AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 18, 2003
REGISTRATION NO. 333-106949
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
VALERO ENERGY CORPORATION
(Exact name of each registrant as specified in its charter)
DELAWARE 74-1828067
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Nos.)
JAY D. BROWNING, ESQ.
VICE PRESIDENT AND SECRETARY
ONE VALERO PLACE ONE VALERO PLACE
SAN ANTONIO, TEXAS 78212 SAN ANTONIO, TEXAS 78212
(210) 370-2000 (210) 370-2000
(Address, including zip code, and telephone (Address, including zip code, and telephone
number, number,
including area code, of each including area code, of each
registrant's principal executive office) registrant's principal executive office)
Copy to:
R. JOEL SWANSON, ESQ.
BAKER BOTTS L.L.P.
ONE SHELL PLAZA
910 LOUISIANA
HOUSTON, TEXAS 77002-4995
(713) 229-1234
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED SEPTEMBER 18, 2003
PRELIMINARY PROSPECTUS
10,000,000 SHARES
OF
VALERO ENERGY CORPORATION
2% MANDATORY CONVERTIBLE PREFERRED STOCK
(LIQUIDATION PREFERENCE $25 PER SHARE)
---------------------
This prospectus relates to the offering for resale of Valero Energy
Corporation's 2% Mandatory Convertible Preferred Stock (liquidation preference
$25 per share) and the shares of our common stock issuable upon conversion of
the convertible preferred stock. In this prospectus, the terms "Valero", "we",
or "us" will each refer to Valero Energy Corporation and its subsidiaries and
"Orion" refers to Orion Refining Corporation. The convertible preferred stock
was issued to Orion, a debtor in possession, in connection with Valero's
purchase of Orion's refinery located in Louisiana. This prospectus will be used
by the selling securityholder named in this prospectus to resell its shares of
our convertible preferred stock and shares of our common stock issuable upon
conversion of its convertible preferred stock. We will not receive any proceeds
from sales by the selling securityholder.
Valero will pay annual dividends on each share of convertible preferred
stock in the amount of $0.50 when, as and if declared by our board of directors.
Dividends will be paid quarterly, provided that dividends will not accrue or be
payable with respect to a particular calendar quarter if we do not declare a
dividend on our common stock during that calendar quarter.
On July 1, 2006, each share of convertible preferred stock will
automatically convert, subject to adjustments described in this prospectus, into
between .4955 and .6690 of a share of our common stock, depending on the then
current market price of our common stock. At any time prior to July 1, 2006,
holders may elect to convert each of their shares of convertible preferred
stock, subject to adjustment described in this prospectus, into .4955 of a share
of common stock of Valero. The effective conversion price of the convertible
preferred stock based upon the $25 liquidation preference depends upon the price
of our underlying common stock. If our common stock is trading between $37.37
and $50.45 over a 20 trading day pricing period immediately prior to the
conversion date, then the conversion price will equal the then current market
value of our common stock. If our common stock is trading at a price greater
than $50.45 over such period, the conversion price will be $50.45, while if the
stock is trading at a price less than or equal to $37.37 over such period, then
the conversion price will be $37.37.
At any time prior to July 1, 2006, holders may elect to convert each of
their shares of convertible preferred stock, subject to adjustment described in
this prospectus, into .4955 of a share of common stock of Valero, which
represents an effective conversion price of $50.45 per share of common stock.
Prior to this offering, there has been no public market for the convertible
preferred stock. We have not applied to list the convertible preferred stock on
any national securities exchange or established trading market. The common stock
currently trades on the New York Stock Exchange under the symbol "VLO." The
closing price of the common stock on the New York Stock Exchange was $38.09 per
share on September 16, 2003.
---------------------
INVESTING IN OUR PREFERRED OR COMMON STOCK INVOLVES RISKS. PLEASE READ
CAREFULLY THE SECTION ENTITLED "RISK FACTORS" BEGINNING ON PAGE 5.
---------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
September , 2003
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
different information. You should not assume that the information contained in
this prospectus is accurate as of any date other than the date on the front of
this prospectus.
TABLE OF CONTENTS
PAGE
----
About This Prospectus....................................... i
About Valero Energy Corporation............................. 1
The Offering................................................ 2
Risk Factors................................................ 5
Ratio of Earnings to Combined Fixed Charges and Preferred
Dividends................................................. 9
Use of Proceeds............................................. 10
Description of the Convertible Preferred Stock.............. 10
Description of Valero Capital Stock......................... 16
Federal Income Tax Considerations........................... 19
Selling Securityholder...................................... 21
Plan of Distribution........................................ 23
Legal Matters............................................... 25
Experts..................................................... 25
Matters Relating to Arthur Andersen LLP..................... 26
Where You Can Find More Information......................... 26
Information We Incorporate By Reference..................... 26
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission utilizing a "shelf" registration process or
continuous offering process. Under this shelf registration process, the selling
securityholders may, from time to time, sell the securities described in this
prospectus in one or more offerings. This prospectus provides you with a general
description of the securities which may be offered by the selling
securityholders. Each time a selling securityholder sells securities, the
selling securityholder is required to provide you with this prospectus and, in
certain cases, a prospectus supplement containing specific information about the
selling securityholder and the terms of the securities being offered. That
prospectus supplement may include additional risk factors or other special
considerations applicable to those securities. Any prospectus supplement may
also add, update, or change information in this prospectus. If there is any
inconsistency between the information in this prospectus and any prospectus
supplement, you should rely on the information in that prospectus supplement.
You should read both this prospectus and any prospectus supplement together with
additional information described under "Where You Can Find More Information."
i
ABOUT VALERO ENERGY CORPORATION
We are a Fortune 500 company based in San Antonio with approximately 20,000
employees and annual revenues of nearly $27 billion. We are one of the top three
U.S. refining companies in terms of refining capacity. Prior to our acquisition
of Orion's Louisiana refinery located near New Orleans, we owned and operated
thirteen refineries in the United States and Canada with a combined throughput
capacity of approximately 1.9 million barrels per day and total crude oil
capacity of approximately 1.5 million barrels per day. The Orion refinery has a
throughput capacity of approximately 185,000 barrels per day and a crude oil
capacity of approximately 155,000 barrels per day. Valero's refining network
extends from eastern Canada to the U.S. Gulf Coast and West Coast. We produce
premium, environmentally clean products such as reformulated gasoline, gasoline
meeting the specifications of the California Air Resources Board, or CARB
gasoline, CARB diesel fuel, low sulfur diesel fuel and oxygenates. We also
produce a substantial slate of conventional gasoline, distillates, jet fuel,
asphalt and petrochemicals.
We are also a leading marketer of refined products. We market branded and
unbranded refined products on a wholesale basis in 40 U.S. states and Canada
through an extensive bulk and rack marketing network. We also market refined
products and convenience store merchandise through a network of approximately
4,000 retail outlets in the United States and Canada, under various brand names
including Diamond Shamrock(R), Shamrock(R), Ultramar(R), Valero(R), Beacon(R),
Total(R) and Exxon(R).
We have access to a logistics system that complements our refining and
marketing assets in the U.S. Gulf Coast, Mid-Continent and West Coast regions.
We own approximately 46 percent (including the general partner interest) of
Valero L.P., a master limited partnership that owns and operates crude oil
pipelines, crude oil and intermediate feedstock storage facilities, and refined
product pipelines and terminals primarily in Texas, California, Oklahoma, New
Mexico and Colorado. Units of Valero L.P. are listed on the New York Stock
Exchange under the symbol "VLI".
We were incorporated in Delaware in 1981 as Valero Refining and Marketing
Company, a wholly owned subsidiary of our predecessor company. On July 31, 1997,
our stock was distributed, or spun off, by our predecessor company to its
stockholders, and we changed our name to Valero Energy Corporation. Our common
stock is listed for trading on the New York Stock Exchange under the symbol
"VLO."
We have our principal executive offices at One Valero Place, San Antonio,
Texas, 78212, and our telephone number is (210) 370-2000.
1
THE OFFERING
On May 13, 2003, we entered into an agreement to acquire Orion's refinery
located in St. Charles Parish, Louisiana for $400 million plus approximately
$149 million for refinery hydrocarbon inventories and up to $175 million of
potential earn-out payments as further described below. Consideration for the
purchase, including various transaction costs incurred and warehouse inventories
acquired, consisted of $307.7 million in cash and $250 million stated value of
convertible preferred stock (10 million shares with a stated value of $25 per
share), of which $21.1 million is held in escrow pending the satisfaction of
possible claims under the purchase agreement. The potential earn-out payments
arise if agreed- upon refining margins reach a specified level during any of the
seven years following the closing and are subject to an annual maximum limit of
$50 million and an aggregate limit of $175 million.
On July 1, 2003, we completed the purchase of the Orion refinery and issued
the convertible preferred stock to Orion. We entered into a registration rights
agreement with Orion in which we agreed, for the benefit of Orion and its
stockholders and creditors who may receive the convertible preferred stock in
Orion's bankruptcy proceedings and certain other transferees of Orion or its
stockholders or creditors, to file a shelf registration statement with the SEC
with respect to resales of the convertible preferred stock and common stock
issued upon the conversion thereof. We also agreed to keep the shelf
registration statement continuously effective, subject to certain suspension
periods when we are excused from keeping it effective, until the convertible
preferred stock and common stock issued upon the conversion thereof have been
sold pursuant to the shelf registration statement or are eligible to be sold
under Rule 144(k) of the Securities Act.
Securities Offered............ 10,000,000 shares of 2% mandatory convertible
preferred stock.
Dividends..................... Annual dividends of $0.50 per share payable
quarterly in cash on each March 31, June 30,
September 30 and December 31, commencing
September 30, 2003, when, as and if declared by
the board of directors. Dividends will be paid
in arrears on the basis of a 360-day year
consisting of twelve 30-day months. Dividends
on the convertible preferred stock will be
non-cumulative and will not accrue or be
payable with respect to a particular calendar
quarter if we do not declare a dividend on our
common stock during that calendar quarter,
subject to certain exceptions set forth in the
certificate of designation of the convertible
preferred stock.
Liquidation Preference........ $25 per share, plus accrued and unpaid
dividends.
Ranking....................... The convertible preferred stock will rank with
respect to dividend rights and rights upon our
liquidation, winding-up or dissolution:
- senior to all of our common stock and to all
of our other capital stock issued in the
future that ranks junior to the convertible
preferred stock;
- on a parity with any of our capital stock
issued in the future the terms of which
expressly provide that it will rank on a
parity with the convertible preferred stock;
and
- junior to all of our capital stock the terms
of which expressly provide that such stock
will rank senior to the convertible preferred
stock.
Redemption.................... Shares of convertible preferred stock are not
redeemable by us.
Optional Conversion Rights.... Each share of convertible preferred stock may
be converted at any time, at the option of the
holder, into .4955 of a share of our
2
common stock, referred to as the "optional
conversion ratio," plus cash in lieu of
fractional shares. The optional conversion
ratio is subject to adjustment upon the
occurrence of certain events.
Mandatory Conversion.......... On July 1, 2006, referred to as the "mandatory
conversion date," each share of convertible
preferred stock will be automatically converted
into a fraction of a share of our common stock,
based on the applicable market value of our
common stock as of the mandatory conversion
date, as follows:
MANDATORY CONVERSION RATIO
(SHARES OF COMMON STOCK
FOR EACH SHARE
APPLICABLE MARKET VALUE OF PREFERRED STOCK)
----------------------- ---------------------------
Less than or equal to .6690
$37.37
Greater than $37.37 but $25.00
less than or equal to ---------------------------
$50.45 applicable market value of
common stock
Greater than $50.45 .4955
The "applicable market value" of the common
stock as of the mandatory conversion date is
the average of the closing prices per share of
our common stock for the 20 consecutive trading
days ending on the second day prior to the
mandatory conversion date. The mandatory
conversion ratio is subject to adjustment upon
the occurrence of certain events.
