<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number 1-11154
ULTRAMAR DIAMOND SHAMROCK CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3663331
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9830 Colonnade Boulevard
San Antonio, Texas 78230
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (210) 641-6800
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Common Stock, $.01 Par Value -- 74,770,404 shares outstanding as of April
30, 1997.
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ULTRAMAR DIAMOND SHAMROCK CORPORATION
FORM 10-Q
March 31, 1997
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
Item 1. Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheets as of March 31, 1997 and
December 31, 1996 3
Consolidated Statements of Income for the Three Month
Periods Ended March 31, 1997 and 1996 4
Consolidated Statements of Cash Flows for the Three Month
Periods Ended March 31, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 9
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURE 17
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
ULTRAMAR DIAMOND SHAMROCK CORPORATION
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1997 1996
(Unaudited)
(in millions)
Assets
Current assets:
Cash and cash equivalents $ 99.4 $ 197.9
Accounts and notes receivable, net 434.9 503.1
Inventories 543.4 633.3
Prepaid expenses and other current assets 39.3 35.0
Deferred income taxes 32.0 30.0
Total current assets 1,149.0 1,399.3
Property, plant and equipment 3,674.0 3,685.2
Less accumulated depreciation and amortization (976.7) (954.4)
2,697.3 2,730.8
Other assets 282.0 289.9
Total assets $4,128.3 $4,420.0
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable and current portion of long-term debt $ 9.9 $ 3.2
Accounts payable 397.2 540.7
Accrued liabilities 287.7 328.9
Taxes other than income taxes 194.4 191.3
Income taxes payable 30.3 32.1
Total current liabilities 919.5 1,096.2
Long-term debt, less current portion 1,579.8 1,646.3
Other long-term liabilities 304.7 349.6
Deferred income taxes 80.3 87.0
Commitments and contingencies (Note 4)
Stockholders' equity:
Convertible Preferred Stock, par value $.01
per share:
25,000,000 shares authorized, 1,725,000 shares
issued and outstanding at March 31, 1997 and
December 31, 1996 0.0 0.0
Common Stock, par value $.01 per share:
250,000,000 shares authorized, 74,772,291
and 74,710,000 shares issued and outstanding
at March 31, 1997 and December 31, 1996,
respectively 0.7 0.7
Additional paid-in capital 1,138.1 1,137.0
ESOP, treasury stock and other (32.2) (32.2)
Retained earnings 199.6 193.7
Foreign currency translation adjustment (62.2) (58.3)
Total stockholders' equity 1,244.0 1,240.9
Total liabilities and stockholders' equity $4,128.3 $4,420.0
The accompanying notes are an integral part of these consolidated financial
statements.
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ULTRAMAR DIAMOND SHAMROCK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 31,
1997 1996
(in millions, except per share data)
Sales and other revenues (including
excise taxes) $2,550.2 $2,369.6
Operating costs and expenses:
Cost of products sold 1,649.7 1,487.4
Operating expenses 210.2 219.2
Selling, general and administrative expenses 72.0 70.9
Taxes other than income taxes 509.2 488.8
Depreciation and amortization 44.2 41.7
Total operating costs and expenses 2,485.3 2,308.0
Operating income 64.9 61.6
Interest income 2.4 3.6
Interest expense (32.5) (28.4)
Gain on sale of office building 11.0 -
Income before income taxes 45.8 36.8
Provision for income taxes 18.2 14.8
Net income 27.6 22.0
Dividend requirements on preferred stock 1.1 1.1
Net income applicable to common shares $26.5 $20.9
Net income per common share:
Primary $.35 $.28
Fully diluted $.35 $.28
Weighted average number of common shares
used in computation (in thousands):
Primary 75,561 74,861
Fully diluted 79,049 78,348
Dividends per share:
Common shares $.275 $.275
Cumulative convertible preferred stock $.625 $.625
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
ULTRAMAR DIAMOND SHAMROCK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
1997 1996
(in millions)
Cash Flows from Operating Activities
Net income $ 27.6 $ 22.0
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Depreciation and amortization 44.2 41.7
(Gain) loss on sale of fixed assets (18.8) 0.4
Provision for deferred income taxes 14.8 3.3
Other, net 1.3 1.0
Changes in operating assets and liabilities:
(Increase) decrease in accounts and notes
receivable 63.4 (59.1)
Decrease in inventories 88.2 66.3
(Increase) decrease in prepaid expenses
and other current assets (6.6) 16.4
(Increase) decrease in other assets 21.5 (3.3)
Decrease in accounts payable and other
current liabilities (193.2) (106.7)
Decrease in other long-term liabilities (44.5) (1.1)
Other, net 8.0 3.2
Net cash provided by (used in) operating
activities 5.9 (15.9)
Cash Flows from Investing Activities
Capital expenditures (51.6) (70.3)
Acquisition of marketing operations (8.4) -
Deferred turnaround costs 0.5 (8.3)
Expenditures for investments (5.1) (2.1)
Proceeds from sales of property, plant
and equipment 45.6 0.6
Net cash used in investing activities (19.0) (80.1)
Cash Flows from Financing Activities
Increase in long-term debt 7.9 152.8
Repayment of long-term debt (72.2) (42.1)
Proceeds from issuances of Common Stock 0.8 3.7
Payment of dividends (21.6) (17.3)
Other, net 0.0 (1.0)
Net cash provided by (used in) provided by
financing activities (85.1) 96.1
Effect of exchange rate changes on cash (0.3) 0.4
Net Increase (Decrease) in Cash and Cash
Equivalents (98.5) 0.5
Cash and Cash Equivalents at Beginning of
Period 197.9 175.5
Cash and Cash Equivalents at End of Period $ 99.4 $176.0
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
ULTRAMAR DIAMOND SHAMROCK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1: Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared for Ultramar Diamond Shamrock Corporation (the "Company"), in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the
three month period ended March 31, 1997, are not necessarily indicative of
the results that may be expected for the year ending December 31, 1997.
The results of operations may be affected by seasonal factors, such as the
demand for petroleum products and working capital requirements in the
Northeast, which vary significantly during the year, or industry factors
that may be specific to a particular period, such as movements in and the
general level of crude oil prices, the demand for and prices of refined
products, industry supply capacity and maintenance turnarounds. For
further information, see the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for
the year ended December 31, 1996. Prior period amounts have been
reclassified to reflect the merger of Diamond Shamrock, Inc., with and into
the Company effective December 3, 1996, in a transaction accounted for as a
pooling of interests. Certain reclassifications of historical financial
data have been made to conform the accounting policies of the two companies
as further described in the Company's annual report on Form 10-K for the
year ended December 31, 1996.
NOTE 2: Inventories
Inventories consisted of the following:
March 31, December 31,
1997 1996
(in millions)
Crude oil and other feedstocks $224.6 $309.2
Refined and other finished products 266.4 264.7
Materials and supplies and convenience
store items 52.4 59.4
$543.4 $633.3
NOTE 3: Gain on Sale of Assets
Earnings for the first quarter of 1997 include a pre-tax gain of $11.0
million, resulting from the sale of an office building in San Antonio,
Texas which was originally purchased to serve as the Company's new
corporate headquarters.
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NOTE 4: Commitments and Contingencies
The Company's operations are subject to environmental laws and regulations
adopted by various governmental authorities. Site restoration and
environmental remediation and clean-up obligations are accrued either when
known or when considered probable and reasonably estimable. Total future
environmental costs cannot be reasonably estimated due to unknown factors
such as the magnitude of possible contamination, the timing and extent of
remediation, the determination of the Company's liability in proportion to
other parties and the extent to which environmental laws and regulations
may change in the future. Although environmental costs may have a
significant impact on results of operations for any single year, the
Company believes that such costs will not have a material adverse effect on
the Company's financial position.
There are various legal proceedings and claims pending against the Company
that arise in the ordinary course of business. It is management's opinion,
based upon advice of legal counsel, that these matters, individually or in
the aggregate, will not have a material adverse effect on the Company's
financial position.
NOTE 5: Accounting Pronouncements
The Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities," in
June 1996. This statement provides accounting and reporting standards for,
among other things, the transfer and servicing of financial assets, such as
factoring receivables with recourse, and will require the Company to
classify its financial assets pledged as collateral separately in the
financial statements. This statement is effective for transactions
occurring after December 31, 1996, and is to be applied prospectively.
Earlier or retroactive application is not permitted. In December 1996, the
FASB issued SFAS No. 127, "Deferral of the Effective Date of Certain
Provisions of SFAS No. 125." SFAS No. 127 postpones some, but not all, of
the provisions of SFAS No. 125 to December 31, 1997. The Company believes
the adoption of these statements will not have a material impact on the
financial position or results of operations of the Company.
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share", which
establishes standards for computing and presenting earnings per share
("EPS") for entities with publicly held common stock. SFAS No. 128
simplifies the standards for computing EPS previously found in Accounting
Principles Board Opinion No. 15, "Earnings Per Share", and makes them
comparable to international EPS standards. It replaces the presentation of
primary EPS with a presentation of basic EPS, and requires dual
presentation of basic and diluted EPS on the face of the income statement.
SFAS No. 128 is effective for fiscal years ending after December 15, 1997,
and early adoption is not permitted. The Company has not completed its
calculations of EPS data under SFAS No. 128; however, management of the
Company does not anticipate the adopting of this pronouncement will have a
material impact on the Company's results of operations.
NOTE 6: Subsequent Events
On April 15, 1997, the Company entered into a definitive agreement to
acquire Total Petroleum (North America) Ltd. ("Total"), a Denver, Colorado
based petroleum refining and marketing company. The agreement provides for
the issuance of .322 shares of Common Stock for each outstanding share of
Total Common Stock. The Company expects to issue approximately 13.0
million shares of Common Stock and will assume approximately $414.0 million
of Total debt. The transaction is subject to the approval of Total
shareholders, completion of due diligence and customary approvals. The
transaction is expected to be completed near the end of the second quarter
of 1997.
<PAGE>
On May 6, 1997, the Board of Directors declared a quarterly dividend of
$.275 per common share payable on June 6, 1997 to holders of record on May
20, 1997. In addition, the Board of Directors declared a quarterly
dividend of $.625 per share on the Company's 5% Cumulative Convertible
Preferred Stock payable on June 13, 1997, to holders of record on May 20,
1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
The Company's operating results are affected by Company-specific factors,
primarily its refinery utilization rates and refinery maintenance
turnarounds; seasonal factors, such as the demand for petroleum products
and working capital requirements for the Northeast, both of which vary
significantly during the year; and industry factors, such as movements in
and the general level of crude oil prices, the demand for and prices of
refined products and industry supply capacity. The effect of crude oil
price changes on the Company's operating results is determined, in part, by
the rate at which refined product prices adjust to reflect such changes.
As a result, the Company's earnings have been volatile in the past and may
be volatile in the future.
Three Months Ended March 31, 1997 Compared to Three Months Ended March 31,
1996
Financial and operating data by geographic area for the three month periods
ended March 31, 1997 and 1996 are as follows:
Financial Data:
<TABLE>
Three Months Ended March 31,
1997 1996
<S> <C> <C> <C> <C> <C> <C>
Southwest Northeast Total Southwest Northeast Total
(in millions)
Sales and
other
revenues $1,732.1 $818.1 $2,550.2 $1,631.5 $738.1 $2,369.6
Cost of
products
sold 1,145.4 504.3 1,649.7 1,031.2 456.2 1,487.4
Operating
expenses 177.4 32.8 210.2 187.3 31.9 219.2
Selling,
general and
administra-
tive expenses 29.7 42.3 72.0 32.2 38.7 70.9
Taxes other
than income
taxes 319.8 189.4 509.2 321.2 167.6 488.8
Depreciation
and amorti-
zation 36.9 7.3 44.2 35.4 6.3 41.7
Operating
income $ 22.9 $ 42.0 64.9 $ 24.2 $ 37.4 61.6
Interest
expense, net 30.1 24.8
Gain on sale
of office
building 11.0 -
Income be-
fore income
taxes 45.8 36.8
Provision for
income taxes 18.2 14.8
Net income $ 27.6 $ 22.0
</TABLE>
<PAGE>
<TABLE>
Operating Data: Three Months Ended
March 31,
1997 1996
<S> <C> <C>
Southwest
McKee and Three Rivers Refineries
Throughput (BPD) 222,700 224,900
Margin (dollars per barrel) 4.68 4.32
Wilmington Refinery
Throughput (BPD) 104,900 83,600
Margin (dollars per barrel) 5.01 3.63
Retail Marketing
Fuel volume (BPD) 104,500 101,800
Fuel margin (cents per gallon) 9.1 11.4
Merchandise volume ($1,000/day) 2,145 2,288
Merchandise margin (%) 30.2 30.1
Northeast
Quebec Refinery
Throughput (BPD) 148,600 144,400
Margin (dollars per barrel) 2.47 3.87
Retail Marketing
Fuel volume (BPD) 70,600 63,500
Overall margin (cents per gallon) (1) 29.2 24.1
</TABLE>
(1) Retail marketing overall margin reported for the Northeast represent a
blend of gross margin from company and dealer operated service
stations, heating oil sales and the cardlock business segment.
General
Net income for the quarter ended March 31, 1997 totaled $27.6 million as
compared to $22.0 million for the quarter ended March 31, 1996. In the
Southwest, the Company had operating income of $22.9 million for the first
quarter of 1997, as compared to $24.2 million for the first quarter of
1996. The increase in refining margins and throughput in the Southwest
was offset by a decrease in retail fuel margins. In the Northeast,
operating income of $42.0 million was $4.6 million higher than that of the
first quarter of 1996, as strong retail marketing margins and volumes more
than offset weak refining margins during the first quarter of 1997.
Southwest Operations
Sales and other revenues in the Southwest in the first quarter of 1997
totaled $1.7 billion and were 6.2% higher than for the first quarter of
1996, primarily due to a 6.2% increase in refinery throughput and a 2.7%
increase in retail fuel volumes as compared to the first quarter of 1996.
<PAGE>
The refining margin for the McKee and Three Rivers refineries of $4.68 per
barrel in the first quarter of 1997 increased by 8.3% as compared to $4.32
per barrel in the first quarter of 1996, reflecting strong margin
improvement late in the quarter as a result of declining crude oil costs.
The refining margin for the Wilmington refinery increased by 38.0% to $5.01
per barrel in the first quarter of 1997 due to an improvement in the heavy,
sour crude oil price differential, lower overall crude oil costs, and a
strong market rebound during March 1997. Throughput at the Wilmington
refinery during the first quarter of 1997 increased by 25.5% over the same
period in 1996 to 104,900 barrels per day, principally due to the
processing of additional feed and blendstocks through the refinery's gas
oil hydrotreater which came on stream in the second quarter of 1996.
Retail marketing fuel volume increased by 2.7%, to 104,500 barrels per day,
principally as a result of increased demand; however, fuel margins
decreased by 20.2% to 9.1 cents per gallon in the first quarter of 1997,
due to intense competitive pressures.
Merchandise sales at the Company's convenience stores averaged $2.1 million
per day during the first quarter of 1997 as compared to $2.3 million per
day during the corresponding quarter of 1996, as a result of disposing of a
number of stations during recent months. Merchandise margins for the first
quarters of 1997 and 1996 remained relatively constant at 30.2% and 30.1%,
respectively.
Refining system operating expenses, before depreciation, of $74.3 million
were $7.8 million lower than in the first quarter of 1996, reflecting
merger related expense savings in 1997. Marketing and other operating
expenses of $94.4 million were $7.9 million higher than in the first
quarter of 1996, principally due to a $5.0 million environmental credit
received in 1996. Selling, general and administrative expenses of $29.7
million were $2.5 million lower than in the first quarter of 1996,
reflecting cost reductions and synergies from the Ultramar-Diamond Shamrock
merger in December 1996.
The petrochemicals and natural gas liquids businesses also contributed to
operating profit in the first quarter of 1997 with continued strong demand
for Nitromite fertilizer and propylene.
Northeast Operations
Sales and other revenues in the Northeast in the first quarter of 1997
totaled $818.1 million and were $80.0 million, or 10.8%, higher than in the
corresponding quarter of 1996 as average product prices increased by 17.4%.
Higher volume in retail activities, mainly associated with expansion into
New England which occurred in mid-1996, was principally responsible for the
improvement in revenue.
Refining margins decreased 36.2% to $2.47 per barrel in the first quarter
of 1997 as compared to $3.87 per barrel in the first quarter of 1996, due
to high crude oil costs and low import parity prices. Throughput at the
Quebec Refinery averaged 148,600 BPD or 2.9% higher than in the first
quarter of 1996, as throughput was adversely affected in the first quarter
of 1996 by delays in crude shipping due to bad weather conditions. Overall
retail margins increased 5.1 cents per gallon, or 21.2%, to 29.2 cents per
gallon in the first quarter of 1997 as compared to the corresponding
quarter of 1996, reflecting the Home Heat and Cardlock segments' ability to
maintain prices as costs declined. Retail marketing volumes increased
11.2% as compared with the first quarter of 1996, to 70,600 barrels per
day, as a result of the Company's expanding home heating oil operations and
the implementation of the "value plus" pricing program in the Company's
Canadian retail gasoline operations late in the second quarter of 1996.
Refinery operating expenses, before depreciation, totaled $11.9 million or
89 cents per barrel in the first quarter of 1997 as compared to $11.3
million or 86 cents per barrel in the first quarter of 1996. Refinery
operating expenses in the first quarter of 1997 reflect increased
throughput and higher maintenance costs. Selling, general and
administrative expenses of $42.3 million were $3.6 million higher than in
the first quarter of 1996 principally due to the previously mentioned
acquisition of home heating oil and distribution operations in the
northeast United States.
Combined Interest and Income Taxes
Net interest expense of $30.1 million in the first quarter of 1997 was $5.3
million higher than in the corresponding quarter of 1996. Borrowing levels
increased in the first quarter of 1997, compared to the same period in
1996, and the Company capitalized interest in the first quarter of 1996,
for the Gas Oil Hydrotreater and other major capital expenditure projects
in California.
<PAGE>
The consolidated income tax provisions for the first quarter of 1997 and
1996 were based upon the Company's estimated effective income tax rates for
the years ending December 31, 1997 and 1996 of 39.7% and 40.2%,
respectively. The consolidated effective income tax rates exceed the U.S.
Federal statutory income tax rate primarily due to state income taxes and
the effects of foreign operations.
Outlook
The Company's earnings depend largely on refining and retail marketing
margins. The petroleum refining and marketing industry has been and
continues to be volatile and highly competitive. The cost of crude oil
purchased by the Company as well as the price of refined products sold by
the Company have fluctuated widely in the past. As a result of the
historic volatility of refining and marketing margins and the fact that
they are affected by numerous diverse factors, it is impossible to predict
future margin levels.
In general, industry gasoline inventories are lower than they were a year
ago. This should bode well for better margins, as the industry enters the
spring and summer driving season. In addition, backwardation has moderated
in the crude oil market and crude oil prices have been declining and are
relatively stable at present.
California refining margins are reduced somewhat from the first quarter;
however, retail margins have improved significantly. As product prices
stabilized and the Company was able to run lower cost crude oil, Texas
refining margins have also improved. Southwest retail margins, which
includes California, have improved early in the second quarter of 1997 from
a very weak first quarter but are still lower than recent historical
levels.
In eastern Canada, refining spreads have improved from the first quarter
while retail margins have weakened slightly as the heating oil season came
to an end.
Certain Forward Looking Statements
This Quarterly Report on Form 10-Q contains certain "forward-looking"
statements as such term is defined in the Private Securities Litigation
Reform Act of 1995 and information relating to the Company and its
subsidiaries that are based on the beliefs of the Company's management as
well as assumptions made by and information currently available to the
Company's management. When used in this report, the words "anticipate,"
"believe," "estimate," "expect," and "intend" and words or phrases of
similar import, as they relate to the Company or its subsidiaries or
Company management, are intended to identify forward-looking statements.
Such statements reflect the current risks, uncertainties and assumptions
related to certain factors including, without limitations, competitive
factors, general economic conditions, customer relations, relationships
with vendors, the interest rate environment, governmental regulation and
supervision, seasonality, distribution networks, product introductions and
acceptance, technological change, changes in industry practices, one-time
events and other factors described herein and in other filings made by the
Company with the Securities and Exchange Commission. Based upon changing
conditions, should any one or more of these risks or uncertainties
materialize, or should any underlying assumptions prove incorrect, actual
results may vary materially from those described herein as anticipated,
believed, estimated, expected or intended. The Company does not intend to
update these forward-looking statements.
Capital Expenditures
The refining and marketing of petroleum products is a capital intensive
business. Significant capital requirements include expenditures to upgrade
or enhance operating facilities to meet environmental regulations and
maintain the Company's competitive position as well as to acquire, build
and maintain broad-based retail networks. The capital requirements of the
Company's operations consist primarily of (i) reliability, environmental
and regulatory expenditures, such as those required to maintain equipment
reliability and safety and to address environmental regulations (including
reformulated fuel specifications, stationary source emission standards and
underground storage tank regulations); and (ii) growth opportunity
expenditures, such as those planned to expand and upgrade its retail
marketing business, to increase the capacity of certain refinery processing
units and pipelines and to construct additional petrochemical processing
units.
<PAGE>
During the first quarter of 1997, capital expenditures and acquisition of
marketing operations totaled $60.0 million, of which $29.9 million related
to growth opportunity expenditures. Growth capital spending included $11.9
million for the continued construction of the benzene, toluene, and xylene
("BTX") extraction unit at the Three Rivers refinery, which has started up
in the second quarter of 1997. Other growth capital spending, during the
first quarter of 1997 included $5.4 million to increase conversion
capability at the Quebec refinery and $5.4 million to increase pipeline and
terminal capacity at Denver, El Paso and Albuquerque.
In conjunction with its plans to expand and upgrade its retail marketing
operations, the Company also spent $16.8 million related to retail
marketing growth projects. Retail capital spending included the acquisition
of two retail home heating operations in the northeast United States and
the completion of six new stores in Arizona, California and Colorado.
The Company believes that the Quebec provincial government may issue new
refinery liquid effluent regulations during 1998 which may require
modifications and additions to the Quebec Refinery's waste water treatment
facilities. The Company has completed a detailed process design and
estimates the cost of potential capital expenditures required to comply
with the expected regulations to be approximately $11.6 million. It is
expected that any required construction for the modifications and new
equipment would begin in 1998 and be completed to meet the anticipated new
regulations.
The Company is continually investigating strategic acquisitions and other
business opportunities, some of which may be material, that will complement
its current business activities.
The Company expects to fund its capital expenditures over the next several
years from cash provided by operations and, to the extent necessary, from
the proceeds of borrowings under its bank credit facilities and its
commercial paper and medium-term note programs discussed below. In
addition, depending upon its future needs and the cost and availability of
various financing alternatives, the Company may, from time to time, seek
additional debt or equity financing in the public or private markets.
Liquidity and Capital Resources
At March 31, 1997, the Company had cash and cash equivalents of $99.4
million. The Company has committed, unsecured bank facilities which
provide a maximum of $500.0 million and Cdn. $200.0 million of available
credit, and a $200.0 million commercial paper program supported by the
unsecured, committed U. S. dollar bank facility. The Company's bank
facilities require the maintenance of certain financial ratios and contain
covenants with which the Company must comply. The Company believes these
covenants will not have a significant impact on the Company's liquidity or
its ability to pay dividends. At March 31, 1997, the Company had
approximately $489.5 million of remaining borrowing capacity under its
committed bank facilities and commercial paper program. In addition to its
committed bank facilities, on March 31, 1997, the Company had approximately
$232.0 million of borrowing capacity under uncommitted, unsecured short-term
lines of credit with various financial institutions.
In addition to its bank credit facilities, the Company has $50.0 million
available under a debt shelf registration previously filed with the
Securities and Exchange Commission. The net proceeds from any offering
under the existing shelf registration would add to the Company's working
capital and could be available for general corporate purposes.
<PAGE>
The Company also has $107.0 million available pursuant to lease agreements
aggregating $290.0 million, under which the lessors will construct or
acquire and lease to the Company primarily retail marketing sites.
The Company believes its current sources of funds will be sufficient to
satisfy its capital expenditure, working capital, debt service and dividend
requirements for at least the next twelve months.
In connection with the proposed acquisition of Total Petroleum (North
America) Ltd., the Company has begun to negotiate new credit, lease and
other financing arrangements.
On May 6, 1997, the Board of Directors declared a quarterly dividend of
$.275 per common share payable on June 6, 1997, to holders of record on May
20, 1997. In addition, the Board of Directors declared a quarterly
dividend of $.625 per share on the Company's 5% Cumulative Convertible
Preferred Stock payable on June 13, 1997, to holders of record on May 20,
1997.
Cash Flows for the Three Months Ended March 31, 1997
During the three months ended March 31, 1997, the Company's cash position
decreased $98.5 million to $99.4 million. Net cash provided by operating
activities, before changes in non-cash operating assets and liabilities,
was $87.9 million. Net cash provided by operating activities (after
changes in non-cash operating assets and liabilities) totaled $5.9 million.
Net cash used in investing activities during the three-month period ended
March 31, 1997 totaled $19.0 million, representing scheduled capital
expenditures, the acquisition of a marketing operations in the Northeast
and expenditures for investments, net of the proceeds from asset disposals.
Net cash used in financing activities during the three-month period ended
March 31, 1997, totaled $85.1 million, including the repayment of
borrowings under the Company's commercial paper program of $72.2 million
and the payment of dividends of $21.6 million. These uses of cash were
partially offset by increases in other long-term debt of $7.9 million and
the issuance of Common Stock upon the exercise of employee stock options of
$0.8 million.
Recent Developments
On April 15, 1997, the Company entered into a definitive agreement to
acquire Total Petroleum (North America) Ltd. ("Total"), a Denver, Colorado
based petroleum refining and marketing company. The agreement provides for
the issuance of .322 shares of Common Stock for each outstanding share of
Total Common Stock. The Company expects to issue approximately 13.0
million shares of Common Stock and will assume approximately $414.0 million
of Total debt. The transaction is subject to the approval of Total
shareholders, completion of due diligence and customary approvals. The
transaction is expected to be completed near the end of the second quarter
of 1997. Total has approximately 6,000 employees, and operates refineries
in Ardmore, Oklahoma, Alma, Michigan, and Denver, Colorado. The three
refineries have a combined throughput capacity of approximately 150,000
barrels of crude oil per day. Total distributes gasoline and merchandise
through approximately 2,100 branded outlets, of which approximately 560 are
company-operated.
Seasonality
In the Northeast, demand for petroleum products varies significantly during
the year. Distillate demand during the first and fourth quarters can range
from 30% to 40% above the average demand during the second and third
quarters. The substantial increase in demand for heating oils during the
winter months results in the Company's Canadian operations having
significantly higher accounts receivable and inventory levels during the
first and last quarters of each year. The Company's Southwest operations
are less affected by seasonal fluctuations in demand than its operations in
the Northeast. The working capital requirements of the Southwest
operations are limited due to lower inventory requirements and show little
fluctuation throughout the year.
<PAGE>
Exchange Rates
The value of the Canadian dollar relative to the U.S. dollar has weakened
substantially since the acquisition of the Canadian operations in 1992. As
the Company's Canadian operations are in a net asset position, the weaker
Canadian dollar has reduced, in U.S. dollars, the Company's net equity at
March 31, 1997, by $62.2 million. Although the Company expects the
exchange rate to fluctuate during 1997, it cannot reasonably predict its
future movement.
With the exception of its crude oil costs, which are U.S. dollar
denominated, fluctuations in the Canadian dollar exchange rate will affect
the U.S. dollar amount of revenues and related costs and expenses reported
by the Canadian operation. The potential impact on refining margin of
fluctuating exchange rates together with U.S. dollar denominated crude oil
costs is mitigated by the Company's pricing policies in the Northeast,
which generally pass on any change in the cost of crude oil. Marketing
margin, on the other hand, has been adversely affected by exchange rate
fluctuations as competitive pressures have, from time to time, limited the
Company's ability to promptly pass on the increased costs to the ultimate
consumer.
The Company has considered various strategies to manage currency risk and
it hedges the Canadian currency risk when such hedging is considered
economically appropriate.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Arrangement Agreement
10.2 Stockholder Agreement
11.0 Computation of Earnings Per Share
27.1 Financial Data Schedule
(b) Reports on Form 8-K
Current Report on Form 8-K dated March 4, 1997 (File No. 11154) relating to
change in Registrants' certifying accountant.
