Filed by Valero Energy Corporation
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934
Subject Company: Ultramar Diamond Shamrock Corporation
Registration No. 333-61756
On August 16, 2001, Valero Energy Corporation made the following slide
presentation to investors arranged by UBS Warburg:
[VALERO ENERGY CORPORATION LOGO]
===========================================================
[VALERO SERVICES STATION GRAPHIC]
[VALERO REFINERY GRAPHIC]
[VALERO REFINERY GRAPHIC]
[VAELRO REFINERY GRAPHIC]
[VALERO EMPLOYEES GRAPHIC]
UBS WARBURG PRESENTATION
AUGUST 16, 2001
1
SAFE HARBOR STATEMENT
================================================================================
Statements contained in this presentation are forward-looking statements within
the meaning of the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. These statements are based on management's current
expectations and beliefs and are subject to a number of factors and
uncertainties that could cause actual results to differ materially from those
described in the forward-looking statements. The forward-looking statements
contained in this release include statements about future financial results and
the proposed Valero/UDS merger.
The following factors, among others, could cause actual results to differ
materially from those described in the forward-looking statements: the risk that
Valero's and UDS's businesses will not be integrated successfully; costs related
to the merger; failure of the Valero or UDS stockholders to approve the merger;
and other economic, business, competitive and/or regulatory factors affecting
Valero's and UDS's businesses generally as set forth in Valero's and UDS's
filings with the Securities and Exchange Commission, including their Annual
Reports on Form 10-K for the fiscal year ended 2000, especially in the
Management's Discussion and Analysis section, their most recent Quarterly
Reports on Form 10-Q and their Current Reports on Form 8-K. Valero and UDS are
under no obligation to (and expressly disclaim any such obligation to) update or
alter their forward-looking statements whether as a result of new information,
future events or otherwise.
2
================================================================================
DANNY GIBBONS
EXECUTIVE VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER
3
SUCCESSFUL GROWTH STRATEGY
================================================================================
1996
----
ONE REFINERY IN CORPUS CHRISTI, TX
AND NATURAL GAS BUSINESS
1997
----
LAUNCHED STRATEGIC GROWTH PLAN
BY SELLING OUR NATURAL GAS
BUSINESS TO PG&E CORPORATION
BASIS REFINERIES ACQUISITION -
TRIPLED REFINING CAPACITY
1998
----
PAULSBORO REFINERY ACQUISITION -
ADDED EAST COAST PRESENCE
2000
----
BENICIA ACQUISITION - ADDED WEST
COAST REFINING AND RETAIL EXPOSURE
2001
----
ACQUIRED EL PAS0' CORPUS CHRISTI
REFINERY AND HUNTWAY REFINING
COMPANY IN CALIFORNIA
[Bar graph depicting the following:
Year Throughput Capacity (MBPD)
1996 170
1997 530
1998 735
2000 985
2001 1150]
4
COMPANY OVERVIEW - AS OF EARLY 2001
================================================================================
[Map of the United States depicting the following information:
Headquarters located in San Antonio
Refineries in Corpus Christi, Houston, Texas City, Krotz Springs, Benicia and
Paulsboro
Marketing presence in 33 states
340 Valero branded & Distributor Retail Locations in California]
- 60% GULF COAST
- 20% EAST COAST
- 20% WEST COAST
- 1.2 MILLION BPD OF
REFINED PRODUCT SALES
5
HUNTWAY ACQUISITION
================================================================================
[HUNTWAY REFINERY GRAPHIC]
- TWO REFINERIES IN CALIFORNIA
- BENICIA (13,000 BPD)
- WILMINGTON (6,000 BPD)
- PRODUCES 25% OF CALIFORNIA
ASPHALT DEMAND
- PRODUCT DIVERSIFICATION; LOW COST ACQUISITION
6
EL PASO ENERGY ASSET ACQUISITION