Early Conversion Upon Change
of Control.................... Upon a change of control that is not a Common
Stock Transaction (as defined below) and that
occurs at least five business days prior to the
mandatory conversion date, each holder of
convertible preferred stock will have a
one-time option for a period of 30 days to
convert all or any portion of its shares of
convertible preferred stock into shares of
common stock or other securities or property at
the then mandatory conversion ratio that would
have been in effect if the mandatory conversion
date was the date of such conversion.
A "Common Stock Transaction" means any
transaction in which more than 50% of the value
of the consideration received by holders of our
common stock consists of common stock that for
each of the ten consecutive trading days prior
to the effective date of the transaction has
been admitted for listing or admitted for
listing subject to notice of issuance on a
national securities exchange or quoted on the
Nasdaq National Market.
Voting Rights................. The holders of the convertible preferred stock
will generally be entitled to vote with the
common stock and not as a separate class and
have a number of votes equal to the mandatory
conversion ratio that would be in effect if the
mandatory conversion date was the record date
of such vote. The affirmative vote of holders
of 66 2/3% of the convertible preferred stock
is necessary to make any change to the
certificate of incorporation or the bylaws that
would adversely affect any power, preference or
special right of the convertible preferred
stock.
Tax Consequences.............. The U.S. Federal income tax consequences of
purchasing, owning and disposing of the
convertible preferred stock and any
3
of our common stock received upon its
conversion are described in "Federal Income Tax
Considerations." Prospective investors are
urged to consult their own tax advisors
regarding the tax consequences of purchasing,
owning and disposing of the convertible
preferred stock and any of our common stock
received upon its conversion in light of their
personal investment circumstances.
Common Stock.................. Our common stock is listed for trading on the
NYSE under the symbol "VLO."
4
RISK FACTORS
In addition to the other information set forth elsewhere or incorporated by
reference in this prospectus, the following factors relating to our company, our
convertible preferred stock and our common stock should be considered carefully
before making an investment decision. Because a share of convertible preferred
stock is convertible into our common stock, you are making an investment
decision with respect to our common stock, as well as our convertible preferred
stock. We cannot assure you of a profit or protect you against a loss on the
shares of our convertible preferred stock that you purchase.
RISKS RELATED TO VALERO
OUR FINANCIAL RESULTS ARE AFFECTED BY VOLATILE REFINING MARGINS.
Our financial results are primarily affected by the relationship, or
margin, between refined product prices and the prices for crude oil and other
feedstocks. The cost to acquire our feedstocks and the price at which we can
ultimately sell refined products depend upon numerous factors beyond our
control. Historically, refining margins have been volatile, and they are likely
to continue to be volatile in the future. Earnings on a fully diluted basis for
2001 and 2002 were $8.83 per share and $.83 per share, respectively.
OUR LEVERAGE MAY LIMIT OUR FINANCIAL FLEXIBILITY.
As of June 30, 2003, we had total debt of approximately $4.5 billion, trust
preferred securities in an aggregate liquidation amount of $172.5 million,
stockholders' equity of approximately $5.0 billion, and cash and temporary cash
investments of $697.5 million. Under our revolving bank credit facilities, at
June 30, 2003, our debt to capitalization ratio (net of cash) was approximately
42.6% as more fully described in our quarterly report on Form 10-Q for the
quarter ended June 30, 2003 incorporated by reference herein. For purposes of
this computation, 20% of our $172.5 million of aggregate liquidation amount of
trust preferred securities issued as part of our 7.75% Premium Equity
Participating Security Units were included as debt and the remainder as equity.
We may also incur additional indebtedness in the future, including in connection
with acquisitions, although our ability to do so will be restricted by existing
bank credit facilities. The level of our indebtedness will have several
important effects on our future operations, including, among others:
- a significant portion of our cash flow from operations will be dedicated
to the payment of principal and interest on our indebtedness and will not
be available for other purposes
- covenants contained in our existing debt arrangements require us to meet
certain financial tests, which may affect our flexibility in planning
for, and reacting to, changes in our business, including possible
acquisition opportunities
- our ability to obtain additional financing for working capital, capital
expenditures, acquisitions, general corporate and other purposes may be
limited
- we may be at a competitive disadvantage to our competitors that are less
leveraged
- our vulnerability to adverse economic and industry conditions may
increase.
Our ability to meet our debt service obligations and to reduce our total
indebtedness will be dependent upon our future performance, which will be
subject to general economic conditions, industry cycles and financial, business
and other factors affecting our operations, many of which are beyond our
control. We cannot assure you that our business will continue to generate
sufficient cash flow from operations to service our indebtedness. If we are
unable to generate sufficient cash flow from operations, we may be required to
sell assets, to refinance all or a portion of our indebtedness or to obtain
additional financings. Such refinancing might not be possible and additional
financing might not be available on commercially acceptable terms or at all.
Our bank credit facility imposes financial and other restrictions on us.
Covenants contained in the credit facility and relating to certain of our other
indebtedness limit, among other things, our ability and
5
our subsidiaries' ability to incur funded indebtedness and require maintenance
of a minimum coverage ratio and a maximum debt-to-capitalization ratio. Failure
to comply with such covenants may result in a default with respect to the
related debt under the credit facility or such other indebtedness and could lead
to acceleration of such debt or any instruments evidencing indebtedness that
contain cross-acceleration or cross-default provisions. In such a case, we might
not be able to refinance or otherwise repay such indebtedness.
COMPLIANCE WITH AND CHANGES IN ENVIRONMENTAL LAWS COULD ADVERSELY AFFECT OUR
PERFORMANCE.
We are subject to extensive federal, state and local environmental laws and
regulations, including those relating to the discharge of materials into the
environment, waste management, pollution prevention measures and characteristics
and composition of gasoline and diesel fuels. If we violate or fail to comply
with these laws and regulations, we could be fined or otherwise sanctioned.
Because environmental laws and regulations are increasingly becoming more
stringent and new environmental laws and regulations are continuously being
enacted or proposed, such as those relating to methyl tertiary butyl ether
(MTBE), CARB gasoline, the Tier II gasoline and distillate standards and the
Maximum Available Control Technology rule (MACT II rule) under the Clean Air
Act, the level of future expenditures required for environmental matters could
increase in the future. In addition, any major upgrades in any of our refineries
could require material additional expenditures to comply with environmental laws
and regulations.
In February 2000, the Environmental Protection Agency's "Tier II" gasoline
standard was published in final form under the Clean Air Act. The standard
requires the sulfur content in gasoline to be reduced from approximately 300
parts per million to 30 parts per million. The regulation will be phased in
beginning in 2004. In addition, the EPA finalized its Tier II distillate
standard to reduce the sulfur content of diesel fuel sold to highway consumers
by 97%, from 500 parts per million to 15 parts per million, beginning June 1,
2006. We have determined that modifications will be required at most of our
refineries as a result of the Tier II standards. Based on preliminary estimates,
we believe that the new Tier II specifications, after giving effect to the
acquisition of Orion, will require approximately $1.2 billion in capital
expenditures for our refineries to comply. We expect all modifications to be
complete in time for compliance with the effective dates of the gasoline and
distillate standards.
DISRUPTION OF OUR ABILITY TO OBTAIN CRUDE OIL COULD ADVERSELY AFFECT OUR
OPERATIONS.
About two-thirds of our total crude oil feedstock requirements are
purchased through term crude oil feedstock contracts. The remainder of our crude
oil feedstock requirements are purchased on the spot market. The term agreements
include contracts to purchase feedstocks from various foreign national oil
companies and various domestic integrated oil companies. In particular, a
significant portion of our feedstock requirements are satisfied through
suppliers located in the Middle East, and we are, therefore, subject to the
political, geographic and economic risks attendant to doing business with
suppliers located in that area. In the event one or more of our term contracts
were terminated or political events disrupted our traditional crude oil supply,
it is possible that we would be unable to find alternative sources of supply. If
we are unable to obtain adequate crude oil volumes or are only able to obtain
such volumes at unfavorable prices, our results of operations could be
materially adversely affected, including reduced sales volumes of refined
products or reduced margins as a result of higher crude oil costs.
COMPETITORS WHO PRODUCE THEIR OWN SUPPLY OF FEEDSTOCKS, WHO HAVE MORE
EXTENSIVE RETAIL OUTLETS OR WHO HAVE GREATER FINANCIAL RESOURCES MAY HAVE A
COMPETITIVE ADVANTAGE.
The refining and marketing industry is highly competitive with respect to
both feedstock supply and refined product markets. We compete with numerous
other companies for available supplies of crude oil and other feedstocks and for
outlets for our refined products. We do not produce any of our crude oil
feedstocks. Many of our competitors, however, obtain a significant portion of
their feedstocks from company-owned production and some have more extensive
retail outlets than we do. Competitors that have their own production or
extensive retail outlets (and brand-name recognition) are at times able to
offset
6
losses from refining operations with profits from producing or retailing
operations, and may be better positioned to withstand periods of depressed
refining margins or feedstock shortages.
A number of our competitors also have materially greater financial and
other resources than we possess. Such competitors have a greater ability to bear
the economic risks inherent in all phases of the industry. In addition, we
compete with other industries that provide alternative means to satisfy the
energy and fuel requirements of our industrial, commercial and individual
consumers.
A SIGNIFICANT INTERRUPTION IN ONE OR MORE OF OUR REFINERIES COULD ADVERSELY
AFFECT OUR BUSINESS.
With the acquisition of Orion, our refining activities will be conducted at
fourteen major refineries in Texas, Louisiana, New Jersey, California, Oklahoma,
Colorado and Quebec, Canada. The refineries are our principal operating assets.
As a result, our operations could be subject to significant interruption if one
or more of the refineries were to experience a major accident, be damaged by
severe weather or other natural disaster, or otherwise be forced to shut down.
If any refinery were to experience an interruption in operations, earnings
therefrom could be materially adversely affected, including as a result of lost
production and repair costs.
WE MAY BE UNABLE TO COMPETE SUCCESSFULLY WITH OTHER COMPANIES IN THE RETAIL
SECTOR.
The retail sector has become increasingly competitive. We face strong
competition from the fully integrated major oil companies that have increased
their efforts to capture retail market share in recent years. We also compete
with large grocery stores and other general merchandisers (the so-called
"hypermarts") that often sell gasoline at aggressively competitive prices in
order to attract customers to their sites. A number of our competitors also have
materially greater financial and other resources than we possess. The actions of
our competitors could lead to lower prices and reduced margins, which could have
a material adverse effect on our financial position.
OUR OPERATIONS EXPOSE US TO MANY OPERATING RISKS, NOT ALL OF WHICH ARE
INSURED.
Our refining and marketing operations are subject to various hazards common
to the industry, including explosions, fires, toxic emissions, maritime hazards
and uncontrollable flows of oil and gas. They are also subject to the additional
hazards of loss from severe weather conditions. As protection against operating
hazards, we maintain insurance coverage against some, but not all, such
potential losses. We may not be able to maintain or obtain insurance of the type
and amount we desire at reasonable rates. As a result of market conditions,
premiums and deductibles for certain of our insurance policies have increased
substantially, and could escalate further. In some instances, certain insurance
could become unavailable or available only for reduced amounts of coverage. For
example, insurance carriers are now requiring broad exclusions for losses due to
war risk and terrorist acts. If we were to incur a significant liability for
which we were not fully insured, it could have a material adverse effect on our
financial position.
