be subject to such
financial or non-financial performance or other criteria as may be adopted
from time-to-time by the Committee in its discretion. The performance
criteria ("Performance Criteria") applicable to any award to a Participant
who is, or is determined by the Committee, to be likely to become, a
"covered employee" within the meaning of Section 162(m) of the Code (or any
successor provision) shall be limited to growth, improvement or attainment
of certain levels of:
(i) return on capital, equity, or operating assets;
(ii) margins;
(iii) total stockholder return or market value relative to other
companies selected by the Committee;
(iv) operating profit or net income;
(v) sales, throughput, or product volumes; or
(vi) costs or expenses.
If the Committee determines that a change in the business, operations,
corporate structure or capital structure of the Company, or the manner in
which it conducts its business, or other events or circumstances render the
management performance objectives to be unsuitable, the Committee may
modify such Performance Criteria or the related minimum acceptable level of
achievement, in whole or in part, as the Committee deems appropriate and
equitable; provided, however, that no such modification shall be made in
the case of any award to a Participant who is, or is determined by the
Committee to be likely to become, a covered employee if the effect would be
to cause the award to fail to qualify for the performance-based exception
to Section 162(m) of the Code (or any successor provision). In addition, at
the time the Right is awarded and performance goals established, the
Committee is authorized to determine the manner in which the Performance
Criteria will be calculated or measured to take into
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account certain factors over which Participants have no or limited control
including market related changes in inventory value, changes in industry
margins, changes in accounting principles, and extraordinary charges to
income.
Subject to adjustment as provided in Section 5 of this Plan, no Participant
shall be granted under this Plan in any fiscal year:
(i) Options and SARs, in the aggregate, for more than 200,000 Common
Shares;
(ii) Performance Awards and Securities Awards, in the aggregate, for
more than 200,000 Common Shares; and
(iii) Performance Awards, in the aggregate, for more than $1,000,000.
Each of the foregoing Rights will contain and be subject to such other terms
and conditions as the Committee from time to time determines pursuant to
Sections 1 or 2 or otherwise. Payment for any Right may be made by the
delivery of cash, Common Shares, any combination thereof, or other
consideration, as determined from time to time by the Committee in its
discretion. Any grant may provide for deferred payment of the Option price
from the proceeds of sale through a broker of some or all of the Common
Shares to which the exercise relates. The Committee shall not, without the
further approval of the stockholders of the Company, authorize the amendment
of any outstanding Option to reduce the Option price or authorize the
amendment of any outstanding SAR to reduce the base price. Furthermore, no
Option or SAR shall be canceled and replaced with awards having a lower
Option price or base price without the further approval of the stockholders
of the Company. Further, the Committee may in its discretion prohibit a
terminated employee from exercising a previously granted Option or otherwise
receiving the benefit of any previously granted Right if such terminated
employee has an outstanding loan from the Company, any parent or any
majority-owned subsidiary or any predecessor of any such corporations.
Notwithstanding any of the foregoing, and subject to the provisions of
Section 8, the Company retains the right to convert any previously granted
ISO's to non-qualified Options.
The Committee may provide for the grant, to any optionee except Non-Employee
Directors, of additional Options ("Reload Options") upon the exercise of
Options, including Reload Options, through the delivery of Common Shares;
provided, however, that (i) Reload Options may be granted only with respect
to the same number of Common Shares as were surrendered to exercise the
Options, (ii) the exercise price of the Reload Options will be the Fair
Market Value (as hereinafter defined), and (iii) with respect to optionees
who are subject to the reporting requirements of Section 16(a) of the
Exchange Act, the Reload Option may not be exercised after the expiration or
termination date of the Options with respect to which such Reload Options
were granted.