================================================================================
- EFFECTIVE JUNE 1ST, ACQUIRED EL PASO'S CORPUS
CHRISTI REFINERY AND TEXAS REFINED PRODUCTS
PIPELINE SYSTEM
- $18.5 MILLION CAPITAL LEASE PAYMENT FIRST TWO YEARS
FOLLOWED BY $294 MILLION PURCHASE PRICE
- ADDITIONAL $109 MILLION FOR INVENTORIES
- IMMEDIATELY ACCRETIVE TO EARNINGS AND CASH FLOW
- INTEGRATED INTO CORPUS CHRISTI REFINERY
7
TEXAS SYSTEM
================================================================================
[Map of Texas depicting the folowing information:
Refineries in Houston, Texas City, and Corpus Christi
Terminals in San Antonio, Rio Grande Valley, Corpus Christi, Houston, and on the
products pipeline between Corpus Christi and Houston
Products Pipelines exist between Rio Grande Valley and Corpus Christi, between
San Antonio and Corpus Christi and between Corpus Christi and Houston
Industry Pipelines are Colonial, TEPPCO and Explorer]
EL PASO ENERGY ASSETS COMBINED REFINERY
--------------------- - 340,000 BPD CAPACITY
CORPUS CHRISTI REFINERY - 20.1 COMPLEXITY
- 115,000 BPD CAPACITY
- 12.0 COMPLEXITY
PIPELINES FROM CORPUS CHRISTI TO :
- HOUSTON 100,000 BPD
- SAN ANTONIO 20,000 BPD
- RIO GRANDE VALLEY 32,000 BPD
8
UDS ACQUISITION
================================================================================
- VALERO TO ACQUIRE UDS IN OVER $6 BILLION TRANSACTION
- FIXED EXCHANGE RATIO OF $27.50 PLUS THE VALUE OF .614
SHARES OF VALERO STOCK FOR EACH SHARE OF UDS STOCK
- $2 BILLION CASH + EST. 44.4 MILLION SHARES VALERO STOCK
- ASSUMPTION OF APPROX. $2 BILLION OF DEBT
- TRANSACTION SIGNIFICANTLY ACCRETIVE TO VALERO'S EPS & CFPS
- CLOSING BY YEAR END 2001
9
STRATEGIC RATIONALE
================================================================================
- CREATES THE PREMIER U.S. REFINER & MARKETER
- EXPOSURE TO "QUALITY" REFINING MARKETS
- ENHANCED EARNINGS STABILITY THROUGH TOP-QUALITY,
NATIONALLY RECOGNIZED RETAIL OPERATIONS
- ESTIMATED SYNERGIES OF AT LEAST $200 MILLION ANNUALLY
- SIGNIFICANTLY INCREASED SIZE & LIQUIDITY
- LIKELY INCLUSION IN S&P 500
- POTENTIAL MULTIPLE EXPANSION
- POSITIONS COMPANY FOR FURTHER GROWTH...AND THE FUTURE
10
THE COMBINED COMPANY
================================================================================
HEADQUARTERS IN SAN ANTONIO
BILL GREEHEY TO REMAIN CHAIRMAN & CEO
23,000 EMPLOYEES
13 REFINERIES
5,000 RETAIL OUTLETS
5,000 MILES OF CRUDE & PRODUCT PIPELINES
$32 BILLION IN REVENUES
$10 BILLION IN TOTAL ASSETS
11
THE REFINING & MARKETING MAJOR
================================================================================
[Map of the continential United States and portions of Canada depicting the
following information:
Terminals, Crude Pipelines, Products Pipelines,
Ethylene/Propylene Pipelines, Retail Marketing Presence and Refinieries:
UDS UDS VALERO
DENVER, COLORADO QUEBEC, CANADA PAULSBORO, NEW JERSEY
- 27,000 bdp capacity - 167,000 bpd capacity - 185,000 bpd capacity
UDS VALERO VALERO
ARDMORE, OKLAHOMA KROTZ SPRINGS, LOUISIANA HOUSTON, TEXAS
- 85,000 bpd capacity - 85,000 bpd capacity - 125,000 bpd capacity
VALERO VALERO UDS
TEXAS CITY, TEXAS CORPUS CHRISTI, TEXAS THREE RIVERS, TEXAS
- 230,000 bpd capacity - 340,000 bpd capacity - 98,000 bpd capacity
UDS UDS UDS
MCKEE, TEXAS WILMINGTON, CALIFORNIA GOLDEN EAGLE, CALIFORNIA
- 170,000 bpd capacity - 135,000 bpd capacity - 168,000 bpd capacity
VALERO VALERO
BENICIA, CALIFORNIA WILMINGTON, CALIFORNIA
- 180,000 bpd capacity - 6,000 bpd capacity ]
12
MAJOR RETAIL PRESENCE
================================================================================
[UDS SERVICES STATION GRAPHIC]
- SOME 2,000 COMPANY-OPERATED SITES AND OVER
2,500 DEALERS/JOBBERS AND TRUCK RACK
FACILITIES IN 18 U.S. STATES AND SIX CANADIAN
PROVINCES
- Largest company-owned retailer in Texas,
Oklahoma, Colorado and New Mexico and the
4th largest in the U.S.