Current Report on Form 8-K/A dated March 4, 1997 (File No. 11154) relating
to change in Registrants' certifying accountant.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ULTRAMAR DIAMOND SHAMROCK CORPORATION
(REGISTRANT)
By: /s/ H. PETE SMITH
H. PETE SMITH
EXECUTIVE VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER,
MAY 14, 1997
<PAGE>
Exhibit 11 - Statement re: Computation of Earnings Per Share
Three Months Ended
March 31,
1997 1996
(dollars in millions,
except per share data
and shares in thousands)
Primary:
Average common shares outstanding 74,724 74,135
Net effect of dilutive stock options -
based on the treasury stock method using
average market price 837 726
Total 75,561 74,861
Net income $27.6 $22.0
Dividend requirement on preferred stock 1.1 1.1
Net income applicable to common shares $26.5 $20.9
Net income per common share: $.35 $.28
Fully Diluted:
Average common shares outstanding 74,724 74,135
Net effect of dilutive stock options -
based on the treasury stock method
using the period-end market price, if
higher than average market price 1,005 893
Assumed conversion of 5% cumulative
preferred stock 3,320 3,320
Total 79,049 78,348
Net income $27.6 $22.0
Net income per common share $.35 $.28
ARRANGEMENT AGREEMENT
among
ULTRAMAR DIAMOND SHAMROCK CORPORATION
3007152 NOVA SCOTIA COMPANY
and
TOTAL PETROLEUM (NORTH AMERICA) LTD.
Dated as of April 15, 1997
<PAGE>
TABLE OF CONTENTS
I. THE ARRANGEMENT
1.01. The Arrangement
1.02. Effective Time
II. REPRESENTATIONS AND WARRANTIES
2.01. Representations and Warranties of Topna
2.02. Representations and Warranties of UDS and Canco
III. COVENANTS RELATING TO CONDUCT OF BUSINESS
3.01. Conduct of Business
3.02. No Solicitation by Topna
IV. ADDITIONAL AGREEMENTS
4.01. Preparation of the Proxy Statement; Topna
Shareholders Meeting
4.02. Access to Information; Confidentiality
4.03. Reasonable Efforts
4.04. Stock Options
4.05. Certain Employee Matters
4.06. Indemnification, Exculpation and Insurance
4.07. Fees and Expenses
4.08. Public Announcements
4.09. Affiliates
4.10. NYSE Listing
4.11. Shareholder Litigation
4.12. Issuance of Canco Shares
V. CONDITIONS PRECEDENT
5.01. Conditions to Each Party's Obligation to Effect
the Arrangement
5.02. Conditions to Obligations of UDS and Canco
5.03. Conditions to Obligation of Topna
5.04. Frustration of Closing Conditions
VI. TERMINATION, AMENDMENT AND WAIVER
6.01. Termination
6.02. Effect of Termination
6.03. Amendment
6.04. Extension; Waiver
6.05. Procedure for Termination, Amendment, Extension
or Waiver
<PAGE>
VII. GENERAL PROVISIONS
7.01. Nonsurvival of Representations and Warranties
7.02. Notices
7.03. Definitions
7.04. Interpretation
7.05. Counterparts
7.06. Entire Agreement; No Third-Party Beneficiaries
7.07. Governing Law
7.08. Assignment
7.09. Enforcement
EXHIBITS
Exhibit Title
A Plan of Arrangement
B Form of Affiliate Letter
SCHEDULES
Schedule Title
2.01(b) Subsidiaries
2.01(c) Options and Rights
2.01(d) Authority; Noncontravention
2.01(e) SEC and CSC Documents; Undisclosed Liabilities
2.01(g) Absence of Certain Changes or Events
2.01(h) Litigation
2.01(i) Owned Real Property
2.01(j) Environmental Matters
2.01(k) Compliance with Applicable Laws
2.01(l) Absence of Changes in Benefit Plans
2.01(m) ERISA Compliance
2.01(n) Taxes
2.01(p) Contracts
2.01(s) Transactions with Affiliates
3.01(a) Conduct of Business
4.05 Employee Matters
7.03(d) Officers with Knowledge
<PAGE>
ARRANGEMENT AGREEMENT
ARRANGEMENT AGREEMENT, dated as of April 15, 1997, among Ultramar
Diamond Shamrock Corporation, a Delaware corporation ("UDS"), 3007152 Nova
Scotia Company, a Nova Scotia unlimited liability company and a wholly
owned Subsidiary of UDS ("Canco"), and Total Petroleum (North America)
Ltd., a Canadian corporation ("Topna").
RECITALS
A. The respective Boards of Directors of UDS, Canco and Topna have
determined that the Arrangement and other transactions contemplated hereby
(collectively, the "Arrangement Transactions") are consistent with, and in
furtherance of, their respective long-term business strategies and goals
and have therefore approved the Arrangement Transactions and this
Agreement.
B. UDS, Canco and Topna desire to make certain representations and
warranties and agree to certain covenants in connection with the
Arrangement Transactions and to prescribe various conditions thereto.
NOW, THEREFORE, in consideration of the representations, warranties
and covenants herein contained, the parties agree as follows:
I. THE ARRANGEMENT
1.01. The Arrangement. On the terms and subject to the conditions
set forth in this Agreement, and in accordance with a plan of arrangement
substantially in the form attached hereto as Exhibit A (the "Plan of
Arrangement") and the Canada Business Corporations Act (the "CBCA"), Canco
will acquire all of the issued and outstanding shares of Topna Common
Stock ("Topna Shares") in exchange for shares of Common Stock of UDS ("UDS
Shares").
1.02. Effective Time. Subject to the provisions of this Agreement,
as soon as reasonably practicable after the execution of this Agreement,
Topna will apply to the Court of the Queen's Bench of Alberta (the
"Court") pursuant to Section 192 of the CBCA for an interim order in
substantially the form previously agreed to by UDS and Topna or such other
form as Canco and Topna may approve (such approvals not to be unreasonably
withheld or delayed) (the "Interim Order") providing for, among other
things, the calling and holding of the Topna Shareholders Meeting for the
purpose of obtaining the required shareholder approval of the arrangement,
including the exchange of securities as contemplated in the Plan of
Arrangement (collectively, the "Arrangement"), under Section 192 of the
CBCA. The Interim Order sought by Topna will provide that, for the
purpose of the Topna Shareholders Meeting, the requisite majority for the
approval of the Arrangement by the shareholders of Topna will be two-thirds of
the votes cast by the holders of Topna Shares who vote in
respect of the Arrangement. As promptly as practicable after satisfaction
or waiver of the conditions set forth in Article V (which will be
confirmed at the consummation of the Arrangement, such confirmation to be
so confirmed at a meeting to be held at Jones, Day, Reavis & Pogue, 599
Lexington Avenue, New York, New York not later than the second business
day after such satisfaction or waiver (the "Closing")), Topna will apply
for a final order of the Court approving the Arrangement (the "Final
Order" and, together with the Interim Order, the "Arrangement Orders").
If the Final Order is obtained, Topna will file articles of arrangement
and such other documents as may be required to give effect to the
Arrangement (the "Arrangement Agreements"). Notwithstanding any other
provision hereof, Canco and UDS will have the right to approve the
Arrangement Orders and the Arrangement Documents (which approval will not
be unreasonably withheld or delayed, provided that the Arrangement Orders
and the Arrangement Documents (collectively, the "Arrangement Papers") are
consistent with this Agreement and do not adversely affect the rights of
the parties hereunder or the relative benefits to be obtained from the
Arrangement).
II. REPRESENTATIONS AND WARRANTIES
2.01. Representations and Warranties of Topna. Topna hereby
represents and warrants to UDS and Canco that except as disclosed in the
Topna SEC Documents filed prior to the date hereof or as set forth on the
disclosure schedule delivered by Topna to UDS and Canco prior to the
execution of this Agreement (the "Topna Disclosure Schedule"):
(a) Organization, Standing and Corporate Power. Each of Topna and
each of its Subsidiaries (collectively, the "Topna Companies") is a
corporation or other legal entity duly organized, validly existing and in
good standing (with respect to jurisdictions which recognize such concept)
under the Laws of the jurisdiction in which it is organized and has the
requisite corporate or other power, as the case may be, and authority to
carry on its business as now being conducted. Each Topna Company is duly
qualified or licensed to do business and is in good standing (with respect
to jurisdictions which recognize such concept) in each jurisdiction in
which the nature of its business or the ownership or leasing of its
properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed or to
be in good standing individually or in the aggregate could not reasonably
be expected to have a Topna Material Adverse Effect. Topna has delivered
to UDS, prior to the execution of this Agreement, complete and correct
copies of its articles of continuance and bylaws and has made available to
UDS complete and correct copies of the articles of incorporation and
bylaws (or comparable organizational documents) of each of its Significant
Subsidiaries, in each case as amended to date.
(b) Subsidiaries. Exhibit 21 to Topna's Annual Report on Form 10-K
for the year ended December 31, 1996 (the "Topna 1996 10-K") correctly
lists all Significant Subsidiaries of Topna. Section 2.01(b) of the Topna
Disclosure Schedule correctly lists all other Subsidiaries of Topna. All
the outstanding shares of capital of, or other equity interests in, each
Subsidiary of Topna or of any of its Subsidiaries have been validly issued
and are fully paid and nonassessable and are owned directly or indirectly
by Topna, free and clear of all pledges, claims, options, liens, charges,
encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens").
(c) Capital Structure. The authorized capital of Topna consists of
an unlimited number of Topna Shares, 10,000,000 first preferred shares
("First Preferred"), and 10,000,000 second preferred Shares ("Second
Preferred" and, together with the First Preferred, the "Topna Preferred
Shares"). At the close of business on the second business day immediately
preceding the date hereof (the "Measurement Date"), (i) 39,143,896 Topna
Shares were issued and outstanding, (ii) no Topna Preferred Shares were
issued or outstanding or held by Topna in its treasury, and (iii) based on
Topna's records, 2,440,991 Topna Shares were reserved for issuance
pursuant to options listed in Section 2.01(c) of the Topna Disclosure
Schedule granted under stock plans listed in Section 2.01(c) of the Topna
Disclosure Schedule (the "Topna Stock Plans") and 829,527 Topna Shares
(the "Reserved Shares") were reserved under the Topna Stock Plans for
issuance pursuant to options that had not yet been granted thereunder.
Except as set forth above and excluding the Reserved Shares, at the close
of business on the Measurement Date, no shares of capital stock or other
voting securities of Topna were issued, reserved for issuance or
outstanding. Except as set forth above, at the close of business on the
Measurement Date, there were, and as of the Effective Time there will be,
no outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which any Topna
Company is a party or by which any of them is bound obligating any Topna
Company to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital or other voting securities of any Topna
Company or obligating any Topna Company to issue, grant, extend or enter
into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking (collectively, "Topna Rights") and
no Topna Rights have been issued since the Measurement Date. Section
2.01(c) of the Topna Disclosure Schedule sets forth a complete and correct
list of the number of Topna Shares subject to Topna Rights and the
exercise prices and other material terms thereof. All outstanding capital
shares of Topna are, and all shares which may be issued pursuant to any
Topna Right will be, when issued in accordance with the terms of such
Topna Right, duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive rights. There are, and as of the Effective
Time there will be, no bonds, debentures, notes or other indebtedness or
securities (other than Topna Shares) of any Topna Company having the right
to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which shareholders of any Topna Company
may vote ("Topna Voting Debt"). There are no outstanding contractual
obligations of any Topna Company to repurchase, redeem or otherwise
acquire any capital shares of any Topna Company. As of the close of
business on the Measurement Date, there were no outstanding contractual
obligations of any Topna Company to vote or to dispose of any capital
shares of any Topna Company and no such obligations have arisen since the
Measurement Date.
(d) Authority; Noncontravention. Topna has all requisite corporate
power and authority to enter into each of the Arrangement Agreements and,
subject to the approvals contemplated in the Arrangement Orders or this
Agreement, to consummate the transactions contemplated thereby. The
execution and delivery of each of the Arrangement Agreements by Topna and
the consummation by Topna of the transactions contemplated thereby have
been duly authorized by all necessary corporate action on the part of
Topna, subject, in the case of the adoption of this Agreement, to the
Topna Shareholder Approval. The Arrangement Agreements have been duly
executed and delivered by Topna and constitute legal, valid and binding
obligations of Topna, enforceable against Topna in accordance with their
terms. The execution and delivery of the Arrangement Agreements do not,
and the consummation of the transactions contemplated thereby and
compliance with the provisions thereof will not, result in the creation of
any Lien upon any of the properties or assets of any Topna Company, except
such Liens as could not, individually or in the aggregate, reasonably be
expected to have a Topna Material Adverse Effect, or conflict with, or
result in any violation of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation
or acceleration of any obligation or loss of a material benefit under, (i)
the articles of incorporation or bylaws (or the comparable organizational
documents) of any Topna Company, (ii) any loan or credit agreement, note,
bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license to which any Topna Company is a party or
which is applicable to any Topna Company or its properties or assets, or
(iii) subject to the governmental filings and other matters referred to in
the following sentence, any judgment, order or decree ("Order") or
statute, law, ordinance, rule, regulation or other law (including without
limitation the common law) ("Law") applicable to any Topna Company or its
properties or assets, other than, in the case of clauses (ii) and (iii),
any such conflicts, violations, defaults, rights or losses that,
individually or in the aggregate, could not reasonably be expected to have
a Topna Material Adverse Effect. No consent, approval, Order or
authorization of, or registration, declaration or filing with, any United
States, Canadian, federal, provincial, state, local or foreign government
or any court, administrative or regulatory agency or commission or other
governmental authority or agency (a "Governmental Entity") is required by
or with respect to any Topna Company in connection with the execution and
delivery of any of the Arrangement Agreements by Topna or the consummation
by Topna of the transactions contemplated thereby, except (A) pursuant to
applicable premerger notification and waiting period requirements under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"); (B) pursuant to applicable requirements under the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder
(the "Exchange Act"), as may be required in connection with the
Arrangement Agreements and the transactions contemplated thereby; (C) the
filings of the Arrangement Documents required by the CBCA and approvals
contemplated by Section 1.02; (D) required notices, filings, consents and
approvals under the Investment Canada Act and under the Competition Act
(Canada); and (E) where the failure to obtain such consents, approvals,
orders, or authorizations, registrations, declarations or filings could
not, individually or in the aggregate, reasonably be expected to have a
Topna Material Adverse Effect.
(e) SEC and CSC Documents; Undisclosed Liabilities. Since January
1, 1996, Topna has filed or disclosed with the Securities and Exchange
Commission (the "SEC") all reports, schedules, forms, information,
statements and other documents required to be filed by it with the SEC
(the "Topna SEC Documents") and has filed with all Canadian, federal,
provincial and local Governmental Entities having jurisdiction with
respect to the registration or qualification of Topna Shares and Topna's
public reporting obligations as a result of such registration or
qualification all forms, reports and documents required to be filed by it
therewith (collectively, the "Topna CSC Documents"). As of their
respective dates, the Topna SEC Documents complied in all material
respects with the requirements of the Securities Act of 1933, as amended
(the "Securities Act"), or the Exchange Act, as the case may be, and the
rules and regulations of the SEC promulgated thereunder applicable to such
Topna SEC Documents, and the Topna CSC Documents complied with all
applicable Laws and policies in all material respects. Except to the
extent that information contained in any Topna SEC Document has been
revised or superseded by a later Topna SEC Document or any information in
any Topna CSC Document has been revised or superseded by a later filed
Topna CSC Document in any such case filed prior to the date hereof (the
"Topna Filed SEC/CSC Documents"), none of the Topna SEC Documents or Topna
CSC Documents contains any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements of Topna
included in the Topna SEC Documents complied, as of their respective dates
of filing with the SEC, in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto, were prepared in accordance with United States
generally accepted accounting principles ("U.S. GAAP") (except, in the
case of unaudited statements, as permitted by Form 10-Q of the SEC)
applied on a consistent basis during the periods involved (except as
specified therein) and fairly present in all material respects the
consolidated financial position of Topna and its consolidated subsidiaries
as of the dates thereof and the consolidated results of their operations
and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal recurring year-end audit adjustments).
Except (i) as reflected in the consolidated balance sheet of Topna as of
December 31, 1996 included within the Topna 1996 10-K (the "12/31/96 Topna
Balance Sheet") or as specifically described in the notes thereto, (ii)
for liabilities incurred in connection with the Arrangement Agreements or
the transactions contemplated thereby, and (iii) for liabilities and
obligations incurred since December 31, 1996 in the ordinary course of
business consistent with past practice, none of the Topna Companies has
any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by U.S. GAAP to be reflected in a
consolidated balance sheet (including without limitation the notes
thereto), including without limitation liabilities arising under any Laws
relating to the protection of health, safety or the environment
("Environmental Laws"). Topna has previously delivered to UDS its
business plan for the period 1997-2001 (the "Five-Year Plan"), including
the material assumptions on which it was based. The Five-Year Plan has
been prepared in good faith and is based upon assumptions believed by
management to be reasonable for the purposes for which it was prepared at
the time it was made. Giving effect to changes in the refining and
petroleum products and convenience store marketing business generally in
the United States since the time the Five-Year Plan was prepared, the
executive officers of Topna have no reason to believe that any such
assumption is no longer valid for such purposes in any material respect.
(f) Information Supplied. None of the information to be supplied by
Topna specifically for inclusion or incorporation by reference in the
proxy statement relating to the Topna Shareholders Meeting (the "Proxy
Statement") will, at the date it is first mailed to Topna's shareholders
or at the time of the Topna Shareholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading.
The Proxy Statement will comply as to form in all material respects with
all Laws applicable thereto, except that no representation or warranty is
made by Topna herein or in the immediately preceding sentence with respect
to statements made or incorporated by reference therein based on
information supplied by UDS or Canco specifically for inclusion or
incorporation by reference in the Proxy Statement.
(g) Absence of Certain Changes or Events. Since December 31, 1996,
Topna has conducted its business only in the ordinary course and, except
as expressly contemplated in this Agreement, there has not been (i) any
event, change or condition which could reasonably be expected to result in
a Topna Material Adverse Effect, (ii) any declaration, setting aside or
payment of any dividend or other distribution (whether in cash, shares or
property) with respect to any of Topna's capital, other than regular
quarterly dividends of U.S. $0.075 per Topna Share, (iii) any split,
combination or reclassification of any of Topna's capital or any issuance
or the authorization of any issuance of any other securities in respect
of, in lieu of or in substitution for shares of Topna's capital, (iv) (A)
any granting by any Topna Company to any of its directors, officers or
other key employees of any increase in compensation, (B) any granting by
any Topna Company to any such director, officer or key employee of any
increase in severance or termination pay or incurrence of any obligation
in respect thereof, or (C) any entry by any Topna Company into any
employment, severance or termination agreement with any such executive
officer or key employee, (v) any transaction between any Topna Company and
any officer, director or shareholder of any Topna Company, or any
Affiliate, associate or relative of any of the foregoing, or any payment
to or for the benefit of, directly or indirectly, any of the foregoing,
other than transactions in the ordinary course of business with Total, a
French societe anonyme ("Total"), described by category on the Topna
Disclosure Schedule, and (vi) any transaction consummated or agreement
entered into by any Topna Company that would be required to be described
on the Topna Disclosure Schedule pursuant to Rule 402 or 404 of the SEC's
Regulation S-K if such Rules applied to disclosures by the Topna Companies
on the Topna Disclosure Schedule (any such transaction or agreement, a
"Related-Party Transaction"). For purposes of this Agreement, "key
employee" means any employee whose current salary and targeted bonus
exceeds U.S. $100,000 per annum.
(h) Litigation. Except for claims for money damages alone of less
than $250,000 in respect of any single claim or series of related claims,
there is no suit, judicial or regulatory action or proceeding pending or,
to the Knowledge of Topna, threatened, against or affecting any Topna
Company, any Order or notice of any Order of any Governmental Entity or
arbitrator outstanding against Topna or any of its Subsidiaries, or, to
the Knowledge of Topna, any such threatened or proposed Order.
(i) Owned Real Property. All real property owned by a Topna Company
(the "Owned Real Property") and all real property leased by any Topna
Company ("Leased Real Property") is so owned or leased, as the case may
be, free and clear of all Liens, mortgages, easements, rights-of-way or
other restrictions of any nature whatsoever, except for (A) Liens that are
listed or described on Section 2.01(i) of the Topna Disclosure Schedule,
(B) mechanics', carriers', workers', warehouseman's, materialman's,
repairmen's or other Liens arising or incurred in the ordinary course of
business, (C) Liens for taxes, assessments and other similar governmental
charges which are not due and payable or which may thereafter be paid
without penalty, (D) other imperfections of title or encumbrances, if any,
which do not materially affect the marketability of the property subject
thereto and do not materially impair the use of the property subject
thereto in the business as presently conducted, and (E) other Liens
arising as a matter of Law.
(j) Environmental Matters. The Topna Companies have conducted all
operations at or from the Owned Real Property and Leased Real Property in
compliance with all applicable Environmental Laws. None of the Topna
Companies has received any directive, order, notice, request for
information or demand from any federal, state or local Governmental
Authority, with jurisdiction to enforce the Environmental Laws asserting
any non-compliance or violation of the Environmental Laws, or identifying
any of the Topna Companies as a potential responsible party liable or
potentially liable under any applicable Environmental Laws for the
investigation or remediation of any real property, including any Owned
Real Property and Leased Real Property, formerly owned or operated real
property, or any off-site facilities at which any of the Topna Companies
has disposed of waste. To the Knowledge of Topna, there are no conditions
existing at any Owned Real Property, Leased Real Property and formerly
owned or operated real properties that require remedial, corrective action
or monitoring under any applicable Environmental Laws. To the Knowledge
of Topna, no Topna Company has contractually or by operation of any
Environmental Law assumed any liabilities arising under the Environmental
Laws of any predecessors or any other Person.
(k) Compliance with Applicable Laws. The Topna Companies hold all
permits, licenses, variances, exemptions, Orders and approvals of all
Governmental Entities which are material to the operation of the
businesses of the Topna Companies, taken as a whole, as conducted on the
date hereof (the "Topna Permits"). The Topna Companies are in compliance
with the terms of the Topna Permits and all applicable Laws. No action,
demand, requirement or investigation by any Governmental Entity with
respect to any of the Topna Companies is pending or, to the Knowledge of
Topna, threatened.
(l) Absence of Changes in Benefit Plans. Since December 1, 1996,
except as set forth in Section 2.01(l) of the Topna Disclosure Schedule or
as contemplated in Section 4.05, (i) there has not been any adoption or
amendment by any of the Topna Companies of any collective bargaining
agreement or any bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option,
phantom stock, retirement, vacation, severance, disability, death benefit,
hospitalization, medical or other plan, arrangement or understanding
(whether or not legally binding) providing benefits to any current or
former employee, officer or director of any Topna Company and (ii) no
Topna Company has entered into any employment, consulting, severance,
termination or indemnification agreement, arrangement or understanding
with any current or former employee, officer or director thereof.
(m) ERISA Compliance. (i) The Topna Disclosure Schedule sets forth
all "employee benefit plans," as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and all
other material employee benefit arrangements or policies, including
without limitation severance pay, sick leave, vacation pay, salary,
continuation, retirement, savings, deferred compensation, bonus, stock
purchase, stock option, hospitalization, medical insurance, life insurance
and scholarship programs, (1) maintained by any of the Topna Companies and
(2) to which any of the Topna Companies contributes or is obligated to
contribute, in either case on behalf of current or former employees of any
of the Topna Companies or any current or former employees of Total or any
Affiliate thereof who as of the date hereof perform or performed services
primarily for any of the Topna Companies (any such current employees being
referred to herein collectively as "Business Employees"), other than any
Multiemployer Plan (as defined below) (the "Employee Benefit Plans")
maintained or contributed to by any Person (whether or not incorporated)
which is treated as a single employer under Section 414(b), (c), (m) or
(o) of the Internal Revenue Code of 1986, as amended (the "Code") (an
"ERISA Affiliate"). Topna has previously delivered or made available to
UDS a complete and correct copy of each of the Employee Benefit Plans.
(ii) None of the Topna Companies or any of their ERISA Affiliates has
incurred any liability or obligation that would result in a material
adverse effect due to a complete or partial withdrawal from any plan
described in Section 3(37) of ERISA (a "Multiemployer Plan") prior to the
date hereof, nor has any of them incurred any liability or obligation
that, individually or in the aggregate, could reasonably be expected to
have a material adverse effect due to the termination or reorganization of
a Multiemployer Plan, in either case which remains unsatisfied as of the
date hereof.
(iii) Each Employee Benefit Plan intended to qualify under Section 401
of the Code and the trusts maintained pursuant thereto has received a
determination letter from the Internal Revenue Service (the "IRS") that
they are so qualified and exempt from federal income taxation under
Section 401 of the Code, and, to the Knowledge of Topna, nothing has
occurred with respect to the operation of any such Employee Benefit Plan
which could reasonably be expected to cause the loss of such qualification
or exemption or the imposition of any liability, penalty or tax under
ERISA or the Code.
(iv) No accumulated funding deficiencies exist in any of the Employee
Benefit Plans subject to Section 412 of the Code. No waivers of the
minimum funding requirements of Section 412 of the Code have been
requested or obtained by any of the Topna Companies or any of their ERISA
Affiliates.
(v) Complete and correct copies of the following documents with
respect to each of the Employee Benefit Plans, as applicable, have been
delivered or made available to UDS by Topna: (A) all material Employee
Benefit Plans and related trust documents, and amendments thereto, (B) the
most recent Forms 5500, (C) the most recent IRS determination letter, (D)
summary plan descriptions, and (E) the most recent actuarial report.
(vi) There are no pending actions, claims or lawsuits which have been
asserted or instituted against any Topna Company, the Employee Benefit
Plans, the assets of any of the trusts under such plans or the plan
sponsor or the plan administrator or, to the Knowledge of Topna, against
any fiduciary of the Employee Benefit Plans, concerning the operation of
any such plan (other than routine benefit claims made in the ordinary
course of plan administration for which plan administrative review
procedures have not been exhausted), nor does Topna have Knowledge of
facts which could reasonably be expected to form the basis for any such
claim or lawsuit, except with respect to any such claim or lawsuit which
could not, individually or in the aggregate, reasonably be expected to
have a material adverse effect.
(vii) Except for (A) any failures to maintain any Employee Benefit
Plan or (B) any prohibited transactions that could not, individually or in
the aggregate, reasonably be expected to have a material adverse effect,
the Employee Benefit Plans have been maintained in accordance with their
terms and with all applicable provisions of ERISA (including rules and
regulations thereunder) and other applicable federal and state Laws, and
none of the Topna Companies, or to the Knowledge of Topna, any other
"party in interest" or "disqualified person" with respect to the Employee
Benefit Plans, has engaged in a "prohibited transaction" within the
meaning of Section 4975 of the Code or Section 406 of ERISA with respect
to which an excise tax or penalty could reasonably be expected to be
imposed against any of the Topna Companies. To the Knowledge of Topna, no
fiduciary of any of the Employee Benefit Plans has, or could reasonably be
expected to become subject to, on account of actions taken prior to the
date hereof, any liability for breach of fiduciary duty or any other
failure to act or comply in connection with the administration or
investment of the assets of any Employee Benefit Plan, insofar as such
liability could reasonably be expected to have any adverse effect on the
benefits or participation of any Business Employee.
(viii) None of the Topna Companies or any of their ERISA Affiliates
has terminated any pension plan, as defined in Section 3(2) of ERISA and
which is subject to Title IV of ERISA or Section 412 of the Code ("Pension
Plan"), or incurred any liability to the Pension Benefit Guaranty
Corporation (the "PBGC") (other than for the payment of premiums) or to a
trustee appointed under Section 4042 of ERISA, for which any of the Topna
Companies would be liable following the date hereof. All premiums due the
PBGC with respect to the Pension Plans have been paid when due.
(ix) No liability under any Employee Benefit Plan which is intended
to be qualified under Section 401(a) of the Code respect to any current or
former Business Employee has been funded nor has any such obligation been
satisfied with the purchase of a contract from an insurance company that
is not rated AA or higher by Standard & Poor's Corporation or the
equivalent by any other nationally recognized rating agency.
