-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L+6xgJsVxB+bVsk5wJEJWe2IGxa2HSybDZUTDrJs2XEGGyJWtr6tknjfnl32VERZ iyBwrsUeCOQmhZX1FcVJvA== 0000950134-95-002943.txt : 19951119 0000950134-95-002943.hdr.sgml : 19951119 ACCESSION NUMBER: 0000950134-95-002943 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 13 FILED AS OF DATE: 19951114 SROS: NYSE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: NATIONAL CONVENIENCE STORES INC /DE/ CENTRAL INDEX KEY: 0000314662 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-CONVENIENCE STORES [5412] IRS NUMBER: 741361734 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: 1934 Act SEC FILE NUMBER: 005-33335 FILM NUMBER: 95592419 BUSINESS ADDRESS: STREET 1: 100 WAUGH DR CITY: HOUSTON STATE: TX ZIP: 77007 BUSINESS PHONE: 7138632200 MAIL ADDRESS: STREET 1: 100 WAUGH DRI VE CITY: HOUSTON STATE: TX ZIP: 77007 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: DIAMOND SHAMROCK INC CENTRAL INDEX KEY: 0000810316 STANDARD INDUSTRIAL CLASSIFICATION: PETROLEUM REFINING [2911] IRS NUMBER: 742456753 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: P O BOX 696000 CITY: SAN ANTONIO STATE: TX ZIP: 78230 BUSINESS PHONE: 2106416800 MAIL ADDRESS: STREET 1: P O BOX 696000 CITY: SAN ANTONIO STATE: TX ZIP: 78230 FORMER COMPANY: FORMER CONFORMED NAME: DIAMOND SHAMROCK R&M INC DATE OF NAME CHANGE: 19900207 SC 14D1 1 SCHEDULE 14D-1 TENDER OFFER STATEMENT 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ SCHEDULE 14D-1 TENDER OFFER STATEMENT (PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934) NATIONAL CONVENIENCE STORES INCORPORATED (NAME OF SUBJECT COMPANY) SHAMROCK ACQUISITION CORP. A WHOLLY OWNED SUBSIDIARY OF DIAMOND SHAMROCK, INC. (BIDDER) COMMON STOCK, $.01 PAR VALUE PER SHARE CUSIP NO. 635570500 (INCLUDING THE ASSOCIATED RIGHTS (WITH RESPECT TO THE COMMON STOCK) TO PURCHASE PREFERRED STOCK) CUSIP NO. 635570112 WARRANTS TO PURCHASE COMMON STOCK (WITH RESPECT TO THE WARRANTS) (TITLE OF CLASS OF SECURITIES) (CUSIP NUMBER OF CLASS OF SECURITIES)
------------------------ TIMOTHY J. FRETTHOLD, ESQ. DIAMOND SHAMROCK, INC. 9830 COLONNADE BLVD. SAN ANTONIO, TEXAS 78230 (210) 641-6800 COPY TO: ROBERT A. PROFUSEK, ESQ. JONES, DAY, REAVIS & POGUE 599 LEXINGTON AVENUE NEW YORK, NEW YORK 10022 (212) 326-3939 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDER) ------------------------ CALCULATION OF FILING FEE - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- TRANSACTION VALUATION(1) AMOUNT OF FILING FEE(2) - --------------------------------------------------------------------------------------------- $197,849,405 $39,570 - --------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------
1. For purposes of calculating the amount of the filing fee only. The amount assumes the purchase of (i) all of the 6,865,389 (assuming the exercise of all outstanding stock options) outstanding shares of Common Stock, $.01 par value per share (the "Shares"), of National Convenience Stores Incorporated (the "Company") together with the associated rights to purchase preferred stock issued pursuant to the Rights Agreement, dated as of August 31, 1995, between the Company and Boatmen's Trust Company, at $27.00 per Share, net to the seller (pre-tax) in cash, and (ii) all of the 1,349,611 outstanding Warrants to Purchase Common Stock at $9.25 per Warrant, net to the seller (pre-tax) in cash. 2. 1/50th of 1% of transaction valuation. / / Check box if any part of the fee is offset as provided by Rules 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 This Tender Offer Statement on Schedule 14D-1 (this "Statement") relates to the offer by Shamrock Acquisition Corp. (the "Purchaser"), a wholly owned subsidiary of Diamond Shamrock, Inc. ("Diamond Shamrock"), to purchase (i) all outstanding shares of Common Stock, par value $.01 per share (the "Shares"), of National Convenience Stores Incorporated (the "Company"), together with the associated rights to purchase preferred stock (the "Rights") issued pursuant to the Rights Agreement, dated as of August 31, 1995, between the Company and Boatmen's Trust Company, as Rights Agent, at the purchase price of $27.00 per Share (and the associated Right), and (ii) all outstanding Warrants to purchase Shares (the "Warrants") issued pursuant to the Warrant Agreement, dated as of March 9, 1993, between the Company and Boatmen's Trust Company, as Warrant Agent, at the purchase price of $9.25 per Warrant, in each case, net to the tendering securityholder (pre-tax) in cash and without interest thereon, on the terms and subject to the conditions set forth in the Offer to Purchase, dated November 14, 1995 (the "Offer to Purchase"), and in the related Letters of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"), copies of which are filed as Exhibits (a)(1), (a)(2) and (a)(3) hereto. ITEM 1. SECURITY AND SUBJECT COMPANY. (a) The name of the subject company is National Convenience Stores Incorporated and the address of its principal executive offices is 100 Waugh Drive, Houston, Texas 77007. (b) The information set forth in "Introduction" and Section 1 ("Terms of the Offer; Extension of Tender Period; Termination; Amendments") of the Offer to Purchase is incorporated herein by reference. (c) The information set forth in Section 7 ("Price Ranges of Shares and Warrants; Dividends") of the Offer to Purchase is incorporated herein by reference. ITEM 2. IDENTITY AND BACKGROUND. (a)-(d) and (g) The information set forth in Section 11 ("Certain Information Concerning Diamond Shamrock and the Purchaser") of the Offer to Purchase and Annex I to the Offer to Purchase is incorporated herein by reference. (e) and (f) During the last five years, neither the Purchaser nor Diamond Shamrock, nor to the Purchaser's knowledge, any of the executive officers or directors of the Purchaser or Diamond Shamrock (i) has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which any such person was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, United States federal or state securities laws or finding any violation of such law. ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY. (a)-(b) The information set forth in "Introduction" and Section 13 ("Contacts with the Company; Background of the Offer") of the Offer to Purchase is incorporated herein by reference. ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a)-(b) The information set forth in Section 12 ("Source and Amount of Funds") of the Offer to Purchase is incorporated herein by reference. (c) Not applicable. ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER. (a)-(g) The information set forth in "Introduction," Section 8 ("Possible Effects of the Offer on the Market for Shares and Warrants; Stock Exchange Listing; Registration Under the Exchange Act") and 2 3 Section 14 ("Purpose of the Offer and the Merger; the Merger Agreement; Plans of Diamond Shamrock and the Purchaser with Respect to the Company") of the Offer to Purchase is incorporated herein by reference. ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (a)-(b) The information set forth in "Introduction," Section 11 ("Certain Information Concerning Diamond Shamrock and the Purchaser") and Section 13 ("Contacts with the Company; Background of the Offer") of the Offer to Purchase is incorporated herein by reference. ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES. The information set forth in "Introduction," Section 11 ("Certain Information Concerning Diamond Shamrock and the Purchaser"), Section 13 ("Contacts with the Company; Background of the Offer") and Section 14 ("Purpose of the Offer and the Merger; the Merger Agreement; Plans of Diamond Shamrock and the Purchaser with Respect to the Company") of the Offer to Purchase is incorporated herein by reference. ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The information set forth in "Introduction" and Section 16 ("Fees and Expenses") of the Offer to Purchase is incorporated herein by reference. ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS. The Purchaser is a newly formed corporation which has engaged in no activities other than in connection with the Offer and the Merger (as defined in the Offer to Purchase). Accordingly, the financial statements of the Purchaser are not material to the decision by a securityholder of the Company to sell, tender or hold securities being sought in the Offer. The information set forth in (i) Section 11 ("Certain Information Concerning Diamond Shamrock and the Purchaser") and (ii) the financial statements filed as Exhibit 13.2 to Diamond Shamrock's Annual Report on Form 10-K for the year ended December 31, 1994 (the "1994 Form 10-K"), which was filed with the Securities and Exchange Commission (the "Commission") on March 27, 1995, are incorporated herein by reference. The 1994 Form 10-K and exhibits thereto are available for inspection at the public reference facilities of the Commission located at 450 Fifth Street, N.W., Washington, D.C. 20549, and are also available for inspection and copying at the regional offices of the Commission located at Citicorp Center, 500 W. Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of the 1994 Form 10-K may also be obtained by mail, upon payment of the Commission's customary fees, from the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, the 1994 Form 10-K should also be available for inspection at the library of the New York Stock Exchange, Inc., 20 Broad Street, 7th Floor, New York, New York 10005. The incorporation herein by reference of the financial statements referred to in the preceding paragraph does not constitute an admission that such information is material to a decision by a securityholder of the Company whether to sell or hold Shares (and the associated Rights) or Warrants being sought in the Offer. ITEM 10. ADDITIONAL INFORMATION. (a) Not applicable. (b)-(c) The information set forth in Section 15 ("Certain Legal Matters") of the Offer to Purchase is incorporated herein by reference. (d) The information set forth in Section 8 ("Possible Effects of the Offer on the Market for Shares and Warrants; Stock Exchange Listing; Registration Under the Exchange Act") of the Offer to Purchase is incorporated herein by reference. 3 4 (e) Not applicable. (f) The information set forth in the Offer to Purchase and the Letters of Transmittal, to the extent not otherwise set forth herein, is incorporated herein by reference. ITEM 11. MATERIAL TO BE FILED AS EXHIBITS. (a)(1) Offer to Purchase, dated November 14, 1995. (a)(2) Letter of Transmittal to tender Shares of Common Stock. (a)(3) Letter of Transmittal to tender Warrants to purchase Shares of Common Stock. (a)(4) Letter, dated November 14, 1995, from the Dealer Manager to brokers, dealers, commercial banks, trust companies and other nominees. (a)(5) Letter, dated November 14, 1995, to be sent by brokers, dealers, commercial banks, trust companies and other nominees to their clients. (a)(6) Notice of Guaranteed Delivery of tenders of Shares of Common Stock. (a)(7) Notice of Guaranteed Delivery of tenders of Warrants to purchase Shares of Common Stock. (a)(8) IRS Guidelines to Substitute Form W-9. (a)(9) Press release, dated November 8, 1995. (a)(10) Form of summary newspaper advertisement, dated November 14, 1995. (b)(1) Commitment letter, dated November 2, 1995, between Bank of America National Trust and Savings Association and Diamond Shamrock. (c)(1) Agreement and Plan of Merger, dated November 8, 1995, by and among Diamond Shamrock, the Purchaser and the Company. (d) Not applicable. (e) Not applicable. (f) Not applicable.
4 5 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Statement is true, complete and correct. SHAMROCK ACQUISITION CORP. /s/ TIMOTHY J. FRETTHOLD -------------------------------------- Name: Timothy J. Fretthold Title: Vice President DIAMOND SHAMROCK, INC. /s/ TIMOTHY J. FRETTHOLD -------------------------------------- Name: Timothy J. Fretthold Title: Senior Vice President Dated: November 14, 1995 5 6 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION - ----------- ------------------------------------------------------------------------------ (a)(1) Offer to Purchase, dated November 14, 1995. (a)(2) Letter of Transmittal to tender Shares of Common Stock. (a)(3) Letter of Transmittal to tender Warrants to purchase Shares of Common Stock. (a)(4) Letter, dated November 14, 1995, from the Dealer Manager to brokers, dealers, commercial banks, trust companies and other nominees. (a)(5) Letter, dated November 14, 1995, to be sent by brokers, dealers, commercial banks, trust companies and other nominees to their clients. (a)(6) Notice of Guaranteed Delivery of tenders of Shares of Common Stock. (a)(7) Notice of Guaranteed Delivery of tenders of Warrants to purchase Shares of Common Stock. (a)(8) IRS Guidelines to Substitute Form W-9. (a)(9) Press release, dated November 8, 1995. (a)(10) Form of summary newspaper advertisement, dated November 14, 1995. (b)(1) Commitment letter, dated November 2, 1995, between Bank of America National Trust and Savings Association and Diamond Shamrock. (c)(1) Agreement and Plan of Merger, dated November 8, 1995, by and among Diamond Shamrock, the Purchaser and the Company.