- One of the largest home heating oil businesses
in North America
- Over $1.2 billion in annual merchandise sales and growing
--------------------------------------------------------------------------------
[VALERO SERVICES STATION GRAPHIC]
- 80 VALERO BRANDED SITES AND 260 EXXON-
BRANDED LOCATIONS IN THE CALIFORNIA MARKET
- 30% INCREASE IN VOLUMES SINCE ACQUISITION
--------------------------------------------------------------------------------
13
RETAIL ENHANCES EARNINGS STABILITY
================================================================================
[LINE GRAPH DEPICTING THE FOLLOWING DATA:
3-Month Rolling Average
Gulf Coast UDS Mid-Continent
Refining Spreads Retail Fuel Margins
Year ($/BBL) (CENTS/GAL)
---- ---------------- -------------------
Mar 1997 3.4 13.3
Apr 1997 3.8 13.4
May 1997 3.7 13.2
Jun 1997 3.6 13.7
Jul 1997 3.5 13.9
Aug 1997 4.1 12.9
Sep 1997 4.2 12.3
Oct 1997 3.6 11.9
Nov 1997 2.6 11.7
Dec 1997 2.3 10.8
Jan 1998 2.5 12
Feb 1998 2.6 12.8
Mar 1998 2.6 14
Apr 1998 2.9 13
May 1998 3.4 12.4
Jun 1998 3.9 12.6
Jul 1998 3.6 13.3
Aug 1998 2.9 14.9
Sep 1998 2.3 15.8
Oct 1998 2.3 15
Nov 1998 2.2 15.2
Dec 1998 1.9 15.6
Jan 1999 1.3 15.5
Feb 1999 1.1 13.5
Mar 1999 1.4 10.8
Apr 1999 1.8 10
May 1999 2 10.7
Jun 1999 1.8 12.1
Jul 1999 1.8 11.8
Aug 1999 2.5 10.9
Sep 1999 2.8 10
Oct 1999 2.6 11.4
Nov 1999 2.3 11.7
Dec 1999 2 10.9
Jan 2000 2.2 9.6
Feb 2000 2.8 7.8
Mar 2000 3.7 7.5
Apr 2000 4.5 7.9
May 2000 5.1 8.9
Jun 2000 5.5 8.9
Jul 2000 5.3 10
Aug 2000 4.9 10.7
Sep 2000 4.8 10.7
Oct 2000 5 8.8
Nov 2000 4.6 7.4
Dec 2000 4.1 8.4
Jan 2001 4.6 8.4
Feb 2001 5 8.6
Mar 2001 5.2 7.3
Apr 2001 6.1 6.7
->RETAIL FUEL MARGINS TEND TO BE COUNTER-CYCLICAL TO REFINING SPREADS
14
ESTIMATED TRANSACTION TIMETABLE
================================================================================
MAY 7 ANNOUNCEMENT
MAY 25 FILED REGISTRATION AND PROXY STATEMENTS WITH SEC
MAY 30 FILED HSR DOCUMENTS WITH FTC
JUNE 29 SECOND REQUEST RECEIVED FROM FTC
AUGUST REGISTRATION AND PROXY STATEMENTS DECLARED EFFECTIVE
SEPTEMBER STOCKHOLDER MEETINGS OF VALERO AND UDS TO APPROVE TRANSACTION
FOURTH QUARTER ANTICIPATED CLOSING
15
VALERO/UDS COMBINED INCOME STATEMENT
================================================================================
(IN MILLIONS, EXPECT PER SHARE AMOUNTS)
2000
2000 2000 PRO FORMA
VALERO UDS COMBINED
------ --- --------
OPERATING REVENUE $15,393 $17,061 $29,777
OPERATING INCOME 653 812 1,442
INTEREST EXPENSE (98) (126) (377)
NET INCOME 352 444 660
EARNINGS PER SHARE $5.54 $5.11 $6.13
-AS REPORTED IN PRELIMINARY FORM S-4
16