WE MAY NOT BE SUCCESSFUL IN CONTINUING TO GROW THROUGH ACQUISITIONS, AND ANY
FURTHER ACQUISITIONS MAY REQUIRE US TO OBTAIN ADDITIONAL FINANCING OR COULD
RESULT IN DILUTION.
A substantial portion of our growth over the last several years has been
attributed to acquisitions. The ability to continue to grow through acquisitions
will be dependent on a number of factors, including our ability to
- identify acceptable acquisition candidates
- consummate acquisitions on favorable terms
- obtain financing to support our growth
- successfully integrate acquired businesses.
7
We may not be successful in continuing to grow through acquisitions. In
addition, the financing of future acquisitions may require us to incur
additional indebtedness, which could limit our financial flexibility, or to
issue additional equity, which could result in further dilution of the ownership
interest of existing stockholders.
PROVISIONS IN OUR CORPORATE DOCUMENTS AND DELAWARE LAW COULD DELAY OR PREVENT
A CHANGE IN OUR CONTROL.
The existence of some provisions in our corporate documents and Delaware
law could delay or prevent a change in control of Valero, even if that change
might be beneficial to our stockholders. In addition, we have adopted a
stockholder rights plan that would cause extreme dilution to any person or group
who attempts to acquire a significant interest in Valero without advance
approval of our board of directors. Delaware law imposes additional restrictions
on mergers and other business combinations between us and any holder of 15% or
more of our outstanding common stock.
A PATENT DISPUTE WITH UNOCAL COULD ADVERSELY AFFECT US.
Union Oil Company of California has filed a patent infringement lawsuit
against Valero in California federal court. The complaint seeks a 5.75 cent per
gallon royalty on all reformulated gasoline infringing on Unocal patents that
cover certain compositions of cleaner-burning gasoline. The complaint seeks
treble damages for Valero's alleged willful infringement of Unocal's patents. In
a previous lawsuit involving one of its patents, Unocal prevailed against five
other major refiners. In August 2001, the Federal Trade Commission, or the FTC,
announced that it would begin an antitrust investigation concerning Unocal's
conduct with a joint industry research group during the time that Unocal was
prosecuting its patents at the U.S. Patent and Trademark Office, or the PTO. On
March 4, 2003, the FTC announced that it was filing a complaint against Unocal
for antitrust violations. The FTC's complaint seeks an injunction against any
future enforcement by Unocal of its reformulated gasoline patents. This matter
is set for trial beginning in November 2003. The PTO has reexamined Unocal's
patents, and has issued a notice of rejection of all claims of the patents.
Unocal has the opportunity to respond to the PTO's action. Due to the inherent
uncertainty of litigation, there can be no assurance that Valero will prevail in
the lawsuit, and an adverse result could have a material adverse effect on
Valero's results of operations and financial position.
RISKS RELATED TO OWNERSHIP OF THE CONVERTIBLE PREFERRED STOCK
THERE HAS NOT BEEN A PRIOR MARKET FOR THE SHARES OF THE CONVERTIBLE PREFERRED
STOCK, AND AN ACTIVE TRADING MARKET FOR THE SHARES OF THE CONVERTIBLE
PREFERRED STOCK MAY NOT DEVELOP.
The shares of the convertible preferred stock are a new issue of securities
with no established trading market. In addition, we have not applied for the
listing of the convertible preferred stock on any securities exchange or
established trading market. We cannot assure you that a market for the
convertible preferred stock will develop or that holders of our convertible
preferred stock will be able to sell their shares of the convertible preferred
stock easily. An inactive or illiquid trading market could adversely affect the
trading price of the shares of the convertible preferred stock. In addition, the
market price of shares of the convertible preferred stock could vary
significantly in response to our operating results and other factors, including
the size of the public float of the shares of the convertible preferred stock.
WE MAY NOT PAY CASH DIVIDENDS ON THE CONVERTIBLE PREFERRED STOCK UNDER CERTAIN
CONDITIONS AND HOLDERS OF THE CONVERTIBLE PREFERRED STOCK CANNOT COMPEL US TO
PAY THEM.
If in any calendar year quarter, our board of directors does not declare a
dividend on our common stock (unless we announce a change in our common stock
dividend policy to suspend quarterly dividends and pay dividends on a semiannual
or annual basis), then the dividends on the convertible preferred stock will be
non-cumulative, will not accrue and will not be payable with respect to that
calendar quarter.
8
THE CONVERTIBLE PREFERRED STOCK IS SUBORDINATED TO ALL OF OUR EXISTING OR
FUTURE DEBT OBLIGATIONS AND WILL NOT LIMIT OUR ABILITY TO INCUR FUTURE
INDEBTEDNESS THAT WILL RANK SENIOR TO THE CONVERTIBLE PREFERRED STOCK.
The rights of holders of the convertible preferred stock to the payments of
dividends and amounts distributable upon our dissolution, liquidation or winding
up are inferior to the rights of all of our creditors to have our obligations
paid to them. The terms of the convertible preferred stock will not limit the
amount of debt or other obligations that we may incur.
OUR ABILITY TO ISSUE STOCK SENIOR TO THE CONVERTIBLE PREFERRED STOCK IN THE
FUTURE COULD ADVERSELY AFFECT THE RIGHTS OF HOLDERS OF THE CONVERTIBLE
PREFERRED STOCK.
Under our certificate of incorporation, our board of directors is
authorized, without further stockholder action, to issue up to 20,000,000 shares
of preferred stock in one or more series on terms determined by our board of
directors. Accordingly, we may authorize, increase the authorized amount of, or
issue any shares of any series of preferred stock that would rank senior to the
convertible preferred stock as to dividend rights or rights upon our
liquidation, winding-up or dissolution. We would not need any vote or consent to
authorize, increase the authorized amount of, or issue any such series of
preferred stock. Our future issuance of preferred stock could, therefore,
effectively diminish or supersede dividends on, and the liquidation preference
of, the convertible preferred stock.
SALES, OR THE AVAILABILITY FOR SALE, OF SUBSTANTIAL AMOUNTS OF OUR COMMON
STOCK COULD ADVERSELY AFFECT THE VALUE OF THE CONVERTIBLE PREFERRED STOCK AND
IMPAIR OUR ABILITY TO RAISE EQUITY CAPITAL.
Sales of substantial amounts of our common stock in the public market, and
the availability of shares for future sale, including shares of our common stock
issuable upon the conversion of shares of convertible preferred stock or debt or
upon exercise of outstanding options or other rights to acquire shares of our
common stock, could adversely affect the prevailing market price of our common
stock. This would adversely affect the value of the convertible preferred stock
and could impair our future ability to raise capital through an offering of our
equity securities.
THE TRADING PRICES FOR THE CONVERTIBLE PREFERRED STOCK WILL BE DIRECTLY
AFFECTED BY THE TRADING PRICES FOR OUR COMMON STOCK.
To the extent there is a secondary market for the convertible preferred
stock, we believe that the trading prices of the convertible preferred stock
will be directly affected by the trading prices of our common stock. We cannot
predict how our common stock will trade, but it has been volatile. Trading
prices of our common stock and the convertible preferred stock, if it trades at
all, will be influenced by our consolidated operating results and financial
condition and by economic, financial and other factors and market conditions
that can affect the capital markets generally. If the trading price of our
common stock declines or if we are unable to pay a dividend on our common stock,
the trading price of the shares of the convertible preferred stock can be
expected to decline and may decline to a price that is less than the initial
price that you paid for the shares of convertible preferred stock.
RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED DIVIDENDS
The following table sets forth the ratio of earnings to combined fixed
charges and preferred dividends for the periods indicated:
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED --------------------------------
JUNE 30, 2003 2002 2001 2000 1999 1998
------------- ---- ---- ---- ---- ----
Ratio of earnings to combined fixed
charges and preferred dividends...... 3.3x 1.3x 7.3x 5.6x 1.3x N/A
9
We have computed the ratio of earnings to combined fixed charges and
preferred dividends by dividing earnings by fixed charges and preferred
dividends. For this purpose, earnings consist of consolidated income from
continuing operations before income taxes and fixed charges (excluding
capitalized interest), with certain other adjustments. Fixed charges consist of
total interest, whether expensed or capitalized, including amortization of debt
expense and premiums or discounts related to outstanding indebtedness, one-third
(the proportion deemed representative of the interest factor) of rental expense
and distributions on preferred securities of subsidiary trusts which are
deducted in the determination of consolidated pre-tax income from continuing
operations. For the year ended December 31, 1998, our earnings were insufficient
to cover fixed charges by $77.7 million. This deficiency was due primarily to a
$170.9 million pre-tax charge to earnings to write down the carrying amount of
our refinery inventories to market value. Excluding the effect of the inventory
write-down, the ratio of earnings to fixed charges would have been 2.7x.
We had no preferred or preference securities outstanding with respect to
continuing operations for any period presented, other than preferred securities
of subsidiary trusts. As a result, the ratio of earnings to combined fixed
charges and preferred dividends is the same as the ratio of earnings to fixed
charges.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the convertible
preferred stock or the common stock contemplated by this prospectus. Please read
"Selling Securityholders" for a list of the persons receiving proceeds from the
sale of the convertible preferred stock or the underlying common stock.
DESCRIPTION OF THE CONVERTIBLE PREFERRED STOCK
The following is a summary of certain provisions of the certificate of
designation for the convertible preferred stock. A copy of the certificate of
designation and the form of convertible preferred stock share certificate have
been filed as exhibits to the registration statement of which this prospectus is
a part and are available upon request from Valero at the address set forth under
"Where You Can Find More Information." The following summary of the terms of the
convertible preferred stock does not purport to be complete and is subject to,
and qualified in its entirety by reference to, the provisions of the certificate
of designation. As used in this section, the terms "Valero", "us", "we" or "our"
refer to Valero Energy Corporation and not any of its subsidiaries.
General
Under our certificate of incorporation, our board of directors is
authorized, without further stockholder action, to issue up to 20,000,000 shares
of preferred stock, par value $.01 per share, in one or more series, with such
voting powers or without voting powers, and with such designations, preferences
and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions, as shall be set forth in the
resolutions providing therefore. We have 8,500,000 shares of authorized
preferred stock which are undesignated. Our board of directors has reserved for
issuance pursuant to our Stockholder Rights Plan described below a total of
1,500,000 shares of Junior Participating Preferred Stock, Series I. We have not
issued any shares of Junior Participating Preferred Stock. We have 10,000,000
shares of preferred stock which are designated as 2% Mandatory Convertible
Preferred Stock, of which all are currently outstanding. Please read
"Description of Valero Capital Stock."
The convertible preferred stock and any common stock issued upon the
conversion of the convertible preferred stock will be fully paid and
nonassessable. The holders of the convertible preferred stock have no preemptive
or preferential right to purchase or subscribe for stock, obligations, warrants
or other securities of Valero of any class. The transfer agent, registrar,
redemption, conversion and dividend disbursing agent for shares of the
convertible preferred stock is Computershare Investor Services L.L.C.
10
The convertible preferred stock is subject to mandatory conversion, as
described below in "-- Mandatory Conversion," but is not redeemable by Valero.
Ranking
The convertible preferred stock, with respect to dividend rights or rights
upon the liquidation, winding-up or dissolution of Valero, ranks:
- senior to all classes of common stock and each other class of capital
stock or series of preferred stock established after the original issue
date of the convertible preferred stock (the "Issue Date"), the terms of
which provide that such class or series ranks junior to the convertible
preferred stock as to dividend rights or rights upon the liquidation,
winding-up or dissolution of the Company (collectively referred to as
"Junior Stock");
- on a parity, in all respects, with any class of capital stock or series
of preferred stock established after the Issue Date, the terms of which
expressly provide that such class or series will rank on a parity with
the convertible preferred stock as to dividend rights or rights upon our
liquidation, winding-up or dissolution (which we will refer to
collectively as "Parity Stock"); and
- junior to each class of capital stock or series of preferred stock
established after the Issue Date by our board of directors, the terms of
which expressly provide that such class or series will rank senior to the
convertible preferred stock as to dividend rights or rights upon the
liquidation, winding-up or dissolution of the Company ("Senior Stock").