6 EX-99.A1 2 OFFER TO PURCHASE 1 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED RIGHTS TO PURCHASE PREFERRED STOCK) AND ALL OUTSTANDING WARRANTS TO PURCHASE COMMON STOCK OF NATIONAL CONVENIENCE STORES INCORPORATED BY SHAMROCK ACQUISITION CORP. A WHOLLY OWNED SUBSIDIARY OF DIAMOND SHAMROCK, INC. AT $27.00 NET PER SHARE AND $9.25 NET PER WARRANT ******************************************************************************* * * * THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY* * TIME, ON WEDNESDAY, DECEMBER 13, 1995, UNLESS THE OFFER IS EXTENDED. * * * ******************************************************************************* THE BOARD OF DIRECTORS OF NATIONAL CONVENIENCE STORES INCORPORATED (THE "COMPANY") HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER AND DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR AND IN THE BEST INTERESTS OF THE COMPANY'S SECURITYHOLDERS AND UNANIMOUSLY RECOMMENDS THAT ALL SECURITYHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES AND WARRANTS PURSUANT TO THE OFFER. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS: (1) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE THAT NUMBER OF SHARES AND WARRANTS REPRESENTING AT LEAST TWO-THIRDS OF THE TOTAL NUMBER OF OUTSTANDING SHARES OF THE COMPANY ON A FULLY DILUTED BASIS AND (2) THE COMPANY'S RIGHTS TO PURCHASE PREFERRED STOCK (THE "RIGHTS") HAVING BEEN REDEEMED BY THE BOARD OF DIRECTORS OF THE COMPANY. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS CONTAINED IN THIS OFFER TO PURCHASE. SEE SECTION 6. ------------------------ The Dealer Manager for the Offer is: WASSERSTEIN PERELLA & CO., INC. November 14, 1995 2 IMPORTANT Any securityholder desiring to tender Shares or Warrants should either (i) complete and sign the appropriate Letter of Transmittal (the GREEN Letter of Transmittal in the case of the Shares and the BLUE Letter of Transmittal in the case of the Warrants) (or a manually signed facsimile copy thereof) in accordance with the instructions in the Letter of Transmittal, have such securityholder's signature thereon guaranteed (unless an Agent's Message (as defined herein) is utilized in connection with a book-entry transfer) as required by Instruction 1 to the appropriate Letter of Transmittal, mail or deliver it and any other required documents to the Depositary and either deliver the certificates for such Shares or Warrants to the Depositary along with the Letter of Transmittal or tender such Shares or Warrants pursuant to the procedure for book-entry transfer set forth in Section 2 of this Offer to Purchase or (ii) request such securityholder's broker, dealer, commercial bank, trust company or other nominee to effect the transaction for the securityholder. Securityholders having Shares or Warrants registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such broker, dealer, commercial bank, trust company or other nominee if they desire to tender such Shares or Warrants. A securityholder who desires to tender Shares or Warrants and whose certificates for Shares or Warrants are not immediately available, or who cannot comply with the procedures for book-entry transfer described in this Offer to Purchase on a timely basis, may tender such Shares or Warrants by following the procedure for guaranteed delivery set forth in Section 2. Questions and requests for assistance may be addressed to the Dealer Manager or the Information Agent at their respective addresses and telephone numbers set forth on the back cover of this Offer to Purchase. Additional copies of this Offer to Purchase, the Letters of Transmittal or other tender offer materials may be obtained from the Information Agent. Holders of Shares or Warrants may also contact brokers, dealers, commercial banks or trust companies for assistance concerning the Offer. 3 TABLE OF CONTENTS
PAGE ----- INTRODUCTION..................................................................... 1 THE TENDER OFFER................................................................. 3 1. Terms of the Offer; Extension of Tender Period; Termination; Amendments.............................................................. 3 2. Procedure for Tendering Shares and Warrants............................. 5 3. Withdrawal Rights....................................................... 7 4. Acceptance for Payment and Payment of Purchase Price.................... 8 5. Certain Tax Consequences ............................................... 9 6. Certain Conditions of the Offer......................................... 10 7. Price Ranges of Shares and Warrants; Dividends ......................... 11 8. Possible Effects of the Offer on the Market for Shares and Warrants; Stock Exchange Listing; Registration Under the Exchange Act............. 13 9. Dividends and Distributions ............................................ 15 10. Certain Information Concerning the Company.............................. 15 11. Certain Information Concerning Diamond Shamrock and the Purchaser....... 18 12. Source and Amount of Funds.............................................. 19 13. Contacts with the Company; Background of the Offer...................... 20 14. Purpose of the Offer and the Merger; the Merger Agreement; Plans of Diamond Shamrock and the Purchaser with Respect to the Company ................................................................ 21 15. Certain Legal Matters................................................... 28 16. Fees and Expenses....................................................... 30 17. Miscellaneous........................................................... 30 ANNEX I.......................................................................... I-1
(i) 4 To the Holders of Shares of Common Stock and Warrants of National Convenience Stores Incorporated: INTRODUCTION Shamrock Acquisition Corp. (the "Purchaser"), a wholly owned subsidiary of Diamond Shamrock, Inc. ("Diamond Shamrock"), hereby offers to purchase (i) all outstanding shares of Common Stock, par value $.01 per share (the "Shares"), of National Convenience Stores Incorporated (the "Company"), together with the associated rights to purchase preferred stock (the "Rights") issued pursuant to the Rights Agreement, dated as of August 31, 1995 (the "Rights Agreement"), between the Company and Boatmen's Trust Company, as Rights Agent, at the purchase price of $27.00 per Share (and the associated Right) (the "Share Offer Price"), and (ii) all outstanding Warrants to purchase Shares issued pursuant to the Warrant Agreement, dated as of March 9, 1993 (the "Warrant Agreement"), between the Company and Boatmen's Trust Company, as Warrant Agent (the "Warrants"), at the purchase price of $9.25 per Warrant (the "Warrant Offer Price"), in each case, without interest thereon, net to the tendering securityholder (pre-tax) in cash, on the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letters of Transmittal (which together constitute the "Offer"). All references herein to Rights shall include all benefits that may inure to holders of the Rights pursuant to the Rights Agreement. Unless the context otherwise requires, all references herein to Shares shall include the Rights. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of November 8, 1995 (the "Merger Agreement"), by and among Diamond Shamrock, the Purchaser and the Company. Pursuant to the Merger Agreement, as soon as practicable after the completion of the Offer and the satisfaction or waiver of certain conditions, the Purchaser will be merged with and into the Company (the "Merger") and the Company, as the surviving corporation in the Merger (as such, the "Surviving Corporation"), will become a wholly owned subsidiary of Diamond Shamrock. Pursuant to the Merger Agreement and subject to the terms and conditions thereof, each of Diamond Shamrock, the Purchaser and the Company has agreed to use its reasonable best efforts to cause the Merger to occur within 90 days after the purchase of the Shares and Warrants pursuant to the Offer. The Merger Agreement provides that, at the effective time of the Merger (the "Effective Time"), each then-outstanding Share (other than Shares owned by Diamond Shamrock, the Purchaser or any other direct or indirect subsidiary of Diamond Shamrock or held in the treasury of the Company, all of which will be cancelled, and Shares held by stockholders who comply with all of the relevant provisions of Article IX of the Company's Restated Certificate of Incorporation (the "Company Charter") and who perfect their appraisal rights under Section 262 of the Delaware General Corporation Law (the "DGCL")) will be converted into the right to receive the Share Offer Price, or any higher price per Share paid pursuant to the Offer, without interest thereon, net to the holder (pre-tax) in cash (the "Merger Consideration"). Pursuant to the terms of the Warrant Agreement, each then-outstanding Warrant will remain outstanding and, from and after the Effective Time, holders of Warrants (the "Warrantholders") will have the right to obtain upon exercise of each Warrant and payment of the exercise price therefor, in lieu of the one Share theretofore issuable upon exercise of such Warrant, the Merger Consideration, without interest thereon, net to the holder (pre-tax) in cash. See Section 14 for additional information concerning the Merger Agreement and the Merger. The Offer will expire at 12:00 midnight, New York City time, on Wednesday, December 13, 1995, unless extended. THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER AND DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR AND IN THE BEST INTERESTS OF THE COMPANY'S SECURITYHOLDERS AND UNANIMOUSLY RECOMMENDS THAT ALL SECURITYHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES AND WARRANTS PURSUANT TO THE OFFER. Tendering securityholders will not be obligated to pay brokerage commissions, solicitation fees or, subject to Instruction 6 of the Letters of Transmittal, transfer taxes on the purchase of Shares and Warrants by the Purchaser pursuant to the Offer. However, any tendering securityholder or other payee who fails to complete and sign the Substitute Form W-9 that is included in the Letters of Transmittal may be subject to a required 5 backup federal income tax withholding of 31% of the gross proceeds payable to the securityholder or other payee pursuant to the Offer. See Section 2. The Purchaser will pay all charges and expenses of Wasserstein Perella & Co., Inc., as Dealer Manager (in such capacity, the "Dealer Manager"), KeyCorp Shareholder Services, Inc., as Depositary (in such capacity, the "Depositary"), and MacKenzie Partners, Inc., as Information Agent (in such capacity, the "Information Agent"), incurred in connection with the Offer. For a description of the fees and expenses to be paid by the Purchaser, see Section 16. Certain federal income tax consequences of the sale of Shares or Warrants pursuant to the Offer are described in Section 5. The Purchaser is not offering to purchase (nor will tenders be accepted of) any options to purchase Common Stock (the "Options") granted pursuant to the Company's 1993 Non-Qualified Stock Option Plan (the "Option Plan"). Accordingly, holders of Options desiring to tender Shares issuable upon exercise thereof must exercise such Options in accordance with the terms thereof and then tender Shares issued upon such exercise pursuant to the procedures set forth in Section 2. There can be no assurance that Shares issued upon such exercise will be received in time to allow the holders thereof to tender such Shares pursuant to the Offer. The Merger Agreement provides that all Options, whether or not exercisable, will, subject to the prior written approval of the Option holder, be cancelled and each Option holder will be entitled to receive promptly after the acceptance of securities for payment in the Offer, in cancellation and settlement of such Option, a cash payment from the Company in an amount equal to the difference between the Share Offer Price and the per share exercise price of such Option, multiplied by the number of Shares covered by such Option, in each case after the deduction of all withholding and other applicable taxes. Pursuant to the terms of the Merger Agreement, the Board of Directors of the Company has fixed the Effective Time as the date on which Options granted under the Option Plan which are not cancelled as provided in the preceding sentence will terminate pursuant to the Option Plan. The Offer is subject to the fulfillment of certain conditions described in Section 6. These include the Minimum Condition (as defined below) and the Rights Condition (as defined below), as well as other conditions. Consummation of the Offer is conditioned upon there being validly tendered and not withdrawn prior to the Expiration Date (as defined in Section 1 below) that number of Shares and Warrants representing at least two-thirds of the total number of outstanding Shares of the Company on a fully diluted basis (the "Minimum Condition"). The Merger Agreement provides that, as of November 6, 1995, there were (i) 6,090,389 Shares outstanding, (ii) 1,349,611 Warrants outstanding, and (iii) 775,000 Shares subject to issuance pursuant to outstanding Options. Based on the foregoing, the Purchaser believes that there are presently 8,215,000 Shares outstanding on a fully diluted basis. For purposes of the Offer, "fully diluted basis" assumes (a) no dilution due to the Rights, (b) the exercise of all outstanding Options and Warrants, (c) that no Shares are issued (other than those reserved as of November 8, 1995 for Options and Warrants then outstanding) or acquired by the Company after November 8, 1995 and no options, warrants, rights or other securities convertible or exercisable or exchangeable for Shares are issued or granted after November 8, 1995, and (d) as of the date of purchase there are no other obligations to issue Shares. As a result, the Purchaser believes that the Minimum Condition would be satisfied if at least an aggregate of 5,476,667 Shares and Warrants are validly tendered and not withdrawn prior to the Expiration Date. Consummation of the Offer is also conditioned upon the Rights having been redeemed by the Board of Directors of the Company (the "Rights Condition"). According to the Company's Registration Statement on Form 8-A dated August 31, 1995 (the "Company's Form 8-A"), on August 31, 1995, the Board of Directors of the Company declared a dividend to stockholders of record on September 11, 1995 of one Right for each outstanding Share. The Rights Agreement provides that, until the close of business on the Distribution Date (as defined in the Rights Agreement), the Rights will be evidenced by the certificates for Shares. The Rights Agreement provides that, at any time prior to the close of business on the earlier of (i) the tenth day following a public announcement that a person has become an Acquiring Person (as defined in the Rights Agreement) and (ii) the Final Expiration Date (as defined in the Rights Agreement), the Board of Directors of the Company may redeem the Rights in whole, but not in part, at a price of $.01 per Right, except as provided in 2 6 the Rights Agreement. In the Merger Agreement, the Company agreed to (a) take all action necessary to defer the Distribution Date to prevent the occurrence of the Distribution Date as a result of the commencement of the Offer or the consummation of the transactions contemplated by the Merger Agreement, and (b) redeem the Rights effective immediately prior to the Purchaser's acceptance for payment of Shares and Warrants pursuant to the Offer. Certain other conditions to the Offer are described in Section 6. The Purchaser expressly reserves the right to waive any one or more of the conditions to the Offer (other than the Minimum Condition). See Section 6. HOLDERS OF SHARES AND WARRANTS ARE URGED TO READ CAREFULLY THIS OFFER TO PURCHASE AND THE APPLICABLE LETTER OF TRANSMITTAL BEFORE DECIDING TO TENDER THEIR SHARES OR WARRANTS. 