4. TRANSFERABILITY. No Option or other derivative security (as that term is
used in Rule 16b-3 of the Exchange Act) granted under this Plan may be
transferred by a Participant except by will or the laws of descent and
distribution. Options and SARs granted under this Plan may not be exercised
during a Participants lifetime except by the Participant or, in the event of
the Participants legal incapacity, by his guardian or legal representative,
acting in a fiduciary capacity on behalf of the Participant under state
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law and court supervision. Notwithstanding the foregoing, the Committee, in
its sole discretion, may provide for the transferability of particular
awards under this Plan so long as such provisions will not disqualify the
exemption of other awards under Rule 16b-3 of the Exchange Act.
5. EXERCISE PRICE; ADJUSTMENTS. The exercise price of any Option may not be
less than the fair market value of the Common Shares covered thereby as
determined by the Committee from time-to-time ("Fair Market Value").
The Committee may, but will not be required to, make or provide for such
adjustments (eliminating fractions) in the originally specified price or in
the number or kind of Common Shares covered by outstanding Rights or in other
consideration which has been previously granted or is available for issuance
under the Plan (including shares of another issuer) as the Committee may
determine is equitably required to prevent dilution, enlargement or any other
change of or in the rights of recipients that otherwise would result from any
merger, spin-off or other distribution of assets to shareholders,
consolidation, reorganization, assumption, and conversion of outstanding
grants due to an acquisition, or other business combination transaction,
recapitalization, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares,
change in corporate structure or otherwise, from the date that any Right is
granted or awarded by the Committee.
Moreover, the Committee may on or after the date of grant provide in the
agreement evidencing any award under this Plan that the holder of the award
may elect to receive an equivalent award in respect of securities of the
surviving entity of any merger, consolidation or other transaction or event
having a similar effect, or the Committee may provide that the holder will
automatically be entitled to receive such an equivalent award. The Committee
may also make or provide for such adjustments in the maximum number of Common
Shares specified in Sections 1 and 3 of this Plan as the Committee may in
good faith determine to be appropriate in order to reflect any transaction or
event described in this Section 5.
6. INCENTIVE OPTIONS. No ISO shall be granted after the ten (10) year period
following the adoption of the Plan and no ISO shall be exercisable after the
expiration of ten (10) years from the date of grant. Notwithstanding the
provisions of Section 1 to the contrary, any Common Shares subject to an SAR
which has been granted in tandem with an ISO will not be available for
issuance under the Plan upon exercise of such SAR. Notwithstanding the
provisions of Section 5 to the contrary, no adjustment shall be made with
respect to any Option intended to qualify as an ISO if such an adjustment
would prevent such Option from so qualifying.
7. FOREIGN PARTICIPANTS. Subject to the provisions of Section 9, the Committee
may, in order to fulfill the Plan purposes and without amending the Plan,
modify previously granted Rights to employees who are foreign nationals or
employed outside the United States to recognize differences in local law,
tax policy or custom.
8. NON-EMPLOYEE DIRECTORS: RESTRICTED SHARES. Each director of the Company who
is not an employee of the Company ("Non-Employee Director") will be granted
Common Shares that are forfeitable and
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nontransferable except as provided in this Section 8 ("Restricted Shares")
in lieu of all or a portion (as specified by the Non-Employee Director) of
his annual retainer on the terms and conditions set forth in this Section 8.
(a) Non-Employee Directors serving on May 5, 1992 will be granted
Restricted Shares on the first Tuesday in May (the "Anniversary Date")
immediately after the expiration of the five year period following
grants of restricted Common Shares previously made to them under
Section 8 of the Diamond Shamrock, Inc. 1987 Long-Term Incentive Plan;
provided however, Non-Employee Directors who were granted restricted
Common Shares on July 1, 1987 will be granted Restricted Shares on May
5, 1992.
(b) Non-Employee Directors first elected to the Company's Board of
Directors after May 5, 1992 will be granted Restricted Shares on the
day of election to the Board of Directors. The amount of the Non-
Employee Director's annual retainer used to determine the amounts of
the Grants attributable to the first partial year of service of any new
Non-Employee Director elected to the Board of Directors in a month
other than May will be pro-rated to the Anniversary Date which follows
election to the Board of Directors.