The affirmative vote or consent of the holders of at least 66 2/3% of the
outstanding convertible preferred stock is necessary to change the provisions of
our restated certificate of incorporation or the certificate of designation when
such a change would adversely affect any power, preference or special right of
the holders of the convertible preferred stock. See "-- Voting Rights" below.
Dividends
Holders of shares of the convertible preferred stock will be entitled to
receive, when, as and if declared by our board of directors out of funds legally
available for payment, cash dividends at the rate per annum of $0.50 per share
on the liquidation preference thereof of $25 per share of convertible preferred
stock (equivalent to 2% per annum per share). Dividends on the convertible
preferred stock will be payable quarterly on March 31, June 30, September 30 and
December 31 of each year, commencing September 30, 2003 (each, a "Dividend
Payment Date") at such annual rate, and shall accrue from July 1, 2003. The
first dividend on the convertible preferred stock paid on the last day of the
calendar quarter during which the convertible preferred stock is issued will
reflect an accrual of dividends from the date of issuance to the end of such
quarter at the annual dividend rate. Dividends payable on the convertible
preferred stock for any period less than a full dividend period (based upon the
number of days elapsed during the period) are computed on the basis of a 360-day
year consisting of twelve 30-day months. Dividends will be payable to holders of
record as they appear on our stock register on such record date, not exceeding
30 days preceding the payment date thereof, as shall be fixed by our board of
directors (each, a "Record Date").
If in any calendar year quarter, our board of directors does not declare a
dividend on our common stock, then the dividends on the convertible preferred
stock shall be non-cumulative, shall not accrue and shall not be payable with
respect to that calendar quarter unless we announce a change in common stock
dividend policy to suspend quarterly dividends and pay dividends on a semiannual
or annual basis.
Subject to certain exceptions, if we have neither declared and paid nor
irrevocably set apart for payment when due all accrued but unpaid dividends on
the convertible preferred stock then we may not (1) declare or pay any dividend
on any Parity Stock or Junior Stock, (2) redeem, purchase, retire or otherwise
acquire for consideration shares of any Junior Stock or any Parity Stock, or (3)
permit any Valero subsidiary to acquire for consideration any shares of stock of
Valero unless Valero could, pursuant to the foregoing, purchase or otherwise
acquire such shares at such time and in such manner.
11
Our ability to declare and pay cash dividends and make other distributions
with respect to our capital stock, including the convertible preferred stock, is
limited by the terms of our outstanding indebtedness.
Liquidation Preference
In the event of any liquidation, winding-up or dissolution, each holder of
convertible preferred stock will be entitled to receive and to be paid out of
our assets available for distribution to our stockholders, before any payment or
distribution is made to holders of Junior Stock (including our common stock), a
liquidation preference in the amount of $25 per share of the convertible
preferred stock, plus accrued and unpaid dividends (whether or not declared) on
the shares to the date fixed for liquidation, winding-up or dissolution. If,
upon any liquidation, winding-up or dissolution, the amounts payable with
respect to the liquidation preference of the convertible preferred stock and all
Parity Stock are not paid in full, the holders of the convertible preferred
stock and the Parity Stock will share equally and ratably in any distribution of
our assets in proportion to the full liquidation preference and accumulated and
unpaid dividends to which they are entitled.
The certificate of designation does not contain any provision requiring
funds to be set aside to protect the liquidation preference of the convertible
preferred stock even though it is substantially in excess of the par value
thereof.
Voting Rights
Each holder of shares of the convertible preferred stock will be entitled
to vote with holders of our common stock on all matters voted upon by the
holders of our common stock. The number of votes such holder of convertible
preferred stock will be entitled to in such a vote per share of convertible
preferred stock will be equal to the mandatory conversion ratio that would be in
effect if the mandatory conversion date had occurred on the record date for
determining holders of common stock entitled to vote on such matter. On any
other matter described below, the holders of the convertible preferred stock
will be entitled to one vote per share.
While any shares of convertible preferred stock are outstanding, we may
not, without the affirmative vote or consent of the holders of at least 66 2/3%
of the outstanding shares of convertible preferred stock, permit, effect or
validate any amendment, alteration or repeal, by merger or otherwise, of any of
the provisions of the restated certificate of incorporation or of the
certificate of designation which would adversely affect any power, preference or
special right of the convertible preferred stock provided that such an adverse
effect shall not be deemed to have occurred solely as a result of the
authorization, designation or issuance of any class of equity security.
Mandatory Conversion
On July 1, 2006, each outstanding share of convertible preferred stock will
be automatically converted into (a) a fraction of a share of our common stock
equal to the mandatory conversion ratio, which will be determined as set forth
below and subject to adjustment as described in "-- Conversion Price Adjustment"
and (b) the right to receive an amount in cash equal to all accrued and unpaid
dividends to and including the day immediately prior to the mandatory conversion
date. Dividends for the quarter in which the mandatory conversion date occurs
shall be considered accrued and unpaid unless we publicly announce an intention
not to declare a dividend on our common stock for that quarter.
12
The mandatory conversion ratio will be determined as follows, based on the
applicable market value of our common stock as of the mandatory conversion date:
MANDATORY CONVERSION RATIO
(SHARES OF COMMON STOCK FOR
APPLICABLE MARKET VALUE EACH SHARE OF PREFERRED STOCK)
----------------------- ------------------------------
(1) Less than or equal to $37.37 .6690
(2) Greater than $37.37 but $25.00
less than or equal to $50.45 ---------------------------
applicable market value of
common stock
(3) Greater than $50.45 .4955
The applicable market value of our common stock as of the mandatory
conversion date is the average of the closing prices per share of Valero common
stock for the 20 consecutive trading days ending on the second day prior to the
conversion date.
Optional Conversion Rights
Each share of convertible preferred stock is convertible at any time at the
option of the holder thereof into .4955 of a share of common stock subject to
adjustment as described below under "-- Conversion Price Adjustment," such ratio
or adjusted ratio being referred to as the "optional conversion ratio."
The holders of shares of convertible preferred stock at the close of
business on a Record Date will be entitled to receive the dividend payment on
those shares on the corresponding Dividend Payment Date notwithstanding the
conversion of such shares following that Record Date or our default in payment
of the dividend due on that Dividend Payment Date. Except as provided above, in
connection with an optional conversion, we will make no payment or allowance for
unpaid dividends, whether or not in arrears, on converted shares or for
dividends on the shares of our common stock issued upon conversion.
Early Conversion Right Upon Change of Control
Except as provided below, upon a Change of Control (as defined below) that
is not a Common Stock Transaction (as defined below), holders of convertible
preferred stock will have an option for a period of 30 days after the mailing of
a notice of the Change of Control to convert all or any portion of such holder's
outstanding shares of convertible preferred stock into shares of our common
stock (or other securities or property) at a conversion ratio equal to the
mandatory conversion ratio that would have been in effect if the mandatory
conversion date was the date of such conversion. A holder who exercises his
right pursuant to this provision shall be entitled to receive on the date of
conversion the aggregate amount of any accrued and unpaid dividends to and
including the day immediately prior to the date such holder converted its shares
on such shares of convertible preferred stock that are converted, whether or not
earned or declared, out of funds legally available therefor.
The certificate of designation defines "Change of Control" as any of the
following events:
- the sale, lease, transfer, conveyance or other disposition (other than by
way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of Valero and its
subsidiaries taken as a whole to any "person" or group of related persons
(a "Group") (as such term is used in Section 13(d)(3) of the Securities
Exchange Act of 1934 (the "Exchange Act"));
- the consummation of any transaction (including without limitation, any
purchase, sale, acquisition, disposition, merger or consolidation) of
which the result is that any "person" or Group becomes the "beneficial
owner" (as such term is used in Section 13(d)(3) of the Exchange Act) of
more than 50% of the aggregate voting power of all classes of capital
stock of Valero having the right to elect directors under ordinary
circumstances;
13
- any consolidation or merger of Valero with or into another corporation
(other than a merger or consolidation in which our common stock
outstanding immediately prior to the merger or consolidation is not
exchanged for cash, securities or other property of Valero or another
entity except an entity created for such transaction in which each share
of our common stock is converted into one share of common stock of such
entity); or
- the adoption of a plan the consummation of which would result in our
liquidation or dissolution.
The certificate of designation defines a "Common Stock Transaction" as any
transaction in which more than 50% of the value of the consideration received by
holders of our common stock consists of common stock that for each of the ten
consecutive trading days prior to the effective date of the transaction has been
admitted for listing or admitted for listing subject to notice of issuance on a
national securities exchange or quoted on the Nasdaq National Market.
The phrase "all or substantially all" of our assets is likely to be
interpreted by reference to applicable state law at the relevant time, and will
be dependent on the facts and circumstances existing at such time. As a result,
there may be a degree of uncertainty in ascertaining whether a sale or transfer
is of "all or substantially all" of our assets.
Fractional Shares
No fractional shares of our common stock or securities representing
fractional shares of our common stock will be issued upon conversion, whether
voluntary or mandatory. Any fractional interest in a share of our common stock
resulting from conversion will be paid in cash based on the average sale price
of our common stock for the 20 days ending on the second trading day prior to
the date of determination as listed in the Wall Street Journal's NYSE-Composite
Transaction listing (or such other national securities exchange or automated
quotation system on which our common stock is then listed or authorized for
quotation or, if not so listed or authorized for quotation, an amount determined
to be the market value of our common stock on such date as determined by a
recognized independent investment banking firm retained for this service by
Valero).
Conversion Price Adjustment
The conversion ratios are subject to adjustment (in accordance with
formulas set forth in the certificate of designation) in certain events,
including:
- any payment of a dividend (or other distribution) payable in shares of
our common stock on our common stock;
- any issuance to all holders of shares of our common stock of rights,
options or warrants entitling them to subscribe for or purchase shares of
our common stock at less than the Market Value (as defined below);
provided, however, that if such rights, options or warrants are not
exercised before their expiration, then the conversion ratios will be
adjusted to the amount it would have been had it not been adjusted based
upon such issuance in the first place;
- any subdivision, combination or reclassification of our common stock;
- a distribution to all holders of our common stock consisting of evidences
of indebtedness, cash or assets or rights to subscribe;
- pursuant to our Rights Agreement, dated as of July 17, 1997 between the
corporation and Computershare Investors Services L.L.C., as Rights Agent,
a Distribution Date occurs (as defined in the Rights Agreement) with
respect to the Preference Share Purchase Rights (as defined in the Rights
Agreement);
- the completion of a tender or exchange offer made by us or any of our
subsidiaries for shares of our common stock that involves an aggregate
consideration that, together with (a) any cash and other consideration
payable in a tender or exchange offer by us or any of our subsidiaries
for shares of our
14
common stock expiring within the then preceding 12 months in respect of
which no adjustment has been made and (b) the aggregate amount of any
all-cash distributions to all holders of shares of our common stock
within the then preceding 12 months in respect of which no adjustments
have been made, exceeds 15% of our market capitalization on the
expiration of such tender offer; or
- the completion of a tender or exchange offer made by a person other than
us or our subsidiaries that increases the offeror's ownership of our
common stock by more than 25% of our common stock outstanding where the
offeror is to pay consideration per share of common stock having a fair
market value at the last time (the "Expiration Time") tenders or
exchanges may be made pursuant to the tender or exchange offer that
exceeds the Market Value of our common stock on the trading day next
succeeding the Expiration Time, and in which, as of the Expiration Time,
our board of directors is recommending acceptance of the offer.