ANTICIPATED SYNERGIES
================================================================================
($ IN MILLIONS)
YEAR 1 YEAR 2+
------ -------
CRUDE SOURCING & LOGISTICS $75 $80
MARKETING 60 75
ADMINISTRATIVE, PROCUREMENT &
BEST PRACTICES 55 85
------ -------
TOTAL $190 $240
->SIGNIFICANT UPSIDE TO CURRENT ESTIMATES
17
BASE EARNINGS RAISED SUBSTANTIALLY
================================================================================
5 YEAR
AVERAGE
ESTIMATED EPS CASE MARGINS(1)
------------------ -------
VALERO $4.84
PRO FORMA $7.85
ACCRETION 62%
- CURRENT 2002 FIRST CALL ESTIMATES SIGNIFICANTLY UNDERSTATE
MID-CYCLE EARNINGS FOR THE COMBINED COMPANY.
(1) CASE IS BASED ON 1996-2000 AVERAGE FEEDSTOCK AND PRODUCT MARGINS,
2002 OPERATING PLAN VOLUMES FOR UDS AND VALERO AND 110 MILLION
SHARES OUTSTANDING
18
STRONG CASH FLOW FOR FUTURE GROWTH
================================================================================
MID-CYCLE CASH FLOW
-------------------
NET INCOME $900 MILLION
DEPRECIATION $400 MILLION
--------------
CASH FLOW $1,300 BILLION
- PAY DOWN DEBT
- FUND CAPITAL INVESTMENTS
- BUY BACK STOCK
- MAINTAIN FLEXIBILITY FOR ACQUISITIONS
19
================================================================================
GENE EDWARDS
SENIOR VICE PRESIDENT, PLANNING AND
BUSINESS DEVELOPMENT
20
GASOLINE FUNDAMENTALS VOLATILE
================================================================================
[Line graph depicting price ((1)-15) of USGC GASOLINE - WTI ($ PER
BARREL) from January to December during 2000, 2001, and over a 5-year range.]
[Line graph depicting level (180,000-240,000) of U.S. GASOLINE INVENTORIES
(THOUSANDS OF BARRELS) from January to December during 2000, 2001, and over a
5-year range.]
21
GASOLINE MARKET HAS FIRMED
================================================================================
[Line graph depicting level (7,000-9,000) of GASOLINE PRODUCTION (BARRELS PER
DAY) from January to December during 2000, 2001, and over a 5-year range.]
[Line graph depicting level (6,800-9,200) of GASOLINE DEMAND (BARRELS PER DAY)
from January to December during 2000, 2001, and over a 5-year range.]
22
DISTILLATE MARGINS REMAIN STRONG
================================================================================
[Line graph depicting price ((2)-8) of USGC HEATING OIL - WTI ($ PER
BARREL) from January to December during 2000, 2001, and over a 5-YEAR RANGE.]
[Line graph depicting level (80,000-160,000) of U.S. DISTILLATE INVENTORIES
(THOUSANDS OF BARRELS) from January to December during 2000, 2001, and over a
5-YEAR RANGE.]