(x) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (A) except as
provided in Section 4.04 and 4.05, result in any payment which would be
considered a "parachute payment" under Section 280G of the Code, without
reference to whether such payment is made to a "disqualified individual"
for purposes of Section 280G of the Code, becoming due to any current or
former Business Employee, (B) except as disclosed in Sections 4.05 and
4.06 and Schedule 4.05, increase any benefits otherwise payable to any
current or former Business Employee under any Employee Benefit Plan or
other material agreement to which any of the Topna Companies is subject,
or (C) except as provided in Section 4.04, result in the acceleration of
the time of payment or vesting of any such benefits, including to any such
payment, increase or acceleration that individually or collectively could
give rise to any amount that would not be deductible pursuant to Section
280G of the Code.
(xi) Except as described in Section 4.05, none of the Topna Companies
has any Contract, plan or commitment to create any additional Employee
Benefit Plan covering any current or former Business Employee or to modify
any existing Employee Benefit Plan with respect to any current or former
Business Employee.
(xii) There has been no "mass layoff" or "plant closing," as defined
in the Worker Adjustment and Retraining Notification Act ("WARN") or any
similar state or local "plant closing" law, with respect to the employees
of any of the Topna Companies with respect to which any of the Topna
Companies could be subject to liability in the future, except with respect
to any such liability which could not, individually or in the aggregate,
reasonably be expected to have a material adverse effect.
(n) Taxes. (i) Each Topna Company has filed all tax returns and
reports required to be filed by it or requests for extensions to file such
returns or reports have been timely filed, granted and have not expired,
and each Topna Company has paid (or Topna has paid on behalf of the other
Topna Companies) all taxes shown as due on such returns. The most recent
financial statements contained in the Topna SEC Documents reflect reserves
that are adequate under U.S. GAAP for all taxes payable or which may
become payable by the Topna Companies for all taxable periods and portions
thereof through the date of such financial statements.
(ii) No material deficiencies for taxes have been proposed, asserted
or assessed against any Topna Company that are not adequately reserved for
in the 12/31/96 Topna Balance Sheet. The income tax returns of the Topna
Companies consolidated in such returns have been examined and closed, or
the applicable statutes of limitations with respect to such returns after
giving effect to any and all extensions and waivers have expired, or
remain open only for the periods described in the Topna Disclosure
Schedule, and except as reflected therein are not currently under audit or
examination by any taxing authority.
(iii) None of the Topna Companies is a party to, or is bound by, any
tax allocation or tax sharing agreement with any third party, or has any
current or potential contractual obligation to indemnify any other Person,
with respect to any material amount of taxes.
(iv) Each Topna Company has withheld and paid all taxes required by
it to be withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, shareholder or other third
party, except where the failure to withhold and pay such taxes,
individually or in the aggregate, could not reasonably be expected to have
a Topna Material Adverse Effect.
(v) The information set forth in Section 2.01(n)(v) of the Topna
Disclosure Schedule represents Topna management's best estimate of the
minimum amount of adjusted cost base to Topna of the shares of Total
Petroleum, Inc., Topna's direct wholly owned Subsidiary ("TPI"), and the
exempt surplus of TPI in respect of Topna, in each case in accordance with
applicable Canadian tax Law (the sum of such adjusted cost base and exempt
surplus, the "TPI Tax Basis").
(vi) As used in this Agreement, "taxes" includes all United States,
Canadian, federal, state, provincial, foreign and local income, property,
sales, excise and other taxes or similar governmental charges.
(o) Insurance. The Topna Companies are insured, and will be so
insured through the Effective Time, against risks and in aggregate amounts
deemed to be reasonable and sufficient in the judgment of management and
consistent in all material respects with then-prevailing industry
practice.
(p) Contracts. The Topna Disclosure Schedule lists each written or
oral contract, lease or other legally binding obligation of a contractual
nature (a "Contract") which is of a type identified below:
(i) Contract for the employment of any Person or any consulting
Contract with any current or former director or officer of Topna,
Total or any Affiliate thereof;
(ii) Contract with any labor union or association;
(iii) Contract pertaining to a Related-Party Transaction with any
director, officer or Affiliate of Topna, other than those entered
into with Total in the ordinary course of business of a type
described on the Topna Disclosure Schedule;
(iv) indenture, note, loan or credit agreement or other Contract
relating to the borrowing of money or the payment of interest
thereon, or issuance of any material letters of credit, by any of the
Topna Companies or to the direct or indirect guarantee or assumption
by any of the Topna Companies of any material obligation of any other
Person other than lease financing transactions, borrowings under
existing revolving credit agreements and similar transactions in any
such case in the ordinary course of business; or
(v) other Contract to which it is a party that is material to
the Topna Companies, taken as a whole, or which, individually or in
the aggregate, could reasonably be expected to have a Topna Material
Adverse Effect.
Each Contract listed or required to be listed in the Topna Disclosure
Schedule is a valid and binding obligation of the parties thereto
enforceable in accordance with its terms and in full force and effect, and
no Topna Company is (with or without the lapse of time or the giving of
notice, or both) in breach or default in any material respect under any
such Contract, and, to the Knowledge of Topna, none of the other parties
to any such Contract is (with or without the lapse of time or the giving
of notice, or both) in such breach or default thereunder, except for such
of the foregoing as could not, individually or in the aggregate,
reasonably be expected to have a Topna Material Adverse Effect.
(q) Material Misstatements or Omissions. No statements,
representations or warranties by Topna contained herein (including the
Topna Disclosure Schedule), contains or will contain any untrue statement
of a material fact.
(r) Voting Requirements. Subject to obtaining the Arrangement
Orders, the affirmative vote of the holders of two-thirds of the Topna
Shares represented in person or by proxy at the Topna Shareholders Meeting
and actually voted thereat ("Topna Shareholder Approval") is the only vote
of the holders of any class or series of Topna's capital necessary to
approve and adopt this Agreement and the transactions contemplated hereby
or by any other Arrangement Agreement.
(s) Transaction With Affiliates. No Affiliate of any Topna Company
is involved in any business arrangement or relationship, other than solely
as an employee, with any Topna Company (whether written or oral), and none
of such Affiliates owns any property or right, tangible or intangible,
which is used in the business of any Topna Company. All transactions set
forth on the Topna Disclosure Schedule in which any Affiliate has an
interest were or are on terms no less favorable than could be obtained
from an unrelated third party.
(t) Brokers. No broker, investment banker, financial advisor or
other Person, other than Credit Suisse First Boston Corporation ("CSFB"),
the fees and expenses of which will be paid by Topna, is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission
in connection with the transactions contemplated by any of the Arrangement
Agreements based upon arrangements made by or on behalf of Topna. Topna
has furnished to UDS complete and correct copies of all agreements under
which any such fees or expenses are payable and all indemnification and
other agreements related to the engagement of the Persons to whom such
fees are payable.
(u) Opinion of Financial Advisor. Topna has received the opinion of
CSFB dated the date of this Agreement, to the effect that, as of such
date, the consideration to be received by the Shareholders of Topna in the
Arrangement is fair to such shareholders from a financial point of view,
and a copy of such opinion has been delivered to UDS.
(v) Ownership of UDS Shares. Except for holdings of less than 1% of
the outstanding securities of any class or ownership of any employee plan
or related trust (such exception, the "1% Exception"), neither Topna nor,
to its Knowledge, any of its Affiliates (other than any employee benefit
trust or plan) (i) beneficially owns (as such term is defined in Rule 13d-3
under the Exchange Act), directly or indirectly, or (ii) is party to any
agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of, in each case, shares of capital stock of
UDS.
2.02. Representations and Warranties of UDS and Canco. UDS and
Canco, jointly and severally, hereby represent and warrant to Topna that,
except as disclosed in the UDS SEC Documents filed prior to the date
hereof or as set forth on the disclosure schedule delivered by UDS to
Topna prior to the execution of this Agreement (the "UDS Disclosure
Schedule"):
(a) Organization, Standing and Corporate Power. Each of UDS, Canco
and UDS's Significant Subsidiaries (collectively, the "UDS Companies") is
a corporation or other legal entity duly organized, validly existing and
in good standing (with respect to jurisdictions which recognize such
concept) under the Laws of the jurisdiction in which it is organized and
has the requisite corporate or other power, as the case may be, and
authority to carry on its business as now being conducted. Each UDS
Company is duly qualified or licensed to do business and is in good
standing (with respect to jurisdictions which recognize such concept) in
each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification or licensing necessary,
other than in such jurisdictions where the failure to be so qualified or
licensed or to be in good standing, individually or in the aggregate,
could not be reasonably expected to have a UDS Material Adverse Effect.
UDS will deliver to Topna, within 10 days after the execution of this
Agreement, complete and correct copies of its and Canco's certificates of
incorporation and bylaws (or comparable organizational documents), in each
case as amended to date.
(b) Subsidiaries. UDS's Annual Report on Form 10-K for the year
ended December 31, 1996 correctly lists all Subsidiaries of UDS which as
of the date of this Agreement are Significant Subsidiaries.
(c) Capital Structure of UDS. The authorized capital stock of UDS
consists of 250,000,000 UDS Shares and 25,000,000 shares of preferred
stock of UDS ("UDS Preferred Shares"). Except as set forth above, at the
close of business on the Measurement Date, no shares of capital stock or
other voting securities of UDS were issued, reserved for issuance or
outstanding. Except (i) as set forth on the UDS Disclosure Schedule, (ii)
for the UDS Rights and (iii) for options granted pursuant to stock option
plans filed as exhibits to UDS's SEC Documents, at the close of business
on the Measurement Date, there were no outstanding securities, options,
warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which any UDS Company is a party or by which
any of them is bound obligating any UDS Company to issue, deliver or sell,
or cause to be issued, delivered or sold, additional shares of capital
stock or other voting securities of any UDS Company or obligating any UDS
Company to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking
(collectively, "UDS Rights") and no UDS Rights have been issued since the
Measurement Date. All outstanding shares of capital stock of UDS are, and
all shares which may be issued pursuant to any UDS Right will be, when
issued in accordance with the terms of such UDS Right, duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights. There are, and as of the Effective Time there will be, no bonds,
debentures, notes or other indebtedness of any UDS Company having the
right to vote (or convertible into, or exchangeable for, securities having
the right to vote) on any matters on which stockholders of any UDS Company
may vote ("UDS Voting Debt"). The UDS Shares to be issued in the
Arrangement have been duly authorized and, when issued and delivered in
accordance herewith, will be validly issued, fully paid and nonassessable
with no liability attaching to the ownership thereof. Canco is a newly
formed, wholly owned Subsidiary of UDS that has not engaged in any
substantial business prior to the date hereof.
(d) Authority; Noncontravention. Each of UDS and Canco has the
requisite corporate or other power and authority to enter into each
Arrangement Agreement to which it is a party and to consummate the
transactions contemplated thereby. The execution and delivery of each of
the Arrangement Agreements by UDS and Canco, as applicable, and the
consummation by them of the transactions contemplated thereby have been
duly authorized by all necessary corporate or other action on the part of
UDS and Canco. The Arrangement Agreements have been duly executed and
delivered by each of UDS and Canco, as applicable, and constitute legal,
valid and binding obligations of them, enforceable against them in
accordance with the terms thereof. The execution and delivery of the
Arrangement Agreements do not, and the consummation of the transactions
contemplated thereby and compliance with the provisions thereof will not,
result in the creation of any Lien upon any of the properties or assets of
any UDS Company, except such Liens as could not, individually or in the
aggregate, reasonably be expected to have a UDS Material Adverse Effect,
or conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right
of termination, cancellation or acceleration of any obligation or loss of
a material benefit under, (i) the certificate of incorporation or bylaws
(or the comparable organizational documents) of any UDS Company, (ii) any
loan or credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise or license applicable
to or its properties or assets, or (iii) subject to the governmental
filings and other matters referred to in the following sentence, any Order
or Law applicable to any UDS Company or its properties or assets, other
than, in the case of clauses (ii) and (iii), any such conflicts,
violations, defaults, rights, losses or Liens that, individually or in the
aggregate, could not reasonably be expected to have a UDS Material Adverse
Effect. No consent, approval, Order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to any UDS Company in connection with the execution and delivery
of the Arrangement Agreements by UDS or Canco or the consummation by UDS
or Canco of the transactions contemplated thereby, except (A) pursuant to
applicable premerger notification and waiting period requirements under
the HSR Act; (B) pursuant to applicable requirements under the Exchange
Act as may be required in connection with the Arrangement Agreements and
the transactions contemplated thereby; (C) the filing of appropriate
documents with the relevant Governmental Entities of other states in which
UDS or Canco is qualified to do business and such filings with
Governmental Entities to satisfy the applicable requirements of state
securities or "blue sky" Laws; (D) filings with and approvals of the New
York Stock Exchange ("NYSE") and Montreal Exchange ("ME") to permit the
UDS Shares that are to be issued in the Arrangement or under the Topna
Stock Plans to be listed on the NYSE and ME; (E) required notices,
filings, consents and approvals under the Investment Canada Act and under
the Competition Act (Canada); and (F) such consents, approvals, Orders or
authorizations the failure of which to be made or obtained could not,
individually or in the aggregate, reasonably be expected to have a UDS
Material Adverse Effect.
(e) SEC Documents; Undisclosed Liabilities. UDS has filed or
disclosed all required reports, schedules, forms, information statements
and other documents with the SEC since January 1, 1996 (the "UDS SEC
Documents"). As of their respective dates, the UDS SEC Documents complied
in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations of the
SEC promulgated thereunder applicable to such UDS SEC Documents. Except
to the extent that information contained in any UDS SEC Document has been
revised or superseded by a later UDS SEC Document, none of the UDS SEC
Documents contains any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements of UDS
included in the UDS SEC Documents complied, as of their respective dates
of filing with the SEC, in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto, were prepared in accordance with U.S. GAAP (except,
in the case of unaudited statements, as permitted by Form 10-Q of the SEC)
applied on a consistent basis during the periods involved (except as
specified therein) and fairly present in all material respects the
consolidated financial position of UDS and its consolidated Subsidiaries
as of the dates thereof and the consolidated results of their operations
and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal recurring year-end audit adjustments).
Except (i) as reflected in such financial statements or as specifically
described in the notes thereto, (ii) for liabilities incurred in
connection with the Arrangement Agreements or the transactions
contemplated thereby, and (iii) for liabilities and obligations incurred
since December 31, 1996 in the ordinary course of business consistent with
past practice, none of the UDS Companies has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or
otherwise), including without limitation liabilities arising under any
Environmental Laws, required by U.S. GAAP to be reflected in a
consolidated balance sheet (including without limitation the notes
thereto) of UDS and its consolidated Subsidiaries and which, individually
or in the aggregate, could reasonably be expected to have a UDS Material
Adverse Effect.
(f) Information Supplied. None of the information to be supplied by
UDS or Canco specifically for inclusion or incorporation by reference in
the Proxy Statement will, at the date it is first mailed to Topna's
shareholders or at the time of the Topna Shareholders Meeting, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(g) Absence of Certain Changes or Events. Except (i) as disclosed
in the UDS SEC Documents, (ii) for the transactions provided for in the
Arrangement Agreements, and (iii) for liabilities incurred in connection
with or as a result of the Arrangement Agreements since December 31, 1996,
UDS has conducted its business only in the ordinary course, and there has
not been (A) any UDS Material Adverse Effect, (B) any declaration, setting
aside or payment of any dividend or other distribution (whether in cash,
stock or property) with respect to any of UDS's capital stock, other than
regular quarterly dividends of U.S. $0.275 per UDS Share and U.S. $0.625
per share of UDS 5% Cumulative Convertible Preferred Stock, (C) any split,
combination or reclassification of any of UDS's capital stock or any
issuance or the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for shares of UDS's capital
stock, or (D) except insofar as required by a change in U.S. GAAP, any
change in accounting methods, principles or practices by UDS materially
affecting its assets, liabilities or business.
(h) Brokers. No broker, investment banker, financial advisor or
other Person, other than Merrill Lynch & Co., the fees and expenses of
which will be paid by UDS, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with
the transactions contemplated by the Arrangement Agreements based upon
arrangements made by or on behalf of UDS or Canco. UDS has furnished to
Topna true and complete copies of all agreements under which any such fees
or expenses are payable and all indemnification and other agreements
related to the engagement of the Persons to whom such fees are payable.
(i) Ownership of UDS Shares. Subject to the 1% Exception, neither
UDS nor, to its Knowledge, any of its Affiliates (other than any employee
benefit trust or plan) (i) beneficially owns (as such term is defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, or (ii) is
party to any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of, in each case, shares of
capital stock of Topna.
III. COVENANTS RELATING TO CONDUCT OF BUSINESS
3.01. Conduct of Business. (a) Conduct of Business by Topna.
Except as set forth in Section 3.01 of the Topna Disclosure Schedule,
during the period from the date of this Agreement to the Effective Time,
Topna will, and will cause each of its Subsidiaries to, carry on their
respective businesses in the ordinary course in substantially the same
manner as heretofore conducted and in compliance in all material respects
with all applicable Laws. Without limiting the generality or effect of
the foregoing, prior to the Effective Time, Topna will (i) consult with
UDS at such times as UDS may reasonably request with respect to all
material matters pertaining to the business, financial condition and
results of operations of the Topna Companies, including, prior to the
approval thereof, in respect of any matter which (whether under Topna's
constituent documents, resolutions of the Board of Directors of Topna (the
"Topna Board"), applicable Law or Topna's ordinary practice) requires the
approval of the Topna Board or the Chief Executive Officer of Topna or
TPI, (ii) not take, or fail to take, any action which is materially
inconsistent with the assumptions underlying the Five-Year Plan, and (iii)
cooperate with UDS and Canco in the development of a transition and
consolidation plan to be effective as of the Effective Time. Except as
set forth in Section 3.01 of the Topna Disclosure Schedule, without
limiting the generality of the foregoing, during the period from the date
of this Agreement to the Effective Time, Topna will not, and will not
permit any of its Subsidiaries to:
(i) other than dividends and distributions (including
liquidating distributions) by a direct or indirect wholly owned
Subsidiary of Topna to its parent, or by a Subsidiary that is
partially owned by Topna or any of its Subsidiaries, provided that
Topna or any such Subsidiary receives its proportionate share
thereof, and other than the regular quarterly dividends of U.S.
$0.075 per Topna Share, (A) declare, set aside or pay any dividends
on, or make any other distributions in respect of, any of its capital
stock, (B) split, combine or reclassify any of its capital stock, or
issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock, or
(C) purchase, redeem or otherwise acquire any capital shares or any
other securities of any Topna Company or any rights, warrants or
options to acquire any such shares or other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber (A)
any shares of capital stock, any other voting securities (including
without limitation any Topna Voting Debt) or any securities
convertible into any such shares or voting securities or (B) any
rights to acquire any such shares, voting securities or convertible
securities (other than the issuance of Topna Shares upon the exercise
of Topna Rights outstanding on the date of this Agreement which are
accurately listed and described on the Topna Disclosure Schedule in
accordance with the present terms thereof);
(iii) amend its articles of incorporation or bylaws (or
comparable organizational documents);
(iv) acquire, whether by merger, consolidation or purchase of a
substantial portion of the assets, or any other manner, any business
or any corporation, limited liability company, partnership, joint
venture, association or other business organization, or any division
thereof, except for (A) such acquisitions which do not, individually
or in the aggregate, involve the payment of consideration exceeding
U.S. $5,000,000, (B) purchases of inventory, feedstock and other
items in the ordinary course of business consistent with past
practice, and (C) capital expenditures as to any particular project
contemplated by the total projection therefor reflected in the Five-
Year Plan;
(v) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of its properties or
assets, other than (A) in the ordinary course of business consistent
with past practice, (B) financing transactions, including sales of
receivables, on a basis consistent with past practice, and (C) sales
of assets for an amount (whether in cash or in kind) which in the
aggregate exceeds U.S. $5,000,000;
(vi) (A) incur any indebtedness for borrowed money or guarantee
any such indebtedness of another Person, issue or sell any debt
securities or warrants or other rights to acquire any debt securities
of any Topna Company, guarantee any debt securities of another
Person, enter into any "keep well" or other agreement to maintain any
financial condition of another Person or enter into any arrangement
having the economic effect of any of the foregoing, except for lease
financing transactions, borrowings under existing revolving credit
arrangements and short-term borrowings, letters of credit or similar
financial transactions in any such case in the ordinary course of
business consistent with past practice and not otherwise in breach of
any provision hereof or to finance capital expenditures made in
accordance with this Agreement or (B) make any loans, advances or
capital contributions to, or investments in, any other Person, other
than (1) to Topna or any Subsidiary of Topna, (2) to officers and
employees of any Topna Company for travel, business or relocation
expenses, or (3) loans or advances to jobbers and similar Persons, in
any such case in the ordinary course of business consistent with past
practice;
(vii) make or agree to make any capital expenditures as to any
particular project not contemplated by the total projection therefor
reflected in the Five-Year Plan;
(viii) make any material tax election, waive the tolling of any
statute of limitations relating to any material tax liability or
settle, compromise or agree on any tax liability with the IRS, any
Canadian, provincial, state or local tax authority or any third party
pertaining to income, excise or franchise taxes without, in the case
of any such settlement, compromise or agreement, the prior
consultation with and consent of UDS (such consent not to be
unreasonably withheld or delayed) or any other material tax
liability;
(ix) except as required by Law or contemplated hereby, enter
into, adopt, amend or terminate any Topna Employee Benefit Plan or
any other agreement, plan or policy involving any Topna Company and
one or more of its directors, officers or employees, or change any
actuarial or other assumption used to calculate funding obligations
with respect to any Pension Plans, or change the manner in which
contributions to any pension plans are made or the basis on which
such contributions are determined;
(x) increase the compensation of any director, officer or other
key employee of any Topna Company or pay any benefit or amount not
required by a plan or arrangement as in effect on the date of this
Agreement to any such Person, except (A) pursuant to existing
agreements or arrangements or in the ordinary course of business
consistent with past practice and described in Section 3.01(a)(x) of
the Topna Disclosure Schedule and (B) except, as to any key employee,
as a result of a change or increase relating to a promotion to a
higher position;
(xi) engage in any transaction with any officer, director or
shareholder of any Topna Company, or any Affiliate, associate or
relative of any of the foregoing, or make any payment to or for the
benefit of, directly or indirectly, any of the foregoing, except as
described by category in Section 3.01(a)(xi) of the Topna Disclosure
Schedule or pursuant to existing agreements, the existence of which
does not constitute a breach of any other provision hereof;
(xii) enter into any Contract involving the purchase or sale of
crude oil or any supply Contract having a term expiring after
December 31, 1997, except (A) in accordance with Section 3.01(a) of
the Topna Disclosure Schedule, (B) petroleum hedging contracts in the
ordinary course of business consistent with past practice, and (c)
lease purchase contracts;
(xiii) authorize, or commit or agree to take, any of the foregoing
actions; or
(xiv) except as set forth in Section 3.01(a)(xiv) of the Topna
Disclosure Schedule, decrease or increase the types or levels of
supplies and standard parts or otherwise maintain inventories
(whether crude oil products, catalyst, merchandise, materials or
other inventory) at other than normal operating levels consistent
with past practices, or voluntarily modify any insurance referred to
in Section 2.01(o) in any material respect prior to the Effective
Time.
(b) Conduct of Business by UDS. Except as set forth in Section 3.01
of the UDS Disclosure Schedule, during the period from the date of this
Agreement to the Effective Time, UDS will not, and will not permit any of
its Subsidiaries to, *** other than dividends and distributions (including
liquidating distributions) by a direct or indirect wholly owned Subsidiary
of UDS to its parent, or by a Subsidiary that is partially owned by UDS or
any of its Subsidiaries, provided that UDS or any such Subsidiary receives
or is to receive its proportionate share thereof, and other than the
regular quarterly dividends, (A) declare, set aside or pay any dividends
on, or make any other distributions in respect of, any of its capital
stock, (B) split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock, or (C) purchase,
redeem or otherwise acquire any shares of capital stock of any UDS Company
or any other securities thereof or any rights, warrants or options to
acquire any such shares or other securities or *** authorize, or commit or
agree to take, any of the foregoing actions.
(c) Coordination of Dividends. Each of UDS and Topna will
coordinate with the other regarding the declaration and payment of
dividends in respect of the UDS Shares and the Topna Shares and the record
dates and payment dates relating thereto, it being the intention of UDS
and Topna that any holder of Topna Shares will not receive two dividends,
or fail to receive one dividend, for any single calendar quarter with
respect to its shares of Topna Shares and/or any shares of UDS Shares any
such holder may receive in exchange therefor pursuant to the Arrangement.
(d) Other Actions. Except as required by Law, Topna and UDS will
not, and will not permit any of their respective Subsidiaries to,
voluntarily take any action that would, or that could reasonably be
expected to, result in (i) any of the representations and warranties of
such party set forth in any Arrangement Agreements that are qualified as
to materiality becoming untrue, (ii) any of such representations and
warranties that are not so qualified becoming untrue in any material
respect, or (iii) any of the conditions to the Arrangement set forth in
Article V not being satisfied.
(e) Advice of Changes. Topna and UDS will promptly advise the other
party orally and in writing of (i) any representation or warranty made by
it contained in any Arrangement Agreement that is qualified as to
materiality becoming untrue or inaccurate in any respect or any such
representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect, (ii) the failure by it to comply in
any material respect with, or satisfy in any material respect, any
covenant or condition to be complied with or satisfied by it under any
Arrangement Agreement, or (iii) any change or event having, or which,
insofar as can reasonably be foreseen, could reasonably be expected to
have a material adverse effect on such party or on the truth of its
representations and warranties or the ability of the conditions set forth
in Article V to be satisfied; provided, however, that no such notification
shall affect the representations, warranties or covenants of the parties
or the conditions to the obligations of the parties under any Arrangement
Agreement.
(f) Dissenting Shares. Topna will give UDS (i) prompt notice of any
written objections to the resolutions in respect of the Arrangement at the
Topna Shareholders Meeting, withdrawals of such objections and any other
documents received by it pursuant to Section 190 of the CBCA and the
applicable provisions of the Plan of Arrangement (together, the
"Dissenting Share Provisions") and received by Topna from holders of Topna
Shares who exercise rights of dissent (such shares, "Dissenting Shares")
and (ii) the opportunity to participate in all negotiations and
proceedings with respect to Dissenting Shares. Topna will not, except
with the prior written consent of UDS, voluntarily make any payment with
respect to any Dissenting Shares or offer to settle or settle any claim,
demand or proceeding in respect thereof. Notwithstanding any other
provision hereof, effective as of the Effective Time, all Dissenting
Shares will cease to represent Topna Shares and will thereafter represent
only the rights provided in the Dissenting Share Provisions.
3.02. No Solicitation by Topna. (a) From and after the date
hereof, Topna will not, nor will it permit any of its Subsidiaries or
Affiliates controlled by it to, nor will it authorize or permit any of its
or any other such Person's officers, directors or employees or any
investment banker, financial advisor, attorney, accountant or other
representatives retained by it or any of its Subsidiaries (collectively,
"Representatives") to, directly or indirectly through another Person, (i)
solicit, initiate or encourage, or take any other action designed to
facilitate, any inquiries or the making of any proposal which constitutes
any Topna Takeover Proposal or (ii) furnish any confidential information
to any Person, or participate in any discussions or negotiations,
regarding any Topna Takeover Proposal; provided, however, that if the
Topna Board determines in good faith, after consulting with outside
counsel, that it is necessary to do so in order to comply with its
fiduciary duties to Topna's shareholders under applicable Law, Topna may,
in response to a Topna Takeover Proposal which was not solicited by it on
or after the date hereof or which did not otherwise result from a breach
of this Section 3.02(a), and subject to compliance with Section 3.02(c),
(A) furnish information with respect to the Topna Companies to any Person
pursuant to a customary confidentiality agreement (as determined in good
faith by Topna after consultation with its outside counsel) and (B)
participate in negotiations regarding such Topna Takeover Proposal. For
purposes of this Agreement, "Topna Takeover Proposal" means any inquiry,
proposal or offer from any Person on or after the date hereof relating to
any direct or indirect acquisition or purchase of 10% or more of the
assets of Topna and its Subsidiaries or 10% or more of any class of equity
securities of Topna or any of its Subsidiaries, any tender offer or
exchange offer that if consummated would result in any Person beneficially
owning 10% or more of any class of equity securities of Topna or any of
its Subsidiaries, or any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction
involving Topna or any of its Subsidiaries, other than the transactions
contemplated by this Agreement.