No adjustment of the conversion ratios will be required to be made until
the cumulative adjustments (whether or not made) amount to 1.0% or more of the
conversion ratios as last adjusted. We reserve the right to make such reductions
in the conversion ratios in addition to those required in the foregoing
provisions as we consider to be advisable in order that any event treated for
Federal income tax purposes as a dividend of stock or stock rights will not be
taxable to the recipients. In the event we elect to make such a reduction in the
conversion ratios, we will comply with the requirements of securities laws and
regulations thereunder if and to the extent that such laws and regulations are
applicable in connection with the reduction of the conversion ratios.
The term "Market Value" means the average closing price of the common stock
for a 20 consecutive trading day period on the New York Stock Exchange ending on
the second trading day prior to the date of determination (or such other
national securities exchange or automated quotation system on which the common
stock is then listed or authorized for quotation or, if not so listed or
authorized for quotation, an amount determined to be the market value of the
common stock by a recognized independent investment banking firm retained for
this service by the corporation).
Following any consolidation or merger of us with or into another person or
any merger of another person with or into us (with certain exceptions), or any
sale or transfer to another entity of our assets as an entirety or substantially
as an entirety or any statutory exchange of our securities with another entity
(other than in connection with a merger or acquisition), each share of
convertible preferred stock then outstanding will, without the consent of any
holder of convertible preferred stock, be convertible only into the kind and
amount of securities, cash and other property receivable upon such
consolidation, merger, sale or other disposition or share exchange by a holder
of the number of shares of our common stock into which such convertible
preferred stock was convertible immediately prior thereto, after giving effect
to any adjustment event.
Sinking Fund
The convertible preferred stock shall not be entitled to any mandatory
redemption or prepayment (except on liquidation, dissolution or winding up of
the affairs of Valero) or to the benefit of any sinking fund.
15
DESCRIPTION OF VALERO CAPITAL STOCK
We have summarized selected aspects of our capital stock below. The summary
is not complete. For a complete description, you should refer to our restated
certificate of incorporation, restated by-laws and the Rights Agreement, all of
which are exhibits to the registration statement of which this prospectus is a
part.
Authorized Capital Stock
Our authorized capital stock consists of:
- 300,000,000 shares of common stock, par value $.01 per share
- 20,000,000 shares of preferred stock, par value $.01 per share, issuable
in series.
COMMON STOCK
Each share of common stock is entitled to participate equally in dividends
as and when declared by our board of directors. The payment of dividends on our
common stock may be limited by obligations we may have to holders of any
preferred stock.
Common stockholders are entitled to one vote for each share held on all
matters submitted to them. The common stock does not have cumulative voting
rights, meaning that holders of a majority of the shares of common stock voting
for the election of directors can elect all the directors if they choose to do
so.
If we liquidate or dissolve our business, the holders of common stock will
share ratably in the distribution of assets available for distribution to
stockholders after creditors are paid and preferred stockholders receive their
distributions. The shares of common stock have no preemptive rights and are not
convertible, redeemable or assessable or entitled to the benefits of any sinking
fund.
All issued and outstanding shares of common stock are fully paid and
nonassessable. Any shares of common stock into which the convertible preferred
stock may be converted will be fully paid and nonassessable.
The common stock is listed on the New York Stock Exchange and trades under
the symbol "VLO."
PREFERRED STOCK
Our board of directors can, without action by stockholders, issue one or
more series of preferred stock. The board can determine for each series the
number of shares, designation, relative voting rights, dividend rates,
liquidation and other rights, preferences and limitations. In some cases, the
issuance of preferred stock could delay or discourage a change in control of us.
Any shares of preferred stock we issue will be fully paid and
nonassessable.
Our board of directors has reserved for issuance pursuant to our
Stockholder Rights Plan described below a total of 1,500,000 shares of Junior
Participating Preferred Stock, Series I. We have not issued any shares of the
Junior Participating Preferred Stock, Series I at the date of this prospectus.
ANTI-TAKEOVER PROVISIONS
The provisions of Delaware law and our restated certificate of
incorporation and our restated by-laws summarized below may have an
anti-takeover effect and may delay, defer or prevent a tender offer or takeover
attempt that a stockholder might consider in his or her best interest, including
those attempts that might result in a premium over the market price for the
common stock.
16
Staggered Board of Directors
Our board of directors is divided into three classes that are elected for
staggered three-year terms. The classification of the board of directors has the
effect of requiring at least two annual stockholder meetings, instead of one, to
effect a change in control of the board of directors. Holders of 60% of the
shares of common stock entitled to vote in the election of directors may remove
a director for cause, but stockholders may not remove any director without
cause.
Fair Price Provision
Our restated certificate of incorporation contains a fair price provision.
Mergers, consolidations and other business combinations involving us and an
"interested stockholder" require the approval of holders of at least 66 2/3% of
our outstanding voting stock not owned by the interested stockholder. Interested
stockholders include any holder of 15% or more of our outstanding voting stock.
The 66 2/3% voting requirement does not apply, however, if the "continuing
directors," as defined in our restated certificate of incorporation, approve the
business combination, or the business combination meets other specified
conditions.
Liability of Our Directors
As permitted by the Delaware corporation statute, we have included in our
restated certificate of incorporation a provision that limits our directors'
liability for monetary damages for breach of their fiduciary duty of care to us
and our stockholders. The provision does not affect the liability of a director:
- for any breach of his/her duty of loyalty to us or our stockholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- for the declaration or payment of unlawful dividends or unlawful stock
repurchases or redemptions; or
- for any transaction from which the director derived an improper personal
benefit.
This provision also does not affect a director's responsibilities under any
other laws, such as the federal securities laws or state or federal
environmental laws.
Stockholder Proposals and Director Nominations
Our stockholders can submit stockholder proposals and nominate candidates
for our board of directors if the stockholders follow advance notice procedures
described in our restated by-laws.
Generally, stockholders must submit a written notice between 60 and 90 days
before the first anniversary of the date of our previous year's annual
stockholders' meeting. To nominate directors, the notice must include the name
and address of the stockholder, the class and number of shares owned by the
stockholder, information about the nominee required by the SEC and a description
of any arrangements or understandings with respect to the election of directors
that exist between the stockholder and any other person. To make stockholder
proposals, the notice must include a description of the proposal, the reasons
for bringing the proposal before the meeting, the name and address of the
stockholder, the class and number of shares owned by the stockholder and any
material interest of the stockholder in the proposal.
In each case, if we have changed the date of the annual meeting to more
than 30 days before or 60 days after the anniversary date of our previous year's
annual stockholders' meeting, stockholders must submit the notice between 60 and
90 days prior to such annual meeting or no later than 10 days after the day we
make public the date of the annual meeting.
17
Director nominations and stockholder proposals that are late or that do not
include all required information may be rejected. This could prevent
stockholders from bringing certain matters before an annual meeting, including
making nominations for directors.
Delaware Anti-takeover Statute
We are a Delaware corporation and are subject to Section 203 of the
Delaware General Corporation Law. In general, Section 203 prevents us from
engaging in a business combination with an "interested stockholder" (generally,
a person owning 15% or more of our outstanding voting stock) for three years
following the time that person becomes a 15% stockholder unless one of the
following is satisfied:
- before that person became a 15% stockholder, our board of directors
approved the transaction in which the stockholder became a 15%
stockholder or approved the business combination;
- upon completion of the transaction that resulted in the stockholder's
becoming a 15% stockholder, the stockholder owns at least 85% of our
voting stock outstanding at the time the transaction began (excluding
stock held by directors who are also officers and by employee stock plans
that do not provide employees with the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer); or
- after the transaction in which that person became a 15% stockholder, the
business combination is approved by our board of directors and authorized
at a stockholders' meeting by at least two-thirds of the outstanding
voting stock not owned by the 15% stockholder.
Under Section 203, these restrictions also do not apply to certain business
combinations proposed by a 15% stockholder following the disclosure of an
extraordinary transaction with a person who was not a 15% stockholder during the
previous three years or who became a 15% stockholder with the approval of a
majority of our directors. This exception applies only if the extraordinary
transaction is approved or not opposed by a majority of our directors who were
directors before any person became a 15% stockholder in the previous three
years, or the successors of these directors.
Other Provisions
Our restated certificate of incorporation also provides that:
- stockholders may act only at an annual or special meeting and not by
written consent;
- an 80% vote of the outstanding voting stock is required for the
stockholders to amend our restated by-laws; and,
- an 80% vote of the outstanding voting stock is required to amend our
restated certificate of incorporation with respect to certain matters,
including those described in the first two bullet points above.
TRANSFER AGENT AND REGISTRAR
Computershare Investor Services L.L.C., is our transfer agent and
registrar.
STOCKHOLDER RIGHTS PLAN
We have a stockholder rights plan under which one preferred share purchase
right is attached to each outstanding share of our common stock. The rights
become exercisable under specified circumstances, including any person or group
(an "acquiring person") becoming the beneficial owner of 15% or more of our
outstanding common stock, subject to specified exceptions. Each right entitles
the registered holder to purchase from us one one-hundredth of a share of Junior
Participating Preferred Stock, Series I, at an exercise price of $100, subject
to adjustment under specified circumstances. If events specified in the
stockholder rights plan occur, each holder of rights other than the acquiring
person can exercise their rights. When a holder exercises a right, the holder
will be entitled to receive common stock valued at
18
twice the exercise price of the right. In some cases, the holder will receive
cash, property or other securities instead of common stock. We may redeem the
rights for $0.01 per right at any time prior to the tenth day after a person or
group becomes an acquiring person.
FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes the material U.S. Federal income tax
consequences to U.S. holders (as defined below) of the purchase, ownership, and
disposition of the convertible preferred stock and any common stock received
upon its conversion. This discussion is based upon the provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), the final, temporary and
proposed Treasury Regulations promulgated thereunder, and administrative rulings
and judicial decisions now in effect, all of which are subject to change
(possibly with retroactive effect) or different interpretations. This summary
does not purport to deal with all aspects of U.S. Federal income taxation that
may be relevant to an investor's decision to purchase shares of preferred stock,
nor any tax consequences arising under the laws of any state, locality or
foreign jurisdiction. This summary is not intended to be applicable to all
categories of investors, such as dealers in securities, banks, insurance
companies, tax-exempt organizations, foreign persons, persons that hold the
convertible preferred stock or common stock as part of a straddle or conversion
transaction, or holders subject to the alternative minimum tax, which may be
subject to special rules. In addition, this discussion is limited to persons who
hold the convertible preferred stock or common stock as "capital assets"
(generally, property held for investment) within the meaning of Section 1221 of
the Code. As used in this section, a "U.S. holder" is a beneficial owner of
preferred stock or common stock that is for U.S. Federal income tax purposes:
- an individual U.S. citizen or resident alien;
- a corporation, or entity taxable as a corporation that was created or
organized in or under the laws of the United States, any state thereof or
the District of Columbia;
- an estate or trust whose world-wide income is subject to U.S. Federal
income tax; or
- a trust (1) that is subject to the primary supervision of a U.S. court
and the control of one or more U.S. persons or (2) that has a valid
election in effect under applicable U.S. Treasury Regulations to be
treated as a United States person.
If a partnership holds preferred stock or common stock, the tax treatment
of a partner will generally depend upon the status of the partner and upon the
activities of the partnership.