1. TERMS OF THE OFFER; EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS. On the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the Purchaser will accept for payment and pay for all Shares and Warrants which are validly tendered on or prior to the Expiration Date (as hereinafter defined) and not theretofore withdrawn as provided in Section 3. The term "Expiration Date" means 12:00 midnight, New York City time, on Wednesday, December 13, 1995, unless and until the Purchaser shall have extended the period of time for which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by the Purchaser, shall expire. Pursuant to the Merger Agreement, the Purchaser may not extend the period of time for which the Offer is open unless one or more of the conditions to the Offer is not satisfied. CONSUMMATION OF THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THE SATISFACTION OF THE MINIMUM CONDITION AND THE RIGHTS CONDITION. See Section 6. Pursuant to the Merger Agreement, the Purchaser has reserved the right (but shall not be obligated) to waive any or all of such conditions (other than the Minimum Condition). If by 12:00 midnight, New York City time, on Wednesday, December 13, 1995 any or all of such conditions have not been satisfied or waived, the Purchaser reserves the right (but shall not be obligated) (i) to decline to purchase any of the Shares and Warrants tendered, subject to the terms of the Merger Agreement, and to terminate the Offer and return all tendered Shares and Warrants to tendering securityholders, (ii) to waive all of the unsatisfied conditions (other than the Minimum Condition) and, to the extent permitted by the provisions of the Merger Agreement and subject to complying with applicable rules and regulations of the Securities and Exchange Commission (the "Commission"), to purchase all Shares and Warrants validly tendered, or (iii) to extend the Offer and, subject to the right of securityholders to withdraw Shares and Warrants until the Expiration Date, retain the Shares and Warrants which have been tendered during the period or periods for which the Offer is extended. The Merger Agreement provides that if the conditions to the Offer are not satisfied or waived by the Purchaser as of the initial Expiration Date, the Purchaser will extend the Offer until the earlier of the consummation of the Offer or the 60th calendar day from the day on which the Offer shall have commenced. Subject to the Merger Agreement, the Purchaser has expressly reserved the right to (i) extend the period of time during which the Offer is open if any condition thereto is not satisfied and thereby delay acceptance for payment of, and the payment for, any Shares or Warrants, by giving oral or written notice of such extension to the Depositary or (ii) increase the Share Offer Price or Warrant Offer Price to be paid in the Offer by giving oral or written notice of such amendment to the Depositary. Pursuant to the Merger Agreement, the Purchaser has agreed that, without the prior written consent of the Company, the Purchaser will not (a) decrease the Share Offer Price or the Warrant Offer Price, (b) decrease the number of Shares or Warrants to be purchased in the Offer, (c) change the form of consideration payable in the Offer, (d) add to or change the conditions to the Offer as set forth in the Merger Agreement, (e) change or waive the Minimum Condition, or (f) make any other change in the terms and conditions of the Offer which is materially adverse to the holders of the Shares or Warrants. The Purchaser's reservation of the right to delay payment for Shares which it has accepted for payment is limited by Rule 14e-1(c) under the Securities 3 7 Exchange Act of 1934, as amended (the "Exchange Act"), which requires that a tender offeror pay the consideration offered or return the tendered securities promptly after the termination or withdrawal of a tender offer. The rights reserved by the Purchaser in the preceding paragraph are in addition to the Purchaser's rights pursuant to Section 6. Any extension, amendment or termination will be followed as promptly as practicable by public announcement, such announcement in the case of an extension to be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date, in accordance with the requirements of Rule 14e-1(d) under the Exchange Act. (As used in this Offer to Purchase, "business day" has the meaning set forth in Rule 14d-1(c)(6) under the Exchange Act.) Subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require that any material change in the information published, sent or given to securityholders in connection with the Offer be promptly disseminated to securityholders in a manner reasonably designed to inform securityholders of such change) and without limiting the manner in which the Purchaser may choose to make any public announcement, the Purchaser currently intends to make announcements by issuing a release to the Dow Jones News Service. If the Purchaser extends the Offer, or if the Purchaser (whether before or after its acceptance for payment of Shares or Warrants tendered pursuant to the Offer) is delayed in its payment for Shares or Warrants or is unable to pay for Shares or Warrants pursuant to the Offer for any reason, then, without prejudice to the Purchaser's right under the Offer, the Depositary may retain tendered Shares or Warrants on behalf of the Purchaser, and such Shares or Warrants may not be withdrawn except to the extent tendering securityholders are entitled to withdrawal rights as described in Section 3. However, as described above, the ability of the Purchaser to delay payment for Shares or Warrants which the Purchaser has accepted for payment is limited by Rule 14e-1(c) under the Exchange Act. If the Purchaser makes a material change in the terms of the Offer or the information concerning the Offer or waives a material condition of the Offer, the Purchaser will disseminate additional tender offer materials (including by public announcement as set forth above) and extend the Offer to the extent required by law. In general, the minimum period during which a tender offer must remain open following a material change in the terms of the offer or information concerning the offer, other than a change in price or a change in percentage of securities sought, will depend upon the facts and circumstances, including the relative materiality of the changes in the terms or information. With respect to a change in price or a change in percentage of securities sought, a minimum ten business day period is generally required to allow for adequate dissemination to stockholders and for investor response. The Company has provided the Purchaser with the Company's stockholder and Warrantholder lists and security position listings for the purpose of disseminating the Offer to holders of Shares and Warrants. This Offer to Purchase and the related Letters of Transmittal and other relevant materials will be mailed by the Purchaser to record holders of Shares and Warrants and furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the securityholder lists or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares and Warrants. According to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1995, as amended by the Form 10-K/A dated October 5, 1995 (the "Company's 1995 10-K"), the Company's Employee Stock Ownership Plan (the "ESOP") received 9,706 Shares and 16,179 Warrants and the Company's Profit Sharing Plan (the "Profit Sharing Plan") received 33,005 Shares and 3,545 Warrants pursuant to the Company's Plan of Reorganization (as defined in Section 10). The Offer is being made to the Trustee of the ESOP and the Profit Sharing Plan (the "Trustee") for Shares and Warrants held by the ESOP and the Profit Sharing Plan at the same price and in accordance with the same terms as for Shares and Warrants held by other securityholders. The Company has informed Diamond Shamrock that the ESOP and the Profit Sharing Plan provide that the ESOP and Profit Sharing Plan participants will have the right to determine whether to tender such Shares and Warrants and that the Trustees shall endeavor to distribute or cause to be distributed materials relating to the Offer to the ESOP and Profit Sharing Plan participants. 4 8 Participants must give the Trustee written notice of their desire to accept the Offer in a manner prescribed by the Profit Sharing and ESOP Committee of the Company. A request is being made by the Company to the Trustee to transmit or cause to be transmitted this Offer to Purchase and any required election materials to ESOP and Profit Sharing Plan participants who are beneficial owners of any Shares and Warrants owned of record by the Trustees. Participants in the ESOP and the Profit Sharing Plan should receive with the Offer to Purchase a letter and Direction Form to permit participants to instruct the Trustee whether to tender the Shares or Warrants held in their ESOP and the Profit Sharing Plan accounts. Participants may not use the Letters of Transmittal to instruct the Trustee; instructions may only be delivered by completing and returning the Direction Form in accordance with the instructions set forth therein. Diamond Shamrock has been informed that participants may contact Boatmen's Trust Company at (800) 456-9852 with questions regarding the Direction Form. Unless otherwise specified, all references to Sections herein are to sections of this Offer to Purchase. 2. PROCEDURE FOR TENDERING SHARES AND WARRANTS. VALID TENDER OF SHARES AND WARRANTS. For a holder validly to tender Shares or Warrants pursuant to the Offer, a properly completed and duly executed Letter of Transmittal (the GREEN Letter of Transmittal in the case of the Shares and the BLUE Letter of Transmittal in the case of the Warrants) (or a manually signed facsimile thereof), together with any required signature guarantees and any other required documents (or, in the case of a book-entry transfer, an Agent's Message), must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase, and either (i) certificates for tendered Shares or Warrants must be received by the Depositary at one of such addresses or such Shares or Warrants must be delivered pursuant to the procedure for book-entry transfer set forth below (and a confirmation of receipt of such delivery received by the Depositary), in each case prior to the Expiration Date, or (ii) the tendering securityholder must comply with the guaranteed delivery procedures set forth below. SIGNATURE GUARANTEES. No signature guarantee on a Letter of Transmittal is required if (i) the Letter of Transmittal is signed by the registered holder(s) (which term, for purposes of the Offer, includes any participant in a Book-Entry Transfer Facility (as defined below) whose name appears on a security position listing as the owner of Shares or Warrants) of the Shares or Warrants tendered herewith, unless such registered holder(s) has completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on the applicable Letter of Transmittal or (ii) such Shares or Warrants are tendered for the account of a financial institution (including most commercial banks, savings and loan associations and brokerage houses) that is a member of a signature guarantee program within the meaning of Rule 17Ad-15 under the Exchange Act (collectively, "Eligible Institutions"). In all other cases, all signatures on the Letter of Transmittal must be guaranteed by an Eligible Institution. If the certificates are registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made or certificates for any untendered or unpurchased Shares or Warrants are to be issued to a person other than the registered holder, then the tendered certificates for Shares or Warrants must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered owner or owners appear on the certificates, with the signatures on the certificates or stock powers guaranteed as described above. See Instructions 1 and 5 of the applicable Letter of Transmittal. The method of delivery of all documents, including certificates for Shares or Warrants, is at the election and risk of the tendering securityholder. Shares and Warrants will be deemed delivered only when actually received by the Depositary including, in the case of a book-entry transfer, by Book-Entry Confirmation (as defined below). If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. In all cases, sufficient time should be allowed to ensure delivery. BOOK-ENTRY TRANSFER. The Depositary will make a request to establish accounts with respect to the Shares and Warrants at The Depository Trust Company, the Midwest Securities Trust Company and the Philadelphia Depository Trust Company (individually, a "Book-Entry Transfer Facility" and, collectively, the "Book-Entry Transfer Facilities") for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in any of the Book-Entry Transfer Facilities' 5 9 systems may make book-entry delivery of Shares and Warrants by causing any Book-Entry Transfer Facility to transfer such Shares and Warrants into the Depositary's account in accordance with such Book-Entry Transfer Facility's procedure for such transfer. Although delivery of Shares and Warrants may be effected through book-entry transfer at any Book-Entry Transfer Facility, a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof), together with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message) and any other required documents, must, in any case, be transmitted to and received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date, or the tendering securityholder must comply with the guaranteed delivery procedures described below. The confirmation of a book-entry transfer of Shares or Warrants into the Depositary's account at a Book-Entry Transfer Facility as described above is referred to herein as a "Book-Entry Confirmation." DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. BACKUP FEDERAL TAX WITHHOLDING. To prevent backup federal income tax withholding on payments made to securityholders with respect to Shares or Warrants purchased pursuant to the Offer, each tendering securityholder must, unless an exemption applies, provide the Depositary with its correct taxpayer identification number and certify that such securityholder is not subject to backup federal income tax withholding by completing the Substitute Form W-9 included in the applicable Letter of Transmittal. If a securityholder does not provide a correct taxpayer identification number or fails to provide the required certification, the Internal Revenue Service may impose a penalty on such securityholder and payment of cash to such securityholder pursuant to the Offer may be subject to backup withholding of 31%. See Instruction 10 of the applicable Letter of Transmittal. GUARANTEED DELIVERY. If a securityholder desires to tender Shares or Warrants pursuant to the Offer and such securityholder's certificates for Shares or Warrants are not immediately available or the procedures for book-entry transfer cannot be completed on or prior to the Expiration Date or time will not permit all required documents to reach the Depositary prior to the Expiration Date, such Shares or Warrants may nevertheless be tendered provided that all of the following conditions are satisfied: (i) such tender is made by or through an Eligible Institution; (ii) the Depositary receives, on or prior to the Expiration Date, a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form provided by the Purchaser; (iii) in the case of Shares, the certificates for all tendered Shares, in proper form for transfer, or a Book-Entry Confirmation, together with the applicable Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed, together with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message) and any other documents required by the applicable Letter of Transmittal, are received by the Depositary within three New York Stock Exchange, Inc. ("NYSE") trading days after the date of such Notice of Guaranteed Delivery; and (iv) in the case of Warrants, the certificates for all tendered Warrants, in proper form for transfer, or a Book Entry Confirmation, together with the applicable Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed, together with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message) and any other documents required by such Letter of Transmittal, are received by the Depositary within three NYSE trading days after the date of such Notice of Guaranteed Delivery. The Notice of Guaranteed Delivery may be delivered by hand, or may be transmitted by telegram, telex, facsimile transmission or mail, to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery. Notwithstanding any other provision of the Offer, payment for Shares and Warrants accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of (i) either (a) certificates for such Shares and Warrants or (b) a Book-Entry Confirmation with respect to 6 10 such Shares and Warrants, (ii) a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) or an Agent's Message in connection with a book-entry transfer, and (iii) any other documents required by the Letters of Transmittal. For purposes of the Offer, the term "Agent's Message" means a message transmitted through electronic means by a Book-Entry Transfer Facility to and received by the Depositary and forming a part of a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has received an express acknowledgement from the participant in such Book-Entry Transfer Facility tendering the Shares that such participant has received and agrees to be bound by the applicable Letter of Transmittal. APPOINTMENT OF PROXY. By executing a Letter of Transmittal, a tendering securityholder irrevocably appoints designees of the Purchaser as such securityholder's proxies, in the manner set forth in the applicable Letter of Transmittal, each with full power of substitution and resubstitution, to the full extent of such securityholder's rights with respect to the Shares and Warrants tendered by such securityholder (and any and all dividends on the Shares or other shares, rights or other securities or distributions issued or issuable in respect of such Shares or Warrants that are declared or paid on or after November 8, 1995, including without limitation the amounts payable upon redemption of the Rights), effective when, if and to the extent that the Purchaser accepts such Shares or Warrants for payment pursuant to the Offer. All such proxies are coupled with an interest in the tendered Shares or Warrants and will therefore be irrevocable. Upon acceptance for payment, all prior proxies given by such securityholder with respect to such Shares or Warrants accepted for payment or other securities will, without further action, be revoked, and no subsequent proxies may be given (and, if given, will not be deemed effective). Such designees of the Purchaser will, with respect to such Shares or Warrants or other securities be empowered to exercise all voting and other rights of such securityholder as they in their sole discretion may deem proper in respect of any annual, special or adjourned meeting of the Company's securityholders, by consent in lieu of any such meeting or otherwise. In order for Shares or Warrants to be deemed validly tendered, immediately after the Purchaser's acceptance for payment of such Shares or Warrants, the Purchaser must be able to exercise full voting and other rights with respect to such Shares or Warrants. A tender of Shares or Warrants pursuant to any one of the procedures described above will constitute the tendering securityholder's acceptance of the terms and conditions of the Offer. The Purchaser's acceptance for payment of Shares and Warrants tendered pursuant to any of the procedures described above will constitute a binding agreement between the tendering securityholder and the Purchaser on the terms and subject to the conditions of the Offer. All questions as to the validity, form, eligibility (including time of receipt) and acceptance for payment of any tendered Shares or Warrants will be determined by the Purchaser in its sole discretion, and its determination will be final and binding. The Purchaser reserves the absolute right to reject any or all tenders that it determines are not in appropriate form or the acceptance for payment of or payment for which may, in the opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves the absolute right, subject to the Merger Agreement, to waive any of the conditions of the Offer or any defect or irregularity in any tender with respect to any particular Shares or Warrants or any particular securityholder and, subject to the Merger Agreement, the Purchaser's interpretation of the terms and conditions of the Offer (including the Letters of Transmittal and the Instructions thereto) will be final and binding. No tender of Shares or Warrants will be deemed to have been validly made until all defects or irregularities have been cured or expressly waived. None of the Purchaser, Diamond Shamrock, the Dealer Manager, the Depositary, the Information Agent or any other person will be obligated to give notice of any defects or irregularities in tenders, nor shall any of them incur any liability for failure to give any such notice. 3. WITHDRAWAL RIGHTS. Tenders of Shares and Warrants made pursuant to the Offer will be irrevocable, except that Shares or Warrants tendered may be withdrawn at any time prior to the Expiration Date, and, unless theretofore accepted for payment as provided herein, may also be withdrawn on or after January 13, 1996. Shares or Rights may not be withdrawn unless the associated Rights or Shares, as the case may be, are also withdrawn. 7 11 A withdrawal of Shares or Rights will also constitute a withdrawal of the associated Rights or Shares, as the case may be. For a withdrawal to be effective, a written, telegraphic, telex or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase. Any notice of withdrawal must specify the name of the person who tendered the Shares or Warrants to be withdrawn, the number of Shares or Warrants to be withdrawn and the name in which the Shares or Warrants are registered, if different from that of the person who tendered such Shares or Warrants. If certificates for Shares or Warrants to be withdrawn have been delivered or otherwise identified to the Depositary, the serial numbers shown on the particular certificates evidencing such Shares or Warrants to be withdrawn must also be furnished to the Depositary as aforesaid prior to the physical release of the Shares or Warrants to be withdrawn, together with a signed notice of withdrawal with signatures guaranteed by an Eligible Institution (except, with respect to signature guarantees, in the case of Shares or Warrants tendered by an Eligible Institution). If Shares or Warrants have been delivered pursuant to the procedure for book-entry transfer set forth in Section 2, any notice of withdrawal must specify the name and number of the account at the appropriate Book-Entry Transfer Facility to be credited with such withdrawn Shares or Warrants and must otherwise comply with such Book-Entry Transfer Facility's procedures. If the Purchaser extends the Offer, is delayed in its acceptance for payment of or payment for Shares or Warrants, or is unable to accept or pay for Shares or Warrants for any reason, then, without prejudice to the Purchaser's rights under the Offer, tendered Shares or Warrants may not be withdrawn except to the extent that tendering securityholders are entitled to withdrawal rights as set forth in this Section 3. Withdrawals may not be rescinded and any Shares or Warrants withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. However, withdrawn Shares or Warrants may be retendered by again following the procedures described in Section 2 at any time prior to the Expiration Date. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by the Purchaser in its sole discretion, subject to the Merger Agreement, and its determination will be final and binding. No withdrawal of Shares or Warrants will be deemed to have been properly made until all defects and irregularities have been cured and waived. None of the Purchaser, Diamond Shamrock, the Dealer Manager, the Depositary, the Information Agent or any other person will be obligated to give notice of any defects or irregularities in any notice of withdrawal, nor shall any of them incur any liability for failure to give any such notice. 4. ACCEPTANCE FOR PAYMENT AND PAYMENT OF PURCHASE PRICE. On the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any extension or amendment), the Purchaser will accept for payment and pay for all Shares or Warrants validly tendered prior to the Expiration Date (and not properly withdrawn in accordance with Section 3) as soon as practicable after the Expiration Date. Any determination concerning the satisfaction of such terms and conditions will be within the sole discretion of the Purchaser and such determination will be final and binding on all tendering securityholders. See Section 6. The Purchaser expressly reserves the right to delay acceptance for payment of, or payment for, Shares or Warrants in order to comply in whole or in part with any applicable law, including without limitation the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"). If the Purchaser desires to delay payment for Shares or Warrants purchased pursuant to the Offer, and such delay would otherwise be in contravention of Rule 14e-1(c) of the Exchange Act, the Purchaser will formally extend the Offer. In all cases, payment for Shares or Warrants accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of certificates for such Shares or Warrants (or a timely Book-Entry Confirmation with respect to such Shares or Warrants into the Depositary's account at one of the Book-Entry Transfer Facilities, as described in Section 2), a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof), together with any required signature guarantees and any other documents (or, in the case of a book-entry transfer, an Agent's Message) required by the applicable Letter of Transmittal. See Section 2. 8 12 Diamond Shamrock filed a Notification and Report Form with respect to the Offer under the HSR Act on November 8, 1995, and the required waiting period under the HSR Act with respect to the Offer will expire at 11:59 p.m., New York City time on November 23, 1995 (unless earlier terminated pursuant to a request therefor). However, prior to such time, the Federal Trade Commission (the "FTC") or the Antitrust Division of the Department of Justice (the "Antitrust Division") may extend the waiting period by requesting additional information or documentary material from Diamond Shamrock. If such a request is made, such waiting period will expire at 11:59 p.m., New York City time, on the tenth day after substantial compliance by Diamond Shamrock with such request. Thereafter, such waiting period can only be extended by court order. See Section 15 for additional information concerning the HSR Act. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares or Warrants validly tendered and not withdrawn pursuant to the Offer when, as and if the Purchaser gives oral or written notice to the Depositary of its acceptance for payment of such Shares or Warrants. Payment for Shares or Warrants so accepted will be made by the deposit of the purchase price therefor with the Depositary, which will act as agent for the tendering securityholders for the purpose of receiving such payment from the Purchaser and transmitting such payment to tendering securityholders. In no circumstances will interest be paid on the purchase price by reason of any delay in making such payment. Upon deposit of funds with the Depositary for the purpose of making payments to tendering securityholders, the Purchaser's obligation to make such payment shall be satisfied and tendering securityholders must thereafter look solely to the Depositary for payment of amounts owed to them by reason of the acceptance for payment of Shares or Warrants pursuant to the Offer. The Purchaser will pay any transfer taxes incident to the transfer to it of validly tendered Shares or Warrants, except as otherwise provided in Instruction 6 of the Letters of Transmittal, as well as any other charges and expenses of the Depositary and the Information Agent. If, for any reason whatsoever, acceptance for payment of or payment for any Shares or Warrants tendered pursuant to the Offer is delayed or the Purchaser is unable to accept for payment or pay for tendered Shares or Warrants, then, without prejudice to the Purchaser's rights under Section 6, the Depositary may, nevertheless, on behalf of the Purchaser, retain tendered Shares or Warrants, and such Shares or Warrants may not be withdrawn except to the extent that tendering securityholders are entitled to withdrawal rights as described in Section 3. If any tendered Shares or Warrants are not accepted for payment and paid for pursuant to the Offer for any reason, or if certificates submitted represent more Shares or Warrants than are tendered, certificates for such Shares or Warrants not tendered or purchased will be returned (or, in the case of Shares or Warrants delivered by book-entry transfer with any Book-Entry Transfer Facility as permitted by Section 2, such Shares or Warrants will be credited to an account maintained with such Book-Entry Transfer Facility) without expense to the tendering securityholder as promptly as practicable following the expiration or termination of the Offer, as the case may be. If, prior to the Expiration Date, the Purchaser increases the consideration to be paid for Shares or Warrants pursuant to the Offer, the Purchaser will pay such increased consideration for all Shares or Warrants tendered pursuant to the Offer, whether or not such Shares or Warrants have been tendered or accepted for payment prior to such increase in the consideration. Subject to the Merger Agreement, the Purchaser reserves the right to transfer or assign in whole or from time to time in part to one or more subsidiaries or affiliates of the Purchaser or Diamond Shamrock the right to purchase Shares or Warrants tendered pursuant to the Offer, but any such transfer or assignment will not relieve the Purchaser of its obligations under the Offer or prejudice the rights of tendering securityholders to receive payment for Shares or Warrants validly tendered and accepted for payment pursuant to the Offer. 5. CERTAIN TAX CONSEQUENCES. The summary of federal income tax consequences set forth below is for general information only. The tax treatment of each stockholder and Warrantholder will depend in part upon his, her or its particular situation. Special tax consequences not described in this Offer to Purchase may be applicable to particular classes of taxpayers, such as financial institutions, broker-dealers, persons who are not citizens or residents of the United States and persons who received payments in respect of Options. ALL STOCKHOLDERS AND WARRANTHOLDERS SHOULD 9 13 CONSULT WITH THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES OF THE OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL AND FOREIGN TAX LAWS. Sales of Shares and Warrants in response to the Offer will be taxable transactions for federal income tax purposes and may also be taxable transactions under applicable state, local or other laws. Generally, for federal income tax purposes, a person who sells Shares or Warrants in response to the Offer will recognize gain or loss in an amount equal to the difference between the person's adjusted tax basis in the Shares and Warrants sold and the cash received. That gain or loss will be a capital gain or loss if the Shares or Warrants are a capital asset in the hands of the person, and a long-term capital gain or loss if the stockholder's holding period is more than one year as of the date the stockholder or Warrantholder accepts payment pursuant to the Offer. There are limitations on the deductibility of capital losses. If a Warrantholder has held a Warrant for more than one year, any gain or loss recognized upon either the tendering of such Warrant pursuant to the Offer or, assuming the Offer is completed, the Merger, would generally be treated as long-term capital gain or loss. However, if such Warrantholder were to exercise the Warrant, the Share acquired through the exercise of such Warrant would have a holding period beginning as of the date on which the Warrant was exercised. Therefore, any Shares so acquired and tendered pursuant to the Offer or the Merger would not qualify for long-term capital gain or loss if the Warrantholder were to become entitled to the receipt of cash within one year or less of the date of the exercise of such Warrant. ACCORDINGLY, WARRANTHOLDERS WHO ARE CONSIDERING EXERCISING SUCH WARRANTS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS AS TO WHETHER OR NOT THEY WOULD BE FOREGOING A POSSIBLE LONG-TERM CAPITAL GAIN OR LOSS BY NOT TENDERING SUCH WARRANTS PURSUANT TO THE OFFER AND INSTEAD INCURRING A SHORT-TERM CAPITAL GAIN OR LOSS THROUGH THE EXERCISE OF SUCH WARRANTS AND THE RECEIPT OF CASH WITHIN ONE YEAR FOLLOWING SUCH EXERCISE IN EXCHANGE FOR THE SHARES RECEIVED UPON THE EXERCISE OF SUCH WARRANTS. For federal income tax purposes, amounts paid to non-tendering stockholders with respect to any redemption of the Rights may be treated as additional consideration for the Shares in the Merger; however, these amounts may be treated as a dividend or otherwise as ordinary income. See also "Backup Federal Tax Withholding" in Section 2. 6. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision of the Offer, and in addition to (and not in limitation of) the Purchaser's rights to amend and extend the Offer in any respect, at any time, and in its sole discretion (subject to the provisions of the Merger Agreement), neither Diamond Shamrock nor the Purchaser will be required to accept for payment, purchase or, subject to any applicable rules and regulations of the Commission, including Rule 14e-1(c) under the Exchange Act relating to the Purchaser's obligation to pay for or return tendered Shares or Warrants after termination of the Offer, pay for any Shares or Warrants tendered pursuant to the Offer, and may (subject to the provisions of the Merger Agreement) amend, extend or terminate the Offer or postpone the Expiration Date, the acceptance for payment of and/or the purchase or (subject to the applicable rules and regulations aforesaid) payment for Shares and Warrants tendered if as of the expiration of the Offer (and any extensions thereof) (i) the Minimum Condition shall not have been satisfied, (ii) the waiting period applicable for the purchase of securities pursuant to the Offer and the Merger under the HSR Act shall not have expired or been terminated, or (iii) at any time on or after November 8, 1995 and at or prior to the time of payment for any such Shares or Warrants (whether or not any Shares or Warrants have been accepted for payment or paid for pursuant to the Offer), any one or more of the following events shall have occurred and be continuing: (a) there has been any action taken, or any statute, rule, regulation, judgment, order or injunction promulgated, enacted, entered or deemed applicable to the Offer or the Merger, by any Governmental Entity (as defined in the Merger Agreement) that in the sole judgment of Diamond Shamrock (1) makes the acceptance for payment of or payment for Shares or Warrants illegal, challenges the acquisition by Diamond Shamrock or the Purchaser of the Shares or Warrants or otherwise seeks to restrain or prohibit consummation of the Offer or the Merger, (2) renders Diamond Shamrock unable to accept for payment, pay for or purchase Shares or Warrants, (3) seeks to impose or imposes limitations 10 14 on the ability of Diamond Shamrock to acquire or hold, transfer or dispose of, or effectively to exercise any of its rights of ownership of, the Shares or Warrants, including without limitation the right to vote the Shares purchased by it on all matters properly presented to the stockholders of the Company, (4) as a result of the Offer or the Merger, seeks to require or requires Diamond Shamrock, the Company or any of their respective Subsidiaries (as defined in the Merger Agreement) or affiliates to dispose of or hold separate or otherwise limits or affects the exercise of ordinary ownership or control rights in respect to all or any significant portion of their respective businesses, assets or properties, each taken as a whole, or imposing any limitations on the ability of any such entities to conduct their respective businesses and own such assets and properties, or (5) seeks to impose or imposes any limitations on the ability of Diamond Shamrock or any of its Subsidiaries effectively to control the business or operations of the Company or any of its Subsidiaries as a result of the Offer or the Merger; or (b) there has been instituted or pending any action, proceeding, claim or counterclaim by or before any Governmental Entity, or any other person or entity, seeking to restrain or prohibit the making of the Offer or the Merger, seeking to obtain any significant damages from Diamond Shamrock or its Subsidiaries, or the Company or its Subsidiaries or from any other person or entity to whom or to which any of the foregoing has any indemnity obligation arising from the Offer or the Merger or seeking to prohibit the ownership by Diamond Shamrock or any of its Subsidiaries of the Shares or Warrants or of any significant portion of their businesses or assets, taken as a whole, or any significant portion of the business or assets of the Company and its Subsidiaries, taken as a whole, or to compel Diamond Shamrock, the Company or any of their affiliates to dispose of or hold separate all or a significant portion of any of their business or assets, in each case as a result of the Offer or the Merger; or (c) there has occurred (1) any general suspension of, or limitation on prices for, trading in securities on the NYSE or the over-the-counter market, (2) a decline of at least 20% in either the Dow Jones Average of Industrial Stocks or the Standard & Poor's 500 Index from November 8, 1995, (3) the declaration of a banking moratorium or any limitation or suspension of payments in respect of the extension of credit by banks or other lending institutions in the United States, (4) any limitation by any Governmental Entity on, or any other event which in the sole judgment of Diamond Shamrock may have a material adverse effect on, the extension of credit by banks or other lending institutions, (5) a commencement of war, armed hostilities or other international or national calamity directly or indirectly involving the United States, or (6) in the case of any of the foregoing which exists at the time of the commencement of the Offer, a material acceleration or worsening thereof; or (d) any material adverse change has occurred since September 30, 1995 in the business, assets, results of operations, financial condition or prospects (not including a change in prospects arising from general economic or industry conditions) of the Company and its Subsidiaries, taken as a whole; or (e) the Company has breached or failed to perform in any material respect any of its obligations under the Merger Agreement, including without limitation a failure to cause the Rights to be redeemed as provided for therein; or (f) any of the representations and warranties of the Company contained in the Merger Agreement shall not have been true and correct when made or have since ceased to be true and correct and remain incorrect at the Expiration Date; or (g) it shall have been publicly disclosed or Diamond Shamrock shall have learned that any person or entity shall have entered into a definitive agreement or an agreement in principle with the Company with respect to a tender offer or exchange offer for any shares of capital stock of the Company (including without limitation the Shares and Warrants) or a merger, consolidation or other business combination or any acquisition or disposition of any material assets or any comparable event with or involving the Company or any of its Subsidiaries; or (h) the Company's Board of Directors shall have failed to recommend and approve, or shall no longer recommend and approve, the Offer or the adoption of the Merger Agreement, or shall modify or 11 15 amend its recommendation and approval with respect thereto, or shall have resolved to do any of the foregoing; or (i) the Merger Agreement has terminated in accordance with its terms; or (j) Diamond Shamrock and the Company agree that the Purchaser shall amend or terminate the Offer; which, in the sole judgment of Diamond Shamrock, and in each case regardless of the circumstances (including without limitation any inaction by Diamond Shamrock or its affiliates other than a material breach by Diamond Shamrock or its affiliates of the Merger Agreement), with respect to each and every matter referred to above makes it inadvisable to proceed with the Offer or with such acceptance for payment or purchase of or such payment for the Shares and Warrants. The foregoing conditions (i) may be asserted by Diamond Shamrock or the Purchaser regardless of the circumstances (including any action or inaction by Diamond Shamrock or any of its affiliates other than a material breach by Diamond Shamrock or the Purchaser of the Merger Agreement) giving rise to such condition and (ii) other than the Minimum Condition, are for the sole benefit of Diamond Shamrock and its affiliates. The foregoing conditions, except as otherwise provided in the Merger Agreement, may be waived by Diamond Shamrock, in whole or in part, at any time and from time to time in its sole discretion. The failure by Diamond Shamrock at any time to exercise any of the foregoing rights will not be deemed a waiver of any right and each right will be deemed an ongoing right which may be asserted by Diamond Shamrock at any time and from time to time. Any determination by Diamond Shamrock concerning the events described above will be final and binding upon all parties. 7. PRICE RANGES OF SHARES AND WARRANTS; DIVIDENDS. Since November 16, 1994, the Shares have traded on the NYSE under the symbol "NCS." According to the Company's 1995 10-K, from March 10, 1993 through November 15, 1994, the Common Stock was traded on the NASDAQ National Market System ("NASDAQ-NMS"). The following table sets forth, for the periods indicated, the high and low sales prices of the Shares as reported by published financial sources. Based on publicly available information, the Company has never paid a dividend on its Common Stock, other than the Rights which were distributed in the form of a dividend on September 11, 1995. The sales quotations per Share include the associated Right for any prices after September 11, 1995. PRICE RANGES FOR SHARES
HIGH LOW ------- ------- Fiscal Year Ended June 30, 1994: First Quarter...................................................... $16.75 $12.75 Second Quarter..................................................... 17.00 13.25 Third Quarter...................................................... 20.25 15.75 Fourth Quarter..................................................... 17.00 10.25 Fiscal Year Ended June 30, 1995: First Quarter...................................................... 11.50 7.50 Second Quarter..................................................... 8.88 6.38 Third Quarter...................................................... 10.63 8.38 Fourth Quarter..................................................... 13.00 8.63 Fiscal Year Ended June 30, 1996: First Quarter...................................................... 24.00 11.75 Second Quarter (through November 13, 1995)......................... 26.75 23.38 ------ ------
12 16 On August 11, 1995, the last full trading day prior to the public announcement of a $17.00 per Share acquisition proposal by The Circle K Corporation ("Circle K"), the reported closing price of the Shares on the NYSE Composite Tape was $13.75 per Share. On November 7, 1995, the last full trading day prior to the announcement of the Merger Agreement, the reported closing price of the Shares on the NYSE Composite Tape was $25.63 per Share. On November 13, 1995, the last full trading day prior to the commencement of the Offer, the reported closing price of the Shares on the NYSE Composite Tape was $26.63 per Share. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES. Diamond Shamrock has been informed by the Company that since April 15, 1993, the Warrants were traded on the NASDAQ-NMS under the symbol "NCSIW" and on December 1, 1994, the Warrants ceased to trade on the NASDAQ-NMS and commenced trading under such symbol on the NASDAQ Small-Cap Market (the "NASDAQ Stock Market"). The following table sets forth, for the periods indicated, the high and low sales prices for the periods before December 1, 1994, and the high and low closing bid prices for the periods after December 1, 1994, in each case as reported by published financial sources. PRICE RANGES FOR WARRANTS
HIGH LOW ----- ----- Fiscal Year Ended June 30, 1994: First Quarter........................................................ $4.75 $3.50 Second Quarter....................................................... 5.75 3.50 Third Quarter........................................................ 7.75 5.00 Fourth Quarter....................................................... 5.75 2.75 Fiscal Year Ended June 30, 1995: First Quarter........................................................ 3.00 1.50 Second Quarter....................................................... 1.50 0.63 Third Quarter........................................................ 1.25 0.63 Fourth Quarter....................................................... 2.13 0.88 Fiscal Year Ended June 30, 1996: First Quarter........................................................ 6.13 1.13 Second Quarter (through November 13, 1995)........................... 9.00 5.50 ---- ----
On August 11, 1995, the last full trading day prior to the public announcement of a $17.00 per Share acquisition proposal by Circle K, the reported closing bid price of the Warrants on the NASDAQ Stock Market was $2.38 per Warrant. On November 7, 1995, the last day on which the Warrants traded prior to the announcement of the Merger Agreement, the reported closing bid price of the Warrants on the NASDAQ Stock Market was $8.00 per Warrant. On November 13, 1995, the last full trading day prior to the commencement of the Offer, the reported closing bid price of the Warrants on the NASDAQ Stock Market was $9.00 per Warrant. WARRANTHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE WARRANTS. 13 17 8. POSSIBLE EFFECTS OF THE OFFER ON THE MARKET FOR SHARES AND WARRANTS; STOCK EXCHANGE LISTING; REGISTRATION UNDER THE EXCHANGE ACT. The purchase of Shares and Warrants pursuant to the Offer will reduce the number of holders of Shares and Warrants and the number of Shares and Warrants that might otherwise trade publicly. Consequently, depending upon the number of Shares and Warrants purchased and the number of remaining holders of Shares and Warrants, the purchase of Shares and Warrants pursuant to the Offer may adversely affect the liquidity and market value of the remaining Shares and Warrants held by the public. QUOTATION -- SHARES Depending upon the number of Shares purchased pursuant to the Offer, the Shares may no longer meet the requirements of the NYSE for continued listing. According to the NYSE's published guidelines, the NYSE would consider delisting the Shares if, among other things, the number of record holders of at least 100 Shares should fall below 1,200, the number of publicly held Shares (exclusive of management or other concentrated holdings) should fall below 600,000 or the aggregate market value of publicly held Shares should not exceed $5,000,000. If as a result of the purchase of Shares pursuant to the Offer, Shares no longer meet the requirements of the NYSE for continued listing and the listing of the Shares is discontinued, the market for the Shares could be adversely affected. If the NYSE were to delist the Shares, it is possible that the Shares would continue to trade on other securities exchanges or in the over-the-counter market and that price quotations would be reported by such exchanges or through the National Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or other sources. The extent of the public market for the Shares and the availability of such quotations would, however, depend upon the number of stockholders remaining at such time, the interest in maintaining a market in the Shares on the part of securities firms, the possible termination of registration under the Exchange Act, as described below, and other factors. QUOTATION -- WARRANTS Depending upon the number of Warrants and Shares purchased pursuant to the Offer, the Warrants may no longer meet the requirements of the National Association of Securities Dealers, Inc. (the "NASD") for continued inclusion of a Warrant in the NASDAQ Stock Market, which require among other things, that the common stock of the issuer of such Warrant continue to be listed on the NASDAQ-NMS or a national securities exchange. If these requirements are not met, the Warrants may nevertheless continue to be included in the NASDAQ Stock Market with quotations published in the NASDAQ "additional list" or in one of