(c) Each Non-Employee Director will be granted additional Restricted Shares
on the fifth Anniversary Date that follows the initial date of grant of
Restricted Shares pursuant to Section 8(a) or Section 8(b) of the Plan,
and on the fifth Anniversary Date that follows the date of each grant
of Restricted Shares pursuant to this Section 8(c).
(d) Each Non-Employee Director will receive one-third of the value of his
annual retainer to which he would otherwise be entitled during the five
(5) years following the date of grant and assuming that the amount of
such retainer remains constant during such five-year period in the form
of Restricted Shares (the "Minimum Grant").
(e) Each Non-Employee Director may make an election to receive any or all
of the remaining cash balance of the annual retainer to which he would
otherwise be entitled during the five (5) years following the date of
the Minimum Grant and assuming that the amount of such retainer remains
constant during such five-year period in the form of Restricted Shares
(the "Elective Grant"). The Minimum Grant and the Elective Grant are
hereafter referred to as the "Grants." The election will be in writing
and must be delivered to the Company not later than the date of the
Minimum Grant. Any election of an Elective Grant will be irrevocable.
(f) Minimum Grants will be made on the date of grant provided in Section
8(a), Section 8(b) or Section 8(c), as the case may be. Elective Grants
will be made on the first business day that is at least six months and
one day following the date of the corresponding Minimum Grants. The
total number of Restricted Shares included in each such Grant will be
equal to the amount of the Non-Employee Director's retainer as provided
in Section 8(b), Section 8(d) or Section 8(e) of the Plan, as the case
may be, multiplied by the percentage of annual retainer represented by
the Minimum Grant or Elective Grant, as the case may be, divided by the
closing sale price per share of the Common Shares as reported in the
New York Stock Exchange Composite Transactions Report (or any other
consolidated transactions reporting system which subsequently may
replace such Composite Transactions Report) for the New York Stock
Exchange trading day immediately preceding such Minimum Grant or
Elective Grant, or if there are no sales on such date, on the next
preceding day on which there were sales, and rounded up to the next
whole Restricted Share.
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PROXY STATEMENT
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(g) Twenty percent (20%) of the Restricted Shares subject to a Grant will
become transferable and nonforfeitable one year after the Anniversary
Date on which the Grant was elected; provided however, that the
Restricted Shares may not be sold until at least six months after the
grant date. An additional twenty percent (20%) will become transferable
and nonforfeitable two, three, four, and five years after the
Anniversary Date on which the Grant was elected. The foregoing
percentages will not apply, however, to any Non-Employee Director who
is first elected to the Company's Board of Directors after May 5, 1992
and in a month other than May. The number of Restricted Shares awarded
to any such Non-Employee Director that becomes transferable and
nonforfeitable on the Anniversary Date which immediately follows the
date of such election will equal 20% of the total number of Restricted
Shares that would have been awarded to the director had he or she first
become a Non-Employee Director as of the Anniversary Date immediately
prior to election to the Board of Directors (the "Full Term Share
Amount") multiplied by a fraction, the numerator of which is the amount
of the annual retainer paid to such Non-Employee Director for service
as a director for the period ending on the Anniversary Date which
immediately follows the date of election and the denominator of which
is the total annual retainer payable to such Non-Employee Director as
if he or she had been a Non-Employee Director as of the Anniversary
Date immediately prior to election to the Board of Directors. An
additional 20% of the Full Term Share Amount will become transferable
and nonforfeitable on the Anniversary Dates which are one, two, three,
and four years after the Anniversary Date which immediately follows the
date of election to the Board of Directors.
(h) If a Non-Employee Director's services as a board member are terminated
for any reason at any time before completion of the Non-Employee
Director's annual term of service, a portion of the Restricted Shares
that would have become nonforfeitable and transferable at the end of
such complete annual term will become nonforfeitable and transferable
pursuant to this Section 8(h), and Section 8(g) shall not apply. The
number of whole Restricted Shares that will become transferable and
nonforfeitable will be determined by multiplying the number of
Restricted Shares by a fraction, the numerator of which will equal the
number of complete three-month periods during which at all times such
Non-Employee Director was serving as a Non-Employee Director within the
twelve-month period in which the Non-Employee Director's service
terminates (such twelve-month period to commence on the first day of
May and such three-month periods to commence on August 1, November 1
and February 1) and the denominator of which is four (4).