(b) Neither the Topna Board nor any committee thereof may (i)
withdraw or modify, or propose publicly to withdraw or modify, in a manner
adverse to UDS or Canco, the approval or recommendation by the Topna Board
or such committee of the Arrangement or this Agreement, (ii) approve or
recommend, or propose publicly to approve or recommend, any Topna Takeover
Proposal, or (iii) cause Topna to enter into any letter of intent,
agreement in principle, acquisition agreement or other similar agreement
(each, a "Topna Acquisition Agreement") related to any Topna Takeover
Proposal, provided that, in the event that the Topna Board determines in
good faith, after it has received a Topna Superior Proposal and after
consulting with outside counsel, that it is necessary to do so in order to
comply with its fiduciary duties to Topna's shareholders under applicable
Law, the Topna Board may (subject to this and the following sentences)
withdraw or modify its approval or recommendation of the Arrangement or
this Agreement, approve or recommend such Topna Superior Proposal or
terminate this Agreement (and concurrently with or after such termination,
if it so chooses, cause Topna to enter into any Topna Acquisition
Agreement with respect to any Topna Superior Proposal), but in each of the
cases set forth in this sentence, only (A) at a time that is after the
fifth business day following UDS's receipt of written notice advising UDS
that the Topna Board has received a Topna Superior Proposal, specifying
the material terms and conditions of such Topna Superior Proposal and
identifying the person making such Topna Superior Proposal and (B) prior
thereto or simultaneously therewith, Topna shall have paid the Termination
Fee. For purposes of this Agreement, a "Topna Superior Proposal" means
any proposal received by Topna after the date hereof by a third party to
acquire, directly or indirectly, for consideration consisting of cash
and/or securities, more than 50% of the combined voting power of the Topna
Shares then outstanding or all or substantially all the assets of Topna
and otherwise on terms which the Topna Board determines in its good faith
judgment (based on the advice of a financial advisor of nationally
recognized reputation) to provide value to Topna's shareholders that is
greater than that provided by the Arrangement and for which financing, to
the extent required, is then committed or which, in the good faith
judgment of the Topna Board, is reasonably available to such third party.
(c) In addition to the obligations of Topna set forth in Sections
3.02(a) and 3.02(b), Topna will immediately advise UDS orally and in
writing of any request for information or of any Topna Takeover Proposal,
the material terms and conditions of such request or Topna Takeover
Proposal and the identity of the Person making such request or Topna
Takeover Proposal. Topna will keep UDS reasonably informed of the status
and details (including amendments or proposed amendments) of any such
request or Topna Takeover Proposal.
(d) Nothing contained in this Section 3.02 will prohibit Topna from
making any disclosure to Topna's shareholders if, in the good faith
judgment of the Topna Board, after consultation with outside counsel, the
failure so to disclose would be inconsistent with its fiduciary duties to
Topna's shareholders under applicable Law or would result in a violation
of Rule 14e-2(a) under the Exchange Act; provided, however, that neither
Topna nor the Topna Board nor any committee thereof may withdraw or
modify, or propose publicly to withdraw or modify, its position with
respect to this Agreement or the Arrangement or approve or recommend, or
propose publicly to approve or recommend, a Topna Takeover Proposal,
except as expressly provided in Section 3.02(b).
IV. ADDITIONAL AGREEMENTS
4.01. Preparation of the Proxy Statement; Topna Shareholders
Meeting. (a) Topna will use all reasonable efforts to cause the Proxy
Statement to be mailed to Topna's shareholders as promptly as practicable.
Subject to the Interim Order, UDS will on a timely basis provide Topna
with all such information as may be required to be included in the Proxy
Statement which relates to it and Canco and will take any action (other
than qualifying to do business in any jurisdiction in which it is not now
so qualified or to file a general consent to service of process) required
to be taken under any applicable securities Laws of any State of the
United States or any province of Canada in connection with the issuance of
UDS Shares in the Arrangement and under the Topna Stock Plans and Topna
will furnish all information concerning Topna and the holders of Topna
Shares as may be reasonably requested in connection with any such action.
(b) Subject to the Interim Order, Topna will, as soon as practicable
following the date of this Agreement, duly call, give notice of, convene
and hold a meeting of its shareholders (the "Topna Shareholders Meeting")
for the purpose of obtaining the Topna Shareholder Approval. Without
limiting the generality of the foregoing but subject to Section 3.02(b),
Topna agrees that its obligations pursuant to the first sentence of
Section 4.01(b) will not be affected by the commencement, public proposal,
public disclosure or communication to Topna of any Topna Takeover
Proposal, and Topna will, through the Topna Board, recommend to its
shareholders the approval and adoption of this Agreement, the Arrangement
and the other transactions contemplated hereby.
4.02. Access to Information; Confidentiality. Subject to the
previously executed confidentiality agreement between UDS and Topna (the
"Confidentiality Agreement"), each of UDS and Topna will, and Topna will
cause each of its Subsidiaries to, afford to the other party and to the
Representatives of such other party, reasonable access during normal
business hours during the period prior to the Effective Time to all their
respective properties, books and records, contracts, commitments, and
personnel and, during such period, each of UDS and Topna will, and Topna
will cause each of its Subsidiaries to, furnish promptly to the other
party (i) a copy of each report, schedule, registration statement and
other document filed by it during such period pursuant to the requirements
of federal, state or provincial securities Laws and (ii) all other
information concerning its business, properties and personnel as such
other party may reasonably request, including without limitation with
respect to budgets and forecasts (in the case of Topna, on both a
consolidated and consolidating basis), environmental and engineering
reports relating to Owned Real Property, pending and threatened
litigation, and prospective acquisitions and other significant
transactions, provided, however, that (A) each of the parties will conduct
any such review in a fashion as does not unreasonably disrupt the
operations of the other or any Subsidiaries of the other, (B) in no event
will a party be obligated to grant access hereunder or otherwise to any
information that (1) would constitute a breach of any Contract (provided
that any required consents thereunder have been requested) or violation of
Law or (2) Topna determines in good faith, after consulting with counsel,
is protected by the attorney-client or attorney work product privilege,
and (C) in conducting any environmental review, UDS will not be entitled
to conduct any borings or other so-called "Phase II" environmental testing
procedures unless the conduct of such procedures has been recommended by a
third-party environmental engineering firm of recognized competence based
upon such firm's review of information then available to it, UDS gives
notice thereof to Topna which in reasonable detail describes such
recommendation and the stated reasons therefor Known to UDS and then only
if and to the extent to which Topna has consented thereto, such consent
not to be unreasonably withheld or delayed. Each of UDS and Topna will
hold, and will cause its Representatives and affiliates to hold, any
nonpublic information (including in respect of any termination of this
Agreement) in accordance with the terms of the Confidentiality Agreement,
provided, however, that if the Closing occurs, there will be no
restrictions on any UDS Company in respect of information pertaining to
the business, financial condition, results of operations or prospects of
the Topna Companies.
4.03. Reasonable Efforts. (a) On the terms and subject to the
conditions set forth in this Agreement, each of the parties will use all
reasonable efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Arrangement and
the other transactions contemplated by the Arrangement Agreements,
including (i) the obtaining of all necessary actions or nonactions,
waivers, consents and approvals from Governmental Entities and the making
of all necessary registrations and filings (including filings with
Governmental Entities, such as those referred to in Sections
2.01(d)(A)-(D) and 2.02(d)(A)-(E)) and the taking of all reasonable steps
as may be necessary to obtain an approval or waiver from, or to avoid an
action or proceeding by, any Governmental Entity, (ii) the obtaining of
all necessary consents, approvals or waivers from third parties, (iii) the
defending of any lawsuits or other legal proceedings, whether judicial or
administrative, challenging any of the Arrangement Agreements or the
consummation of the transactions contemplated thereby, including seeking
to have any stay or temporary restraining order entered by any court or
other Governmental Entity vacated or reversed, and (iv) the execution and
delivery of any additional instruments necessary to consummate the
transactions contemplated by, and to fully carry out the purposes of, this
Agreement and the other Arrangement Agreements.
(b) In connection with and without limiting the foregoing, Topna and
UDS will each use reasonable efforts (i) to take all action necessary to
ensure that no state or provincial takeover statute or similar Law is or
becomes applicable to this Agreement, the Arrangement or the other
transactions contemplated hereby or any of the other Arrangement
Agreements or the transactions contemplated thereby and (ii) if any state
or provincial takeover statute or similar Law becomes applicable to this
Agreement, the Arrangement or the other transactions contemplated hereby
or any of the other Arrangement Agreements or any transaction contemplated
thereby, to take all action necessary to ensure that the Arrangement and
such other transactions may be consummated as promptly as practicable on
the terms contemplated by this Agreement and the other Arrangement
Agreements and otherwise to minimize the effect of such Law on the
Arrangement and the other transactions contemplated by this Agreement and
the other Arrangement Agreements.
(c) In connection with and without limiting the generality of the
foregoing, it is the intention of UDS to defend against any actual or
threatened action, suit or proceeding arising or purportedly arising under
federal or state antitrust laws and seeking to impose any restraint
against the consummation of the Arrangement or any of the other effects
specified in Section 5.02(d) hereunder, and Topna will reasonably
cooperate in connection therewith. Notwithstanding the foregoing or any
other provision hereof, Topna acknowledges that the decision as to whether
to initiate or continue any such defense will be made by UDS in its sole
discretion, nothing herein will affect UDS's or Canco's rights hereunder,
including without limitation under Section 5.02(d), and in no event will
UDS be required to agree to any divestiture, hold-separate or other
requirement applicable to any UDS Company or Topna Company in connection
with this Agreement or any of the transactions contemplated hereby.
4.04. Stock Options. (a) Within 10 calendar days after the
execution and delivery of this Agreement, the Topna Board (or, if
appropriate, any committee administering the Topna Stock Plans) will adopt
such resolutions and take such other actions (and Topna will furnish
evidence thereof to UDS) so as to adjust the terms of all outstanding
options to acquire Topna Shares granted under the Topna Stock Plans as
necessary to provide that, at the Effective Time, each such option
outstanding immediately prior to the Effective Time (a "Topna Option") (i)
will be fully vested and exercisable and (ii) options to acquire Topna
Shares will be deemed to constitute an option to acquire that number of
UDS Shares calculated by multiplying (A) the number of Topna Shares
subject thereto by (B) the Exchange Ratio, at an exercise price equal to
(1) the aggregate exercise price of such Topna Option divided by (2) the
Exchange Ratio (each, as so adjusted, an "Adjusted Option"). Other than
as set forth in the preceding sentence and the proviso to this sentence,
each Adjusted Option shall on and after the Effective Time be subject to
the same terms and conditions as the Topna Option to which it relates;
provided that no Adjusted Option shall expire sooner than the earlier of
(i) six months (or, in the case of Topna's Chief Executive Officer on the
date hereof, nine months) following the holder's termination for any
reason described in Section 8.6 of the Topna 1990 Incentive Stock Plan, or
(ii) the end of the original term of the Topna Option to which it relates.
(b) As soon as practicable after the Effective Time, UDS will
deliver to the holders of Topna Options appropriate notices setting forth
such holders' rights pursuant to the Topna Stock Plans and the agreements
evidencing the Topna Options (and, following the Effective Time, the
Adjusted Options) and confirming that the Topna Stock Plans and the Topna
Options have been assumed by UDS in accordance with the terms and
conditions required by this Section 4.04.
(c) UDS will take necessary actions for the assumption of the Topna
Stock Plans and the Topna Options as of the Effective Time, including the
reservation and listing of UDS Shares as is necessary to effectuate the
transactions contemplated by Section 4.04(a).
(d) A holder of an Adjusted Option may exercise such Adjusted Option
in whole or in part in accordance with its terms by delivering a properly
executed notice of exercise to UDS, together with the consideration
therefor and the withholding tax information, if any, required in
connection with the related Topna Stock Plans. The Topna Board (or, if
appropriate, any committee administering the Topna Stock Plan) shall
approve a "cashless" exercise procedure whereby the holder of an Adjusted
Option may deliver irrevocable instruction to a broker to sell shares
underlying such Adjusted Option on the applicable national stock exchange.
(e) Except as otherwise contemplated by this Section 4.04, all
restrictions or limitations on transfer with respect to Topna Options
awarded under the Topna Stock Plans, to the extent that such restrictions
or limitations shall not have already lapsed, will remain in full force
and effect with respect to such Topna Options after giving effect to the
Arrangement and the assumption by UDS as set forth above.
4.05. Certain Employee Matters. Following the Effective Time, UDS
will cause Topna to honor and assume all obligations and liabilities
relating to the employment change-in-control and severance agreements
listed on Schedule 4.05 and the Employee Benefit Plans relating to such
arrangements in accordance with the terms thereof.
4.06. Indemnification, Exculpation and Insurance. (a) All rights
to indemnification and exculpation from liabilities for acts or omissions
occurring at or prior to the Effective Time now existing in favor of the
current or former directors or officers of Topna and its Subsidiaries as
provided in their respective articles of incorporation or bylaws (or
comparable organizational documents) and any indemnification agreements of
Topna, the existence of which does not constitute a breach of this
Agreement, will survive the Arrangement and continue in full force and
effect in accordance with their respective terms.
(b) The provisions of this Section 4.06 (i) are intended to be for
the benefit of, and will be enforceable by, each indemnified party, his or
her heirs and his or her representatives and (ii) are in addition to, and
not in substitution for, any other rights to indemnification or
contribution that any such Person may have by contract or otherwise.
4.07. Fees and Expenses. (a) Except as set forth in this Section
4.07 or in Section 6.01, all fees and expenses incurred in connection with
this Agreement, the Arrangement and the other transactions contemplated
hereby and the other Arrangement Agreements and the transactions
contemplated thereby will be paid by the party incurring such fees or
expenses, whether or not the Arrangement is consummated, except that each
of UDS and Topna will bear and pay one-half of the out-of-pocket costs and
expenses incurred in connection with (i) the filing, printing and mailing
of the Proxy Statement and any filing fees relating to the issuance of UDS
shares in the Arrangement and (ii) the filings of the premerger
notification and report forms under the HSR Act (including filing fees).
(b) In the event that (i) a Topna Takeover Proposal shall have been
made known to Topna or has been made directly to its shareholders
generally or any Person shall have publicly announced or disclosed an
intention (whether or not conditional) to make a Topna Takeover Proposal
and thereafter this Agreement is terminated by either UDS or Topna
pursuant to Section 6.01(b)(i) or 6.01(b)(ii) and, in the case of a
termination by UDS pursuant to Section 6.01(b), a Topna Board
reconfirmation shall not have been given and publicly announced within
five business days after any request therefor, or (ii) this Agreement is
terminated by (A) UDS pursuant to Section 6.01(d) or (B) Topna pursuant to
Section 6.01(f), then Topna will promptly, but in no event later than two
days after the date of such termination or at such earlier time as is
contemplated hereby, pay UDS a fee equal to U.S. $15 million (the
"Termination Fee"). Topna acknowledges that the agreements contained in
this Section 4.07(b) are an integral part of the transactions contemplated
by this Agreement, and that, without these agreements, UDS would not enter
into this Agreement; accordingly, if Topna fails to pay promptly the
amount due pursuant to this Section 4.07(b), and, in order to obtain such
payment, UDS commences a suit which results in a judgment against Topna
for the fee set forth in this Section 4.07(b), Topna will pay to UDS its
costs and expenses (including attorneys' fees and expenses) in connection
with such suit, together with interest on the amount of the fee at the
prime rate of Citibank N.A. in effect on the date such payment is made.
4.08. Public Announcements. UDS and Topna will consult with each
other before issuing, and provide each other the opportunity to review,
comment upon and concur with, any press release or other public statements
with respect to the transactions contemplated by this Agreement, including
the Arrangement, and the other Arrangement Agreements and will not issue
any such press release or make any such public statement without the prior
consent of the other party (which shall not be unreasonably withheld),
except as either party may determine is required by applicable Law, court
process or by obligations pursuant to any listing agreement with any
securities exchange. The parties agree that the initial press release to
be issued with respect to the execution of this Agreement will be in the
form heretofore agreed to by the parties.
4.09. Affiliates. Prior to the Closing Date, Topna will deliver to
UDS a letter identifying all Persons who are, at the time this Agreement
is submitted for adoption by the shareholders of Topna, "affiliates" of
Topna for purposes of Rule 145 under the Securities Act. Topna will use
all reasonable efforts to cause each such Person to deliver to UDS on or
prior to the Closing Date a written agreement substantially in the form
attached as Exhibit B.
4.10. NYSE Listing. UDS will use reasonable efforts to cause the
UDS Shares to be issued in the Arrangement and under the Topna Stock Plans
to be approved for listing on the NYSE, subject to official notice of
issuance, prior to the Effective Time.
4.11. Shareholder Litigation. Each of Topna and UDS will give the
other the reasonable opportunity to participate in the defense of any
shareholder litigation against Topna or UDS, as applicable, and its
directors relating to the transactions contemplated by this Agreement and
the other Arrangement Agreements.
4.12. Issuance of Canco Shares. Canco will, in consideration of the
deposit by UDS of the UDS Shares and cash in lieu of fractional UDS Shares
with the depositary pursuant to the depositary agreement contemplated by
the Plan of Arrangement, issue to UDS as of the Effective Time one
additional Canco Common Share for each UDS Share so deposited plus a
number of Canco Common Shares (rounded down to the nearest whole share)
determined by dividing the aggregate cash payment made by UDS by the
closing price for UDS Shares on the NYSE on the fifth business day prior
to the Effective Time.
V. CONDITIONS PRECEDENT
5.01. Conditions to Each Party's Obligation to Effect the
Arrangement. The respective obligation of each party to effect the
Arrangement is subject to the satisfaction or waiver on or prior to the
Closing Date of the following conditions:
(a) Interim Order. The Interim Order shall have been obtained;
(b) The Arrangement. The Arrangement shall have been approved at
the Topna Shareholders Meeting in accordance with the Interim Order;
(c) The Final Order. The Final Order shall have been obtained;
(d) No Termination. This Agreement shall not have been terminated
in accordance with the provisions hereof;
(e) No Injunctions or Restraints. No judgment, Order, decree,
statute, Law, ordinance, rule, regulation, temporary restraining order,
preliminary or permanent injunction or other order enacted, entered,
promulgated, enforced or issued by any court of competent jurisdiction or
other Governmental Entity or other legal restraint or prohibition
preventing the consummation of the Arrangement (collectively,
"Restraints") shall be in effect; provided, however, that, subject to
Section 4.03(c), each of the parties shall have used reasonable efforts to
prevent the entry of any such Restraints and to appeal as promptly as
possible any such Restraints that may be entered.
(f) NYSE Listing. The UDS Shares issuable pursuant to this
Agreement and under the Topna Stock Plans shall have been approved for
listing on the NYSE, subject to official notice of issuance.
(g) Regulatory Approvals. The waiting period prescribed under the
HSR Act shall have expired or been terminated. UDS, Canco and Topna shall
each have filed all notices and information (if any) required under Part
IX of the Competition Act (Canada) and the applicable waiting periods and
any extensions thereof shall have expired or the parties shall have
received an Advance Ruling Certificate pursuant to Section 102 of the
Competition Act (Canada) setting out that the Director under such Act is
satisfied that he would not have sufficient grounds on which to apply for
an order in respect of the Arrangement. The Arrangement shall have
received the allowance or approval or deemed allowance or approval by the
responsible Minister under the Investment Canada Act in respect of the
Arrangement, to the extent such allowance or approval is required, and
such allowance or approval shall be consistent with this Agreement and not
adversely affect the rights of the parties hereunder or the relative
benefit to be obtained from the Arrangement.
5.02. Conditions to Obligations of UDS and Canco. The obligations
of each of UDS and Canco to effect the Arrangement are further subject to
satisfaction or waiver of the following conditions:
(a) Representations and Warranties. There shall be no breach of any
representation or warranty of Topna contained in this Agreement that,
individually or in the aggregate when considered with any other such
breach, could reasonably be expected to result in a Topna Material Adverse
Effect, and UDS shall have received a certificate signed on behalf of
Topna by the chief executive officer and the chief financial officer of
Topna to such effect; provided, however, that, (i) for purposes of this
Section 5.02(a), any breach or alleged breach of Sections 2.01(a)-(d),
2.01(e) (first two sentences only), 2.01(f), 2.01(g) (clauses (ii) through
(v) only), 2.01(l), 2.01(p) (first sentence only) and 2.01(r)-(v) may be
asserted by UDS regardless of Sections 6.01(g) and (h) or whether matters
pertaining to any such Sections are discovered in the Topna Due Diligence
Review and (ii) this Section 5.02(a) will not apply to any actual or
alleged breach of any provision of Section 2.01 not listed in clause (i)
hereof (collectively, the "Diligenced Reps") except to the extent that (A)
such breach arises based on events occurring or failing to occur after May
10, 1997, in the case of any matter referred to in Section 6.01(g), or May
1, 1997, in the case of any matter referred to in Section 6.01(h), or (B)
was a matter Known to Topna but not Known to UDS prior to such relevant
date.
(b) Performance of Obligations of Topna and Total. Each of Topna
and Total shall have performed in all material respects all obligations
required to be performed by it under this Agreement and the Stockholder
Agreement (as applicable) at or prior to the Effective Time, and UDS shall
have received a certificate signed on behalf of Topna and Total by their
respective chief executive officers and the chief financial officer of
Topna to such effect.
(c) No Topna Material Adverse Effect. At any time (i) after the
date of this Agreement but prior to May 10, 1997, there shall not have
occurred any event which, individually or when considered with any other
such event, was Known to Topna but not Known to UDS until after such date,
which could reasonably be expected to result in a Topna Material Adverse
Effect or (ii) on or after May 10, 1997, there shall have occurred any
event which, individually or when considered with any other event, could
reasonably be expected to result in a Topna Material Adverse Effect.
(d) No Litigation. There shall not be pending any suit, action or
proceeding brought by or on behalf of any Governmental Entity (i) seeking
to restrain or prohibit the consummation of the Arrangement or any of the
other transactions contemplated by this Agreement or any of the other
Arrangement Agreements or seeking to obtain from either Topna or UDS any
damages that are material in relation to Topna and its Subsidiaries taken
as a whole or UDS and its Subsidiaries taken as a whole, as applicable,
(ii) seeking to prohibit or limit the ownership or operation by Topna, UDS
or any of their respective Subsidiaries of any portion of the business or
assets of Topna, UDS or any of their respective Subsidiaries, or to compel
Topna, UDS or any of their respective Subsidiaries to dispose of or hold
separate any portion of the business or assets of Topna, UDS or any of
their respective Subsidiaries, as a result of the Arrangement or any of
the other transactions contemplated by this Agreement or any of the other
Arrangement Agreements, or (iii) otherwise seeking any other relief which
otherwise could have a Topna Material Adverse Effect or a UDS Material
Adverse Effect, as applicable. In addition, there shall not be any
Restraint enacted, entered, enforced or promulgated that is reasonably
likely to result, directly or indirectly, in any of the consequences
referred to in clauses (ii) or (iii) above.
(e) Tax Opinions. UDS shall not have received an opinion of either
of Smith, Lyons or Jones, Day, Reavis & Pogue that due to a change in Law
or any interpretation thereof by any Governmental Entity since the date
hereof, such firm could not confirm as of the Effective Time that the tax
consequences of the transactions contemplated therein were not
substantially the same as set forth in the opinions of such firm delivered
to UDS on the date hereof.
(f) Dissenting Shares. There shall be no more than 2,000,000
Dissenting Shares in the aggregate.
5.03. Conditions to Obligation of Topna. The obligations of Topna
to effect the Arrangement are further subject to satisfaction or waiver of
the following conditions:
(a) Representations and Warranties. There shall be no breach of any
representation or warranty of UDS or Canco contained in this Agreement
that, individually or in the aggregate when considered with any other such
breach, could reasonably be expected to result in a UDS Material Adverse
Effect, and UDS shall have received a certificate signed on behalf of UDS
by the chief executive officer and the chief financial officer of UDS to
such effect.
(b) Performance of Obligations of UDS and Canco. Each of UDS and
Canco shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the
Effective Time, and Topna shall have received a certificate signed on
behalf of UDS by the chief executive officer and the chief financial
officer of UDS to such effect.
(c) No UDS Material Adverse Change. At any time after the date of
this Agreement there shall not have occurred any event which, individually
or when considered together with any other event, could reasonably be
expected to result in a UDS Material Adverse Effect.
5.04. Frustration of Closing Conditions. None of UDS, Canco or
Topna may rely on the failure of any condition set forth in Section 5.01,
5.02 or 5.03, as the case may be, to be satisfied if such failure was
caused by such party's failure to use reasonable efforts to consummate the
Arrangement and the other transactions contemplated by this Agreement and
the other Arrangement Agreements, as required by and subject to Section
4.03.
VI. TERMINATION, AMENDMENT AND WAIVER
6.01. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after the Topna Shareholder
Approval:
(a) by mutual written consent of UDS and Topna;
(b) by either UDS or Topna:
(i) if the Arrangement shall not have been consummated by
September 30, 1997; provided, however, that the right to terminate this
Agreement pursuant to this Section 6.01(b)(i) will not be available to any
party whose failure to perform any of its obligations under this Agreement
results in the failure of the Arrangement to be consummated by such time;
(ii) if the Topna Shareholder Approval shall not have been
obtained at a Topna Shareholders Meeting duly convened therefor or at any
adjournment or postponement thereof;
(iii) if any Governmental Entity shall have issued a permanent
Restraint or taken any other action permanently enjoining, restraining or
otherwise prohibiting the consummation of the Arrangement or any of the
other transactions contemplated by this Agreement or the other Arrangement
Agreements and such Restraint or other action shall have become final and
nonappealable;
provided, however, that Topna may so terminate this Agreement pursuant to
this Section 6.01(b) only if it is not in material breach of any provision
hereof;
(c) by UDS, if Topna shall have breached or failed to perform in any
respect any of its representations, warranties, covenants or other
agreements contained in this Agreement, which breach or failure to perform
(i) would give rise to the failure of a condition set forth in Section
5.02(a) or (b) and (ii) cannot be or has not been cured within 30 days
after the giving of written notice to Topna of such breach (a "Topna
Material Breach") (provided that UDS is not then in UDS Material Breach of
any representation, warranty or covenant contained in this Agreement);
(d) by UDS, if (i) the Topna Board or any committee thereof shall
have withdrawn or modified in a manner adverse to UDS its approval or
recommendation of the Arrangement or this Agreement or failed to reconfirm
its recommendation within five business days after a written request to do
so, or approved or recommended any Topna Takeover Proposal, (ii) the Topna
Board or any committee thereof shall have resolved to take any of the
foregoing actions, or (iii) Total shall have breached any provision of the
Stockholder Agreement between UDS and Total entered into substantially
simultaneously herewith;
(e) by Topna, if UDS shall have breached or failed to perform in any
respect any of its representations, warranties, covenants or other
agreements contained in this Agreement, which breach or failure to perform
(i) would give rise to the failure of a condition set forth in Section
5.03(a) or (b) and (ii) cannot be or has not been cured within 30 days
after the giving of written notice to UDS of such breach (a "UDS Material
Breach") (provided that Topna is not then in Topna Material Breach of any
representation, warranty or covenant contained in this Agreement);
(f) by Topna in accordance with Section 3.02(b), provided that it
has complied with all provisions thereof, including the notice provisions
therein, and that prior to such termination it has paid the Termination
Fee provided in Section 4.07;
(g) by UDS, if the Total Due Diligence Amount equals or exceeds U.S.