YOU SHOULD CONSULT YOUR OWN TAX ADVISOR REGARDING THE FEDERAL, STATE,
LOCAL, AND FOREIGN TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP, CONVERSION, AND
DISPOSITION OF THE CONVERTIBLE PREFERRED STOCK AND COMMON STOCK RECEIVED AS A
RESULT OF A CONVERSION OF THE CONVERTIBLE PREFERRED STOCK.
Consequences to Holders of Preferred Stock or Common Stock
Distributions. Except as provided below, the amount of any distribution to
you with respect to the convertible preferred stock or common stock will be
treated as a dividend, taxable as ordinary income to you, to the extent of our
current or accumulated earnings and profits ("earnings and profits") as
determined under U.S. Federal income tax principles. To the extent the amount of
such distribution exceeds our earnings and profits, the excess will be applied
against and will reduce your tax basis (on a dollar-for-dollar basis) in the
convertible preferred stock or common stock, as the case may be. Any amount in
excess of your tax basis will be treated as capital gain.
If you are an individual and receive a distribution that is treated as a
dividend, recently enacted legislation generally will treat the dividend as net
capital gain taxed at rates up to 15%. However, there are
19
several exceptions and restrictions relating to the treatment of the dividend as
net capital gain, such as restrictions relating to:
- your holding period of stock the dividends on which are received;
- your obligation, if any, to make related payments with respect to
positions in substantially similar or related property; and
- amounts you take into account as investment income under Section
163(d)(4)(B) of the Code.
The provisions in the Code that treat a dividend as net capital gain apply
only to taxable years beginning after December 31, 2002 and on or before
December 31, 2008. Individuals should consult their own tax advisors regarding
the extent, if any, to which such exceptions and restrictions may apply to their
particular factual situation.
Dividends to Corporate Shareholders. In general, a distribution which is
treated as a dividend for U.S. Federal income tax purposes and is made to a
corporate shareholder with respect to the convertible preferred stock or common
stock will qualify for the 70% dividends-received deduction under Section 243 of
the Code. Corporate shareholders should note, however, there can be no assurance
that the amount of distributions made with respect to the convertible preferred
stock or the common stock will not exceed the amount of our earnings and profits
in the future. Accordingly, there can be no assurance that the
dividends-received deduction will be available in respect of distributions on
the convertible preferred stock or common stock.
In addition, there are many exceptions and restrictions relating to the
availability of such dividends-received deduction such as restrictions relating
to:
- the holding period of stock the dividends on which are sought to be
deducted;
- debt-financed portfolio stock;
- dividends treated as "extraordinary dividends" for purposes of Section
1059 of the Code; and
- taxpayers that pay corporate alternative minimum tax.
Corporate shareholders should consult their own tax advisors regarding the
extent, if any, to which such exceptions and restrictions may apply to their
particular factual situation.
Sale or Other Disposition. Upon a sale or other disposition of the
convertible preferred stock or common stock (other than an exchange of
convertible preferred stock for common stock pursuant to the conversion
privilege), you generally will recognize capital gain or loss equal to the
difference between the amount of cash and the fair market value of property you
receive on the sale or other disposition and your adjusted tax basis in the
convertible preferred stock or common stock. Such capital gain or loss will be
long-term capital gain or loss if your holding period for the preferred stock or
common stock, as applicable, is more than one year. Under recently enacted
legislation, if you are an individual, such long-term capital gain will
generally be taxed at rates up to 15%. Moreover, if you are an individual and
previously received, with respect to such stock, one or more dividends that were
treated as net capital gain, as described above under "Distributions," any
capital loss on a subsequent disposition of the stock will, regardless of your
holding period, be treated as long-term capital loss to the extent that the
previous dividends were extraordinary dividends within the meaning of Section
1059(c) of the Code.
Conversion of Convertible Preferred Stock in Exchange for Common
Stock. You generally will not recognize gain or loss by reason of receiving
common stock in exchange for the convertible preferred stock upon conversion of
the convertible preferred stock, except gain or loss will be recognized with
respect to any cash received in lieu of fractional shares, and any cash received
attributable to dividend arrearages will be treated as a distribution and taxed
as described above under "Distributions." The adjusted tax basis of the common
stock (including fractional share interests) so acquired will be equal to the
tax basis of the shares of the convertible preferred stock exchanged and the
holding period of the common stock received will include the holding period of
the preferred stock exchanged.
20
Adjustment of Conversion Price. Holders of the convertible preferred stock
may, in certain circumstances, be deemed to have received constructive
distributions of stock if the conversion rate for the convertible preferred
stock is adjusted. Adjustments to the conversion price made pursuant to a bona
fide reasonable adjustment formula which has the effect of preventing the
dilution of the interest of the holders of the convertible preferred stock,
however, generally will not be considered to result in a constructive
distribution of stock. Certain of the possible adjustments provided in the
anti-dilution provisions of the convertible preferred stock, including, without
limitation, adjustments in respect of stock dividends or the distribution of
rights to subscribe for common stock should qualify as being pursuant to a bona
fide reasonable adjustment formula and should not result in a constructive
distribution. In contrast, adjustments in respect of distributions of our
indebtedness or assets to our stockholders, for example, will not qualify as
being pursuant to a bona fide reasonable adjustment formula. In addition, an
adjustment triggered by a change of control or mandatory conversion as described
under "Description of the Convertible Preferred Stock" may not so qualify. If
such adjustments are made, the holders generally will be deemed to have received
constructive distributions in amounts based upon the value of such holders'
increased interests in our equity resulting from such adjustments. The amount of
the distribution will be treated as a distribution to a holder with the tax
consequences specified above under "Distributions." Accordingly, you could be
considered to have received distributions taxable as dividends to the extent of
our earnings and profits even though you did not receive any cash or property as
a result of such adjustments.
Backup Withholding. Under the backup withholding provisions of the Code
and applicable Treasury Regulations, you may be subject to backup withholding
with respect to dividends paid on, or the proceeds of a sale, exchange or
redemption of, the convertible preferred stock or common stock unless:
- you are a corporation or come within certain other exempt categories and
when required demonstrate this fact, or
- you timely supply an accurate taxpayer identification number and
otherwise comply with applicable United States information reporting and
certification requirements.
The amount of any backup withholding from a payment to you will be allowed
as a credit against your U.S. Federal income tax liability and may entitle you
to a refund, provided that the required information is furnished to the Internal
Revenue Service.
THE FOREGOING SUMMARY DOES NOT DISCUSS ALL ASPECTS OF U.S. FEDERAL INCOME
TAXATION THAT MAY BE RELEVANT TO YOU IN LIGHT OF YOUR PARTICULAR CIRCUMSTANCES
AND INCOME TAX SITUATION. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR AS TO THE
SPECIFIC TAX CONSEQUENCES THAT WOULD RESULT FROM YOUR PURCHASE, OWNERSHIP AND
DISPOSITION OF THE CONVERTIBLE PREFERRED STOCK, INCLUDING THE APPLICATION AND
EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF
CHANGES IN FEDERAL OR OTHER TAX LAWS.
SELLING SECURITYHOLDER
The Selling Securityholder
The securities covered by this prospectus are to be offered for the account
of Orion Refining Corporation. As of the date of this prospectus, Orion owned
10,000,000 shares of convertible preferred stock, with 844,000 of those shares
being held in an escrow account for the benefit of Valero to satisfy possible
indemnification claims that may arise pursuant to the agreement to acquire
Orion. Orion controls the disposition and voting of any shares held in escrow.
If sold at the instruction of Orion, the cash proceeds would replace the shares
in escrow. Excluding shares that may be issued upon conversion of the
convertible preferred stock, as of the date of this prospectus, Orion owned no
shares of our common stock. Because of the conversion feature of our convertible
preferred stock, as of the date of this prospectus, based on a conversion ratio
of .4955, the conversion ratio into which a share of convertible preferred stock
can be converted as of any time prior to July 1, 2006, Orion may be deemed to
beneficially own the
21
4,955,000 shares of our common stock underlying the convertible preferred stock.
This represents approximately 4.3% of our outstanding common stock as of the
date of this prospectus. This amount on the mandatory conversion date is subject
to change depending upon the conversion ratio that is described in "Description
of the Convertible Preferred Stock -- Mandatory Conversion." Giving effect to
the sale of all of the convertible preferred stock pursuant to this prospectus,
Orion would own no shares of convertible preferred stock and no shares of our
common stock.
On May 13, 2003, Orion filed with the United States bankruptcy court for
the District of Delaware a voluntary petition for reorganization under Chapter
11 of the United States Bankruptcy Code. On May 13, 2003, we entered into an
agreement to acquire Orion's refinery located in St. Charles Parish, Louisiana
for $400 million plus approximately $149 million for refinery hydrocarbon
inventories and up to $175 million of potential earn-out payments as further
described below. Consideration for the purchase, including various transaction
costs incurred and warehouse inventories acquired, consisted of $307.7 million
in cash and $250 million stated value of the convertible preferred stock (10
million shares with a stated value of $25 per share), of which $21.1 million is
held in escrow pending the satisfaction of possible claims under the purchase
agreement. The potential earn-out payments arise if agreed-upon refining margins
reach a specified level during any of the seven years following the closing and
are subject to an annual maximum limit of $50 million and an aggregate limit of
$175 million. On July 1, 2003, we completed the purchase of the Orion Refinery
and issued the convertible preferred stock.
In connection with the issuance of the convertible preferred stock, we
entered into a registration rights agreement with Orion pursuant to which we
agreed to file a shelf registration statement covering the resale from time to
time of the convertible preferred stock and any of our common stock issued upon
conversion of the convertible preferred stock by Orion. We have agreed to keep
the shelf registration statement continuously effective, subject to certain
suspension periods when we are excused from keeping it effective, until the
convertible preferred stock and common stock issued upon the conversion thereof
have been sold pursuant to the shelf registration statement or are eligible to
be sold under Rule 144(k) of the Securities Act.
The following table sets forth the name of the selling securityholder, the
amount of preferred stock and shares of our common stock beneficially owned by
such selling securityholder prior to the offering, the amount being offered for
the selling securityholder's account and the amount to be owned by such
securityholder after completion of the offering.
NUMBER OF NUMBER OF
SHARES OF NUMBER OF SHARES OF
NUMBER OF PREFERRED SHARES OF COMMON
SHARES OF NUMBER OF STOCK TO BE COMMON NUMBER OF STOCK TO BE
PREFERRED SHARES OF OWNED STOCK SHARES OF OWNED
STOCK PREFERRED AFTER BENEFICIALLY COMMON AFTER
BENEFICIALLY STOCK BEING COMPLETION OWNED PRIOR STOCK BEING COMPLETION
OWNED PRIOR OFFERED OF THE TO THE OFFERED OF THE
NAME TO THE OFFERING HEREBY OFFERING OFFERING HEREBY OFFERING
---- --------------- ----------- ----------- ------------ ----------- -----------
Orion Refining
Corporation........ 10,000,000 10,000,000 0(1) 4,955,000(2) 4,955,000 0(3)
---------------
(1) Based on the assumption that Orion sells all the shares of convertible
preferred stock.
(2) This number is based on a conversion ratio of .4955, the ratio at which a
share of convertible preferred stock is convertible into a share of our
common stock at any time prior to July 1, 2006, an amount that is subject to
change on the mandatory conversion date as described in "Description of the
Convertible Preferred Stock -- Mandatory Conversion".
(3) Based on the assumption that Orion sells all its shares of convertible
preferred stock or our common stock underlying the convertible preferred
stock.