the "local lists." Depending upon the number of Warrants and Shares purchased pursuant to the Offer, the Warrants may no longer be "qualified" for NASDAQ Stock Market reporting and the NASDAQ Stock Market would cease to provide any quotations. If, as a result of the purchase of Warrants or Shares pursuant to the Offer or otherwise, the Warrants no longer meet the requirements of the NASD for continued inclusion in the NASDAQ Stock Market, the market for the Warrants could be adversely affected. In the event that the Warrants no longer meet the requirements of the NASD for continued inclusion in the NASDAQ Stock Market, it is possible that the Warrants would continue to trade in the over-the-counter market and that price quotations would be reported by other sources. The extent of the public market for the Warrants and the availability of such quotations would, however, depend upon the number of holders of Warrants remaining at such time, the interests in maintaining a market in the Warrants on the part of securities firms, the possible termination of registration of the Warrants under the Exchange Act, as described below, and other factors. MARGIN REQUIREMENTS The Shares are currently "margin securities" under the regulations of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which designation has the effect, among other things, of allowing brokers to extend credit on such Shares as collateral. Depending on factors such as the number of record holders of Shares and the number and market value of publicly held Shares following the purchase of Shares pursuant to the Offer, it is possible the Shares would no longer constitute "margin 14 18 securities" for purposes of the Federal Reserve Board's margin regulations and therefore could no longer be used as collateral for margin loans made by brokers. If registration of the Shares under the Exchange Act were terminated, the Shares would no longer be "margin securities" or eligible for stock exchange listing. EXCHANGE ACT REGISTRATION The Shares and Warrants are currently registered under the Exchange Act. Such registration may be terminated upon application of the Company to the Commission if such securities are not listed on a national exchange and there are fewer than 300 holders of record of each of such securities. The termination of the registration of the Shares or Warrants under the Exchange Act would reduce the information required to be furnished by the Company to the holders thereof and to the Commission, and would make certain of the provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b) of the Exchange Act, the requirement of furnishing a proxy statement in connection with stockholders' meetings pursuant to Section 14(a) or 14(c) of the Exchange Act and the related requirement of an annual report to stockholders and the requirements of Rule 13e-3 of the Exchange Act with respect to going private transactions, no longer applicable with respect to the Shares or Warrants or the Company. Furthermore, if a substantial number of Shares are acquired by the Purchaser, the ability of "affiliates" of the Company and persons holding "restricted securities" of the Company to dispose of such securities pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended, may be impaired or, with respect to certain persons, eliminated. If registration of the Shares under the Exchange Act were terminated, the Shares would no longer be margin securities or eligible for stock exchange listing or NASDAQ reporting. The Purchaser believes that the purchase of the Shares and Warrants pursuant to the Offer may result in the Shares and Warrants becoming eligible for deregistration under the Exchange Act and it is the intention of the Purchaser to cause the Company to make an application for termination of registration of the Shares and Warrants as soon as possible after successful completion of the Offer, if the Shares and Warrants are then eligible for such termination. If registration of the Shares and Warrants under the Exchange Act is not terminated prior to the Merger, registration of the Shares and Warrants under the Exchange Act will be terminated following the consummation of the Merger. 9. DIVIDENDS AND DISTRIBUTIONS. The Merger Agreement provides that, prior to the Effective Time, the Company will not, and will not permit any of its Subsidiaries to, (i) issue, reissue, sell or pledge or authorize or propose the issuance, reissuance, sale or pledge of any shares of capital stock of any class, or securities convertible into capital stock of any class, or any rights, warrants or options to acquire any convertible securities or capital stock, other than the issuance of Shares upon the exercise of Warrants and Options issued pursuant to the Option Plan outstanding on the date of the Merger Agreement and identified therein, (ii) declare, set aside or pay any dividend or other distribution (whether in cash, securities or property or any combination thereof) in respect of any class or series of its capital stock, except that any wholly owned Subsidiary of the Company may pay dividends and make distributions to the Company or any of the Company's wholly owned Subsidiaries, or (iii) adjust, split, combine, subdivide, reclassify or redeem, purchase or otherwise acquire, or propose to redeem or purchase or otherwise acquire, any shares of its capital stock, except that the Company may redeem the Rights in accordance with the Merger Agreement. Based on publicly available information, the Company has never paid a dividend on its Common Stock, other than the Rights which were distributed in the form of a dividend on September 11, 1995. 10. CERTAIN INFORMATION CONCERNING THE COMPANY. GENERAL. According to the Company's 1995 10-K, the Company is a Delaware corporation with its principal offices located at 100 Waugh Drive, Houston, Texas. The following description of the Company's business has been taken from the Company's 1995 10-K. The Company is the largest operator of convenience stores in the state of Texas and one of the 20 largest convenience store operators in the United States. At June 30, 1995, the Company operated 661 specialty convenience stores in four cities in the state of Texas under the name Stop N Go. Eighty-two percent of the 15 19 Company's stores are located in the Houston and San Antonio areas where the Company is the largest convenience store operator. The Company was originally organized as a Texas corporation in 1959 and was reincorporated in Delaware in 1979. The Company filed for voluntary Chapter 11 bankruptcy reorganization on December 9, 1991 and emerged from such on March 9, 1993 as a result of the confirmation of the Company's Revised Fourth Amended and Restated Joint Plan of Reorganization (the "Plan of Reorganization"). In the fourth quarter of fiscal 1994, the Company divested its 80 operating convenience stores in the states of California and Georgia and acquired 88 stores in the Houston and Dallas/Fort Worth areas. With the consummation of that transaction the Company attained its goal of geographically consolidating its operations within the state of Texas. SUMMARY FINANCIAL INFORMATION. The following tables set forth certain summary consolidated financial information with respect to the Company and its consolidated subsidiaries derived from the audited financial statements contained in the Company's 1995 10-K and the unaudited financial statements contained in the Company's Quarterly Report on Form 10-Q for the period ended September 30, 1995. Certain amounts reflected in the Company's 1995 10-K have been reclassified to conform to the current year presentation. The summaries below are qualified by reference to such documents (which may be inspected and obtained as described below), including the financial statements and related notes contained therein. 16 20 THE COMPANY AND SUBSIDIARIES SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
REORGANIZED COMPANY --------------------------------------------------------------- PREDECESSOR COMPANY THREE MONTHS ENDED PERIOD FROM ------------ YEAR ENDED JUNE 30, INCEPTION EIGHT MONTHS SEPTEMBER 30, (MARCH 1, 1993) ENDED -------------------- -------------------- TO JUNE 30, FEBRUARY 28, 1995 1994 1995 1994 1993 1993 -------- -------- -------- -------- --------------- ------------ Sales......................................... $236,792 $235,281 $906,023 $880,447 $ 297,985 $580,867 Costs and Expenses: Cost of sales............................... 175,421 175,354 683,037 658,845 222,639 429,019 Operating expenses.......................... 41,015 44,209 165,529 169,870 54,193 108,326 General and administrative expenses......... 10,241 11,448 40,756 34,204 10,982 20,793 Gain on sale of assets, net................. -- -- (360) (2,965) -- -- Other special charges....................... -- -- -- -- -- 6,561 -------- -------- -------- -------- -------- -------- 226,677 231,011 888,962 859,954 287,814 564,699 -------- -------- -------- -------- -------- -------- Operating Income.............................. 10,115 4,270 17,061 20,493 10,171 16,168 Other Income (Expense): Interest expense............................ (2,137) (2,380) (9,297) (10,598) (3,241) (1,547) Interest income............................. 319 342 1,411 1,220 328 50 -------- -------- -------- -------- -------- -------- Income Before Reorganization Expenses, Fresh-Start Adjustments, Income Tax Expense and Extraordinary Gain...................... 8,297 2,232 9,175 11,115 7,258 14,671 Reorganization Expenses, net.................. -- -- -- -- -- (8,124) Fresh-Start Adjustments....................... -- -- -- -- -- 382 -------- -------- -------- -------- -------- -------- Income Before Income Tax Expense and Extraordinary Gain.......................... 8,297 2,232 9,175 11,115 7,258 6,929 Income Tax Expense............................ 3,468 1,089 3,883 4,280 2,869 133 -------- -------- -------- -------- -------- -------- Income Before Extraordinary Gain.............. 4,829 1,143 5,292 6,835 4,389 6,796 Extraordinary Gain............................ -- -- -- -- -- 61,493 -------- -------- -------- -------- -------- -------- Net Income.................................... $ 4,829 $ 1,143 $ 5,292 $ 6,835 $ 4,389 $ 68,289 ======== ======== ======== ======== ======== ======== Earnings Per Share............................ $ 0.70 $ 0.19 $ 0.87 $ 1.09 $ 0.70 * ======== ======== ======== ======== ======== Weighted Average Common and Common Equivalent Shares Outstanding.......................... 6,997 6,050 6,061 6,274 6,291 * ======== ======== ======== ======== ========
- --------------- * Not meaningful. 17 21 THE COMPANY AND SUBSIDIARIES SUMMARY CONSOLIDATED BALANCE SHEETS (AMOUNTS IN THOUSANDS)
JUNE 30, ------------------- 1995 1994 SEPTEMBER 30, -------- -------- 1995 ------------- (UNAUDITED) ASSETS Current Assets: Cash and cash equivalents, $8,395, $9,093 and $14,083 reserved................................................ $ 40,633 $ 31,497 $ 48,797 Accounts receivable, net................................... 5,736 5,296 5,727 Inventories................................................ 35,685 36,555 39,626 Prepaid expenses........................................... 2,337 2,518 4,775 Deferred tax asset......................................... 5,610 5,610 4,259 -------- -------- -------- Total Current Assets............................... 90,001 81,476 103,184 Property and Equipment, net of Accumulated Depreciation...... 164,077 162,508 158,075 Other Assets: Reorganization value in excess of amounts allocable to identifiable assets, net................................ 23,600 23,939 34,542 Deferred tax asset, net.................................... 2,421 5,620 1,812 Other assets, net.......................................... 10,975 10,781 8,915 -------- -------- -------- Total Other Assets................................. 36,996 40,340 45,269 -------- -------- -------- $ 291,074 $284,324 $306,528 ======== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable and accrued expenses...................... $ 66,123 $ 61,625 $ 75,563 Current portion of long-term debt.......................... 10,953 12,061 12,103 -------- -------- -------- Total Current Liabilities.......................... 77,076 73,686 87,666 Long-Term Debt............................................... 88,360 90,256 107,204 Other Long-Term Liabilities.................................. 40,250 40,342 36,910 Commitments and Contingencies Stockholders' Equity: Common Stock, par value $.01 per share; 50,000,000 shares authorized; 6,090,325, 6,050,075 and 6,050,069 shares issued and outstanding............................................. 61 61 61 Series A Junior Participating Preferred Stock, par value $1.00 per share; 100,000 shares authorized as of September 11, 1995; 0 shares issued..................... -- -- -- Additional paid-in capital................................. 63,982 63,463 63,463 Retained earnings.......................................... 21,345 16,516 11,224 -------- -------- -------- Total Stockholders' Equity......................... 85,388 80,040 74,748 -------- -------- -------- $ 291,074 $284,324 $306,528 ======== ======== ========
OTHER INFORMATION. The Company is subject to the informational filing requirements of the Exchange Act and, in accordance therewith, is obligated to file periodic reports, proxy statements and other information with the Commission relating to its business, financial condition and other matters. Information, as of particular dates, concerning the Company's directors and officers, their remuneration, options granted to them, the principal holders of the Company's securities and any material interest of such persons in transactions with the Company is required to be disclosed in such proxy statements or annual reports and distributed to the Company's securityholders and filed with the Commission. Such reports, proxy statements and other information is available for inspection at the public reference facilities of the Commission located at 450 Fifth 18 22 Street, N.W., Washington, D.C. 20549, and is also available for inspection and copying at the regional offices of the Commission located at Citicorp Center, 500 W. Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of this material may also be obtained by mail, upon payment of the Commission's customary fees, from the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, such material should also be available for inspection at the library of the NYSE, 20 Broad Street, 7th Floor, New York, New York 10005. CERTAIN PROJECTIONS. The Company does not as a matter of course make public projections as to future operating results. However, in connection with its discussions regarding a possible transaction with the Company, the Company provided Diamond Shamrock certain projections for the Company. Diamond Shamrock, the Purchaser and the Dealer Manager understand that such projections are based on assumptions as to many matters which are beyond the control of the Company and cannot be accurately predicted. BECAUSE SUCH PROJECTIONS ARE INHERENTLY SUBJECT TO UNCERTAINTIES BEYOND THE CONTROL OF THE COMPANY, DIAMOND SHAMROCK, THE PURCHASER AND THE DEALER MANAGER, AND ARE BASED UPON ASSUMPTIONS AS TO FUTURE EVENTS, INCLUDING THOSE DISCUSSED BELOW, NONE OF DIAMOND SHAMROCK, THE PURCHASER, THE COMPANY OR THE DEALER MANAGER ASSUMES ANY RESPONSIBILITY FOR THEIR ACCURACY. There can be no assurance that such projections will be realized and should not be relied on as such. The projections were not prepared with a view toward public disclosure or compliance with published guidelines of the Commission or the guidelines established by the American Institute of Certified Public Accountants regarding projections. The information is being included herein solely because it was furnished to Diamond Shamrock during its discussions with the Company. There may well be variations between the Company's actual future results of operations and the assumptions on which the following projections are based and such variations could be material. Accordingly, there can be no assurance that the Company's actual future results of operations will not be materially greater or less than the following projections. Set forth below is a summary of selected projected income statement and other data which has been provided by the Company to Diamond Shamrock as described above.