(i) Any increase in retainer fees paid to Non-Employee Directors by the
Company occurring after May 5, 1992, will not be reflected in any
outstanding Grant but will be paid in cash.
(j) The provisions of Section 8 of the Plan relating to Minimum Grants may
not be amended more than once every six months, other than to comport
with changes in the Code, ERISA or the rules thereunder.
(k) Each Non-Employee Director will enter into an agreement with the
Company which will set forth the terms of the Grants, in such form as
the Committee determines is consistent with the provisions of the Plan.
In the event of any inconsistency between the provisions of the Plan
and any such agreement entered into hereunder, the provisions of the
Plan will govern.
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PROXY STATEMENT
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9. NON-EMPLOYEE DIRECTORS: OPTIONS.
(a) GRANT OF OPTIONS. Effective and including May 2, 1995, each Non-
Employee Director shall be granted, as of the close of business on each
Anniversary Date, an Option to purchase 1,500 Common Shares. Each such
grant shall be evidenced by an agreement in such form as attached to
this Plan as Appendix A, and shall be subject to the additional terms
and conditions set forth in this Section 9.
(b) TERMS AND EXERCISE OF OPTIONS.
(i) Except as provided in subsection (iii) below, 100% of the Option
shall become exercisable three years from the date the Option is
granted.
(ii) 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 termination of service on the Company's
Board of Directors, other than as provided in subsection (iii)
below, an outstanding Option may be exercised only to the extent it
was exercisable on the date of such termination and shall expire
three years after such termination, or on its stated expiration
date, whichever occurs first.
(iii) Upon the occurrence of any of the following events prior to the
expiration of an Option, the Option shall become immediately and
fully exercisable:
(1) death of the Director;
(2) disability of the Director;
(3) the Director ceases to be a director of the Company and is
eligible to participate in the Diamond Shamrock, Inc. Retirement
Plan for Directors; or
(4) change in control of the Company which will be deemed to have
occurred when a report is filed on Schedule 13D or Schedule 14D-
1 (or any successor schedule, form or report), each as
promulgated pursuant to the Exchange Act, disclosing that any
person (as the term "person" is used in Section 13 (d)(3) or
Section 14 (d)(2) of 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 more than 25% of the
combined voting power of the then-outstanding voting securities
of the Company.
(c) EXERCISE PRICE. The exercise price of any Option granted to a Non-
Employee Director shall be equal to the closing sale price per share of
the Common Shares as reported in the New York Stock Exchange Composite
Transactions Report (or any other consolidated transactions reporting
system which subsequently may replace such Composite Transactions
Report) for the New York Stock Exchange trading day immediately
preceding such grant, or if there are no sales on such date, on the
next preceding day on which there were sales.
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A-8
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PROXY STATEMENT
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(d) PAYMENT. An Option may be exercised by a Non-Employee Director only
upon payment to the Company in full of the Option price of the Common
Shares to be delivered. Such payment shall be made in cash or in Common
Shares previously owned by the optionee for more than six months, or in
a combination of cash and such Common Shares.
10. WITHHOLDING TAXES. To the extent that the Company is required to withhold
federal, state, local or foreign taxes in connection with any payment made
or benefit realized by a Participant or other person under this Plan, and
the amounts available to the Company for the withholding are insufficient,
it shall be a condition to the receipt of any such payment or the
realization of any such benefit that the Participant or such other person
make arrangements satisfactory to the Company for payment of the balance of
any taxes required to be withheld. At the discretion of the Committee, any
such arrangements may without limitation include relinquishment of a
portion of any such payment or benefit or the surrender of outstanding
Common Shares. The Company and any Participant or such other person may
also make similar arrangements with respect to the payment of any taxes
with respect to which withholding is not required.