23
CONTINUED STRONG SOUR CRUDE DISCOUNTS
================================================================================
[Line graph depicting ARAB MEDIUM TO WTI sour crude discounts in dollars (0-8)
from JAN-98 to 01-JUL]
- SOUR CRUDE DISCOUNTS TRENDING AT HIGHER LEVELS OVER LAST 18 MONTHS
- RECENT IRAQI ACTIONS HAVE CREATED VOLATILITY IN SOUR CRUDE PRICING
- DISCOUNTS IMPROVING WITH RESUMPTION OF EXPORTS AND RUN CUTS
24
STRATEGIC DIRECTION FOR THE NEW VALERO
================================================================================
- MAXIMIZE VALUE OF COMBINED COMPANY ASSETS
- CAPTURE OPPORTUNITIES CREATED BY MERGER
- CONTINUE TO PURSUE ACCRETIVE ACQUISITIONS
- GROWTH OPPORTUNITIES INCLUDE:
- REFINING & RETAIL
- MID-STREAM
- PETROCHEMICAL
- COGEN
- ASPHALT
- INTERNATIONAL
25
APPENDIX
26
KEY MARGIN DRIVERS
================================================================================
2001
YTD 5-YEAR
FEEDSTOCKS & FUEL: 2000 ACTUALS (1) AVG. (2)
------------------ ---- ----------- --------
WTI - SOUR CRUDE $3.53 $5.11 $2.64
WTI - ANS $2.04 $2.80 $1.75
WTI - SWEET CRUDE $(.49) $(.33) ($.06)
NATURAL GAS (MMBTU) $4.32 $5.34 $2.75
PRODUCTS:
---------
GASOLINE - WTI (USGC) $4.66 $6.45 $3.45
CARB GASOLINE - ANS $14.74 $17.81 $10.97
HEATING OIL - WTI (USGC) $3.60 $3.24 $1.96
3-2-1 REFINING MARGIN (3) $4.31 $5.38 $2.95
(1) ACTUAL PRICES THROUGH AUGUST 14
(2) AVERAGE PRICES 1996 THROUGH 2000
(3) 3-2-1 REFINING MARGIN EQUALS (2 TIMES GASOLINE-WTI PLUS HEATING OIL-WTI)
DIVIDED BY 3
27
VALERO/UDS MERGER CONSIDERATION
================================================================================
- IN MAY, 2001 VALERO ENERGY AND ULTRAMAR DIAMOND SHAMROCK AGREED TO A
PART-CASH/PART-STOCK MERGER IN WHICH VALERO WOULD EXCHANGE ALL OF THE SHARES
OF UDS FOR CONSIDERATION WITH A VALUE REPRESENTING A 31.3% PREMIUM TO UDS'
STOCK PRICE, BASED ON THE AVERAGE CLOSING PRICE OF UDS FOR THE 10 DAY PERIOD
PRIOR TO APRIL 26TH.
- THE TOTAL CONSIDERATION EQUATES TO $27.50 IN CASH AND A FIXED EXCHANGE RATIO
OF 0.614 VALERO SHARES FOR EACH OUTSTANDING SHARE OF UDS COMMON STOCK,
REPRESENTING AN AGGREGATE CONSIDERATION OF APPROXIMATELY $2 BILLION IN CASH
PLUS APPROXIMATELY 44.4 MILLION VALERO SHARES (SUBJECT TO POSSIBLE ADJUSTMENT
AS DESCRIBED BELOW).
- A UDS STOCKHOLDER CAN ELECT TO RECEIVE CONSIDERATION IN THE FORM OF CASH,
VALERO STOCK OR A COMBINATION. WHATEVER THE FORM, THE MECHANISM IS DESIGNED
SUCH THAT THE PER-SHARE CONSIDERATION WILL HAVE THE SAME VALUE, BASED ON THE
AVERAGE PRICE OF VALERO COMMON STOCK DURING A 10 DAY MEASUREMENT PERIOD ENDING
3 DAYS BEFORE CLOSING, REGARDLESS OF THE FORM OF CONSIDERATION. THAT PER-SHARE
VALUE, WHETHER PAID IN THE FORM OF STOCK OR CASH, WILL BE THE SUM OF
(A) $27.50 AND (B) THE AVERAGE VALUE OF 0.614 VALERO SHARES DURING THE
MEASUREMENT PERIOD.