22
Other Potential Selling Securityholders
In accordance with the terms of our registration rights agreement with
Orion, the identification of the selling securityholder under this prospectus
may change from time to time. Under the registration rights agreement, we agreed
to file a registration statement covering the potential resale of the
convertible preferred stock and the shares of common stock that may be issued
upon conversion thereof by, in addition to Orion, (a) any trustee appointed in
the bankruptcy of Orion, (b) any trust created as part of the bankruptcy of
Orion, (c) any person to whom Orion or any such trustee or trust transfers any
such securities, (d) any stockholder or creditor of Orion who receives any such
securities in exchange for or satisfaction of all or any portion of such
person's claims against or interests in Orion or any Orion bankruptcy trust or
(e) any affiliate of any of the foregoing.
As part of Orion's bankruptcy proceedings:
- Orion may seek to satisfy its obligations to its creditors and
stockholders, in whole or in part, by delivering to such persons shares
of convertible preferred stock or the common stock that may be issued
upon conversion thereof;
- a trustee or trust may be appointed or established to own or control all
or a part of the shares of convertible preferred stock or the shares of
common stock issuable upon conversion thereof; or
- Orion may seek to sell or otherwise transfer a portion of the convertible
preferred stock or common stock that may be issued upon conversion
thereof to one or more purchasers on a private placement basis if the
registration statement of which this prospectus is a part is not
available for such resales.
In any of these cases, the transferee of such shares may become selling
securityholders under this prospectus. If the identity of the selling
securityholder changes, we will supplement or amend this prospectus to identify
the additional selling securityholders.
The bankruptcy order approving the sale of the Orion refinery to Valero
provides that if Orion has not retired certain indebtedness owed to General
Electric Capital Corporation ("GE Capital") and has not set aside certain
additional funds to satisfy some of Orion's other outstanding obligations prior
to the earlier to occur of October 30, 2003 and 20 business days (plus any
additional business days during which Valero suspends Orion's right to sell the
convertible preferred stock pursuant to the registration statement of which this
prospectus is a part) after the effectiveness of the registration statement,
then (a) Orion shall sell or dispose of the convertible preferred stock in a
manner directed by GE Capital or (b) if Orion fails to sell or dispose of the
convertible preferred stock as directed by GE Capital on or before three
business days after such direction, subject, in the event of either clause (a)
or (b), to the entry of an order of the bankruptcy court prior to the
consummation of such sale approving such sale or approving procedures for such
sale, Orion shall distribute the convertible preferred stock to GE Capital. GE
Capital would then be required to use its reasonable best efforts to sell the
convertible preferred stock as necessary to satisfy amounts owed to it as
promptly as practicable after its receipt of the convertible preferred stock,
subject to approval of such sale by the bankruptcy court. Proceeds from such
sale would be used to retire amounts owed to GE Capital and certain other
obligations of Orion. Any excess proceeds or convertible preferred stock not
sold by GE Capital would generally be returned to Orion or used to satisfy other
obligations of Orion.
PLAN OF DISTRIBUTION
The convertible preferred stock and the common stock issuable upon
conversion thereof are being registered to permit public secondary trading of
these securities by the holders thereof from time to time after the date of this
prospectus. We have agreed, among other things, to bear all expenses (other than
underwriting discounts and selling commissions and direct expenses of the
selling securityholder) in connection with the registration and sale of the
preferred stock and the common stock covered by this prospectus.
23
We will not receive any of the proceeds from the offering of the
convertible preferred stock or the common stock by the selling securityholder.
We have been advised by the selling securityholder that the selling
securityholder may sell all or a portion of the convertible preferred stock and
common stock beneficially owned by it and offered hereby from time to time on
any exchange on which the securities are listed on terms to be determined at the
times of such sales. The selling securityholder may also make private sales
directly or through a broker or brokers. Alternatively, the selling
securityholder may from time to time offer the convertible preferred stock or
the common stock beneficially owned by it through underwriters, dealers or
agents, who may receive compensation in the form of underwriting discounts,
commissions or concessions from the selling securityholder and the purchasers of
the convertible preferred stock and the common stock for whom they may act as
agent. Offerings may be made at market, through a firm commitment underwriting
or a best-efforts underwriting. The aggregate proceeds to the selling
securityholder from the sale of the convertible preferred stock or common stock
offering by it hereby will be the purchase price of such convertible preferred
stock or common stock less discounts and commissions, if any.
The convertible preferred stock and common stock may be sold from time to
time in one or more transactions at fixed offering prices, which may be changed,
or at varying prices determined at the time of sale or at negotiated prices.
These prices will be determined by the holders of such securities or by
agreement between these holders and underwriters or dealers who may receive fees
or commissions in connection therewith.
These transactions may include block transactions or crosses. Crosses are
transactions in which the same broker acts as an agent on both sides of the
trade.
In connection with sales of the convertible preferred stock or our common
stock or otherwise, the selling securityholder may enter into hedging
transactions with broker-dealers or others, which may in turn engage in short
sales of the convertible preferred stock or our common stock in the course of
hedging the positions they assume. The selling securityholder may also sell
convertible preferred stock or our common stock short and deliver the
convertible preferred stock or our common stock to close out short positions, or
loan or pledge the convertible preferred stock or our common stock to
broker-dealers or others that in turn may sell such securities. The selling
securityholder may pledge or grant a security interest in some or all of the
convertible preferred stock or our common stock issued upon conversion of the
convertible preferred stock owned by it and if it defaults in the performance of
its secured obligations, the pledgees or secured parties may offer and sell the
convertible preferred stock or our common stock from time to time pursuant to
this prospectus. The selling securityholder also may transfer and donate the
convertible preferred stock or shares of our common stock issuable upon
conversion of the convertible preferred stock in other circumstances in which
case the transferees, donees, pledgees or other successors in interest will be
the selling securityholder for purposes of the prospectus. The selling
securityholder may sell short our common stock and may deliver this prospectus
in connection with such short sales and use the shares of our common stock
covered by the prospectus to cover such short sales. In addition, any
convertible preferred stock or shares of our common stock covered by this
prospectus that qualify for sale pursuant to Rule 144A or any other available
exemption from registration under the Securities Act may be sold under Rule 144,
Rule 144A or such other available exemption.
At the time a particular offering of convertible preferred stock or shares
of our common stock issuable upon conversion of the preferred stock is made, a
prospectus supplement, if required, will be distributed which will set forth the
aggregate amount of convertible preferred stock or number of shares of our
common stock being offered and the terms of the offering, including the name or
names of any underwriters, dealers, brokers or agents, if any, and any
discounts, commissions or concessions allowed or reallowed to be paid to brokers
or dealers.
Our outstanding common stock is listed for trading on the New York Stock
Exchange.
We have agreed to indemnify the selling securityholder, and the selling
securityholder has agreed to indemnify us against certain liabilities arising
under the Securities Act.
24
The selling securityholder and any underwriters, dealers, brokers or agents
who participate in the distribution of the convertible preferred stock or our
common stock may be deemed to be "underwriters" within the meaning of the
Securities Act and any profits on the sale of the convertible preferred stock
and our common stock by them and any discounts, commissions or concessions
received by any such underwriters, dealers, brokers or agents may be deemed to
be underwriting discounts and commissions under the Securities Act.
The selling securityholder and any other person participating in such
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation, Regulation
M which may limit the timing of purchases and sales of the convertible preferred
stock and our common stock by the selling securityholder and any other such
person. Furthermore, Regulation M under the Exchange Act may restrict the
distribution rights of any person who decides to engage in a distribution of the
convertible preferred stock and our common stock being distributed for a period
of up to five business days prior to the commencement of such distribution. All
of the foregoing may affect the marketability of the convertible preferred stock
and our common stock and the ability of any person or entity to engage in
market-making activities with respect to the convertible preferred stock and our
common stock.
We will use our commercially reasonable best efforts to keep the
registration statement of which this prospectus is a part effective until the
earliest of (a) the sale pursuant to the shelf registration statement of all the
convertible preferred stock and the shares of common stock issuable upon
conversion of the convertible preferred stock thereunder, (b) the expiration of
the holding period applicable to such securities held by persons that are not
our affiliates under Rule 144(k) under the Securities Act or any successor
provision, subject to certain permitted exceptions, and (c) the date all of the
convertible preferred stock and common stock issuable upon conversion of the
convertible preferred stock cease to be outstanding.
LEGAL MATTERS
Mr. Jay D. Browning, Esq., Vice President and Corporate Secretary of
Valero, will issue opinions about the validity of the issuance of the
convertible preferred stock and the common stock issuable upon conversion of the
convertible preferred stock for us. Mr. Browning is our employee and at June 30,
2003, beneficially owned approximately 7,334 shares of our common stock
(including shares held under employee benefit plans) and held options under our
employee stock option plans to purchase an additional 30,212 shares of our
common stock. None of such shares or options were granted in connection with the
offering of the securities. Any underwriters will be advised about other issues
relating to any offering by their own legal counsel.
EXPERTS
Our audited consolidated financial statements at December 31, 2002 and for
the year then ended incorporated by reference in this prospectus from our annual
report on Form 10-K for the year ended December 31, 2002 have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such consolidated
financial statements have been incorporated by reference herein in reliance upon
such report given on the authority of such firm as experts in accounting and
auditing.
Our consolidated financial statements at December 31, 2001, and for each of
the two years in the period ended December 31, 2001, appearing in our Annual
Report on Form 10-K for the year ended December 31, 2002, have been audited by
Arthur Andersen LLP, independent public accountants, as set forth in their
report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing. On March 12, 2002, upon the recommendation of the audit
committee, our Board of Directors approved the dismissal of Arthur
25
Andersen LLP as our independent auditors and the selection of Ernst & Young LLP
to audit our consolidated financial statements for the year ended December 31,
2002.
MATTERS RELATING TO ARTHUR ANDERSEN LLP
Arthur Andersen LLP completed its audit of our consolidated financial
statements for the year ended December 31, 2001 and issued its report with
respect to such consolidated financial statements on March 5, 2002. On June 15,
2002, Arthur Andersen LLP was convicted of obstruction of justice for activities
relating to its previous work for Enron Corp., and Arthur Andersen LLP announced
that it would cease to audit publicly held companies in August 2002. Investors
may not be able to effectively recover against Arthur Andersen LLP for any
claims they may have under securities or other laws as a result of Arthur
Andersen LLP's previous role as our independent public accountants and as author
of the audit report for the audited consolidated financial statements
incorporated by reference in this prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You can read and copy any materials we file with the
SEC at the SEC's public reference room at 450 Fifth Street, N.W., Washington,
D.C. 20549. You can obtain information about the operation of the SEC's public
reference room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a
website that contains information we file electronically with the SEC, which you
can access over the Internet at http://www.sec.gov. You can obtain information
about us at the offices of the New York Stock Exchange, 20 Broad St., New York,
New York 10005.
This prospectus is part of a registration statement we have filed with the
SEC relating to the securities we may offer. As permitted by SEC rules, this
prospectus does not contain all of the information we have included in the
registration statement and the accompanying exhibits and schedules we file with
the SEC. You may refer to the registration statement, the exhibits and schedules
for more information about us and our securities. The registration statement,
exhibits and schedules are available at the SEC's public reference room or
through its web site.
INFORMATION WE INCORPORATE BY REFERENCE
We are incorporating by reference information we file with the SEC, which
means that we are disclosing important information to you by referring you to
those documents. The information we incorporate by reference is an important
part of this prospectus, and information that we file later with the SEC
automatically will update and supersede this information. We incorporate by
reference the documents listed below and any future filings we make with the SEC
under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act (excluding
information deemed to be furnished and not filed with the SEC) until we sell all
the securities:
- our annual report on Form 10-K for the year ended December 31, 2002
- the description of our common stock contained in our registration
statement on Form 8-A, as may be amended from time to time to update that
description
- the description of the rights associated with our common stock contained
in our registration statement on Form 8-A, as may be amended from time to
time to update that description
- our quarterly report on Form 10-Q for the period ended March 31, 2003
- our quarterly report on Form 10-Q for the period ended June 30, 2003
- our current reports on Form 8-K filed on March 28, 2003, June 4, 2003 and
July 15, 2003 (as amended by our current reports on Form 8-K/A filed
August 12, 2003 and September 18, 2003).