11. EFFECTIVE DATE. The Plan is effective as of May 1, 1990; the amendments to
the Plan approved by the Company's Board of Directors on February 7, 1995
will become effective upon approval by the stockholders of the Company.
12. AMENDMENT.
(a) This Plan may be amended from time-to-time by the Committee; provided,
however, except as expressly authorized by this Plan, no such amendment
shall increase the maximum number of Common Shares specified in Sections
1 and 3 hereof, or otherwise cause this Plan to cease to satisfy any
applicable condition of Rule 16b-3 of the Exchange Act, without the
further approval of the stockholders of the Company.
(b) Any Right that may be granted pursuant to an amendment to this Plan
that shall have been adopted without the approval of the stockholders of
the Company shall be null and void if it is subsequently determined that
such approval was required in order for this Plan to continue to satisfy
the applicable conditions of Rule 16b-3 of the Exchange Act.
13. TERMINATION. If the Plan is terminated, the terms of the Plan will,
notwithstanding such termination, continue to apply to awards of Rights
made prior to termination, and no suspension, termination, modification or
amendment of the Plan or any Right may, without the consent of the
recipient to whom an award of Rights theretofore has been granted,
adversely affect the rights of such recipient under such award.
14. GOVERNING LAW. This Plan shall be governed by the laws of the State of
Delaware and applicable federal law.
15. RULE 16B-3 TRANSITION. The Plan is intended to comply with and be subject
to Rule 16b-3 of the Exchange Act as in effect prior to May 1, 1991. The
Committee may at any time elect that the Plan shall be subject to Rule 16b-
3 of the Exchange Act as in effect on and after May 1, 1991.
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A-9
<PAGE>
PROXY STATEMENT
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APPENDIX "A" TO THE LONG-TERM INCENTIVE PLAN
NON-EMPLOYEE DIRECTOR'S STOCK OPTION AGREEMENT
1. GRANT: Diamond Shamrock, Inc. ("DS") hereby grants to (the
"Director") an option (the "Option") to purchase at a price of $ per share
(the "Price") all or part of 1,500 shares ("Option Shares") of Common Stock,
$.01 par value, of DS ("Common Stock") pursuant to the Diamond Shamrock,
Inc. Long-Term Incentive Plan (the "Plan"). Capitalized terms used in this
agreement that are not otherwise defined herein will have the meaning
assigned to such terms in the Plan. Subject to the terms hereof, the Option
shall expire on the tenth anniversary of May (the "Grant Date") and
shall become exercisable to the extent of 100 percent of the Option Shares
covered thereby on the third anniversary of the Grant Date. The Option will
not be transferable other than by will or the applicable laws of descent and
distribution. The Option may not be exercised during the Director's lifetime
except by the Director or, in the event of the Director's legal incapacity,
by the Director's guardian or legal representative, acting in a fiduciary
capacity on behalf of the Director under state law and court supervision.
2. EXERCISE OF OPTION: Subject to the provisions of Paragraphs 1, 2, and 4
hereof, the Option may be exercised by the Director (or the Director's
executor or administrator) in whole or in part from time to time by written
notice to the Secretary of DS at DS's corporate headquarters. Upon the full
or partial exercise of the Option and the payment of the Price therefor by
the Director (which may be paid in cash, shares of Common Stock previously
owned by the Director for more than six months, or a combination thereof),
DS will deliver to the Director certificates representing the Option Shares.