- THE ELECTIONS WILL BE SUBJECT TO PRORATION, AS THE TOTAL NUMBER OF VALERO
SHARES TO BE ISSUED AND THE TOTAL AMOUNT OF CASH TO BE PAID IN THE MERGER TO
UDS STOCKHOLDERS AS A GROUP ARE EACH FIXED EXCEPT THAT VALERO MAY ADD MORE
STOCK, VALUED AT THE MEASUREMENT PERIOD VALUE AND IN LIEU OF AN EQUIVALENT
AMOUNT OF CASH, IF NEEDED TO MAINTAIN THE TAX-FREE TREATMENT OF THE MERGER. IF
STOCK IS OVERSUBSCRIBED, THEN UDS STOCKHOLDERS WHO HAVE ELECTED STOCK WILL
NEVERTHELESS RECEIVE CASH FOR SOME OF THEIR UDS SHARES, ON A PRO RATA BASIS,
AND VICE VERSA IF CASH IS OVERSUBSCRIBED. ALSO, IF BASED ON THE AVERAGE PRICE
OF VALERO STOCK DURING THE MEASUREMENT PERIOD THE LIMIT ON THE PERCENTAGE OF
UDS SHARES THAT MAY BE CONVERTED TO STOCK CONSIDERATION IS GREATER THAN 50%,
VALERO AT ITS OPTION, MAY REDUCE THAT LIMIT TO 50%.
28
VALERO/UDS MERGER CONSIDERATION
================================================================================
Equalization Mechanism
MM, EXCEPT PER SHARE FIGURES
TRANSACTION STRUCTURE
------------------------------------------------------------------------------------------------------------------
Total UDS Shares 72.3
------------------------------------------------------------------------------------------------------------------
CASH PORTION (VALUE OF $55.00 OFFER AT 50%) STOCK PORTION (VALUE OF 1.228X OFFER AT 50%)
------------------------------------------------------------------------------------------------------------------
Cash Offer per Share 27.50 Stock Exchange Ratio 0.614x
------------------------------------------------------------------------------------------------------------------
Cash Offered in Transaction ($27.50 x 72.3 Shares) 1,988 Number of Valero Shares (0.614 x 72.3 Shares) 44.4
------------------------------------------------------------------------------------------------------------------
STOCK BLENDED TOTAL VALUE TOTAL PERCENT OF
VALERO CASH EXCHANGE VALUE TRANSACTION TOTAL CASH OF STOCK CONSIDERATION UDS SHARES TOTAL SHARES
SHARE VALUE RATIO AT VALUE PER OFFERED OFFERED BY OFFERED BY PURCH. OFFERED BY
PRICE AT 50% AT 50% 50% UDS SHARE BY VALERO VALERO VALERO CASH VALERO
---------------------------------------------------------------------------------------------------------------------
$25.00 $27.50 0.614X $15.35 $42.85 $1,766 $1,332 $3,098 57.0% 53.3
---------------------------------------------------------------------------------------------------------------------
30.00 27.50 0.614X 18.42 45.92 1,892 1,428 3,320 57.0% 47.6
33.73* 27.50 0.614X 20.71 48.21 1,988 1,498 3,486 57.0% 44.4
---------------------------------------------------------------------------------------------------------------------
35.00 27.50 0.614X 21.49 48.99 1,988 1,554 3,542 56.1% 44.4
---------------------------------------------------------------------------------------------------------------------
40.00 27.50 0.614X 24.56 52.06 1,988 1,776 3,764 52.8% 44.4
---------------------------------------------------------------------------------------------------------------------
45.00 27.50 0.614X 27.63 55.13 1,988 1,988 3,986 49.9% 44.4
---------------------------------------------------------------------------------------------------------------------
50.00 27.50 0.614X 30.70 58.20 1,988 2,220 4,208 47.3% 44.4