26
You may request a copy of these filings (other than an exhibit to those
filings unless we have specifically incorporated that exhibit by reference into
the filing), at no cost, by writing or telephoning us at the following address:
Valero Energy Corporation
One Valero Place
San Antonio, TX 78212
Attention: Investor Relations
Telephone: (210) 370-2139
27
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses of this offering (all of which are to be paid by the
registrant) are estimated to be as follows:
Securities and Exchange Commission registration fee......... $ 20,225
Legal fees and expenses..................................... 50,000
Accounting fees and expenses................................ 50,000
Printing expenses........................................... 25,000
Miscellaneous............................................... 10,000
--------
TOTAL..................................................... $155,225
========
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's Restated Certificate of Incorporation contains a provision
that eliminates the personal liability of a director to the Company and its
stockholders for monetary damages for breach of fiduciary duty as a director to
the extent currently allowed under the Delaware General Corporation Law. If a
director were to breach such duty in performing his duties as a director,
neither the Company nor its stockholders could recover monetary damages from the
director, and the only course of action available to the Company's stockholders
would be equitable remedies, such as an action to enjoin or rescind a
transaction involving a breach of fiduciary duty. To the extent certain claims
against directors are limited to equitable remedies, the provision in the
Company's Restated Certificate of Incorporation may reduce the likelihood of
derivative litigation and may discourage stockholders or management from
initiating litigation against directors for breach of their fiduciary duty.
Additionally, equitable remedies may not be effective in many situations. If a
stockholder's only remedy is to enjoin the completion of the Board of Directors'
action, this remedy would be ineffective if the stockholder does not become
aware of a transaction or event until after it has been completed. In such a
situation, it is possible that the stockholders and the Company would have no
effective remedy against the directors. Under the Company's Restated Certificate
of Incorporation, liability for monetary damages remains for (i) any breach of
the duty of loyalty to the Company or its stockholders, (ii) acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) payment of an improper dividend or improper repurchase or
redemption of the Company's stock under Section 174 of the Delaware General
Corporation Law, or (iv) any transaction from which the director derived an
improper personal benefit.
Under Article V of the Restated Certificate of Incorporation and Article
VIII of the Company's Restated By-laws as currently in effect and an
indemnification agreement with the Company's officers and directors (the
"Indemnification Agreement"), each person who is or was a director or officer of
the Company or a subsidiary of the Company, or who serves or served any other
enterprise or organization at the request of the Company or a subsidiary of the
Company, shall be indemnified by the Company to the full extent permitted by the
Delaware General Corporation Law.
Under such law, to the extent that such person is successful on the merits
in defense of a suit or proceeding brought against him by reason of the fact
that he is or was a director or officer of the Company, or serves or served any
other enterprise or organization at the request of the Company, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred in connection with such action.
Under such law, if unsuccessful in defense of a third-party civil suit or a
criminal suit, or if such suit is settled, such a person shall be indemnified
against both (a) expenses, including attorneys' fees, and (b) judgments, fines
and amounts paid in settlement if he acted in good faith and in a manner he
II-1
reasonably believed to be in, or not opposed to, the best interests of the
Company, and, with respect to any criminal action, had no reasonable cause to
believe his conduct was unlawful.
If unsuccessful in defense of a suit brought by or in the right of the
Company, or if such a suit is settled, such a person shall be indemnified under
such law only against expenses (including attorneys' fees) actually and
reasonably incurred in the defense or settlement of such suit if he acted in
good faith and in a manner he reasonably believed to be in, or not opposed to,
the best interests of the Company, except that if such person is adjudged to be
liable in such a suit for negligence or misconduct in the performance of his
duty to the Company, he cannot be made whole for expenses unless the court
determines that he is fairly and reasonably entitled to indemnity for such
expenses.
The Indemnification Agreement provides directors and officers with specific
contractual assurance that indemnification and advancement of expenses will be
available to them regardless of any amendments to or revocation of the
indemnification provisions of the Company's Restated By-laws. The
Indemnification Agreement provides for indemnification of directors and officers
against both stockholder derivative claims and third-party claims. Sections
145(a) and 145(b) of the Delaware General Corporation Law, which grant
corporations the power to indemnify directors and officers, specifically
authorize lesser indemnification in connection with derivative claims than in
connection with third-party claims. The distinction is that Section 145(a),
concerning third-party claims, authorizes expenses and judgments and amounts
paid in settlement (as is provided in the Indemnification Agreement), while
Section 145(b), concerning derivative suits, generally authorizes only
indemnification of expenses. However, Section 145(f) expressly provides that the
indemnification and advancement of expenses provided by or granted pursuant to
the subsections of Section 145 shall not be exclusive of any other rights to
which those seeking indemnification or advancement of expenses may be entitled
under any agreement. No Delaware case directly answers the question whether
Delaware's public policy would support this aspect of the Indemnification
Agreement under the authority of Section 145(f), or would cause its invalidation
because it does not conform to the distinctions contained in Sections 145(a) and
145(b).
Delaware corporations also are authorized to obtain insurance to protect
officers and directors from certain liabilities, including liabilities against
which the corporation cannot indemnify its directors and officers. The Company
currently has in effect a directors' and officers' liability insurance policy.
ITEM 16. EXHIBITS
The following exhibits are filed herewith pursuant to the requirements of
Item 601 of Regulation S-K:
EXHIBIT
NO. DESCRIPTION
------- -----------
2.1+ Purchase and Sale Agreement dated as of May 13, 2003 among
Orion Refining Corporation, Valero Energy Corporation and
Valero Refining -- New Orleans, L.L.C. as amended by the
First Amendment to the Purchase and Sale Agreement dated as
of June 13, 2003 and by the Second Amendment to the Purchase
and Sale Agreement dated as of July 1, 2003
3.1 Amended and Restated Certificate of Incorporation of Valero
Energy Corporation, formerly known as Valero Refining and
Marketing Company (incorporated by reference to Exhibit 3.1
to the Company's Registration Statement on Form S-1
(Registration No. 333-27013))
3.2 Amendment to Restated Certificate of Incorporation of Valero
Energy Corporation (incorporated by reference to Exhibit 3.1
to the Company's Current Report on Form 8-K, filed on
January 11, 2002 (SEC file no. 1-13175))
3.3 Amended and Restated By-Laws of Valero Energy Corporation
(incorporated by reference to Exhibit 3.3 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 2001 (SEC file no. 1-13175))
4.1 Rights Agreement, dated as of July 17, 1997, between Valero
Refining and Marketing Company and Harris Trust and Savings
Bank, as Rights Agent (incorporated by reference to Exhibit
4.1 to the Company's Registration Statement on Form S-8
(Registration No. 333-31709))
4.2.1+ Certificate of Designation of Preferred Stock
II-2
EXHIBIT
NO. DESCRIPTION
------- -----------
4.2.2+ Form of Preferred Stock
5.1+ Opinion of Jay D. Browning, Esq.
8.1+ Tax opinion of Baker Botts L.L.P.
10.1+ Registration Rights Agreement dated July 1, 2003 between
Orion Refining Corporation and Valero Energy Corporation
12.1 Computation of ratio of earnings to fixed charges
(incorporated by reference to Exhibit 12.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
2003 (SEC file no. 1-13175))
23.1 Consent of Ernst & Young LLP
23.2+ Consent of Jay D. Browning (included in the opinion filed as
Exhibit 5.1)
23.3 Consent of PricewaterhouseCoopers LLP
24.1+ Powers of Attorney (included on signature page)
---------------
+ Previously filed.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to the Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) of the Securities Act if, in
the aggregate, the changes in volume and price represent no more than a
20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective Registration
Statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
Registration Statement is on Form S-3 or Form S-8 and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to Section 13 or Section 15(d)
of the Exchange Act that are incorporated by reference in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report
II-3
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in the Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Antonio, State of Texas, on September 18, 2003.
VALERO ENERGY CORPORATION
By: /s/ WILLIAM E. GREEHEY
------------------------------------
William E. Greehey
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated and on September 18, 2003.
SIGNATURE TITLE
--------- -----
/s/ WILLIAM E. GREEHEY Chairman of the Board and Chief Executive Officer
-------------------------------------- (Principal Executive Officer)
William E. Greehey
/s/ MICHAEL S. CISKOWSKI Executive Vice President and Chief Financial
-------------------------------------- Officer (Principal Financial and Accounting
Michael S. Ciskowski Officer)
/s/ E.G. BIGGS* Director
--------------------------------------
E. Glenn Biggs
/s/ W.E. BRADFORD* Director
--------------------------------------
W.E. Bradford
/s/ R.K. CALGAARD* Director
--------------------------------------
Ronald K. Calgaard
/s/ JERRY D. CHOATE* Director
--------------------------------------
Jerry D. Choate
/s/ ROBERT G. DETTMER* Director
--------------------------------------
Robert G. Dettmer
/s/ RUBEN M. ESCOBEDO* Director
--------------------------------------
Ruben M. Escobedo
/s/ BOB MARBUT* Director
--------------------------------------
Bob Marbut
II-5
SIGNATURE TITLE
--------- -----
/s/ SUSAN KAUFMAN PURCELL* Director
--------------------------------------
Susan Kaufman Purcell
*By: /s/ JAY D. BROWNING
------------------------------
Jay D. Browning
Attorney-in-Fact
II-6
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
------- -----------
2.1+ Purchase and Sale Agreement dated as of May 13, 2003 among
Orion Refining Corporation, Valero Energy Corporation and
Valero Refining -- New Orleans, L.L.C. as amended by the
First Amendment to the Purchase and Sale Agreement dated as
of June 13, 2003 and by the Second Amendment to the Purchase
and Sale Agreement dated as of July 1, 2003
3.1 Amended and Restated Certificate of Incorporation of Valero
Energy Corporation, formerly known as Valero Refining and
Marketing Company (incorporated by reference to Exhibit 3.1
to the Company's Registration Statement on Form S-1
(Registration No. 333-27013))
3.2 Amendment to Restated Certificate of Incorporation of Valero
Energy Corporation (incorporated by reference to Exhibit 3.1
to the Company's Current Report on Form 8-K, filed on
January 11, 2002 (SEC file no. 1-13175))
3.3 Amended and Restated By-Laws of Valero Energy Corporation
(incorporated by reference to Exhibit 3.3 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 2001 (SEC file no. 1-13175))
4.1 Rights Agreement, dated as of July 17, 1997, between Valero
Refining and Marketing Company and Harris Trust and Savings
Bank, as Rights Agent (incorporated by reference to Exhibit
4.1 to the Company's Registration Statement on Form S-8
(Registration No. 333-31709))
4.2.1+ Certificate of Designation of Preferred Stock
4.2.2+ Form of Preferred Stock
5.1+ Opinion of Jay D. Browning, Esq.
8.1+ Tax opinion of Baker Botts L.L.P.
10.1+ Registration Rights Agreement dated July 1, 2003 between
Orion Refining Corporation and Valero Energy Corporation
12.1 Computation of ratio of earnings to fixed charges
(incorporated by reference to Exhibit 12.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
2003 (SEC file no. 1-13175))
23.1 Consent of Ernst & Young LLP
23.2+ Consent of Jay D. Browning (included in the opinion filed as
Exhibit 5.1)
23.3 Consent of PricewaterhouseCoopers LLP
24.1+ Powers of Attorney (included on signature page)
---------------
+ Previously filed.
II-7