$50.0 million, calculated on a pre-tax basis and without giving effect to
any time value of money factor. For purposes of this Section 6.01(g), UDS
will be entitled to conduct a due diligence examination ("Topna Due
Diligence Review") of the business, assets, rights, liabilities,
obligations, financial condition, results of operations and prospects of
the Topna Companies and Topna will cooperate therewith and furnish
information and access to UDS as otherwise provided herein in connection
therewith. During the course of such review, UDS will use reasonable
efforts to inform Topna and the Arbiter of material developments therein,
including by reviewing the results thereof with Topna and the Arbiter at a
meeting to be held at the headquarters of Topna between the 10th and 15th
calendar day of the Topna Due Diligence Review, but the failure by UDS so
to inform Topna or the Arbiter of any such matter will not prejudice or
otherwise affect the rights and obligations of the parties hereunder. On
or prior to May 10, 1997, UDS may, at its option, deliver to Topna UDS's
calculation of the Total Due Diligence Amount, together with a schedule
describing the material components of such calculation in reasonable
detail. If requested by Topna, representatives of UDS will meet with
representatives of Topna and the Arbiter at Topna's headquarters during
the period from May 11, 1997 to May 12, 1997 in an effort to resolve any
disagreement relating to such determination. If, on or prior to May 14,
1997, Topna disagrees with UDS's calculation of the Total Due Diligence
Amount, Topna will give notice to UDS and the Arbiter on or prior to such
date, which notice will (i) set forth Topna's calculation of the Total Due
Diligence Amount (if any) and (ii) specify in reasonable detail the basis
for Topna's disagreement with UDS's calculation in relation to the
components of UDS's calculation contemplated above. The failure by UDS to
give the notice contemplated above by May 10, 1997 will constitute UDS's
waiver of its rights under this Section 6.01(g) and the failure by Topna
to express disagreement with any component of UDS's calculation of the
Total Due Diligence Amount by May 14, 1997 will be deemed to constitute
Topna's acceptance thereof for all purposes hereof. During the period
from May 15, 1997 to May 22, 1997, the parties may make such submissions
to the Arbiter as they may elect, will appear, together, before the
Arbiter on such terms as the Arbiter may elect and during such period and
any subsequent period the parties will use their respective reasonable
efforts to cause the Arbiter to render its decision as contemplated herein
as promptly as practicable with the objective that the Arbiter renders a
final decision not later than May 27, 1997. For purposes of this
Agreement, (i) "Arbiter" means a "Big 6" accounting firm mutually accepted
by UDS and Topna by April 18, 1997; (ii) the Arbiter's determination of
the Total Due Diligence Amount will represent its determination of the
most likely outcome of any matter, and be determined by it in its sole
discretion based solely on the submissions of the parties and such
consultation and such other investigations as the Arbiter may deem
relevant in its sole discretion (the parties hereby acknowledging that the
Arbiter may, but will not be required to, consult with such other
professionals or other Persons as it may elect in its sole discretion),
any such determination to be final and binding on the parties; (iii) in no
event will the Arbiter have any liability or obligation to any of the
parties or any other Person by reason of any such determination; (iv) each
of UDS and Topna will pay one-half of the fees and all other amounts due
the Arbiter (including without limitation amounts due any other
professional firms selected by the Arbiter); (v) the term "Total Due
Diligence Amount" means the sum of (A) the Unreserved Liabilities and (B)
the Plan Variances, in each case determined by the Arbiter as aforesaid;
(vi) "Unreserved Liabilities" means the sum of (A) the total amount of any
liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by U.S. GAAP to be reflected in a
consolidated balance sheet of Topna or to be referenced in the notes
thereto, in the opinion of the Arbiter as aforesaid, but excluding
therefrom the portion thereof (1) reflected in the 12/31/96 Topna Balance
Sheet, (2) incurred or accrued on or after January 1, 1997 in accordance
with or contemplated by the representations, warranties and covenants of
Topna herein contained (without giving effect to any limitation or
qualification therein as to materiality, any Topna Material Adverse Effect
or Topna's Knowledge (collectively, the "Materiality/Knowledge
Limitations")), and (3) specifically described in Sections 2.01(e),
2.01(j) or 2.01(h) (Items 1-4, 6-13, and 24 only) of the Topna Disclosure
Schedule (such Sections of the Topna Disclosure Schedule, as so limited,
the "Particularly Scheduled Items"); and (vii) the term "Plan Variances"
means any cost, damage, expense, liability or other loss (including
without limitation lost profit or cash flow), arising out of any
liabilities, obligations or states of facts of any nature (whether
accrued, absolute, contingent or otherwise), other than the Particularly
Scheduled Items, to the extent that the same (A) constitutes a breach of
any representation or warranty contained in Article II (without giving
effect to any Materiality/Knowledge Limitation or matter in the Topna
Disclosure Schedule other than the Particularly Scheduled Items) and (B)
is inconsistent with any assumptions underlying the Five-Year Plan, the
existence and extent thereof to be determined in either such case in the
opinion of the Arbiter as aforesaid; or
(h) by UDS, if the amount by which, in the written opinion of the
Arbiter delivered to Topna on or before May 1, 1997, the TPI Tax Basis, as
determined under Canadian tax law in the opinion of the Arbiter arrived at
as contemplated in Section 6.01(g), is less than Canadian $397.0 million.
For purposes of this Section 6.01(h), UDS will be entitled to conduct a
due diligence examination of the books and records of Topna, Topna will
cooperate therewith and furnish information and access to Topna as
otherwise provided herein, and the Arbiter's opinion contemplated herein
will be made by the Arbiter in accordance with the procedures set forth in
Section 6.01(g) (except as specifically modified hereby).
6.02. Effect of Termination. In the event of termination of this
Agreement by either Topna or UDS as provided in Section 6.01, this
Agreement will forthwith become void and have no effect, without any
liability or obligation on the part of UDS, Canco or Topna, other than the
provisions of Section 2.01(t), Section 2.02(h), Section 4.08, Section 4.02
(last sentence only), this Section 6.02 and Article VII and except to the
extent that such termination results from the prior breach by a party of
any of its representations, warranties or covenants set forth in this
Agreement.
6.03. Amendment. This Agreement may be amended by the parties at
any time before or after the Topna Shareholder Approval; provided,
however, that after any such approval, there may not be made any amendment
that by Law requires further approval by the shareholders of Topna or the
approval by the shareholders of UDS without the approval of such
shareholders as may be required by the Court. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties.
6.04. Extension; Waiver. At any time prior to the Effective Time, a
party may (i) extend the time for the performance of any of the
obligations or other acts of the other parties, (ii) waive any
inaccuracies in the representations and warranties of the other parties
contained in this Agreement or in any document delivered pursuant to this
Agreement, or (iii) subject to the proviso of Section 6.03, waive
compliance by the other party with any of the agreements or conditions
contained in this Agreement. Any agreement on the part of a party to any
such extension or waiver will be valid only if set forth in an instrument
in writing signed on behalf of such party. The failure of any party to
this Agreement to assert any of its rights under this Agreement or
otherwise will not constitute a waiver of such rights.
6.05. Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 6.01, an amendment of
this Agreement pursuant to Section 6.03 or an extension or waiver pursuant
to Section 6.04 will, in order to be effective, require, in the case of
UDS or Topna, action by its Board of Directors or, with respect to any
amendment to this Agreement, the duly authorized committee of its Board of
Directors.
VII. GENERAL PROVISIONS
7.01. Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement will survive the Effective Time.
This Section 7.01 will not limit any covenant of the parties which by its
terms contemplates performance after the Effective Time or any provision
of the Stockholder Agreement.
7.02. Notices. All notices, requests, claims, demands and other
communications under this Agreement will be in writing and will be deemed
given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the parties at the
following addresses (or at such other address for a party as will be
specified to the other parties by like notice):
(a) If to Topna, to:
Total Petroleum (North America) Ltd.
Total Tower
900 19th Street
Denver, Colorado 80202
Telecopy: (303) 291-2193
Attention: C. Gary Jones
with copies to:
Total
Total Refining and Marketing
51, Esplanade du General deGaulle
CEDEX 97
La Defense 10
92907 Paris, France
Telecopy: 1 41 35 42 91
Attention: Jean-Paul Vettier
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036
Telecopy: (212) 969-2900
Attention: Stanley Komaroff, Esq.
(b) If to UDS or Canco, to:
Ultramar Diamond Shamrock Corporation
9830 Colonnade Boulevard
San Antonio, Texas 78230
Telecopy: (210) 691-6492
Attention: Patrick J. Guarino, Esq.
with a copy to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Telecopy: (212) 755-7306
Attention: Robert A. Profusek, Esq.
7.03. Definitions. For purposes of this Agreement:
(a) An "Affiliate" of any Person means another Person that directly
or indirectly, through one or more intermediaries, controls, is controlled
by, or is under common control with, such first Person;
(b) "Person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity;
(c) A "Subsidiary" of any Person means another Person, an amount of
the voting securities, other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its board
of directors or other governing body (or, if there are no such voting
interests, 50% or more of the equity interests of which) is owned directly
or indirectly by such first Person; and
(d) "Knowledge" of any party means the actual knowledge of the
officers of such party, or any of them, specified in Section 7.03 of the
Topna Disclosure Schedule or the UDS Disclosure Schedule, as the case may
be, after reasonable inquiry, or the possession of facts by such party's
officers, or any of them, after reasonable inquiry, from which he or she
could reasonably conclude that a particular event or circumstance existed.
(e) "Material Adverse Effect" means any material adverse effect on
the business, financial condition or results of operations of the relevant
party and its Subsidiaries, taken as a whole, in any such case calculated
on a pre-tax basis and without giving effect to any time value of money
factor, or on the ability of such party to perform its obligations under
any of the Arrangement Agreements; a "Topna Material Adverse Effect" means
a Material Adverse Effect pertaining to Topna or the Topna Companies, as
the case may be; and a "UDS Material Adverse Effect" means a Material
Adverse Effect pertaining to UDS or the UDS Companies, as the case may be.
(f) A "Significant Subsidiary" of a Person means any Subsidiary that
would constitute a "significant subsidiary" of such Person within the
meaning of Rule 1-02 of Regulation S-X of the SEC.
7.04. Interpretation. When a reference is made in this Agreement to
an Article, Section or Exhibit, such reference will be to an Article or
Section of, or an Exhibit to, this Agreement unless otherwise indicated.
The table of contents and headings contained in this Agreement are for
reference purposes only and will not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they will be deemed
to be followed by the words "without limitation." The words "hereof",
"herein" and "hereunder" and words of similar import when used in this
Agreement will refer to this Agreement as a whole and not to any
particular provision of this Agreement. All terms defined in this
Agreement will have the defined meanings when used in any certificate or
other document made or delivered pursuant hereto unless otherwise defined
therein. The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the
masculine as well as to the feminine and neuter genders of such term. Any
agreement, instrument or statute defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or
supplemented, including (in the case of agreements or instruments) by
waiver or consent and (in the case of statutes) by succession of
comparable successor statutes and references to all attachments thereto
and instruments incorporated therein. References to a Person are also to
its permitted successors and assigns.
7.05. Counterparts. This Agreement may be executed in one or more
counterparts, all of which will be considered one and the same agreement
and will become effective when one or more counterparts have been signed
by each of the parties and delivered to the other parties.
7.06. Entire Agreement; No Third-Party Beneficiaries. This
Agreement and the other Arrangement Agreements (a) constitute the entire
agreement, and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter of
this Agreement and (b) except for the provisions of Sections 4.04 and
4.06, are not intended to confer upon any Person other than the parties
any rights or remedies.
7.07. Governing Law. This Agreement will be governed by, and
construed in accordance with, the laws of Delaware, except to the extent
mandatorily governed by the laws of Canada, regardless of the laws that
might otherwise govern under applicable principles of conflict of laws
thereof.
7.08. Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement will be assigned, in whole
or in part, by operation of Law or otherwise by either of the parties
hereto without the prior written consent of the other party. Any
assignment in violation of the preceding sentence will be void. Subject
to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of, and be enforceable by, the parties and their respective
successors and assigns.
7.09. Enforcement. The parties agree that irreparable damage would
occur and that the parties would not have any adequate remedy at Law in
the event that any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties will be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any federal
court located in Delaware, this being in addition to any other remedy to
which they are entitled at Law or in equity. In addition, each of the
parties hereto (a) consents to submit itself to the personal jurisdiction
of any federal court located in Delaware in the event any dispute arises
out of this Agreement or any of the transactions contemplated by this
Agreement, (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such
court and (c) agrees that it will not bring any action relating to this
Agreement or any of the transactions contemplated by this Agreement in any
court other than Delaware.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
signed by their respective officers thereunto duly authorized, all as of
the date first written above.
ULTRAMAR DIAMOND SHAMROCK CORPORATION
By: /s/ Roger R. Hemminghaus
Roger R. Hemminghaus
Chairman and Chief Executive Officer
By: /s/ Jean Gaulin
Jean Gaulin
President and Chief Operating Officer
3007152 NOVA SCOTIA COMPANY
By: /s/ Patrick J. Guarino
Patrick J. Guarino
Vice President
TOTAL PETROLEUM (NORTH AMERICA) LTD.
By: /s/ Jean-Paul Vettier
Jean-Paul Vettier
Chairman of the Board
By: /s/ C. Gary Jones
C. Gary Jones
President and Chief Executive Officer
<PAGE>
EXHIBIT A
to the
Arrangement Agreement dated as of April 15, 1997,
among
Ultramar Diamond Shamrock Corporation,
a Delaware corporation ("UDS"),
3007152 Nova Scotia Company,
a Nova Scotia unlimited liability company
and a wholly owned Subsidiary of UDS ("Canco"),
and Total Petroleum (North America) Ltd.,
a Canadian corporation ("Topna")
PLAN OF ARRANGEMENT UNDER SECTION 192
OF THE CANADA BUSINESS CORPORATIONS ACT,
I. INTERPRETATION
1.1. Definitions. All terms used in this Plan of Arrangement with
initial capital letters have the following meanings, unless the subject
matter or context is inconsistent therewith:
"Arrangement" means the arrangement under Section 192 of the CBCA
involving the exchange of securities as contemplated in this Plan of
Arrangement;
"Arrangement Agreement" means the arrangement agreement dated as of
April 15, 1997 among UDS, Canco and Topna to which this Plan of
Arrangement is attached as Exhibit A;
"Arrangement Consideration" means the number of UDS Shares which a
holder of Topna Shares is entitled to receive in accordance with the
provisions of Section 2.3 upon the Arrangement becoming effective;
"Canco Shares" means common shares in the capital of Canco;
"Certificate" means a certificate previously representing Topna
Shares;
"Depositary" means in the United States, Registrar and Transfer
Company, and in Canada, R-M Trust Company;
"Depositary Agreement" means the depositary agreement among the
Depositary, UDS, Topna and Canco;
"Director" means the Director appointed under Section 260 of the
CBCA;
"Effective Date" means the date on which the Arrangement becomes
effective as shown on the certificate of arrangement issued by the
Director pursuant to the CBCA;
"Effective Time" means 12:01 a.m. (Eastern time) on the Effective
Date;
"Exchange Fund" has the meaning set forth in Section 4.1(a);
"Topna Shares" means common shares in the capital of Topna;
"UDS Shares" means common shares, par value $0.01 per share, of UDS.
1.2. Interpretation. When a reference is made in this Plan of
Arrangement to an Article or Section, such reference will be to an Article
or Section of this Plan of Arrangement unless otherwise indicated.
Whenever the words "include," "includes" or "including" are used in this
Plan of Arrangement, they will be deemed to be followed by the words
"without limitation." The words "hereof," "herein" and "hereunder" and
words of similar import when used in this Plan of Arrangement will refer
to this Plan of Arrangement as a whole and not to any particular provision
of this Plan of Arrangement. All terms defined in this Plan of
Arrangement will have the defined meanings when used in any certificate or
other document made or delivered pursuant hereto unless otherwise defined
therein. All sums of money referred to in this Plan of Arrangement are
expressed in lawful currency of the United States.
II. ARRANGEMENT
2.1. Arrangement Agreement. This Plan of Arrangement is made
pursuant to, is subject to the provisions of, and forms a part of the
Arrangement Agreement.
2.2. Effect on Capital of Canco. Each Canco Share which is issued
and outstanding immediately prior to the Effective Time will remain
outstanding and the Arrangement will not effect any change in any of such
Canco Shares.
2.3. Exchange of Topna Shares. As of the Effective Time, each
issued and outstanding Topna Share will be acquired by Canco in exchange
for 0.322 of a UDS Share. Notwithstanding any other provision hereof,
effective as of the Effective Time, without further action, the rights of
holders of Topna Shares immediately prior to the Effective Time will cease
and, subject to Article III, thereafter such holders will have only the
right to receive the Arrangement Consideration and any dividends or other
distributions with respect thereto with a record date after the Effective
Time and cash payments in lieu of any fractional UDS Shares which such
holders are entitled to receive pursuant to the provisions of Article IV.
III. RIGHTS OF DISSENT
3.1. Dissenting Shares. Holders of Topna Shares may exercise rights
of dissent in connection with the Arrangement pursuant to and in the
manner set forth in Section 190 of the CBCA, subject to the following
additional provisions:
(a) Holders who duly exercise their rights of dissent and who are
ultimately entitled to be paid fair value for their Topna Shares as
herein provided will (i) be deemed to have transferred their Topna
Shares to Topna for cancellation and such Topna Shares will be
canceled at the Effective Time and (ii) not be entitled to any other
payment or consideration, including any payment that would be payable
under the Arrangement had such holders not exercised their right of
dissent; and
(b) Holders who duly exercise their right of dissent and who are
ultimately not entitled, for any reason, to be paid fair value for
their Topna Shares will be deemed to have participated in the
Arrangement on the same basis as any non-dissenting holder of Topna
Shares.
In no case will Topna or any other Person be required to recognize such
holders as holders of Topna Shares after the Effective Time, and the names
of such holders of Topna Shares will be deleted from the register of
holders of Topna Shares as of the Effective Time.
IV. DEPOSITARY ARRANGEMENTS
4.1. (a) Depositary. Prior to the Effective Time, the Depositary
will have received from UDS pursuant to the Depositary Agreement, for the
benefit of the holders of Topna Shares exchanged pursuant to Section 2.3,
certificates representing the number of UDS Shares to be issued in
exchange for Topna Shares in accordance with the provisions of Section 2.3
and a cash payment (and/or an irrevocable undertaking by UDS to make cash
payments when determinable) in lieu of fractional UDS Shares in amounts
determined pursuant to Section 4.1(d) (such UDS Shares, together with any
dividends or other distributions with respect thereto with a record date
after the Effective Time and cash payments in lieu of any fractional UDS
Share, being hereinafter referred to as the "Exchange Fund").
(b) Exchange Procedures. Upon surrender of a Certificate to
the Depositary, together with a letter of transmittal from the holder
thereof, specifying, among other things, that delivery will be effected
and risk of loss and title to the Certificate will pass only upon delivery
of the Certificate to the Depositary, duly executed, and such other
documents as may reasonably be required by Topna and the Depositary, the
holder of such Certificate will be entitled to receive in exchange
therefor a certificate representing the Arrangement Consideration and
cash, if any, which such holder has the right to receive pursuant to the
provisions of Section 4.1(d). In the event of a transfer of ownership of
Topna Shares which is not registered in the transfer records of Topna,
certificates representing the Arrangement Consideration may be issued to a
Person other than the Person in whose name the Certificate so surrendered
is registered if such Certificate is properly endorsed or otherwise in
proper form for transfer and the Person requesting such issuance either
pays any transfer or other taxes required by reason of the issuance of UDS
Shares to a Person other than the registered holder of such Certificate or
establishes to the satisfaction of UDS that such tax has been paid or is
not payable. Until surrendered as contemplated by this Section 4.1(b),
each Certificate will be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the Arrangement
Consideration and dividends or other distributions with respect thereto
with a record date after the Effective Time and a cash payment in lieu of
any fractional UDS Shares which the holder thereof has the right to
receive in respect of such Certificate pursuant to the provisions of
Article IV. No interest will be paid or will accrue on any Arrangement
Consideration or any dividends, other distributions or cash payable to
holders of Certificates pursuant to the provisions of this Article IV.
(c) Distributions with Respect to Unexchanged Shares. No dividends
or other distributions with respect to UDS Shares with a record date after
the Effective Time will be paid to the holder of any unsurrendered
Certificate with respect to the UDS Shares receivable in exchange therefor
and all such dividends and other distributions will be paid to the
Depositary and will be included in the Exchange Fund, in each case until
the surrender of such Certificate in accordance with this Article IV.
Subject to the effect of applicable escheat or similar laws, following
surrender of any such Certificate, there will be paid to the holder of the
certificate representing whole UDS Shares issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of
dividends or other distributions with a record date after the Effective
Time theretofore paid with respect to such whole UDS Shares and (ii) at
the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to
such surrender and with a payment date subsequent to such surrender
payable with respect to such whole UDS Share.
(d) No Fractional Shares. (i) No certificates or scrip
representing fractional UDS Shares will be issued upon the surrender of
Certificates for exchange for Arrangement Consideration, and no dividend,
stock split, other change in the capital structure of UDS or distribution
of UDS will be payable with respect to such fractional share interests and
such fractional share interests will not entitle the holder thereof to
vote or to any other rights of a stockholder of UDS.
(ii) In lieu of the issuance of any such fractional share
interests in UDS, each holder of Topna Shares will be entitled to receive
out of the Exchange Fund an amount in cash equal to the product obtained
by multiplying (A) the fractional share interest to which such holder
(after taking into account all Topna Shares held at the Effective Time by
such holder) would otherwise be entitled by (B) the closing price for a
UDS Share as reported in the New York Stock Exchange Composite
Transactions Report (as reported in The Wall Street Journal, or, if not
reported therein, any other authoritative source) on the date which is
five business days prior to the Effective Date.
(e) No Liability. None of UDS, Canco, Topna or the Depositary will
be liable to any Person in respect of any UDS Shares (or dividends or
distributions with respect thereto) or cash from the Exchange Fund
delivered to a public official pursuant to any applicable abandoned
property, escheat or similar Law. If any Certificate shall not have been
surrendered prior to the sixth anniversary of the Effective Time (or
immediately prior to such earlier date on which any Arrangement
Consideration would otherwise escheat to or become the property of any
governmental authority), any such Arrangement Consideration will become
the property of Canco, free and clear of all claims or interest of any
Person previously entitled thereto.
<PAGE>
EXHIBIT B
[Form of Affiliate Agreement]
Ultramar Diamond Shamrock Corporation
9830 Colonnade Blvd
San Antonio, Texas 78230
Ladies and Gentlemen:
The undersigned is a holder of shares of Common Stock, no par value
("Topna Common Stock"), of Total Petroleum (North America) Ltd., a
Canadian corporation ("Topna"). The undersigned may receive shares of
Common Stock, par value $0.01 per share ("UDS Common Stock"), of Ultramar
Diamond Shamrock Corporation, a Delaware corporation ("UDS"), in
connection with the business combination between Topna and UDS pursuant to
a plan of arrangement (the "Arrangement").
The undersigned acknowledges that the undersigned may be deemed an
"affiliate" of Topna as the term "affiliate" is defined for purposes of
paragraphs (c) and (d) of Rule 145 ("Rule 145") of the rules and
regulations under the Securities Act of 1933, as amended (the "Act").
Execution of this Agreement by the undersigned should not be construed as
an admission of "affiliate" status or as a waiver of any rights the
undersigned may have to object to any claim that the undersigned is such
an affiliate on or after the date of this Agreement.
If in fact the undersigned were an affiliate of Topna under the
Securities Act, the undersigned's ability to sell, transfer or otherwise
dispose of any UDS Common Stock received by the undersigned in exchange
for any shares of Topna Common Stock pursuant to the Arrangement may be
restricted unless such transaction is registered under the Securities Act
or an exemption from such registration is available. The undersigned
understands that such exemptions are limited and the undersigned has
obtained advice of counsel as to the nature and conditions of such
exemptions, including information with respect to the applicability to the
sale of such securities of Rules 144 and 145(d) promulgated under the
Securities Act.
A. The undersigned hereby represents to and covenants with UDS that
the undersigned will not sell, transfer or otherwise dispose of any UDS
Common Stock received by the undersigned in exchange for shares of Topna
Common Stock pursuant to the Arrangement except (i) pursuant to an
effective registration statement under the Securities Act, (ii) by a sale
made in conformity with the provisions of Rule 145 (and otherwise in
accordance with Rule 144 under the Securities Act if the undersigned is an
affiliate of UDS and if so required at the time), or (iii) in a
transaction which, in the opinion of independent counsel reasonably
satisfactory to UDS or as described in a "no-action" or interpretive
letter from the Staff of the Securities and Exchange Commission (the
"Commission"), is not required to be registered under the Securities Act.
B. The undersigned understands that, [except as provided in the
Stockholder Agreement to which the undersigned is a party], UDS is under
no obligation to register the sale, transfer or other disposition of UDS
Common Stock by the undersigned or on behalf of the undersigned under the
Securities Act or, except as provided in paragraph F.1 below, to take any
other action necessary in order to make compliance with an exemption from
such registration available.
C. The undersigned also understands that stop transfer instructions
will be given to UDS's transfer agent with respect to the UDS Common Stock
issued to the undersigned and that there will be placed on the
certificates for the UDS Common Stock issued to the undersigned, or any
substitutions therefor, a legend stating in substance:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT DATED APRIL 15, 1997 BETWEEN THE REGISTERED HOLDER
HEREOF AND ULTRAMAR DIAMOND SHAMROCK CORPORATION, A COPY OF
WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF ULTRAMAR
DIAMOND SHAMROCK.
D. The undersigned also understands that unless a sale or transfer
is made in conformity with the provisions of Rule 145, or pursuant to a
registration statement, UDS reserves the right to place the following
legend on the certificates issued to the undersigned's transferees:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED
FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH
RULE 145 PROMULGATED UNDER THE SECURITIES ACT APPLIES. THE
SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR
FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN
THE MEANING OF THE SECURITIES ACT AND MAY NOT BE SOLD, PLEDGED
OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
E. In the event of a sale of UDS Common Stock pursuant to Rule 145,
the undersigned will supply UDS with evidence of compliance with such
Rule, in the form of customary sellers' and brokers' Rule 145
representation letters or as UDS may otherwise reasonably request. The
undersigned understands that UDS may instruct its transfer agent to
withhold the transfer of any UDS Common Stock disposed of by the
undersigned in a manner inconsistent with this letter.
F. By UDS's acceptance of this Agreement, UDS hereby agrees with the
undersigned as follows:
1. For so long as necessary to permit the undersigned to sell the
UDS Common Stock pursuant to Rule 145 and, to the extent applicable, Rule
144 under the Securities Act, UDS will (a) use its reasonable best efforts
to (i) file, on a timely basis, all reports and data required to be filed
with the Commission by it pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and (ii) furnish to
the undersigned upon request a written statement as to whether UDS has
complied with such reporting requirements during the 12 months preceding
any proposed sale of UDS Common Stock by the undersigned under Rule 145
and Rule 144. UDS has filed all reports required to be filed with the
Commission under Section 13 of the Exchange Act during the preceding 12
months.
2. It is understood and agreed that the legends set forth in
paragraphs C and D above will be removed by delivery of substitute
certificates without such legend if such legend is not required for
purposes of the Securities Act or this Agreement. It is understood and
agreed that such legends and the stop orders referred to above will be
removed if (i) one year will have elapsed from the date the undersigned
acquired UDS Common Stock received in the Arrangement and the provisions
of Rule 145(d)(2) are then available to the undersigned, (ii) two years
will have elapsed from the date the undersigned acquired the UDS Common
Stock received in the Arrangement and the provisions of Rule 145(d)(3) are
then applicable to the undersigned, (iii) UDS has received either an
opinion of counsel, which opinion and counsel will be reasonably
satisfactory to UDS, or a "no action" letter obtained from the staff of
the Commission, to the effect that the UDS Common Stock subject thereto
may be transferred free of the restrictions imposed by Rule 144 or 145
under the Securities Act, or (iv) in the event of a sale of UDS Common
Stock received by the undersigned in the Arrangement which has been
registered under the Securities Act or made in conformity with the
provisions of Rule 145; and, in the case of (i) and (ii) above, UDS has
received either an opinion of counsel, which opinion and counsel will be
reasonably satisfactory to UDS, or a "no action" letter obtained from the
staff of the Commission, to the effect that the restrictions imposed by
Rule 145 under the Securities Act no longer apply to the undersigned.
The undersigned acknowledges that it has carefully reviewed this
letter and understands the requirements hereof and the limitations imposed
upon the distribution, sale, transfer or other disposition of UDS Common
Stock received by the undersigned in the Arrangement.