3. EFFECT OF TERMINATION OF EMPLOYMENT: If the Director ceases to be a director
of either DS or any of its majority-owned subsidiaries at any time during
the duration of the Option, other than for one of the reasons provided
below, the Option may be exercised only to the extent it was exercisable on
the date of such termination and shall expire three years after such
termination, or on its stated expiration date, whichever occurs first. Upon
the occurrence of any of the following events prior to the expiration of an
Option, the Option shall become immediately and fully exercisable: (a) death
of the Director; (b) disability of the Director; (c) Director ceases to be
director of DS and is eligible to participate in the Diamond Shamrock, Inc.,
Retirement Plan for Directors; or (d) upon a Change in Control. A "Change in
Control" will be deemed to have occurred when a report is filed on Schedule
13D or Schedule 14D-1 (or any successor schedule, form or report), each as
promulgated pursuant to the Exchange Act, disclosing that any person (as the
term "person" is used in Section 13(d)(3) or Section 14(d)(2) of 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 more than 25%
of the combined voting power of the then-outstanding voting securities of
DS. Notwithstanding anything to the contrary contained in this Paragraph, in
no event will the Option be exercisable beyond ten years from the Grant
Date.
4. SEVERABILITY: Any provision of this agreement which is finally held to be
invalid or unenforceable shall be ineffective to the extent of such
invalidity or unenforceability without invalidating the remaining provisions
hereof, and this agreement shall be construed as if such invalid or
unenforceable provision had not been contained herein.
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A-10
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PROXY STATEMENT
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5. INCORPORATION BY REFERENCE: The Option is granted pursuant and subject to
the Plan; and the Plan, together with all resolutions, requirements or
guidelines previously or hereafter adopted by the Committee in accordance
with the Plan, are hereby incorporated herein by reference.
6. AMENDMENTS: Any amendment to the Plan shall be deemed to be an amendment to
this agreement to the extent that the amendment is applicable hereto;
provided, however, that no amendment shall adversely affect the rights of
the Director hereunder without the Director's consent.
7. GOVERNING LAW: This agreement is made under, and shall be construed in
accordance with, the internal substantive laws of the State of Delaware.
DATED as of May .
Diamond Shamrock, Inc.
By:
---------------------------------
Chairman and Chief Executive
Officer
The undersigned hereby accepts the foregoing according to its terms.
-------------------------------------
Director
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A-11
<PAGE>
P R O X Y
DIAMOND SHAMROCK, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING ON MAY 2, 1995.
The undersigned hereby appoints Roger R. Hemminghaus, Timothy J. Fretthold, and
Jerry D. King, and any of them, each with full power of substitution and resub-
stitution, as proxies to represent and to vote all shares which the undersigned
may be entitled to vote as of the record date at the Annual Meeting of Stock-
holders of Diamond Shamrock, Inc. to be held on May 2, 1995, and any adjourn-
ment thereof.
The following items of business to be acted upon are listed in the Notice of An-
nual Meeting and described in the Proxy Statement:
1. Election of 3 directors, each for a three-year term expiring in 1998.
Nominees: E. Glenn Biggs, W. E. Bradford and Bob Marbut.
2. Approval of amendments to the Long Term Incentive Plan.
3. Ratification of appointment of Price Waterhouse 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. SEE REVERSE SIDE.
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
(change of address)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(If you have written in the above space, please mark the corresponding box on
the reverse side of this card)
----------------
SEE REVERSE
SIDE
----------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[X]PLEASE MARK YOUR DIAMOND SHAMROCK, INC. SHARES IN YOUR NAME +
VOTES AS IN THIS +
EXAMPLE. +
+++++
1. Election of Directors (see reverse).
FOR WITHHELD
[_] [_]
For, except vote withheld from the following nominee(s):
--------------------------------------------------------------------------------
2. Approval of amendments to the Long Term Incentive Plan.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. Ratification of appointment of Price Waterhouse as independent accountants.
FOR AGAINST ABSTAIN
[_] [_] [_]
[_] Change of Address
SIGNATURE(S) ________________________ DATE ____________________________________
SIGNATURE(S) ________________________ DATE ____________________________________
NOTE: 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.
<PAGE>
[LOGO OF DIAMOND SHAMROCK APPEARS HERE]
April 3, 1995
Dear Fellow Employee:
The 1995 Annual Meeting of Stockholders of Diamond Shamrock, Inc. will be held
on May 2, 1995 in El Paso, Texas. At the meeting, we will vote on the election
of three directors, amendments to the Long-Term Incentive plan, and on
ratification of the appointment of Price Waterhouse as independent accountants
for this year.