YEAR ENDING JUNE 30, (ESTIMATED) ---------------------------------------------------------------------- 1996 1997 1998 1999 2000 ---------- ---------- ---------- ---------- ---------- (AMOUNTS IN THOUSANDS) Sales........................ $ 936,462 $1,028,703 $1,117,549 $1,220,239 $1,296,516 Operating profit............. 28,237 38,350 50,012 63,611 75,156 EBITDA(1).................... 45,254 59,830 75,026 90,605 103,314
YEAR ENDING JUNE 30, (ESTIMATED) ---------------------------------------------------------------------- 2001 2002 2003 2004 2005 ---------- ---------- ---------- ---------- ---------- (AMOUNTS IN THOUSANDS) Sales........................ $1,376,802 $1,461,301 $1,550,213 $1,643,755 $1,742,152 Operating profit............. 87,948 101,746 116,663 133,397 152,713 EBITDA(1).................... 117,234 132,160 148,205 166,190 186,679
- --------------- (1) Earnings before interest, taxes, depreciation and amortization ("EBITDA"). EBITDA should not be construed as an alternative to operating profit (determined in accordance with generally accepted accounting principles) or as an indicator of the Company's operating performance or to cash flows from operating activities as a measure of liquidity. Diamond Shamrock has been informed by the Company that the principal assumptions underlying the foregoing projections were as follows: (i) the Company will operate 660 stores throughout the projection period, including 599 stores which sell gasoline, it being assumed that the number of new stores opened and stores closed during the projection period will be equal; (ii) five new stores will be opened in each year beginning 1996 through 1998 and ten new stores will be opened in each year thereafter; (iii) per store merchandise annual growth rates during the projection period range from 5.5% to 6.2% in the case of merchandise revenue and 7.4% to 12.5% in the case of gasoline gallon sales; (iv) merchandise gross margin is approximately 32% throughout the projection period while gasoline profit (in cents per gallon) increases at 3% 19 23 each year during the projection period; and (v) operating expenses grow at a compound annual rate of approximately 4% and overhead expenses grow at an assumed annual inflation rate of 2.5%. Except as otherwise noted in this Offer to Purchase, all of the information with respect to the Company set forth in this Offer to Purchase has been derived from publicly available information. Although none of Diamond Shamrock, the Purchaser or the Dealer Manager has any knowledge that any such information is untrue, none of Diamond Shamrock, the Purchaser or the Dealer Manager takes responsibility for the accuracy or completeness of information contained in this Offer to Purchase with respect to the Company or for any failure by the Company to disclose events which may have occurred or may affect the significance or accuracy of any such information. 11. CERTAIN INFORMATION CONCERNING DIAMOND SHAMROCK AND THE PURCHASER. Diamond Shamrock and the Purchaser are Delaware corporations with their principal executive offices located at 9830 Colonnade Boulevard, San Antonio, Texas 78230. The Purchaser is a newly formed corporation and a wholly owned subsidiary of Diamond Shamrock. The Purchaser has not conducted any business other than in connection with the Offer and the Merger. Diamond Shamrock is the leading independent refiner and marketer of petroleum products in the southwestern United States. Diamond Shamrock operates two crude oil refineries located in Texas and is engaged in the wholesale and retail marketing of refined petroleum products produced at its refineries as well as by other refining companies in its marketing area. Diamond Shamrock sells gasoline and merchandise through company-operated retail outlets concentrated in Texas, Colorado, New Mexico and Louisiana, and distributes gasoline through independently owned Diamond Shamrock branded outlets in Texas and nearby states. Diamond Shamrock also stores and markets natural gas liquids, manufactures and markets anhydrous ammonia and polymer-grade propylene and operates certain other related businesses. Diamond Shamrock is subject to the informational filing requirements of the Exchange Act and, in accordance therewith, files reports and other information with the Commission relating to its business, financial condition and other matters. Information, as of particular dates, concerning Diamond Shamrock's directors and officers, their remuneration, options granted to them, the principal holders of Diamond Shamrock's securities and any material interest of such persons in transactions with Diamond Shamrock is required to be disclosed in proxy statements distributed to Diamond Shamrock's stockholders and filed with the Commission. Such reports, proxy statements and other information is available for inspection and copies may be obtained from the offices of the Commission or the NYSE in the manner described in Section 10. Diamond Shamrock hereby incorporates by this reference the financial statements filed as Exhibit 13.2 to Diamond Shamrock's Annual Report on Form 10-K for its fiscal year ended December 31, 1994, which was filed with the Commission on March 27, 1995. The name, citizenship, business address, present principal occupation or employment and material positions held during the past five years of each of the directors and executive officers of Diamond Shamrock and the Purchaser are set forth in Annex I hereto. Except for 65 Shares owned by Diamond Shamrock (which Shares represent less than 0.1% of the outstanding Shares) and except as described in this Offer to Purchase, (i) none of Diamond Shamrock or the Purchaser or, to the knowledge of Diamond Shamrock or the Purchaser, any of the persons listed in Annex I hereto, or any associate or majority-owned subsidiary of Diamond Shamrock or the Purchaser or any of the persons so listed, beneficially owns any security of the Company or has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company, including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any securities of the Company, joint ventures, loan or option arrangements, puts or calls, guaranties of loans, guaranties against loss or the giving or withholding of proxies and (ii) none of Diamond Shamrock or the Purchaser or, to the knowledge of Diamond Shamrock or the Purchaser, any of the other persons referred to above, or any of the respective directors, executive officers or subsidiaries of any of the foregoing, has effected any transaction in any security of the Company during the past 60 days. 20 24 Except as described in this Offer to Purchase, none of Diamond Shamrock or the Purchaser or, to the knowledge of Diamond Shamrock or the Purchaser, any of the persons listed in Annex I hereto, has had, since July 1, 1992, any business relationships or transactions with the Company or any of its executive officers, directors or affiliates that would require reporting under the rules of the Commission. Except as set forth in this Offer to Purchase, there have been no contacts, negotiations or transactions between the Purchaser or Diamond Shamrock or their respective subsidiaries or, to the knowledge of the Purchaser and Diamond Shamrock, any of the persons listed on Annex I, and the Company or its affiliates, concerning a merger, consolidation or acquisition, tender offer or other acquisition of securities, election of directors or a sale or other transfer of a material amount of assets. 12. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required by the Purchaser to purchase all Shares and Warrants which may be tendered at the Share Offer Price and the Warrant Offer Price and to pay related fees and expenses is estimated to be approximately $205 million. Diamond Shamrock intends to obtain the funds from loans to be provided by Bank of America National Trust and Savings Association ("BofA"). BofA has entered into a commitment letter with Diamond Shamrock, dated November 2, 1995 (the "Commitment"), pursuant to which BofA has committed to provide up to $340 million in borrowings under an unsecured senior credit facility (the "Credit Facility") to finance the Offer, to pay related fees and expenses and to refinance up to approximately $100 million of the Company's existing indebtedness. It is anticipated that BofA will syndicate the Credit Facility to a group of commercial banks. BofA's obligations under the Commitment are subject to the following conditions, among others: (i) the negotiation and execution of a definitive loan agreement and other appropriate documentation relating to the Credit Facility and (ii) there being no material adverse change in the financial condition, business, operations, properties or prospects of Diamond Shamrock, its subsidiaries and the Company, taken as a whole, since the date of the most recent audited financial statements relating to those entities provided to BofA prior to the date of the Commitment. The Credit Facility is a revolving term facility, the amount of which is to be reduced semi-annually by 25% of the amount of the Commitment, beginning September 30, 1999. Its repayment will be guaranteed by the significant subsidiaries of Diamond Shamrock. A commitment fee is payable quarterly in arrears on unadvanced portions of the Commitment at rates ranging from 0.1% to 0.25% per annum, based on the ratings assigned to Diamond Shamrock's unsecured senior long-term debt (the "Senior Debt Rating") by Standard & Poor's Corporation and by Moody's Investor Service, Inc. Amounts advanced under the Commitment will bear interest, at Diamond Shamrock's option, (i) at a variable rate equal to the higher of BofA's prime rate or 0.5% over the rate obtainable by BofA in the Federal Funds market or (ii) at a variable rate equal to the rate offered by BofA as its London Interbank Offered Rate to major banks in the London Interbank Market for one-, two-, three- or six-month dollar deposits, adjusted for the cost of reserves and rounded to the nearest 1/16th percent, plus a margin of between 0.30% and 0.75% per annum, based upon Diamond Shamrock's Senior Debt Rating. It is anticipated that the indebtedness incurred by Diamond Shamrock under the Credit Facility will be repaid from funds generated internally by Diamond Shamrock and its subsidiaries (including, after the Merger, if consummated, funds generated by the Company and its subsidiaries), with the proceeds of borrowings, capital markets transactions or through a combination of such sources. No final decisions have been made concerning the method Diamond Shamrock will employ to repay such indebtedness. Such decisions, when made, will be based on Diamond Shamrock's review from time to time of the advisability of particular actions, as well as on prevailing interest rates and financial and other economic conditions. 13. CONTACTS WITH THE COMPANY; BACKGROUND OF THE OFFER. MERGER NEGOTIATIONS. On August 9, 1995, Roger R. Hemminghaus, Diamond Shamrock's Chairman, President and Chief Executive Officer, met with V.H. Van Horn, the President and Chief Executive Officer of the Company. In that meeting, Mr. Hemminghaus informed Mr. Van Horn that Diamond Shamrock believed 21 25 that a business combination transaction between the two companies might be mutually advantageous and that Diamond Shamrock was interested in exploring that possibility on a negotiated basis. Mr. Van Horn informed Mr. Hemminghaus that the Company believed that its recent marketing strategies and capital spending programs were beginning to result in significant improvements in the Company's results of operations and indicated that the Company would prefer to remain independent. On August 18, 1995, following the public announcement that Circle K proposed to acquire the Company for $17.00 per Share, Mr. Hemminghaus again contacted Mr. Van Horn. Mr. Hemminghaus informed Mr. Van Horn that Diamond Shamrock continued to be interested in exploring a possible business combination transaction. Mr. Van Horn informed Mr. Hemminghaus that the Company was in the process of analyzing Circle K's proposal and related matters and, therefore, was unable to respond to Diamond Shamrock's interest at that time. On September 14, 1995, following Circle K's earlier public announcement that it had increased the price at which it proposed to acquire the Company to $20.00 per Share, Mr. Hemminghaus contacted Mr. Van Horn and informed Mr. Van Horn that Diamond Shamrock was prepared to make an alternative proposal at a price higher than that proposed by Circle K. Later that day, Diamond Shamrock sent the Company a written proposal indicating Diamond Shamrock's willingness to pursue the possible acquisition of the Company at $23.50 per Share and $5.75 per Warrant. On October 2, 1995, Diamond Shamrock and the Company entered into a letter agreement pursuant to which the Company agreed to provide Diamond Shamrock with information regarding the Company. Thereafter, the Company and its representatives furnished Diamond Shamrock with information regarding the Company, including the projections described in Section 10. On November 3, 1995, Diamond Shamrock submitted a proposal to acquire the Company in accordance with the Company's bidding procedures. Thereafter, Diamond Shamrock was contacted by representatives of the Company to clarify certain matters relating to Diamond Shamrock's proposal. After clarification of these matters, representatives of Diamond Shamrock and the Company entered into negotiations of a definitive merger agreement. On the evening of November 7, 1995, Diamond Shamrock was informed that the Company's Board of Directors had met and approved the Merger Agreement. Immediately thereafter, Diamond Shamrock, the Purchaser and the Company executed the Merger Agreement pursuant to which the Purchaser agreed to make the Offer. PROPOSED CONSULTING ARRANGEMENT. Following the execution of the Merger Agreement, Mr. Hemminghaus informed Mr. Van Horn that Diamond Shamrock would be interested in exploring the possibility of Mr. Van Horn becoming a consultant following the consummation of the Merger to assist Diamond Shamrock in the transition following the Merger and with respect to other matters related to retail marketing. As of November 14, 1995, the specific terms of any such consulting arrangement had not been agreed to by Diamond Shamrock and Mr. Van Horn. 14. PURPOSE OF THE OFFER AND THE MERGER; THE MERGER AGREEMENT; PLANS OF DIAMOND SHAMROCK AND THE PURCHASER WITH RESPECT TO THE COMPANY. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY. The purpose of the Offer and the Merger and the Merger Agreement is for Diamond Shamrock to acquire control of, and the entire equity interest in, the Company. The Offer is intended to increase the likelihood that the Merger will be effected promptly. Following the completion of the Merger, Diamond Shamrock presently intends to operate the Company as a wholly owned subsidiary of Diamond Shamrock and to integrate the Company's business into Diamond Shamrock's marketing operations. THE MERGER AGREEMENT. The following is a summary of the material terms of the Merger Agreement. This summary is not a complete description of the terms and conditions thereof and is qualified in its entirety by reference to the full text thereof, which is incorporated herein by reference and a copy of which has been filed with the Commission as an exhibit to the Purchaser's Tender Offer Statement on Schedule 14D-1 (the 22 26 "Schedule 14D-1") filed with the Commission in connection with the Offer. The Merger Agreement may be examined, and copies thereof may be obtained, in the manner described in Section 17. The Offer. The Merger Agreement provides for the commencement by the Purchaser of the Offer. Pursuant to the Merger Agreement, the Purchaser has expressly reserved the right to (i) waive any condition of the Offer (other than the Minimum Condition), (ii) increase the Share Offer Price or the Warrant Offer Price, or (iii) extend the Offer if any condition thereto is not satisfied, but has agreed that it will not, without the prior written consent of the Company (a) decrease the Share Offer Price or the Warrant Offer Price, (b) decrease the number of Shares or Warrants sought to be purchased pursuant to the Offer, (c) change the form of consideration to be paid pursuant to the Offer, (d) add to or change the conditions to the Offer, (e) change or waive the Minimum Condition, or (f) make any other change in the terms or conditions of the Offer which is materially adverse to holders of Shares or Warrants. The Merger Agreement provides that if all conditions of the Offer have not been satisfied or waived prior to the initial Expiration Date, the Purchaser will extend the Offer until the earlier of the consummation of the Offer or the 60th calendar day after commencement of the Offer. Recommendation. The Board of Directors of the Company, based in part on the opinion of Merrill Lynch that the proposed consideration to be paid in the Offer and the Merger is fair from a financial point of view to the holders of Shares and Warrants, determined that the Offer and the Merger are in the best interests of the Company's securityholders, approved the Merger Agreement and the transactions contemplated thereby, and recommends that holders of Shares and Warrants accept the Offer and tender their Shares and Warrants pursuant to the Offer. The Merger Agreement provides that if the Board of Directors of the Company, after consulting