Very truly yours,
[Name]
Accepted this ___ day of
_________, 1997 by:
ULTRAMAR DIAMOND SHAMROCK CORPORATION
By:
Name:
Title:
STOCKHOLDER AGREEMENT
between
ULTRAMAR DIAMOND SHAMROCK CORPORATION
and
TOTAL
Dated as of April 15, 1997
<PAGE>
TABLE OF CONTENTS
1. Definitions
2. Restricted Period
3. Standstill Period
4. Competition
5. Topna Tradename License
6. Topna Technology License
7. Insurance
8. Representations and Warranties of TOTAL
8.1. Organization and Good Standing
8.2. Authorization, Validity and Effect of Agreement
8.3. No Conflict; Required Filings and Consents
8.4. Ownership of Owned Shares
8.5. No Brokers
9. Representations and Warranties of UDS
9.1. Organization and Good Standing
9.2. Authorization, Validity and Effect of Agreement
9.3. No Conflict; Required Filings and Consents
9.4. No Brokers
10. Registration Rights
11. SEC Reports and Other Information
12. Nondisclosure of Information
13. Foreign Shares
14. Nonsurvival of Representations and Warranties
15. Notices
16. Interpretation
17. Counterparts
18. Entire Agreement; No Third-Party Beneficiaries
19. Governing Law
20. Assignment
21. Enforcement
<PAGE>
SCHEDULES
Schedule Title
4(a) Covered Territory
5 Tradename License
6(a) Technology License
10 Registration Rights
<PAGE>
STOCKHOLDER AGREEMENT
Stockholder Agreement ("Agreement"), dated as of April 15, 1997,
between Ultramar Diamond Shamrock Corporation, a Delaware corporation
("UDS"), and Total, a French societe anonyme ("Total").
RECITALS
A. Simultaneously herewith, certain of the parties are entering into
an agreement (the "Arrangement Agreement") pursuant to which a wholly owned
Canadian Subsidiary of UDS has agreed, on the terms and subject to the
conditions set forth therein, to acquire Topna.
B. Total, or a wholly owned Subsidiary of Total, is the sole record
and beneficial owner of, and has the sole right to vote and dispose of,
21,741,626 Topna Shares (together with any Topna Shares acquired by Total
or wholly owned Subsidiaries of Total after the date hereof, the "Owned
Shares").
C. As a condition to its willingness to enter into the Arrangement
Agreement, UDS has required that Total agree to the matters set forth
herein, and Total is willing to agree to such matters.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties and covenants herein contained, the parties
agree as follows:
1. Definitions. Terms used herein with initial capital letters that
are not otherwise defined herein but are defined in the Arrangement
Agreement have the meanings ascribed to them in the Arrangement Agreement.
2. Restricted Period. The "Restricted Period" will commence on the
date hereof and continue until the first to occur of (i) the Effective Time
and (ii) the termination of the Arrangement Agreement in accordance with
the terms thereof (the "Termination Date").
(b) During the Restricted Period, (i) Total will not, nor will it
permit any of its Subsidiaries or Affiliates controlled by it to, nor will
it authorize or permit any of its or any such other Person's officers,
directors, employees or Representatives to, directly or indirectly through
another Person, sell, assign, transfer, grant a participation in, pledge,
hypothecate or otherwise dispose of ("Transfer") any Owned Shares or any
interest therein to any other Person, other than an assignment of Owned
Shares to a wholly owned Subsidiary of Total, provided that Total will
cause such Subsidiary to become a party to this Agreement pursuant to an
instrument reasonably satisfactory to UDS prior to a Transfer of any of the
capital stock of such Subsidiary to any Person other than a wholly owned
Subsidiary of Total, and (ii) Total will not, nor will it permit any of its
Subsidiaries or Affiliates controlled by it to, nor will it authorize or
permit any of its or any such other Person's officers, directors, employees
or Representatives to, directly or indirectly through another Person, (A)
solicit, initiate or encourage, or take any other action designed to
facilitate, any inquiries or the making of any proposal which constitutes
any Topna Takeover Proposal, (B) furnish any confidential information to
any Person, or participate in any discussions or negotiations, in any such
case regarding any Topna Takeover Proposal, or (C) otherwise take or fail
to take any action which would constitute or reasonably be expected to
result in a breach by Topna of any of its covenants under the Arrangement
Agreement, including without limitation Sections 3.01 and 3.02 thereof,
except for such actions with respect to the foregoing which Topna is
permitted to take pursuant to the Arrangement Agreement. Total will not
request that Topna register the Transfer (book-entry or otherwise) of any
certificate or uncertificated interest representing any Topna Shares during
the Restricted Period, other than an assignment of Owned Shares to a wholly
owned Subsidiary of Total in accordance with this Agreement.
(c) Total will deliver to UDS, prior to the Closing, a written
agreement substantially in the form attached as Exhibit B to the
Arrangement Agreement.
(d) During the Restricted Period, at any meeting (whether annual or
special and whether or not adjourned or postponed) of the holders of Topna
Shares, including without limitation the Topna Shareholders Meeting, Total
will appear at the meeting or otherwise cause the Owned Shares to be
counted as present thereat for purposes of establishing a quorum and vote
(or cause to be voted) the Owned Shares (i) in favor of the adoption of the
Arrangement Agreement and the approval of the Arrangement Transactions and
any actions in furtherance thereof, (ii) against any action or agreement
that would result in a breach of any representation, warranty, covenant or
any other obligation or agreement of Topna under the Arrangement Agreement
or of Total under this Agreement, and (iii) against any Topna Takeover
Proposal or Topna Superior Proposal or any other action which is intended,
or could reasonably be expected, to impede, interfere with, delay, postpone
or adversely affect the Arrangement and the transactions contemplated by
this Agreement or the Arrangement Agreement. During the Restricted Period,
in connection with any solicitation of the written consent of Topna Shares,
Total will consent or withhold consent (or cause the consent or withholding
of the consent), as the case may be, in accordance with clauses (i), (ii)
and (iii) of the preceding sentence.
(e) Total will not enter into any agreement or understanding with any
Person the effect of which would be inconsistent with or violative of any
provision contained in this Agreement or grant a proxy to any Person (other
than to UDS or solely in furtherance of any matter referred to in Section
2(b)) with respect to any of the Owned Shares or deposit any Owned Shares
in a voting trust or enter into any other agreement, arrangement or
understanding (other than this Agreement) with respect to the foregoing.
3. Standstill Period. The "Standstill Period" will commence on the
date hereof and extend until the first to occur of (a) the fifth
anniversary of the Effective Date, (b) if the Termination Date has
occurred, January 6, 2000, and (c) the date on which the Board of Directors
of UDS (the "UDS Board") recommends a merger or other transaction which
would result in a third party (together with its Affiliates) beneficially
owning, in the aggregate, 50% or more of the UDS Shares then outstanding
(after giving effect to such transaction), or a third party (together with
its Affiliates) acquires beneficial ownership of 50% or more of the then-
outstanding UDS Shares (after giving effect to such transaction) through
merger, purchase or otherwise. During the Standstill Period, except with
the prior written consent of UDS, Total will not, and will not permit any
of its Subsidiaries or Affiliates to, (i) in any manner acquire, agree to
acquire or make any offer or other proposal to acquire, directly or
indirectly, any securities, any business or any material asset of UDS or
any of its Subsidiaries, except (A) securities issued pursuant to a stock
split, stock dividend, rights offering or recapitalization approved by the
UDS Board, provided that such transactions would not otherwise violate the
provisions of this Section 3, and (B) for the acquisition of not more than
1% in the aggregate of the then-outstanding UDS Shares in open-market
purchases over any two-year period, (ii) make any proposal to enter into,
directly or indirectly, any merger or business combination involving UDS or
any of its Subsidiaries, (iii) participate, directly or indirectly, in any
"solicitation" of "proxies" (as such terms are used in the proxy rules of
the SEC) to vote, or seek to advise or influence any person with respect to
the voting of, any voting securities of UDS or any of its Subsidiaries, in
any manner which has not been recommended by the UDS Board, (iv) form, join
or in any way participate in a "group" (within the meaning of Section
13(d)(3) of the Exchange Act) with respect to any voting securities of UDS
or any of its Subsidiaries, other than a "group" composed solely of Total
and wholly owned Subsidiaries thereof, (v) otherwise act, alone or in
concert with others, to seek to control or influence the management
policies or actions of UDS, including without limitation any proposal to
effect any recapitalization, disposition of assets, dividend, distribution
or liquidation, (vi) disclose any intention, plan or arrangement
inconsistent with the foregoing clauses (i) through (v), (vii) advise,
assist or encourage any other Persons to take any action described in any
of the foregoing clauses (i) through (v), or (viii) Transfer any UDS
Shares, other voting stock of UDS or securities exercisable or exchangeable
for UDS Shares or other voting shares (collectively, "UDS Stock") other
than (A) pursuant to an underwritten public offering in accordance with
Section 10, (B) after the period ending 180 days after the Effective Time
(the "180-Day Period"), pursuant to a private sale to a "Person" (within
the meaning of Section 13(d) of the Exchange Act) who, after giving effect
to such sale, would not beneficially own (within the meaning of Rule 13d-3
under the Exchange Act), 4% or more of the outstanding UDS Shares, (C) any
Transfer pursuant to Rule 144 or 145, if applicable, or any similar rule
under the Securities Act, provided that, during the 180-Day Period, such
Transfer has been previously approved by UDS (such approval not to be
unreasonably withheld or delayed in respect of open-market sales or
privately negotiated sales to an institutional investor), (D) pursuant to a
tender offer or other transaction recommended by the UDS Board, or (E) any
Transfer to any wholly owned Subsidiary of Total (each such Subsidiary or
third party transferee, a "Permitted Transferee"), which Permitted
Transferee becomes a party to this Agreement pursuant to an instrument
reasonably satisfactory to UDS. In addition, during the Standstill Period,
Total will not, and will cause its Subsidiaries and Affiliates not to,
directly or indirectly, except with the prior written consent of UDS in its
sole discretion, (1) request that UDS (or its Representatives) amend or
waive any provisions of this Section 3 (including this sentence), other
than any approval relating to the provisions of clause (viii) above and not
involving any event referred to in any other provision hereof, or (2) take
any action which is calculated to or might reasonably be expected to
require UDS to make a public announcement regarding the possibility of a
tender offer, merger or other business combination or acquisition
transaction.
4. Competition. (a) For a period of three years from the Effective
Time, Total will not and will not permit any of its Affiliates to, directly
or indirectly, individually or as a part of a "group" (within the meaning
of Section 13(d)(3) of the Exchange Act), own, lease, operate, manage,
acquire or maintain any economic interest in any Person engaged in the
business of petroleum refining or marketing petroleum products or the
operation of retail gasoline or convenience stores (the "Covered Activity")
in any of the jurisdictions listed in Schedule 4(a) (collectively, the
"Covered Territory"). Notwithstanding the foregoing, Total will not be
restricted from (i) acquiring a Person, or interest therein, which,
directly or through a Subsidiary, engages in the Covered Activity in the
Covered Territory or (ii) engaging in hydrocarbon trading, chemical
manufacturing or other activities that do not constitute the Covered
Activity.
(b) Total acknowledges and agrees that (i) the covenants set forth in
this Section 4 are reasonable in scope, duration, area restrictions and in
all other respects, (ii) UDS would not have entered into this Agreement or
the Arrangement Agreement but for the covenants contained in this Section 4
(and the remaining covenants herein), and (iii) the covenants contained in
this Section 4 have been made in order to induce UDS to enter into this
Agreement and the Arrangement Agreement.
(c) If, at the time of enforcement of this Section 4, a court shall
hold that the scope, duration or area restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum scope, duration or area restrictions determined by such court to be
reasonable under such circumstances will be substituted for the stated
duration, scope or area restrictions.
(d) In the event of any breach of any provisions of this Section 4,
UDS will have the right, in addition to any other rights and remedies
existing in its favor, to enforce specifically its rights against Total
under this Section 4 and/or injunctive or other equitable relief in order
to enforce or prevent any violations of the provisions of this Section 4.
5. Topna Tradename License. As an inducement to UDS to enter into
the Arrangement Agreement and in partial consideration therefor, at or
prior to the Effective Time, Total will enter into the license with UDS in
the form attached as Schedule 5.
6. Topna Technology License. (a) Total hereby confirms that (i) TPI
will be entitled to continue to use after the Effective Time technology and
software pursuant to licenses in the form of Schedule 6(a) and (ii) it will
enter into a royalty-free technology license relating to solvent technology
and plant design on terms substantially the same as Schedule 6(a) in
respect of Topna's Ardmore, Oklahoma refinery.
(b) Total will inform UDS of the development of new technology which
has application to the Covered Activity reasonably promptly after the
development thereof, and if requested by UDS, will discuss in good faith
with UDS the entry into a technology license in respect thereof on terms
not less satisfactory to UDS as those made available to any nonaffiliated
party. The parties hereby acknowledge that neither UDS nor Total will have
any legal liabilities in respect thereof except as set forth in any such
license.
7. Insurance. Total will fully cooperate with and assist UDS and
Topna and its Affiliates with respect to claims that may be pursued by UDS
or Topna under any insurance policies now or previously owned, issued or
available to Total, Topna or any of their past or current Affiliates. Such
cooperation will include, without limitation, (a) making all claims and
demands against the insurance companies, including providing access to
documents and witnesses and making witnesses available for testimony at
UDS's cost, and pursuing such claims and demands in a commercially diligent
manner and (b) providing UDS, Topna and their Affiliates with all
information reasonably requested or required by them with respect to such
insurance policies or claims, including without limitation all documents
relating or referring to such policies or claims. Until the Effective
Time, Total will take all steps necessary to ensure the continuation and/or
extension of all insurance policies maintained by Total or any of its
Affiliates in order to permit UDS to recover under such policies for losses
arising out of or relating to the past and present businesses of, or assets
owned by or formerly owned by, any of the Topna Companies or for which they
may be held liable or have liability under federal or state laws. In the
event that UDS, Topna or their Affiliates are unable fully to satisfy or
recover under any insurance policy because the aggregate limits or coverage
under such policy have been potentially or wholly impaired as a result of
claims made by Persons other than UDS, Topna and their Affiliates
(excluding Total or its Affiliates), Total will, promptly after UDS
notifies Total of such inability to fully recover under such policy, (i)
take all actions necessary to cause such coverage or aggregate limits to be
reinstated or replenished to the extent necessary to permit UDS, Topna or
such Affiliate thereof to recover the amount under such policy that it
would have been entitled to recover thereunder but for such impairment or
(ii) at the option of Total and without limiting the parties' relative
rights and obligations under clause (i) above, Total may pay or cause
another Person to pay such amount directly to UDS, provided that in no
event will any of UDS, Topna or any of their respective Affiliates have any
reimbursement, indemnity or other obligation in respect of any insurance
payment or claim and Total will indemnify, defend and hold harmless UDS,
Topna and their respective Affiliates with respect to any claim made by any
Person, including any third-party or captive insurance company, which
relates to or arises out of any insurance claim made by UDS, Topna or any
of their Affiliates under any policy of insurance owned or issued to Topna,
Total or their Affiliates.
8. Representations and Warranties of Total. Total hereby represents
and warrants to UDS as follows:
8.1 Organization and Good Standing. Total is a societe anonyme duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized.
8.2 Authorization, Validity and Effect of Agreement. Total has all
requisite power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by Total and the consummation by Total of the
transactions contemplated hereby have been authorized by all necessary
action on the part of Total This Agreement has been duly executed and
delivered by Total and constitutes the valid and binding obligation of
Total, enforceable against Total in accordance with its terms.
8.3 No Conflict; Required Filings and Consents. The execution and
delivery of this Agreement by Total do not, and the consummation by Total
of the transactions contemplated hereby will not, (a) conflict with or
violate the charter or bylaws (or similar governing documents) of Total,
(b) conflict with or violate any Law or Order applicable to Total or by
which Total is bound or affected, or (c) result in any breach of or
constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or result in the creation of a lien or
other encumbrance on any Owned Shares pursuant to any contract, agreement
or other instrument or obligation to which Total is a party or by which
Total or any property or asset of Total is bound or affected.
8.4 Ownership of Owned Shares. As of the date hereof, Total, or a
wholly owned Subsidiary of Total, is, and as of the Effective Time will be,
the sole record and beneficial owner of the Owned Shares, free and clear of
any security interests, Liens, charges, encumbrances, equities, claims,
options, proxies, stockholder agreements or limitations of whatever nature
and free of any other limitation or restriction (including without
limitation any restriction on the right to Transfer the Owned Shares or any
interest therein) except pursuant to this Agreement and except for
Transfers to wholly owned Subsidiaries or Transfers to third parties in
accordance with this Agreement. The Owned Shares constitute all of the
Topna Shares owned of record or beneficially (within the meaning of Rule
13d-3 under the Exchange Act) by Total and its Subsidiaries as of the date
hereof.
8.5 No Brokers. Total has not entered into any contract, arrangement
or understanding with any Person, other than Credit Suisse First Boston
Corporation, which may result in the obligation of UDS or Topna to pay any
finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby.
9. Representations and Warranties of UDS. UDS hereby represents and
warrants to Total as follows:
9.1 Organization and Good Standing. UDS is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware.
9.2 Authorization, Validity and Effect of Agreement. UDS has all
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by UDS and the consummation by UDS of the
transactions contemplated hereby have been authorized by all necessary
corporate actions on the part of UDS. This Agreement has been duly
executed and delivered by UDS and constitutes the valid and binding
obligation of UDS, enforceable against UDS in accordance with its terms.
9.3 No Conflict; Required Filings and Consents. The execution and
delivery of this Agreement by UDS, and the consummation by UDS of the
transactions contemplated hereby, will not (a) conflict with or violate the
charter or bylaws of UDS, (b) conflict with or violate any Law or Order
applicable to UDS or by which UDS is bound or affected, or (c) result in
any breach of or constitute a default (or an event which with notice or
lapse of time or both would become a default) under any contract, agreement
or instrument or obligation to which UDS is a party or by which UDS or any
property or asset of UDS is bound or affected.
9.4 No Brokers. UDS has not entered into any contract, arrangement
or understanding with any Person, other than Merrill Lynch & Co., which may
result in the obligation of UDS or Total to pay any finder's fees,
brokerage or agent's commission or other like payments in connection with
the negotiations leading to this Agreement or the consummation of the
transactions contemplated hereby.
10. Registration Rights. UDS will register for resale UDS Shares
owned by Total (or any Subsidiary thereof that acquires UDS Shares in
transactions permitted by this Agreement or any purchaser of all UDS Shares
beneficially owned by Total and its Subsidiaries at the time of such
purchase and enter into an agreement or instrument reasonably satisfactory
to UDS by which it agrees to be bound by the covenants of Total hereunder
(any such Subsidiary or purchaser, a "Permitted Reg. Rights Assignee"),
pursuant to and in accordance with the terms and conditions set forth on
Schedule 10.
11. SEC Reports and Other Information. So long as Total (or any of
its wholly owned Subsidiaries) owns beneficially or of record 3% or more of
the then-outstanding UDS Shares, UDS will:
(a) Deliver to Total copies of all financial statements, proxy
statements, reports and other general written communications which UDS
sends to its stockholders at the same time as such information is sent to
UDS's stockholders generally and copies of all special or periodic reports
which UDS files with the SEC within 10 days after the filing thereof.
(b) Provide Total with notice of any and all meetings, by means of
telephone conference or otherwise, among members of UDS's senior management
and securities analysts (other than meetings with analysts from a single
firm or meetings the participation in which is otherwise restricted) no
later than 24 hours prior to any such meeting and permit Total to
participate in such meetings.
(c) From time to time upon the request of Total, UDS will cause a
member of its senior management at the Executive Vice President or higher
level to meet (a "Meeting") with members of senior management of Total for
the purpose of informing Total as to the operations and financial condition
of UDS; provided that the number of Meetings per calendar year pursuant to
this Section 11(c) will not exceed three. During any calendar year, the
first Meeting will be held in San Antonio, Texas, the second Meeting will
be held in Paris, France and any additional Meeting will be held at a
location to be agreed upon by UDS and Total (or, absent such agreement, in
New York, New York).
12. Nondisclosure of Information. (a) Total will (i) keep
confidential any information which has been furnished to it by any of the
parties to the Arrangement Agreement or any of their respective
Representatives in connection with the Arrangement Transactions or
otherwise ("Information") and (ii) not use any such Information other than
in connection with the Arrangement Transactions.
(b) If Total or any of its Representatives is requested to disclose
any of the Information, Total will promptly notify UDS to permit UDS to
seek a protective order or take other appropriate action. Total will also
cooperate in such other party's efforts to obtain a protective order or
other reasonable assurance that confidential treatment will be accorded
such Information. If, in the absence of a protective order, Total or any
of its Representatives is, in the written opinion of its counsel, compelled
as a matter of law to disclose any such Information to a third party, such
party may disclose to the third party compelling disclosure only the part
of such Information as is required by law to be disclosed (in which case,
prior to such disclosure, such party will use reasonable efforts to advise
and consult with UDS and its counsel as to such disclosure and the nature
and wording of such disclosure) and will use its reasonable efforts to
obtain confidential treatment therefor.
(c) This Section 12 will not apply to such portions of Information
furnished by any other party or its Representatives which (i) are or become
generally available to the public through no action of the party to which
such Information was furnished and its Representatives or (ii) are or
become available to the party to which it was furnished on a
nonconfidential basis from a source, other than from the other parties or
their respective Representatives, which the receiving party believes, after
reasonable inquiry, was not prohibited from so disclosing such portions by
a contractual, legal or fiduciary obligation.
13. Foreign Shares. Total agrees to take commercially reasonable
actions to the extent necessary so that no registration or qualification of
UDS Shares issued pursuant to the Arrangement will be required by any
Governmental Entity in France or pursuant to any French Law.
14. Nonsurvival of Representations and Warranties. The
representations and warranties contained in Sections 8.1 through 8.5 and
9.1 through 9.4 will survive the Effective Time until 90 days following the
expiration of the applicable statute of limitations. This Section 14 will
not limit any covenant or agreement of the parties hereunder or any
provision of any of the Arrangement Agreements.
15. Notices. All notices, requests, claims, demands and other
communications under this Agreement will be in writing and will be deemed
given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the parties at the
following addresses (or at such other address for a party as will be
specified by like notice):
(a) If to Total, to:
Total
Total Refining and Marketing
51, Esplanade du General deGaulle
CEDEX 97
La Defense 10
92907 Paris, France
Telecopy: 1 41 35 42 91
Attention: Jean-Paul Vettier
with a copy to:
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036
Telecopy: (212) 969-2900
Attention: Stanley Komaroff, Esq.
If to UDS, to:
Ultramar Diamond Shamrock Corporation
9830 Colonnade Boulevard
San Antonio, Texas 78230
Telecopy: (210) 691-6492
Attention: Patrick J. Guarino, Esq.
with a copy to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Telecopy: (212) 755-7306
Attention: Robert A. Profusek, Esq.
16. Interpretation. When a reference is made in this Agreement to a
Section or Schedule, such reference will be to a Section of, or a Schedule
to, this Agreement unless otherwise indicated. The headings contained in
this Agreement are for reference purposes only and will not affect in any
way the meaning or interpretation of this Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement, they will
be deemed to be followed by the words "without limitation." The words
"hereof", "herein" and "hereunder" and words of similar import when used in
this Agreement will refer to this Agreement as a whole and not to any
particular provision of this Agreement. The terms used in this Agreement
are applicable to the singular as well as the plural forms of such terms
and to the masculine as well as to the feminine and neuter genders of such
term. Any agreement, instrument or statute defined or referred to herein
or in any agreement or instrument that is referred to herein means such
agreement, instrument or statute as from time to time amended, modified or
supplemented, including (in the case of agreements or instruments) by
waiver or consent and (in the case of statutes) by succession of comparable
successor statutes and references to all attachments thereto and
instruments incorporated therein. References to a Person are also to its
permitted successors and assigns.
17. Counterparts. This Agreement may be executed in one or more
counterparts, all of which will be considered one and the same agreement
and will become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
18. Entire Agreement; No Third-Party Beneficiaries. This Agreement
and the other Arrangement Documents (a) constitute the entire agreement and
supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter of this Agreement and
(b) are not intended to confer upon any Person other than the parties (or
Permitted Transferees that are holders of Owned Shares in accordance with
this Agreement) any rights or remedies.
19. Governing Law. This Agreement will be governed by, and construed
in accordance with, the laws of Delaware, regardless of the laws that might
otherwise govern under applicable principles of conflict of laws thereof.
20. Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement will be assigned, in whole or
in part, by operation of Law or otherwise by any of the parties hereto
without the prior written consent of the other parties. Any assignment in
violation of the preceding sentence will be void. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of, and
be enforceable by, the parties and their respective successors and assigns.
Without limiting the generality or effect of any other provision hereof,
(a) Total agrees that this Agreement and the obligations hereunder will
attach to all Owned Shares, whenever acquired, and will be binding upon any
Person to which legal or beneficial ownership of such Owned Shares passes,
whether by operation of Law or otherwise and (b) Permitted Reg. Rights
Assignees will have the rights specified in Section 10.
21. Enforcement. The parties agree that irreparable damage would
occur and that the parties would not have any adequate remedy at Law in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties will be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any federal
court located in Delaware, this being in addition to any other remedy to
which they are entitled at Law or in equity. In addition, each of the
parties hereto (a) consents to submit itself to the personal jurisdiction
of any federal court located in Delaware in the event any dispute arises
out of this Agreement or any of the transactions contemplated by this
Agreement, (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such
court, and (c) agrees that it will not bring any action relating to this
Agreement or any of the transactions contemplated by this Agreement in any
court other than in Delaware. The parties agree that service of process on
Total in any proceeding will be deemed effective if made by delivery to
Proskauer Rose Goetz & Mendelsohn LLP in the manner provided pursuant to
Section 15.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
signed by their respective officers thereunto duly authorized, all as of
the date first written above.
ULTRAMAR DIAMOND SHAMROCK CORPORATION
By: /s/ Roger R. Hemminghaus
Roger R. Hemminghaus
Chairman and Chief Executive Officer
By: /s/ Jean Gaulin
Jean Gaulin
President and Chief Operating Officer
TOTAL
By: /s/ Jean Paul Vettier
Jean-Paul Vettier
Executive Vice President
<PAGE>
SCHEDULE 4(a)
COVERED TERRITORY
Arkansas
Colorado
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Michigan
Minnesota
Mississippi
Missouri
Nebraska
New Mexico
North Dakota
Ohio
Oklahoma
South Dakota
Tennessee
Texas
Wisconsin
Wyoming
<PAGE>
Schedule 5
LICENSE AGREEMENT
License Agreement, dated as of , 1997, between Total, a French
societe anomyme ("Licensor"), and Ultramar Diamond Shamrock Corporation, a
Delaware corporation ("Licensee").
WITNESSETH
WHEREAS, Licensee, 3007152 Nova Scotia Company, a Nova Scotia
unlimited liability company and wholly-owned subsidiary of Licensee, and
Total Petroleum (North America) Ltd., a Canadian corporation ("Bronco") and
majority-owned subsidiary of Licensor, entered into an Arrangement
Agreement, dated as of April 15, 1997 (the "Arrangement Agreement"),
pursuant to which Licensee will acquire Bronco, and Licensor entered into a
Stockholder Agreement, dated as of April 15, 1997 (the "Stockholder
Agreement") with Licensee.
WHEREAS, Licensor owns the Trademarks (as defined herein) used by
Bronco in its business.
WHEREAS, Licensee, in connection with its acquisition of Bronco,
desires to use the Trademarks referred to above in connection with the
Petroleum Business (as defined herein) of Licensee and its subsidiaries
(including all Bronco-operated or jobber retail facilities) in the
Territories.
WHEREAS, Licensee desires to have Licensor grant Licensee a license,
and Licensor desires to grant Licensee a license, to enable Licensee and
its subsidiaries to use the Trademarks referred to above in the Petroleum
Business in the Territories, upon the terms and conditions contained in
this Agreement.
NOW, THEREFORE, Licensor and Licensee hereby agree as follows:
ARTICLE 1 - Definitions
As used in this Agreement, the following terms have the meanings
specified or referred to in this Article 1:
"Licensee" is defined in the first paragraph of this Agreement.
"Licensor" is defined in the first paragraph of this Agreement.
"Petroleum Business" shall mean the manufacture, processing,
packaging, advertising, promotion, distribution and/or sale of Petroleum
Products (as defined herein) and Related Services (as defined herein) and
the operation of Retail Facilities (as defined herein), excluding
hydrocarbon trading, chemical manufacturing and other activities that do
not constitute the Petroleum Business.
"Petroleum Products" shall mean (i) petroleum and products derived
from petroleum, (ii) natural gas, liquefied natural gas and natural gas
liquids, and (iii) goods and merchandise customarily sold or offered in
conjunction with the foregoing items, which shall include, automobile parts
and accessories, engine lubricants and automobile fluids of all types.
"Retail Facilities" shall mean retail gasoline and convenience stores.
"Related Services" shall mean repairs and related services customarily
offered in conjunction with Petroleum Products.
"Territories" shall mean the states listed on Schedule 1 hereto.
"Trademarks" shall mean the trademarks, trade names, word marks,
service marks, designs and emblems listed on Schedule 2 hereto.