As a participant in one or both of the Diamond Shamrock, Inc. Employee Stock
Ownership Plans (the "ESOP"s) and/or in the Diamond Shamrock, Inc. 401(k) Plan
(the "401(k) Plan"), you are entitled to direct the voting of the shares
allocated to your account(s). I cannot emphasize enough how important your vote
is to the company. You should specify your choices by marking the appropriate
boxes on the Confidential Voting Instructions form below, and date, sign, and
return the form in the enclosed postpaid return envelope as promptly as
possible.
Prior to this time, you should have received Diamond Shamrock's 1994 Annual
Report and Notice of 1995 Annual Meeting and Proxy Statement. If you did not
receive this material, please contact Diamond Shamrock's Investor Relations
Department at (210) 641-8807. Replacement copies will be forwarded to you
promptly so that you may review this material prior to completing the attached
Confidential Voting Instructions.
As of December 31, 1994 the ESOPs held 3,610,093 shares of the common stock of
Diamond Shamrock, Inc. An additional 5,152 shares were held through the 401(k)
Plan. This represents over 12.5% ownership of the company.
Once again, your vote is important. Please be sure to exercise your right as a
shareholder and sign and date the attached voting card and promptly return it in
the enclosed envelope.
Thank you,
Sincerely,
/s/ Signature Appears Here
ESOP I ESOP II 401(K)
--------------------------------------------------------------------------------
The Board of Directors Recommends a vote FOR the proposals regarding:
(1) ELECTION OF 3 directors each for a three-year term expiring in 1998,
Nominees: E. Glenn Biggs, W.E. Bradford and Bob Marbut.
FOR WITHHOLD
all nominees listed above [_] Authority to vote for all [_]
(except as marked to nominees listed above
the contrary to the right)
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
FOR AGAINST ABSTAIN
--- ------- -------
(2) Approval of amendments to Long [_] [_] [_]
Term Incentive Plan.
--------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
--- ------- -------
(3) Ratification of appointment of Price [_] [_] [_]
Waterhouse as independent accountants.
Please date and sign as your name appears below and return in the enclosed
envelope. These confidential voting instructions will be seen only by the
Trustee(s) and their agent.
The Trustee(s) (in person or by proxy) are hereby authorized to vote upon such
other business as may properly come before the meeting.
--------------------------------------------------------------------------------
PLEASE MARK ALL
-------------- ------------------- CHOICES LIKE THIS [X]
ACCOUNT NUMBER SHARES
SIGNATURE DATE
-------------------------- ---------
<PAGE>
CONFIDENTIAL VOTING INSTRUCTIONS
DIAMOND SHAMROCK, INC.
TO: SOCIETY NATIONAL BANK
Trustee for the Employee Stock Ownership Plans of Diamond Shamrock, Inc.
TO: CG Trust Company
Trustee for the 401(k) Plan of Diamond Shamrock, Inc.
The undersigned, as a participant in one or both of the Diamond Shamrock, Inc.
Employee Stock Ownership Plans, and/or in the Diamond Shamrock, Inc. 401(k) Plan
(collectively the "Plans") having received Diamond Shamrock, Inc.'s Annual
Report and Proxy Statement, hereby directs the Trustee(s) of the Plans to vote
(in person or by proxy as specified upon the items on the reverse side, which
are referred to in the Notice of Annual Meeting and described in the Proxy
Statement, all shares of Common Stock of Diamond Shamrock, Inc. credited to the
undersigned's accounts under the respective Plans as of the record date for the
Annual Meeting of Stockholders to be held on May 2, 1995, and any adjournment
thereof. If no direction is given when the duly executed proxy is returned, such
shares will be voted "FOR" items 1, 2 and 3.
PLEASE MARK, SIGN, DATE, AND RETURN THE PROXY CARD PROMPTLY IN THE ENCLOSED
POSTAGE PAID ENVELOPE TO: Automatic Data Processing, P.O. Box 9079,
Farmingdale, N.Y., 11735-9769