---------------------------------------------------------------------------------------------------------------------
A B C D E F G H I J
---------------------------------------------------------------------------------------------------------------------
=AxC =B+D =$1,998-M =AxJ =F+G =F/H 44.4+L
---------------------------------------------------------------------------------------------------------------------
PERCENT OF UDS SHARES ISSUED CASH REDUCED
SHARES PURCHASED TO MAINTAIN BY ISSUING
FOR VALERO 43% DEAL ADDITIONAL
STOCK VALUE IN STOCK SHARES
----------------------------------------------------
43.0% 8.9 $222.4
----------------------------------------------------
43.0% 3.2 95.8
43.0% - -
---------------------------------------------------
43.9% - -
----------------------------------------------------
47.2% - -
----------------------------------------------------
50.1% - -
----------------------------------------------------
52.7% - -
----------------------------------------------------
K L M
----------------------------------------------------
=G/H =LxA
----------------------------------------------------
NOTES:
-Assumes at least 43% of the consideration will be required to be paid in Valero
stock in order to maintain the tax free status of the transaction with respect
to the stock consideration. Pursuant to the terms of the merger agreement,
the minimum percentage required to be paid in stock will not be determined
until closing and may be higher or lower than the assumption made for this
example.
-$33.73 represents the breakeven price below which additional stock may be
issued to preserve tax-free treatment.
29
================================================================================
- INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE JOINT PROXY
STATEMENT/PROSPECTUS THAT WILL BE SENT TO VALERO AND UDS STOCKHOLDERS
REGARDING THE PROPOSED MERGER, WHEN IT BECOMES AVAILABLE, BECAUSE IT WILL
CONTAIN IMPORTANT INFORMATION. THE JOINT PROXY STATEMENT/PROSPECTUS WILL BE
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION BY VALERO AND UDS. INVESTORS
AND SECURITY HOLDERS MAY OBTAIN A FREE COPY OF THE JOINT PROXY
STATEMENT/PROSPECTUS, WHEN IT IS AVAILABLE, AND OTHER DOCUMENTS FILED BY
VALERO AND UDS WITH THE COMMISSION AT THE COMMISSION'S WEB SITE AT
WWW.SEC.GOV. THE JOINT PROXY STATEMENT/PROSPECTUS AND THESE OTHER DOCUMENTS
MAY ALSO BE OBTAINED, WHEN AVAILABLE, FREE OF CHARGE FROM VALERO AND
UDS. STOCKHOLDERS SHOULD READ THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS
CAREFULLY BEFORE MAKING A DECISION CONCERNING THE MERGER.
- VALERO AND UDS, AND THEIR RESPECTIVE DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN
OTHER OF THEIR RESPECTIVE EMPLOYEES, MAY BE SOLICITING PROXIES FROM THEIR
RESPECTIVE STOCKHOLDERS IN FAVOR OF THE APPROVAL OF THE MERGER. INFORMATION
REGARDING THE PERSONS WHO MAY, UNDER SEC RULES, BE DEEMED TO BE PARTICIPANTS
IN THE SOLICITATION OF VALERO AND UDS STOCKHOLDERS IN CONNECTION WITH THE
MERGER IS SET FORTH, IN THE CASE OF VALERO, IN VALERO'S PROXY STATEMENT FOR
ITS 2001 ANNUAL MEETING, FILED WITH THE SEC ON MARCH 28, 2001, AND IN THE CASE
OF UDS, IN UDS'S PROXY STATEMENT FOR ITS 2001 ANNUAL MEETING, FILED WITH THE
SEC ON MARCH 27, 2001, AND ADDITIONAL INFORMATION WILL BE SET FORTH IN THE
DEFINITIVE PROXY STATEMENT/PROSPECTUS REFERRED TO ABOVE WHEN IT IS FILED WITH
THE SEC.
30