ARTICLE 2 - Grant
2.1 Subject to the terms and conditions of this Agreement, Licensor
hereby grants to Licensee, and Licensee hereby accepts, a license, during
the term of this Agreement, to use the Trademarks in connection with the
Petroleum Business of Licensee and its subsidiaries in the Territories for
substantially and exclusively the same purposes that the Trademarks are
used for the businesses conducted by Bronco and its subsidiaries on the
date hereof. The license granted in this Agreement is not intended to be,
and shall not be construed as, an assignment, in whole or in part, of any
trademark rights of Licensor.
2.2 Licensor agrees that during the term of this Agreement it will
not license to any third party (other than to Licensor's subsidiaries) the
right to use the Trademarks in connection with the Petroleum Business in
the Territories. Notwithstanding the foregoing, Licensor (and any of its
subsidiaries) may use the Trademarks, within or outside of the Territories
(other than the State of Michigan during the term hereof), for any purpose,
subject to the Stockholder Agreement; provided that, in the event that
Licensor (or any of its subsidiaries) acquires a person in the Petroleum
Business and such acquisition is permitted by the terms of the Stockholder
Agreement, Licensor (or any of its subsidiaries) may use the Trademarks
with respect to such acquired Petroleum Business in the Territories (other
than the State of Michigan during the term hereof) at any time after the
earlier of the fourth anniversary of the date of this Agreement and the
termination of this Agreement with respect to such Territories.
2.3 Licensee shall not sell of distribute in the Territories any
Petroleum Products the packaging of which bears any Trademarks to any
person if the Licensee knows that such Petroleum Products will be shipped
or sold or distributed outside of the Territories, either by the person
acquiring such Petroleum Products from Licensee of by any other person.
ARTICLE 3 - Use of Trademark
3.1 Licensee shall use the trademarks only in the form in which they
are registered and currently used in the Territories and shall not use, or
authorize the use of, an abbreviated form of any Trademark. Licensee shall
comply with Licensor's general specifications and standards of trademark
usage set forth in the Total Trademark Graphic Standards, revised and
expanded, second edition May 1996, previously delivered to Licensee (the
"Specifications"), including, as applicable, in connection with all
advertisements and promotional materials.
3.2 Licensee shall not use any Trademark in the packaging material or
on signage at Licensee's Retail Facilities unless Licensee has submitted to
Licensor at a designated location in the United States for approval
reasonably in advance of such use, and Licensor has approved (or has not
objected within 5 business days after such submission for approval), the
use of such Trademarks and the quality, style and taste of such packaging
materials or signage.
3.3 Bronco may continue to use its name, which contains the Trademark
"TOTAL", in the Territories during the term of this agreement, but Licensee
and its subsidiaries (other than Bronco) may not use any of the Trademarks
(or any part of any Trademark) in their names or in the name of any other
business. Licensee hereby agrees that as soon as possible after the
termination of this Agreement Licensee shall take all actions necessary to
change the name of Bronco so that it does not contain the Trademark "TOTAL"
or any other Trademark (or part thereof).
3.4 No other name, trademark (except the Trademarks), inscription or
design ("Other Marks") shall (a) be affixed to packaging for Licensee's
Petroleum Products bearing the Trademarks or (b) appear on signage or other
displays at Licensee's Retail Facilities bearing the Trademarks.
Notwithstanding the foregoing, during the term of this Agreement, Licensee
may use Other Marks owned by Licensee on Licensee's Retail Facilities
bearing the Trademarks when Licensee is rebranding such Retail Facilities,
if Licensee clearly indicates at such Retail Facilities that the Trademarks
are owned by Licensor. Other Marks owned by Licensee may be displayed on
credit cards bearing the Trademarks, to the extent permitted by the
Specifications.
ARTICLE 4 - Quality Standards
4.1 So as to protect the goodwill associated with the Trademarks,
Licensee shall maintain the quality of the Petroleum Products and Related
Services sold or distributed, and the Retail Facilities operated, under the
Trademarks, at a level at least equal to the quality level at which such
Petroleum Products, Related Services and Retail Facilities are maintained
by Bronco as of the date hereof and from time to time in effect for Retail
Facilities generally. Upon request of Licensor, Licensee shall (i) furnish
to Licensor samples of the Petroleum Products, or otherwise provide a means
for sampling Petroleum Products, within five days after such request, and
(ii) upon five days notice and during normal business hours permit Licensor
to inspect any of its Retail Facilities, in each case for the purpose of
allowing Licensor to verify proper trademark usage and that the quality of
the Petroleum Products, Related Services and Retail Facilities meet the
Licensor's quality standards. If Licensor determines that any Petroleum
Products, Related Services or Retail Facilities do not meet such quality
standards, then Licensor shall notify Licensee of such failure and shall
specifically identify the areas and extent of such non-compliance.
Promptly following such notice, Licensee shall take all reasonable action
required to bring the Petroleum Products, Related Services and Retail
Facilities in compliance with such quality standards or discontinue the use
of the Trademarks in connection with the particular Petroleum Products,
Related Services or Retail Facilities which have failed to meet such
quality standards.
4.2 Licensee shall, upon at least five days notice and during normal
business hours, permit Licensor or its representatives full access to
inspect the facilities of Licensee and its subsidiaries where the Petroleum
Products bearing the Trademarks are located in order to enable Licensor to
determine whether the Petroleum Products comply with the quality standards,
trademark usage and other terms and conditions set forth in or promulgated
pursuant to this Agreement.
4.3 Licensor shall maintain the quality of the Petroleum Products and
Related Services sold or distributed, and the Retail Facilities operated,
by Licensor under the Trademarks, both within and outside the Territories,
so as to protect the goodwill associated therewith.
ARTICLE 5 - Consideration
The license granted hereby is a royalty-free license.
ARTICLE 6 - Trademark Rights - Infringement
6.1 During the term of this Agreement, to the extent required,
Licensor shall take all action necessary to register the Trademarks for
Petroleum Products, Related Services and Retail Facilities in the
Territories and to maintain such Trademarks in effect in the Territories.
Licensee agrees not to seek to register the Trademarks (in any form) or any
other marks confusingly similar thereto.
6.2 If an action is commenced against Licensee alleging that its use
of the Trademarks infringe any party's trademarks, Licensee shall promptly
inform the Licensor of such Action. Upon notice to Licensee, Licensor,
with the cooperation of Licensee, may assume the defense of such action if
Licensor agrees to indemnify and hold harmless Licensee against any
monetary liability Licensee may incur from such action; provided, that
Licensor shall not be required to indemnify and hold harmless Licensee with
respect to Licensee's use of Trademarks other than as provided in this
Agreement. If Licensor assumes the defense of such action, Licensor shall
select counsel to conduct such defense and shall control such defense and
the settlement thereof. If Licensor does not assume such defense, then
Licensee, with the cooperation of Licensor, may control such defense but
shall not enter into any settlement thereof without the prior consent of
Licensor.
6.3 If Licensee shall become aware that any Trademark is being
disputed or infringed by any party, Licensee shall inform Licensor thereof
and, upon Licensor's request, shall give Licensor all necessary information
to protect its rights to the Trademarks, including all evidence, material
and data relating to such dispute or infringement. Licensor, with the
cooperation of Licensee, shall take, at its sole expense, such action as
Licensor deems appropriate to protect its rights to the Trademarks,
including commencing legal action in its own name or in Licensee's name or
joining Licensee as a party thereto (provided that if Licensor joins
Licensee as a party it shall indemnify and hold harmless Licensee against
any monetary liability Licensee may incur from being joined as a party).
Any such legal action, including the settlement thereof, shall be
controlled by Licensor. Any proceeds recovered as a result of such legal
action shall be the sole property Licensor.
6.4 Licensee acknowledges that Licensor owns the Trademarks.
Licensee shall never dispute the validity of the Trademarks or take, or
cause to be taken, any action that would invalidate the Trademarks or
otherwise diminish the Licensor's proprietary rights to the Trademarks. It
is understood that Licensee shall not acquire or claim any right or title
to the Trademarks adverse to Licensor by virtue of the license granted to
Licensee, it being the intention of the parties that any rights resulting
from the use of the Trademarks by Licensee shall at all times inure to the
benefit of Licensor.
6.5 Licensee hereby indemnifies and holds harmless Licensor from and
against any claims (including product liability claims) which may be made
or brought against Licensor and/or which it may suffer or incur as a result
of, or in respect of, or arising out of (i) the advertisement, promotion,
sale, offering for sale, and/or distribution of Petroleum Products and
Related Services by Licensee or its sublicensees, (ii) the operation of
Retail Facilities by Licensee or its sublicensees, or (iii) otherwise in
connection herewith, in each case after the date hereof.
ARTICLE 7 - Confidentiality
7.1 Each of Licensor and Licensee agrees that it shall not disclose,
reveal or make available to any third party any confidential or proprietary
information, whether of a technical, financial, commercial or other nature,
received directly or indirectly from the other party ("Confidential
Information"), except as authorized in writing by such other party and
except that either party may disclose such information:
(a) to its employees to whom, and to the extent that, such disclosure
is necessary in furtherance of the purposes of this Agreement; provided,
however, that the disclosing party shall be responsible for ensuring that
such employees comply with the confidentiality and non-use provisions of
this Article 7, and shall take the steps necessary to ensure such
compliance, whether by agreement, establishment of internal regulations, or
otherwise;
(b) to the extent required by applicable law or by judicial or
administrative process; and
(c) to the extent that the disclosing party can establish that the
information: (i) has fallen into the public domain through no unauthorized
act of the disclosing party; (ii) was received from a third party not under
any obligation to refrain from revealing such information; or (iii) was in
the disclosing party's possession prior to the receipt from the other
party.
7.2 Each party (in Section 7.2, the "disclosing party") agrees that
it shall not use any Confidential Information received from the other
party, except (i) as specifically provided in this Agreement, (ii) as
otherwise expressly authorized in writing by the other party or (iii) to
the extent that the disclosing party can establish that the Confidential
Information (x) has fallen into the public domain through no unauthorized
act of the disclosing party, (y) was received from a third party not under
any obligation to refrain from revealing such information or (z) was in the
disclosing party's possession prior to the receipt from the other party.
ARTICLE 8 - Term and Termination
8.1 Subject to the terms and conditions of this Article 8, this
Agreement will initially have a term commencing at the Effective Time (as
defined in the Arrangement Agreement) through (i) in the State of Michigan,
the fifth anniversary of the Effective Time, and (ii) in each state in the
Territories other than Michigan, through one year after the term of the
longest jobber contract (without giving effect to any renewals, automatic
or otherwise) to which any Bronco Company (as defined in the Arrangement
Agreement) is a party in effect in the relevant jurisdiction at the
Effective Time, but in no event less than four years.
8.2 As to the State of Michigan, subject to the terms and conditions
of this Article 8, this Agreement will automatically be renewed for two
additional successive five-year periods (each, a "Renewal Period"), unless
Licensee provides Licensor with written notice at least 180 days prior to
the expiration of the Prior License Period (as defined herein) of its
intention not to renew. Each Renewal Period, if any, will commence upon
the end of the immediately preceding initial term or Renewal Period, as the
case may be ("Prior License Period"), and, subject to this Article 8, will
end on the fifth anniversary of the end of the Prior License Period. No
renewals or extensions hereunder shall affect the right of either party to
terminate this Agreement pursuant to the provisions hereof.
8.3 As to each state in the Territories other than Michigan, if
jobber/distributor agreements in effect in such state at the Effective Time
as listed on Schedule 3 which accounted for at least 90% of all
jobber/distributor volume for jobber/distributor agreements in effect in
such state at the Effective Time have expired prior to the fourth
anniversary of the Effective Time, Licensor shall have the right to
terminate this Agreement with respect to such state; provided, however,
that with respect to Retail Facilities which are now owned or operated by
Licensee, this Agreement shall continue with respect to such Retail
Facilities for such time as Licensee shall require to terminate the rights
under this Agreement granted to the operators of such Retail Facilities,
and Licensee shall be obligated to make commercially reasonable efforts
(other than incurring expenses) to terminate any sublicenses or rights
granted to such operators and to cause such operators to discontinue the
use of the Trademarks, in each case as promptly as practicable.
8.4 Either party may terminate this Agreement on 90 days' prior
notice to the other party, if the other party is in breach of any of its
obligations under this Agreement (other than breach of quality standards as
set forth in Article IV with respect to a particular Retail Facility) and
such breach remains unremedied for 90 days after written notice thereof
shall have been given to such party or, if such breach is one which
requires more than 90 days to remedy, the remedying of which shall not have
commenced within such 90-day period, or if such remedying has commenced
during such 90-day period, such remedying shall not thereafter have been
diligently pursued through completion.
8.5 If during the term of this Agreement Licensee or any of its
sublicensees or Authorized Users (as defined herein) has permitted the
quality of any Retail Facility to decline below the quality standards
applicable to such Retail Facility as set forth in Article IV, Licensor
shall have the right to terminate Licensee's rights hereunder with respect
to such Retail Facility if Licensee or its sublicensees or Authorized Users
fails to remedy for 90 days after written notice of such decline shall have
been given by Licensor or, if such decline is one which requires more than
90 days to remedy, the remedying of which shall not have commenced within
such 90-day period, or if such remedying has commenced during such 90-day
period, such remedying shall not thereafter have been diligently pursued
through completion.
8.6 This Agreement shall terminate upon a change of control (or two
years thereafter if Licensee exercises its right to sublicense under
Section 10.4) of any subsidiary of Licensee who has been sublicensed rights
or delegated duties pursuant to Section 10.1 or the sale or other
disposition of all or a material portion of Licensee's or of any of its
subsidiary's (which subsidiary has been sublicensed rights or delegated
duties pursuant to Section 10.1) Petroleum Business in the Territories, in
any case, which is not approved in writing by Licensor prior thereto. A
"change of control" shall be deemed to have occurred upon a transfer of
record or beneficial ownership of any class of capital stock of a person
constituting 50% or more of the outstanding shares of any such class.
8.7(a) This Agreement shall terminate automatically in the event of
bankruptcy of Licensee or Bronco, whether voluntary or involuntary, or in
the event that Licensee or Bronco makes an assignment for the benefit of
creditors.
(b) Licensee shall be entitled to terminate this Agreement on notice
to Licensor in the event of bankruptcy of Licensor, whether voluntary or
involuntary, or in the event that Licensor makes an assignment for the
benefit of creditors.
8.8(a) The termination of this Agreement shall be without prejudice
to any rights or obligations which may have arisen between the parties
hereto prior to the date of such termination.
(b) Upon the effective date of termination, Licensee shall cease
using the Trademarks, including in packaging materials, advertisements or
promotional materials for Petroleum Products, as well as the color schemes
and designs identifying the Retail Facilities.
ARTICLE 9 - Notice
All notices, requests, claims, demands and other communications under
this Agreement will be in writing and will be deemed given if delivered
personally, telecopied (which is confirmed) or sent by overnight courier
(providing proof of delivery) to the other parties at the following
addresses (or at such other address for a party as will be specified to the
other parties by like notice:)
(a) If to Licensor, to:
Total
Total Refining and Marketing
51, Esplanade de General deGaulle
CEDEX 97
La Defense 10
92907 Paris, France
Telecopy: 1 41 35 42 91
Attention: Jean-Paul Vettier
With a copy to:
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036-8299
Telecopy: (212) 969-2900
Attention: Stanley Komaroff, Esq.
(b) If to Licensee, to:
Ultramar Diamond Shamrock Corporation
9830 Colonnade Boulevard
San Antonio, Texas 78230
Telecopy: (210) 691-6492
Attention: Patrick J. Guarino, Esq.
With a copy to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Telecopy: (212) 755-7306
Attention: Robert A. Profusek, Esq.
ARTICLE 10 - Assignability/Rights to Use
10.1 This Agreement is not assignable by Licensee, except as provided
below, but is assignable by Licensor. Licensee may assign any of its
rights and delegate any of its duties under any provision hereof to any
wholly-owned subsidiary of Licensee that executes an instrument in writing
reasonably acceptable to Licensor becoming a party to this Agreement to the
extent of such assignment or delegation.
10.2 Licensor does hereby grant to Licensee the right to authorize
during the term of this Agreement, the use of one or more of the Trademarks
to its wholesale customers and their customers and dealers ("Authorized
Users") for the purpose of selling Petroleum Products at Retail Facilities
in the Territories; provided, however, that all such Authorized Users are
subject to the quality control provisions provided herein and such
standards are enforced by Licensee. Licensor retains the right to revoke
any Authorized User's rights if the quality control standards in its
reasonable opinion are not adequately maintained.
10.3 In connection with the transfer of any Retail Facility in the
Territory bearing the Trademarks and owned by Licensee to any person,
Licensee (or its assignee hereunder) may sublicense any of its rights
hereunder to use the Trademark to such person if such person, as of the
time of such transfer is entitled to use any of the Trademarks in the
Petroleum Business in the Territories. Licensor retains the right to
revoke any sublicenses if the quality control provisions contained therein
(which shall be no less than the quality control provisions provided
herein) in its reasonable opinion are not adequately maintained.
10.4 At Licensee's option, in connection with the transfer of all or
substantially all of the Retail Facilities in Michigan using the Trademarks
and owned by Licensee to a person (other than a wholly-owned subsidiary of
Licensee), Licensee may sublicense the right to use the Trademarks in
Michigan for a period of up to two years (of if shorter, the remaining term
of this Agreement) after such transfer, subject to Article 8. Licensor
retains the right to revoke any sublicenses if the quality control
provisions contained therein (which shall be no less than the quality
control provisions provided herein) in its reasonable opinion are not
adequately maintained.
ARTICLE 11 - Miscellaneous
11.1 This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware, without giving effect to the
principles of conflicts of law thereof.
11.2 This Agreement constitutes the entire agreement between the
parties hereto relating to the subject matter hereof and supersedes all
previous agreements between the parties.
11.3 This Agreement, or any provision hereof, may not be waived,
modified or terminated orally but only by an agreement in writing, signed
by all the parties hereto. The failure at any time of any party hereto to
insist on strict performance of any provision of this Agreement shall not
limit the ability of the party to insist at any future time on strict
performance of the same or any provision (except insofar as that party may
have given a valid and effective waiver).
11.4 Each party hereby acknowledges that a breach or attempted breach
of any material provisions of this agreement would cause the other party
irreparable injury not compensable in money damages. Therefore, each party
agrees that, in addition to any of the other party's other rights and
remedies, in the event of any such breach or attempted or threatened breach
by it, the other party shall be entitled to obtain temporary and permanent
injunctive relief against such party and a decree for specific performance
of this provisions of this agreement without being required to prove
damages or post any bond or other securities.
11.5 The captions contained in this Agreement are for convenience and
reference only, and shall not be deemed part of this Agreement.
11.6 This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original and all of which shall
constitute one and the same agreement.
11.7 If any term or provision of this Agreement or the application
thereof to any party or circumstance shall to any extent be invalid or
unenforceable, the remainder of this Agreement, or the application of such
term or provision to persons or circumstances other than those as to which
it is invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
11.8 The word "person" shall mean a natural person, a partnership, a
corporation and any other form of business or legal entity.
11.9 The provisions of Articles 6, 7 and 9 shall survive termination
of this Agreement.
11.10 Each of the parties shall, without further consideration,
execute and deliver to the other party such documents and instruments, and
take such other action, as the other party may reasonably request to carry
out the license of the Trademarks and other transactions contemplated by
this Agreement.
IN WITNESS THEREOF, the parties have caused this document to be
executed as of the date and year first above written.
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
TERMINATION AGREEMENT
Termination Agreement, dated as of , 1997, between Total, a
French societe anomyme ("Licensor"), and Total Petroleum, Inc., a Michigan
corporation ("Licensee").
Licensor and Licensee hereby agree that effective as of the date
hereof the United States Trademark License Agreement, dated as of November
1, 1985, between Licensor and Licensee is hereby terminated.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
TOTAL
By:
Name:
Title:
TOTAL PETROLEUM INC.
By:
Name:
Title:
<PAGE>
Schedule 6(a)
Paris, 15.12.95
Re: TOTAL FCC Technologies
Dear Sirs,
In connection with the implementation of certain TOTAL FCC Technologies
(hereafter the "TF Technologies") among which:
the manufacture of feed injectors,
the counter-current feed injection,
and the use of static mixors in the catalyst stripping chambers, in
the FCC units of the refineries of Alma and Ardmore (hereafter the
"Refineries"), you have or will have access to certain proprietary and
confidential information and technical results (hereafter the
"Information") on said TF Technologies.
The purpose of this Letter-Agreement is to set forth the basis upon which
said Information is to be used and held in confidence by the Refineries.
1) Right-to-use:
As a subsidiary of the TOTAL group, the Refineries are granted by TOTAL a
free-of-charge and non-exclusive right-to-use the Information in the
corresponding FCC unit, with an immunity from suit of TOTAL's patent
rights, provided the Refineries use said rights solely in accordance with
the terms of this Letter-agreement.
Said rights do not include the right to sublicense the TF Technologies to
third parties.
2) Grant-back:
It is expressly agreed that all rights title, estate and interest in and to
the TF Technologies shall remain the property of TOTAL.
If requested by TOTAL, the Refineries agree to
permit representatives and clients or prospective clients of TOTAL to
visit the FCC unit of the Refineries in which the TF Technologies are
used, during normal working hours and subject to the Refineries
standard conditions of such visits;
make available to TOTAL and TOTAL's representatives, design and
operating data which will be acquired by the Refineries during the
term of this Letter-Agreement by the practice of the TF Technologies.
3) Confidentiality:
1) the Information will be used solely for the purpose of operating
the unit of the Refineries,
2) the Refineries shall take due measures to keep secret and
confidential any Information received in connection with this
Letter-Agreement,
3) the Information will not be disclosed to third Parties except if
said parties have first entered into an agreement with TOTAL as
least as stringent as hereunder,
4) the Information will not be duplicated or reproduced except for
such copies or reproductions as may be reasonably required to
effect the purpose of this agreement,
5) the Refineries shall use all precautions insofar as legally
possible, to impose the same secrecy obligations upon its
employees, both during and after the period of their employment,
for as long as and to the same extent that the Refineries remains
under these obligations,
6) In any case, the obligation with respect to the unintentional
disclosure of Information furnished hereunder shall terminate ten
(10) years after the end of the present Agreement.
It is understood that for the purpose of this Letter-Agreement, the term
"Information" shall mean any confidential information and data such as
research programs, specifications provided either directly (for instance as
a written document, or as a drawing, or as electronic data) or indirectly
(for instance during discussions between specialists during a visit of our
to the extent that the foregoing obligations of secrecy and non-use shall
not apply with respect to:
a) information which is, or which subsequently becomes, public
knowledge through no fault of the receiving Party,
b) information which was in possession of the receiving Party prior
to the disclosure thereof to the receiving Party,
c) information disclosed in writing to the receiving Party by a third
party who did not acquire such information directly or indirectly
from the disclosing Party under a similar obligation of secrecy
and non-use;
and to the extent that:
d) a specific piece of Information shall not be deemed to be within
the exceptions a), b), c), of the preceding sentence merely
because it is embraced by more general information,
c) nor shall a combination of features be deemed to be within such
exceptions merely because the individual features of said
combination are within such exceptions.
4) Assignment:
This Agreement with the rights and obligations relating thereto may not be
assigned to a third party unless this agreement shall have been assumed by
the assignee, and when duly assigned in accordance with the foregoing, this
Agreement shall be binding upon and inure to the benefit of the assignee.
5) Duration:
The present Letter-Agreement shall be effective from the date of the last
signature below and shall be in full force as long as the Refineries use
the TF Technology in their FCC units, being understood that the termination
of this Letter-Agreement, whatever the cause, will not release the
Refineries from their obligations of confidentiality.
****
If you agree to the foregoing terms, will you please so indicate by having
both copies of this Letter-Agreement executed by an authorized
representative of the Refinery and one exemplary returned to us. In the
meantime, we remain,
Yours faithfully
TOTAL RAFFINAGE DISTRIBUTION S.A.
By : Jean-Beanard SIGAUD
"Accepted and Agreed" Title: Research General Manager
By : /s/ James N. MacCoy
Title: Sr. V.P. REFINING
/s/
<PAGE>
Paris, 15,12.95
Re: TOTAL Software
Dear Sirs,
In connection with the internal exchanges of technical information within
the TOTAL group, certain softwares of simulation (hereafter the
"Softwares") respectively called <<REFOSIM>>, <<ISOSIM>> AND <<MOLIERE>>,
were provided to TPI for the needs of the operation and of the units of its
refineries (hereinafter the "Refineries").
These Softwares including certain proprietary and confidential information
(hereafter the "Information") of great value for TOTAL, this Letter-Agreement
sets forth the basis upon which the Softwares and the Information
are to be used and kept confidential by the Refineries.
1) Right-to-use:
As subsidiaries of the TOTAL group, the Refineries are granted by TOTAL a
free-of-charge and non-exclusive right-to-use the Softwares and the
Information for the needs of their units, provided said Refineries use said
rights solely in accordance with the present agreement.
Said rights do not include the right to sublicense the Softwares to third
parties.
2) Grant-back:
It is expressly agreed that all rights, title, estate and interest in and
to the Software shall remain the property of TOTAL.
If requested by TOTAL, the Refineries agree to make available to TOTAL and
TOTAL's representatives, any updates and/or modifications to the Softwares
during the term of this Letter-Agreement.
3) Confidentiality:
1) the Information will be used solely for the purpose of operating
the unit of the Refineries,
2) the Refineries shall take due measures to keep secret and
confidential the Softwares and the Information,
3) the Softwares and the Information will not be disclosed to third
Parties except if said parties have first entered into an agreement
with TOTAL as least as stringent as hereunder,
4) the Softwares and the Information will not be duplicated or
reproduced except for such copies or reproductions as may be
reasonably required to effect the purpose of this agreement,
5) the Refineries shall use all precautions insofar as legally
possible, to impose the same secrecy obligations upon its
employees, both during and after the period of their employment,
for as long as and to the same extent that the Refineries remains
under these obligations,
6) In any case, the obligation with respect to the unintentional
disclosure of Information furnished hereunder shall terminate ten
(10) years after the end of the present Agreement.
It is understood that for the purposes of this Letter-Agreement, the term
"Information" shall mean any confidential information and data such as
research programs, specifications provided either directly (for instance as
a written document, or as a drawing, or as electronic data), or indirectly
(for instance during discussions between specialists or during a visit of
our labs or facilities),
to the extent that the foregoing obligations of secrecy and non-use shall
not apply with respect to:
a) information which is, or which subsequently becomes, public
knowledge through no fault of the receiving Party,
b) information which was in possession of the receiving Party prior
to the disclosure thereof to the receiving Party,
c) information disclosed in writing to the receiving Party by a third
party who did not acquire such Information directly or indirectly
from the disclosing Party under a similar obligation of secrecy
and non-use;
and to the extent that:
d) a specific piece of Information shall not be deemed to be within
the exceptions a), b), c), of the preceding sentence merely
because it is embraced by more general information,
e) nor shall a combination of features be deemed to be within such
exceptions merely because the individual features of said
combination are within such exceptions.
4) Assignment:
This Agreement with the rights and obligations relating thereto may not be
assigned to a third party unless this agreement shall have been assumed by
the assignee, and when duly assigned in accordance with the foregoing, this
Agreement shall be binding upon and shall inure to the benefit of the
assignee.
5) Duration:
The present Letter-Agreement shall be effective from the date of the last
signature below and shall be in full force as long as the Refineries use
the Softwares under the present conditions.
It is furthermore understood that the termination of this Letter-Agreement,
whatever the cause, will not release the Refineries from their obligations
of confidentiality.
***
If you agree to the foregoing terms, will you please so indicate by having
both copies of this Letter-Agreement executed by an authorized
representative of the Refinery and one exemplary returned to us. In the
meantime, we remain,
Yours faithfully
TOTAL RAFFINAGE DISTRIBUTION S.A.
By : Jean-Bernard SIGAUD
"Accepted and Agreed" Title: Research General Manager
By : /s/ James N. MacCoy
Title: SR. V.P. REFINING /s/
<PAGE>
Schedule 10
REGISTRATION RIGHTS
UDS will register for resale UDS Shares owned by Total, any wholly
owned Subsidiary of Total or, subject to Section 10, any Permitted Reg.
Rights Assignee pursuant to and in accordance with the terms and provisions
set forth on this Schedule 10.
1. Definitions. For purposes of this Schedule 10, the following
terms will have the following meanings:
"Total" means, collectively, Total, any wholly owned Subsidiaries of
Total and any Permitted Reg. Rights Assignees which may from time to time
be the record holders of Registrable Securities in accordance with the
Agreement of which this Schedule is a part.
"Business Day" means a day, other than a Saturday or Sunday, on which
banking institutions and securities exchanges in New York, New York are
open.
"Counsel to Total" means the single law firm reasonably acceptable to
UDS from time to time representing Total
"Prospectus" means the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by any Registration Statement and by all other
amendments and supplements to the prospectus, including post-effective
amendments and all material incorporated by reference in such prospectus.
"underwritten registration" or "underwritten offering" means an
underwritten offering in which securities of UDS are sold to an underwriter
for reoffering to the public.
2. Subject Securities. The securities entitled to the benefits of
this Schedule 10 are the UDS Shares acquired by Total in the Arrangement or
other securities issued or issuable with respect thereto by way of a stock
split or stock dividend or in connection with a combination of shares,
exchange offer, recapitalization, merger, consolidation or other
reorganization approved by the UDS Board (the "Registrable Securities").
For the purposes of this Section 10, Registrable Securities will cease to
be Registrable Securities when and to the extent that (a) a registration
statement covering such Registrable Securities (a "Registration Statement")
has been declared effective under the Securities Act and such Registrable
Securities have been disposed of in accordance with the Registration
Statement, (b) such Registrable Securities have been disposed of without
registration under the Securities Act (other than to a Permitted
Transferee), or (c) the Registrable Securities have ceased to be
outstanding.
3. Piggy-Back Registration Rights. (a) Whenever during the period
commencing 180 calendar days after the Effective Time and ending on the
earlier of (i) the first date as of which all Registrable Securities cease
to be Registrable Securities and (ii) the first date as of which Total owns
beneficially less than 1% of the UDS Shares then outstanding, UDS proposes
to file a registration statement under the Securities Act relating to the
public offering of UDS Shares or securities convertible into or exercisable
or exchangeable for UDS Shares ("UDS Securities") for cash pursuant to a
firm commitment underwritten offering (other than pursuant to a
registration statement on Form S-4 or Form S-8 or any successor forms, or
filed in connection with an exchange offer or an offering of securities
solely to existing stockholders or employees of UDS), UDS will (A) give
written notice at least 15 Business Days prior to the filing thereof to
Total, specifying the approximate date on which UDS proposes to file such
registration statement and advising Total of its right to have any or all
of the Registrable Securities then held by Total included among the
securities to be covered thereby, and (B) at the written request of Total
given to UDS at least five Business Days prior to the proposed filing date,
include among the securities covered by such registration statement the
number of Registrable Securities which Total shall have requested be so
included (subject, however, to reduction in accordance with paragraph (b)
of this Section). UDS will use commercially reasonable efforts to cause
the managing underwriter of the proposed underwritten offering to permit
the Registrable Securities so requested to be included in the Registration
Statement for such offering to be included in such offering on the same
terms and conditions as any similar securities of UDS included therein.
(b) In the event Total desires to participate in an offering pursuant
to Section 3(a), Total may include Registrable Securities in any
registration statement relating to such offering; provided that if the lead
managing underwriter selected by UDS for an underwritten offering pursuant
to Section 3(a) determines that marketing factors require a limitation on
the number of UDS Shares to be offered and sold by the stockholders of UDS
in such offering, there will be included in the offering only that number
of UDS Shares (including Registrable Securities), if any, that such lead
managing underwriter determines will not jeopardize the success of the
offering of all UDS Shares that UDS desires to sell for its own account.
In such event and provided the managing underwriter has so notified UDS in
writing, the number of UDS Shares to be offered and sold by stockholders of
UDS, including Total, desiring to participate in such offering will be
allocated pro rata among such holders of the UDS Shares on the basis of the
number of UDS Shares held by each holder and entitled to be registered
(subject to any written agreements entered into prior to the date hereof
between UDS and one or more holders requiring a different priority).
(c) Nothing in this Section 3 will create any liability or obligation
on the part of UDS to Total if UDS for any reason should decide not to file
a registration statement proposed to be filed under Section 3(a) or to
withdraw such registration statement subsequent to its filing, regardless
of any action whatsoever that Total may have taken, whether as a result of
the issuance by UDS of any notice hereunder or otherwise.
(d) A request by Total to include Registrable Securities in a
proposed underwritten offering pursuant to Section 3(a) will not be deemed
to be a request for a demand registration pursuant to Section 4.
4. Demand Registration Rights. (a) Upon the written request by
Total during the period commencing 180 calendar days after the Effective
Time and ending on the earlier of (i) the first date as of which all
Registrable Securities cease to be Registrable Securities and (ii) the
first date as of which the Registrable Securities may be disposed of
without registration under the Securities Act without compliance with the
volume limitations under Rule 144 or 145 under the Securities Act (or any
comparable requirements) (the "Effective Period") that UDS effect the
registration with the SEC under and in accordance with the provisions of
the Securities Act of all or part of the Registrable Securities (which
written request will specify the aggregate number of shares of Registrable
Securities requested to be registered and the means of distribution), UDS
will file a Registration Statement covering Registrable Securities
requested to be registered as expeditiously as possible after receipt of
such request; provided, however, that UDS will not be required to take any
action pursuant to this Section 4:
(A) if prior to the date of such request UDS shall have effected
two registrations pursuant to this Section 4;
(B) if UDS has effected a registration pursuant to Section 3
within the 180-day period preceding such request;
(C) if UDS shall at the time have effective a shelf registration
statement pursuant to Rule 415 under the Securities Act (a "Shelf
Registration Statement") pursuant to which Total could effect the
disposition of Registrable Securities in the manner requested;
(D) if the Registrable Securities which UDS shall have been
requested to register shall have a then-current market value of less than
U.S. $50,000,000, unless such registration request is for all remaining
Registrable Securities; or
(E) during the pendency of any Section 6(a) Period or Section 6(b)
Period (each, a "Blackout Period").
provided further, however, that UDS will be permitted to satisfy its
obligations under this Section 4(a) by amending (to the extent permitted by
applicable Law) any registration statement previously filed by UDS under
the Securities Act so that such registration statement (as amended) will
permit the disposition (in accordance with the intended methods of
disposition specified as aforesaid) of all of the Registrable Securities
for which a demand for registration has been made under this Section 4(a).
If UDS so amends a previously filed registration statement, it will be
deemed to have effected a registration for purposes of this Section 4.
(b) Total may distribute the Registrable Securities covered by such
request by means of an underwritten offering or any other lawful means, as
determined by Total.
(c) A registration requested pursuant to this Section 4 will not be
deemed to be effected for purposes of this Section 4 if it has not been
declared effective by the SEC or become effective in accordance with the
Securities Act and the rules and regulations thereunder.
(d) Total may, at any time prior to the effective date of the
Registration Statement relating to such registration, revoke such request
by providing a written notice to UDS revoking such request. In such event,
Total will reimburse UDS for all its out-of-pocket expenses incurred in the
preparation, filing and processing of the Registration Statement; provided,
however, that, if such revocation was based on (i) UDS's failure to comply
in any material respect with its obligations hereunder or (ii) the
occurrence of a Blackout Period, such reimbursement will not be required.
5. Selection of Underwriters. In connection with any underwritten
offering pursuant to a Registration Statement filed pursuant to a demand
made by Total under Section 4, Total will have the right to select a
managing underwriter or underwriters to administer the offering, which
managing underwriter or underwriters will be reasonably satisfactory to
UDS.
6. Blackout Periods. (a) If (i) during the Effective Period, UDS
files or proposes to file a registration statement (other than in
connection with the registration of securities issuable pursuant to a
continuous "at the market offering" pursuant to Rule 415(a)(4) under the
Securities Act, an employee stock option, stock purchase, dividend
reinvestment plan or similar plan or pursuant to a merger, exchange offer
or a transaction of the type specified in Rule 145(a) under the Securities
Act) with respect to any securities of UDS, and (ii) with prior notice, (A)
UDS (in the case of a non-underwritten offering pursuant to such
registration statement) advises Total in writing that a sale or
distribution of Registrable Securities would adversely affect such offering
or (B) the managing underwriter or underwriters (in the case of an
underwritten offering) advise UDS in writing (in which case UDS will notify
Total) that a sale or distribution of Registrable Securities would
adversely affect such offering, then UDS will not be obligated to effect
the filing of a Registration Statement pursuant to Section 4 during the
period commencing on the date that is 30 calendar days prior to the date
UDS estimates (as certified in writing by an officer of UDS to Total
following a request for registration pursuant to Section 4(a)) will be the
date of the filing of, and ending on the date which is 120 calendar days
following the effective date of, such Registration Statement (a "Section
6(a) Period").
(b) If UDS determines in good faith that the registration and
distribution of Registrable Securities (i) would materially impede, delay
or interfere with any pending financing (other than a financing of the type
described in Section 6(a)), acquisition, corporate reorganization or other
significant transaction involving UDS or (ii) would require disclosure of
non-public material information, the disclosure of which would materially
and adversely affect UDS, UDS will promptly give Total written notice of
such determination and will be entitled to postpone the filing or
effectiveness of a Registration Statement for a reasonable period of time
not to exceed 120 calendar days (a "Section 6(b) Period"); provided,
however, that in connection therewith UDS will be required to deliver to
Counsel to Total (as identified at such time to UDS) a general statement,
signed by an officer of UDS, summarizing the reasons for such postponement
and an estimate of the anticipated delay. UDS will promptly notify Total
of the expiration or earlier termination of a Section 6(b) Period.
(c) Notwithstanding anything in this Section 6 to the contrary, (i)
the beginning of any Blackout Period will be at least 60 calendar days
after the end of the prior Blackout Period and (ii) the aggregate number of
days included in all Blackout Periods and all Section 7(e) Periods and
Section 7(m) Periods (collectively, "Registration Hold Periods") during any
consecutive 12-month period during the Effective Period will not exceed 180
calendar days.
7. Registration Procedures. If and whenever UDS is required to use
commercially reasonable efforts to effect or cause the registration of any
Registrable Securities under the Securities Act as provided in this
Agreement, UDS will, as expeditiously as possible:
(a) prepare and file with the SEC a Registration Statement with
respect to such Registrable Securities on any form for which UDS then
qualifies or which counsel for UDS deems appropriate, and which form is
available for the sale of the Registrable Securities in accordance with the
intended methods of distribution thereof (including, if so requested by
Total, distributions under Rule 415 under the Securities Act pursuant to a
Shelf Registration Statement), and use commercially reasonable efforts to
cause such Registration Statement to become and remain effective;
(b) prepare and file with the SEC amendments and post-effective
amendments to such Registration Statement and such amendments to the
Prospectus used in connection therewith as may be necessary to maintain the
effectiveness of such registration or as may be required by the rules,
regulations or instructions applicable to the registration form utilized by
UDS or by the Securities Act or rules and regulations thereunder necessary
to keep such Registration Statement effective for up to 90 calendar days,
in the case of an underwritten offering, or 180 calendar days, in any other
case (or longer period in the event of a Registration Hold Period during
such 90 or 180 calendar days, as provided in this Section 7) and cause the
Prospectus as so supplemented to be filed pursuant to Rule 424 under the
Securities Act, and to otherwise comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by
such Registration Statement until the earlier of (i) such 90th or 180th
calendar day (or longer period) and (ii) such time as all Registrable
Securities covered by such Registration Statement have ceased to be
Registrable Securities; provided that a reasonable time before filing a
Registration Statement or Prospectus, or any amendments or supplements
thereto, UDS will furnish to Total, the managing underwriter and their
respective counsel for review and comment copies of all documents proposed
to be filed and will not file any such documents to which any of them
reasonably object prior to the filing thereof;
(c) furnish to Total such number of copies of such Registration
Statement and of each amendment and post-effective amendment thereto (in
each case including all exhibits), any Prospectus or Prospectus supplement
and such other documents as Total may reasonably request in order to
facilitate the disposition of the Registrable Securities by Total (UDS
hereby consenting to the use (subject to the limitations set forth in the
last paragraph of this Section 7) of the Prospectus or any amendment or
supplement thereto in connection with such disposition);
(d) use commercially reasonable efforts to register or qualify such
Registrable Securities covered by such Registration Statement under such
other securities or blue sky laws of such jurisdictions within the United
States as Total reasonably requests, and do any and all other acts and
things which may be reasonably necessary or advisable to enable Total to
consummate the disposition in such jurisdictions of the Registrable
Securities owned by Total, except that UDS will not for any such purpose be
required to qualify generally to do business as a foreign corporation in
any jurisdiction where, but for the requirements of this Section 7(d), it
would not be obligated to be so qualified, to subject itself to taxation in
any such jurisdiction or to consent to general service of process in any
such jurisdiction;
(e) notify Total at any time when a Prospectus relating to any such
Registrable Securities is required to be delivered under the Securities Act
within the appropriate period mentioned in Section 7(b) or UDS's becoming
aware that the Prospectus included in any Registration Statement, as then
in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances then
existing (the period during which Total is required to refrain from
effective public sales or distributions in such case being referred to as a
"Section 7(e) Period"), and prepare and furnish to Total a reasonable
number of copies of an amendment to such Registration Statement or related
Prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such Prospectus shall not
include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, and the
time during which such Registration Statement is required to remain
effective pursuant to Section 7(b) will be extended by the number of days
in the Section 7(e) Period;
(f) notify Total at any time,
(i) when the Prospectus or any Prospectus supplement or post-
effective amendment has been filed, and, with respect to the
Registration Statement or any post-effective amendment, when
the same has become effective;
(ii) of any request by the SEC for amendments or supplements to
the Registration Statement or the Prospectus or for
additional information;
(iii) of the issuance by the SEC of any stop order of which UDS or
its counsel is aware suspending the effectiveness of the
Registration Statement or any order preventing the use of a
related Prospectus, or the initiation or any threats of any
proceedings for such purposes;
(iv) of the receipt by UDS of any written notification of the
suspension of the qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or
any threats of any proceeding for that purpose; and
(v) if at any time the representations and warranties of UDS
contemplated by Section 7(i)(i) cease to be true and correct
in any material respect;
(g) otherwise use commercially reasonable efforts to comply with all
applicable rules and regulations of the SEC, and make available to Total an
earnings statement which shall satisfy the provisions of Section 11(a) of
the Securities Act, provided that UDS will be deemed to have complied with
this Section 7(g) if it has satisfied the provisions of Rule 158 under the
Securities Act;
(h) use commercially reasonable efforts to cause all such Registrable
Securities to be listed on any securities exchange or automated quotation
system on which UDS Shares are then listed, if such Registrable Securities
are not already so listed and if such listing is then permitted under the
rules of such exchange or automated quotation system, and to provide a
transfer agent and registrar for such Registrable Securities covered by
such Registration Statement no later than the effective date of such
Registration Statement;
(i) enter into agreements (including underwriting agreements) and
take all other appropriate and reasonable actions in order to expedite or
facilitate the disposition of such Registrable Securities and in such
connection, whether or not an underwriting agreement is entered into and
whether or not the registration is an underwritten registration:
(i) make such representations and warranties to Total and the
underwriters, if any, in form, substance and scope as are
customarily made by issuers to underwriters in comparable
underwritten offerings;
(ii) obtain opinions of counsel to UDS thereof (which counsel and
opinions (in form, scope and substance) will be reasonably
satisfactory to the managing underwriters, if any, and
TOTAL) addressed to Total and the underwriters, if any,
covering the matters customarily covered in opinions
requested in comparable underwritten offerings and such
other matters as may be reasonably requested by Total and
the managing underwriter, if any;
(iii) obtain "cold comfort" letters and bring-downs thereof from
UDS's independent certified public accountants addressed to
TOTAL and the underwriters, if any, such letters to be in
customary form and covering matters of the type customarily
covered in "cold comfort" letters by independent accountants
in connection with underwritten offerings;
(iv) if requested, provide indemnification in accordance with the
provisions and procedures of Section 10 to all parties to be
indemnified pursuant to said Section; and
(v) deliver such documents and certificates as may be reasonably
requested by Total and the managing underwriters, if any, to
evidence compliance with Section 7(f) and with any customary
conditions contained in the underwriting agreement or other
agreement entered into by UDS.
(j) cooperate with Total and the managing underwriter or underwriters
or agents, if any, to facilitate, to the extent commercially reasonable
under the circumstances, the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing the
securities to be sold under such Registration Statement, and enable such
securities to be in such denominations and registered in such names as the
managing underwriter or underwriters or agents, if any, or Total may
request;
(k) if reasonably requested by the managing underwriter or
underwriters or Total, incorporate in a Prospectus supplement or post-effective
amendment such information as the managing underwriters and Total
agree should be included therein relating to the plan of distribution with
respect to such Registrable Securities, including without limitation
information with respect to the purchase price being paid by such
underwriters and with respect to any other terms of the underwritten
offering of the Registrable Securities to be sold in such offering and make
all required filings of such Prospectus supplement or post-effective
amendment as promptly as practicable upon being notified of the matters to
be incorporated in such Prospectus supplement or post-effective amendment;
(l) provide Total, any underwriter participating in any disposition
pursuant to such Registration Statement and any attorney, accountant or
other agent retained by Total or underwriter (collectively, the
"Inspectors") reasonable access to appropriate officers of UDS to ask
questions and to obtain information reasonably requested by any such
Inspector and make available for inspection all financial and other records
and other information, pertinent corporate documents and properties of any
of UDS (collectively, the "Records") as may be reasonably necessary to
enable them to exercise their due diligence responsibilities; provided,
however, that the Records that UDS determines, in good faith, to be
confidential and which it notifies the Inspectors in writing are
confidential will not be disclosed to any Inspector unless such Inspector
signs a confidentiality agreement reasonably satisfactory to UDS but in any
event permitting disclosure by an Inspector if (i) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission of a
material fact in such Registration Statement or (ii) the release of such
Records is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction; provided further, however, that any decision
regarding the disclosure of information pursuant to clause (i) may be made
only after consultation with counsel for the applicable Inspectors. Total
agrees that it will promptly, after learning that disclosure of such
Records is sought in a court having jurisdiction, give notice to UDS and
allow UDS, at UDS's expense, to undertake appropriate action to prevent
disclosure of such Records; and
(m) in the event of the issuance of any stop order of which UDS or
its counsel is aware suspending the effectiveness of the Registration
Statement or of any order suspending or preventing the use of any related
Prospectus or suspending the qualification of any Registrable Securities
included in the Registration Statement for sale in any jurisdiction, UDS
will use commercially reasonable efforts promptly to obtain its withdrawal;
and the period for which the Registration Statement will be kept effective
will be extended by a number of days equal to the number of days between
the issuance and withdrawal of any stop orders (a "Section 7(m) Period").
UDS may require Total to furnish to UDS such information regarding Total
and pertinent to the disclosure requirements relating to the registration
and the distribution of such securities as UDS may from time to time
reasonably request in writing. Upon receipt of any notice from UDS of the
happening of any event of the kind described in Section 7(e), Total will
forthwith discontinue disposition of Registrable Securities pursuant to the
Prospectus or Registration Statement covering such Registrable Securities
until Total's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 7(e), and, if so directed by UDS, Total
will deliver to UDS (at UDS's expense) all copies, other than permanent
file copies then in Total's possession of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice.
8. Registration Expenses. UDS will pay, upon the written request of
Total, all reasonable expenses incident to the performance of or compliance
with this Agreement, including without limitation (a) all SEC, National
Association of Securities Dealers, Inc. and securities exchange
registration and filing fees, (b) all printing expenses, (c) all fees and
expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange or automated quotation system
pursuant to Section 7(h), and (d) the fees and disbursements of counsel for
UDS and of its independent public accountants, and Total will pay (i) any
fees or expenses, disbursements of counsel to Total and (ii) all
underwriting discounts and commissions and transfer taxes, if any, and all
other fees, costs and expenses of Total relating to the sale or disposition
of Registrable Securities pursuant to the Registration Statement.
9. Reports under the Exchange Act. UDS will:
(a) file with the SEC in a timely manner all reports and other
documents required of UDS under the Exchange Act; and
(b) furnish to Total, during the Effective Period, forthwith upon
request (i) a written statement by UDS that it has complied with the
current public information and reporting requirements of Rule 144 under the
Securities Act and the Exchange Act and (ii) a copy of the most recent
annual or quarterly report of UDS and such other reports and documents so
filed by UDS.
10. Registration Indemnification; Contribution. (a) UDS will
indemnify and hold harmless Total, its officers, directors, agents,
trustees, general partners and each person who controls Total (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) against all losses, claims, damages, liabilities and expenses
(including reasonable attorneys' fees, disbursements and expenses) as and
when incurred by such party pursuant to any actual or threatened action,
suit, proceeding or investigation arising out of or based upon (i) any
violation by UDS (or its officers, directors or controlling persons) of any
federal or state Law, rule or regulation applicable to UDS and relating to
any action required or inaction by UDS (or such other person) in connection
with or relating to any Registration Statement, (ii) any untrue or alleged
untrue statement of material fact contained in the Registration Statement,
any Prospectus or preliminary Prospectus, or any amendment or supplement to
any of the foregoing, or (iii) any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein (in the case of a Prospectus or a preliminary
Prospectus, in light of the circumstances then existing) not misleading,
except in each case insofar as the same arise out of or are based upon any
such untrue statement or omission made in reliance on and in conformity
with information with respect to such indemnified party furnished in
writing to UDS by such indemnified party or its counsel expressly for use
therein. In connection with an underwritten offering, UDS will indemnify
the underwriters thereof, their officers, directors, agents, trustees,
general partners, and each person who controls such underwriters (within
the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) to the same extent as provided above with respect to the
indemnification of Total Notwithstanding the foregoing provisions of this
Section 10(a), UDS will not be liable to Total (or any officer, director,
agent, trustee or controlling person thereof), any person who participates
as an underwriter in the offering or sale of Registrable Securities or any
other person, if any, who controls Total or underwriter (within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act),
under the indemnity agreement in this Section 10(a) for any such loss,
claim, damage, liability (or action or proceeding in respect thereof) or
expense that arises out of Total's or such other person's failure to send
or deliver a copy of the final Prospectus to the person asserting the
existence of an untrue statement or alleged untrue statement or omission or
alleged omission at or prior to the written confirmation of the sale of the
Registrable Securities to such person if such statement or omission was
corrected in such final Prospectus and UDS had previously furnished copies
thereof to Total or such other person in accordance with this Agreement.
(b) In connection with a Registration Statement, Total will furnish
to UDS in writing such information, including the name and address of, and
the amount of Registrable Securities held by, Total, as UDS reasonably
requests for use in such Registration Statement or the related Prospectus
and will indemnify and hold harmless (in the same manner and to the same
extent as set forth in Section 10(a)) UDS or any underwriter, as the case
may be, and any of their respective affiliates, directors, officers,
agents, trustees and controlling persons (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act), against any
losses, claims, damages, liabilities and expenses resulting from (i) any
violation by Total (or its officers, directors, agents, trustees or
controlling persons) of any federal or state Law, rule or regulation
relating to action required of or inaction by Total (or such other person)
in connection with its offer and sale of Registrable Securities and (ii)
any untrue or alleged untrue statement of a material fact contained in, or
any omission or alleged omission of a material fact required to be stated
in, such Registration Statement or Prospectus or any amendment or
supplement to either of them or necessary to make the statements therein
(in the case of a Prospectus, in the light of the circumstances then
existing) not misleading, but only to the extent that any such untrue
statement or omission is made in reliance on and in conformity with
information with respect to Total furnished in writing to UDS by Total or
its counsel specifically for inclusion therein.
(c) Any Person entitled to indemnification hereunder agrees to give
prompt written notice to the indemnifying party after the receipt by such
indemnified party of any written notice of the commencement of any action,
suit, proceeding or investigation or threat thereof made in writing for
which such indemnified party may claim indemnification or contribution
pursuant to this Agreement (provided that failure to give such notification
will not affect the obligations of the indemnifying party pursuant to this
Section 10 except to the extent the indemnifying party shall have been
actually prejudiced as a result of such failure). In case any such action
is brought against any indemnified party and it notifies the indemnifying
party of the commencement thereof, the indemnifying party will be entitled
to participate therein and, to the extent that it wishes, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party (who may not, except
with the consent of the indemnified party, be counsel to the indemnifying
party), and after notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the indemnifying
party will not be liable to such indemnified party under these
indemnification provisions for any legal expenses of other counsel or any
other expenses, in each case subsequently incurred by such indemnified
party, in connection with the defense thereof other than reasonable costs
of investigation, unless in the reasonable judgment of any indemnified
party a conflict of interest is likely to exist, based on the written
opinion of counsel, between such indemnified party and any other of such
indemnified parties with respect to such claim, in which event the
indemnifying party will be obligated to pay the reasonable fees and
expenses of such additional counsel. No indemnifying party, in defense of
any such action, suit, proceeding or investigation, may, except with the
consent of each indemnified party, consent to the entry of any judgment or
entry into any settlement (which consent will not be unreasonably withheld)
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all
liability with respect to such action, suit, proceeding or investigation to
the extent the same is covered by the indemnity obligation set forth in
this Section 10. No indemnified party may consent to entry of any judgment
or enter into any settlement without the consent of each indemnifying party
(which consent will not be unreasonably withheld).
(d) If the indemnification from the indemnifying party provided for
in this Section 10 is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
herein, then the indemnifying party, in lieu of indemnifying such
indemnified party, will contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities
and expenses in such proportion as is appropriate to reflect the relative
fault of the indemnifying party and indemnified party in connection with
the actions which resulted in such losses, claims, damages, liabilities and
expenses, as well as any other relevant equitable considerations. The
relative fault of such indemnifying party and indemnified party will be
determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact, has been
made by, or relates to information supplied by, such indemnifying party or
indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount
paid or payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above will be deemed to include,
subject to the limitations set forth in Section 10(c), any legal and other
fees and expenses reasonably incurred by such indemnified party in
connection with any investigation or proceeding. The parties hereto agree
that it would not be just and equitable if contribution pursuant to this
Section 10(d) were determined by pro rata allocation or by any other method
of allocation which does not take account of the equitable considerations
referred to above. Notwithstanding the provisions of this Section 10(d),
no underwriter will be required to contribute any amount in excess of the
underwriting discount or commission applicable to the Registrable
Securities underwritten by it. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) will be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. Total's obligation to contribute is
several in the proportion that the proceeds of the offering received by
Total bears to the total proceeds of the offering, and not joint. If
indemnification is available under this Section 10(d), the indemnifying
parties will indemnify each indemnified party to the full extent provided
in Section 10(a) or 10(b), as the case may be, without regard to the
relative fault of said indemnifying parties or indemnified party or any
other equitable consideration provided for in this Section 10(d).
(e) In no event will Total be liable or required to contribute any
amount under this Section 10 or otherwise in respect of any untrue or
alleged untrue statement or omission or alleged omission for amounts in
excess of the amount by which the total price at which the Registrable
Securities of Total were offered to the public exceeds the amount of any
damages which Total has otherwise been required to pay by reason of such
untrue statement or omission.
(f) The provisions of this Section 10 will be in addition to any
liability which any indemnifying party may have to any indemnified party
and will survive the termination of this Agreement.
11. Participation in Underwritten Offerings. Total may not
participate in any underwritten offering pursuant to Section 2 unless Total
(i) agrees to sell the Registrable Securities on the basis provided in any
underwriting arrangements approved by UDS in its reasonable discretion and
(ii) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 99,400
<SECURITIES> 0
<RECEIVABLES> 450,000
<ALLOWANCES> 15,100
<INVENTORY> 543,400
<CURRENT-ASSETS> 1,149,000
<PP&E> 3,674,000
<DEPRECIATION> 976,700
<TOTAL-ASSETS> 4,128,300
<CURRENT-LIABILITIES> 919,500
<BONDS> 1,884,500
0
0
<COMMON> 700
<OTHER-SE> 1,243,300
<TOTAL-LIABILITY-AND-EQUITY> 4,128,300
<SALES> 2,561,200
<TOTAL-REVENUES> 2,561,200
<CGS> 1,859,900
<TOTAL-COSTS> 1,859,900
<OTHER-EXPENSES> 625,400
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,100
<INCOME-PRETAX> 45,800
<INCOME-TAX> 18,200
<INCOME-CONTINUING> 27,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,600
<EPS-PRIMARY> 0.35
<EPS-DILUTED> 0.35
</TABLE>