with its outside counsel and financial advisor, determines in good faith, and based in part on a written opinion of outside counsel, that its fiduciary duties require that it withdraw, modify or amend in a manner adverse to Diamond Shamrock its favorable recommendation of the Offer or the Merger in order to approve the execution of a definitive agreement with respect to an Acquisition Transaction (as defined in the Merger Agreement) with another party which the Board of Directors of the Company has determined in good faith is financially superior to the transactions contemplated by the Merger Agreement, such withdrawal, modification or amendment will not constitute a breach of the Merger Agreement but will entitle the Purchaser to receive a termination fee. See "-- Termination" below. Board Representation. The Merger Agreement provides that, upon the Purchaser's acceptance for payment of Shares and Warrants pursuant to the Offer, the Purchaser will be entitled, subject to compliance with applicable law and the Company Charter, to designate at its option up to that number of members, rounded up to the nearest whole number, of the Company's Board of Directors as will make the percentage of the Company's directors designated by the Purchaser equal to the percentage of outstanding Shares held by Diamond Shamrock and any of its wholly owned subsidiaries, and the Company has agreed that it will, upon the request of the Purchaser, promptly increase the size of the Company's Board of Directors and/or use its reasonable best efforts to secure the resignation of such number of directors as is necessary to enable the Purchaser's designees to be so elected and will use its reasonable best efforts to cause the Purchaser's designees to be so elected, subject to Section 14(f) of the Exchange Act. However, prior to the Effective Time, the Company will use its reasonable best efforts to assure that the Company's Board of Directors has at least two members who are directors of the Company as of November 8, 1995. At such times, the Company will use its reasonable best efforts, subject to any limitations imposed by applicable laws or rules of the NYSE, to cause persons designated by Diamond Shamrock to constitute the same percentage as such persons represent on the Company's Board of Directors of (i) each committee of the Board of Directors of the Company, (ii) each board of directors or board of management of each Subsidiary of the Company, and (iii) each committee of each such board. The Merger. The Merger Agreement provides that, on the terms and subject to the conditions set forth in the Merger Agreement and in accordance with the relevant provisions of the DGCL, as soon as practicable following the satisfaction or waiver, if permissible, of the conditions described below under "-- Conditions to the Merger," at the Effective Time, the Purchaser will be merged with and into the Company, with the Company, as the Surviving Corporation, becoming a wholly owned subsidiary of Diamond Shamrock. At the Effective Time, each Share issued and outstanding immediately prior to the Effective Time (other than 23 27 Shares owned by Diamond Shamrock, the Purchaser or any other direct or indirect subsidiary of Diamond Shamrock or held in the treasury of the Company, all of which will be cancelled, and Shares owned by stockholders who have complied with all of the relevant provisions of Article IX of the Company Charter and who have perfected their appraisal rights under the DGCL) will be converted into the right to receive the Merger Consideration, without interest thereon, net to the holder (pre-tax) in cash, and each share of common stock of the Purchaser issued and outstanding immediately prior to the Effective Time will be converted into and become one fully paid and nonassessable share of common stock of the Surviving Corporation. Pursuant to the terms of the Warrant Agreement, each then-outstanding Warrant (other than Warrants held in the treasury of the Company, which shall be cancelled) will remain outstanding and, from and after the Effective Time, each holder of Warrants will have the right to obtain upon exercise of each Warrant and payment of the exercise price thereof, in lieu of the one Share theretofore issuable upon exercise of such Warrant, the Merger Consideration, without interest thereon, net to the holder (pre-tax) in cash. Under the Merger Agreement and subject to the terms and conditions thereof, each of Diamond Shamrock, the Purchaser and the Company agreed to use its reasonable best efforts to cause the Merger to occur within 90 calendar days after the purchase of the securities pursuant to the Offer. The Merger will become effective at the time of filing of a certificate of merger, or certificate of ownership and merger, as required by the DGCL. Stockholder Meeting. The Merger Agreement provides that, if required by applicable law in order to consummate the Merger, the Company will, subject to its fiduciary duties under applicable law as advised in the written opinion of outside counsel to the Company, duly call a special meeting of its stockholders (the "Special Meeting") as soon as practicable following the acceptance for payment of Shares and Warrants in the Offer to consider and vote upon the adoption of the Merger and the Merger Agreement. Diamond Shamrock and the Purchaser have agreed to cause all Shares then owned by Diamond Shamrock, the Purchaser or any other subsidiary of Diamond Shamrock to be voted at the Special Meeting in favor of the adoption of the Merger Agreement. Diamond Shamrock has also agreed that it or the Purchaser will, prior to the record date for the Special Meeting, exercise such number of Warrants as may be necessary to assure that no affirmative vote of any holder of Shares other than Diamond Shamrock or the Purchaser is required for the adoption of the Merger Agreement. If the Minimum Condition is satisfied and the Purchaser purchases Shares and Warrants pursuant to the Offer, the Purchaser will be able to effect the adoption of the Merger Agreement at a meeting of the Company's stockholders without the affirmative vote or consent of any other stockholder of the Company. The Merger Agreement provides that in the event that the Purchaser acquires at least 90% of the outstanding Shares pursuant to the Offer or otherwise, Diamond Shamrock will, subject to its termination rights under the Merger Agreement, take all necessary and appropriate action (including the exercise of Warrants to the extent necessary to achieve the 90% threshold) to cause the Merger to become effective, as soon as practicable after the acceptance for payment of Shares and Warrants in the Offer, but in no event later than 10 business days (or such other time as the Company (acting through the directors of the Company then in office who are directors of the Company on November 8, 1995) and Parent may agree) thereafter in accordance with Section 253 of the DGCL. Company Options. The Merger Agreement provides that all Options, whether or not exercisable, will, subject to the prior written approval of the optionee, be cancelled and each optionee will be entitled to receive promptly after the acceptance of Shares and Warrants for payment in the Offer, in cancellation and settlement of such Option, a cash payment from the Company in an amount equal to the difference between the Share Offer Price and the per share exercise price of such Option, multiplied by the number of Shares covered by such Option. Pursuant to the Merger Agreement, the Board of Directors of the Company has fixed the Effective Time as the date on which Options granted under the Option Plan which are not cancelled as provided in the preceding sentence will terminate pursuant to the Option Plan. Accordingly, holders of Options desiring to tender Shares issuable upon exercise thereof must exercise such Options in accordance with the terms thereof and then tender Shares issued upon such exercise pursuant to the procedures set forth in Section 2. There can be no assurance that Shares issued upon such exercise will be received in time to allow the holders thereof to tender such Shares pursuant to the Offer. 24 28 Representations and Warranties. The Merger Agreement contains representations and warranties by the Company, relating to, among other things (i) the organization of the Company and its subsidiaries and other corporate matters, (ii) the capital structure of the Company, (iii) the authorization, execution, delivery and consummation of the transactions contemplated by the Merger Agreement, (iv) consents and approvals, (v) documents filed by the Company with the Commission and the accuracy of the information contained therein, (vi) the accuracy of the information contained in documents filed with the Commission in connection with the Offer and the Merger, (vii) litigation, (viii) absence of changes, (ix) conflicts, (x) taxes and (xi) receipt of an opinion of a financial advisor. In addition, the Merger Agreement contains representations and warranties by Diamond Shamrock and the Purchaser, relating to, among other things, (a) the organization of Diamond Shamrock and the Purchaser and other corporate matters, (b) the authorization, execution, delivery and consummation of the transactions contemplated by the Merger Agreement, (c) the accuracy of information contained in documents filed with the Commission in connection with the Offer and the Merger, (d) required consents and approvals, (e) conflicts and (f) receipt of a financing commitment. Redemption of Rights. The Merger Agreement provides that (i) the Company will redeem the Rights immediately prior to the Purchaser's acceptance for payment of Shares and Warrants pursuant to the Offer and will not otherwise redeem the Rights, or amend or terminate the Rights Agreement, unless required to do so by a court of competent jurisdiction and (ii) the Board of Directors of the Company will take all action necessary to defer the Distribution Date to prevent the occurrence of the Distribution Date as a result of the commencement of the Offer or the consummation of the transactions contemplated by the Merger Agreement. Conduct of Business Pending the Merger. Pursuant to the Merger Agreement, the Company has agreed that, prior to the Effective Time, except as otherwise provided in the Merger Agreement or with the prior written consent of Diamond Shamrock, the Company will, and will cause each of its Subsidiaries to, conduct its operations only in the ordinary and usual course of business consistent with past practice. The Company has further agreed that it will use all reasonable efforts, and will cause each of its Subsidiaries to use all reasonable efforts, to (i) preserve intact the present business organization of the Company and its Subsidiaries, (ii) keep available the services of the present officers and employees of the Company and its Subsidiaries, and (iii) preserve the material relationships of the Company and its Subsidiaries with licensors, licensees, customers, suppliers, employees and any others having business dealings with the Company or any of its Subsidiaries. The Company has agreed that, except as expressly contemplated by the Merger Agreement, the Company will not, and will not permit its Subsidiaries to, prior to the Effective Time, (i) adopt any amendment to its certificate of incorporation or by-laws or comparable organizational documents or the Rights Agreement, (ii) take any of the actions with respect to dividends or distributions of its Common Stock as described in Section 9, (iii) incur, assume or pre-pay any long-term debt or incur or assume any short-term debt, except that the Company and its Subsidiaries may incur or pre-pay debt in the ordinary course of business consistent with past practice under existing lines of credit, (iv) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person or entity, except in the ordinary course of business consistent with past practice, (v) make any loans, advances or capital contributions to, or investments in, any other person or entity except for loans, advances, capital contributions or investments between the Company and any of its wholly owned Subsidiaries or between wholly owned Subsidiaries of the Company in the ordinary course of business consistent with past practice, (vi) settle or compromise any suit or claim or threatened suit or claim relating to the transactions contemplated by the Merger Agreement, (vii) except for increases in salary, wages or benefits of employees of the Company or its Subsidiaries (other than officers and directors of the Company) in accordance with past practice, and except for increases in salary, wages and benefits granted to employees of the Company or its Subsidiaries (other than officers and directors of the Company) in conjunction with promotions or other changes in job status consistent with past practice or required under existing agreements, increase the compensation or fringe benefits payable or to become payable to its directors, officers or employees (whether from the Company or any of its Subsidiaries) or pay any benefit not required by any existing plan or arrangement (including the granting of, or waiver of performance or other vesting criteria under, stock options, 25 29 or grant any severance or termination pay to (except pursuant to existing agreements or policies), or enter into any employment or severance agreement with, any director, officer or other employee of the Company or any of its Subsidiaries) or establish, adopt, enter into, terminate or amend any bonus, profit sharing, thrift, compensation, stock option, pension, retirement, welfare, deferred compensation, employment, termination, severance or other employee benefit plan, agreement, trust, fund, policy or arrangement for the benefit or welfare of any directors, officers or current or former employees (except as may be necessary to comply with applicable law), (viii) acquire (except as permitted by clause (x) below), sell, lease or dispose of or pledge, mortgage or encumber any assets (including licenses, permits and other rights) of the Company and its Subsidiaries other than in the ordinary course of business consistent with past practice and in each case not exceeding $250,000, or enter into any commitment or transaction outside the ordinary course of business consistent with past practice other than transactions between a wholly owned Subsidiary of the Company and the Company or between wholly owned Subsidiaries of the Company, (ix) (a) modify, amend or terminate any contract, license or permit, (b) waive, release, relinquish or assign any contract (including any insurance policy) or other license, permit, right or claim, or (c) cancel or forgive any indebtedness owed to the Company or its Subsidiaries, other than in each case in a manner in the ordinary course of business consistent with past practice and which is not material to the business of the Company and its Subsidiaries, (x) authorize, commit to or make any capital expenditures except pursuant to and in accordance with the capital budget previously provided to Diamond Shamrock, (xi) make any tax election not required by law or settle or compromise any tax liability, in either case that is material to the Company and its Subsidiaries, (xii) change any of the accounting principles or practices used by it except as required by the Commission or the Financial Accounting Standards Board, or (xiii) agree in writing or otherwise to take any of the foregoing actions or any action which would make any representation or warranty in the Merger Agreement untrue or incorrect in any material respect. Access. Pursuant to the Merger Agreement, the Company has agreed that it will (i) give Diamond Shamrock and its authorized representatives reasonable access to all stores, offices, warehouses and other facilities and to all books and records of the Company and its Subsidiaries, (ii) permit Diamond Shamrock to make such inspections as it may reasonably require, and (iii) cause its officers and those of its Subsidiaries to furnish Diamond Shamrock such financial and operating data and other information with respect to the business and properties of the Company and its Subsidiaries as Diamond Shamrock may from time to time reasonably request. In this regard, Diamond Shamrock has agreed to comply with the terms of the Confidentiality Agreement between Diamond Shamrock and the Company, dated October 2, 1995, which provides generally that confidential information furnished by or on behalf of the Company will be used solely for the purpose of evaluating a possible investment in the Company and that the recipient of such information will take appropriate measures to safeguard the confidentiality thereof. Exclusivity. The Merger Agreement provides that until the earlier of the termination of the Merger Agreement or the Effective Time, the Company will not, and will cause its officers, directors, Subsidiaries, affiliates, representatives or agents, directly or indirectly, not to, (i) negotiate, undertake, authorize, propose or enter into, either as the proposed surviving, merged, acquiring or acquired corporation, any transaction (other than the Offer and the Merger) involving any sale, transfer or other disposition or other change of ownership (whether by tender or exchange offer or otherwise) of any securities of the Company or any of its Subsidiaries, or any assets of the Company or any of its direct or indirect Subsidiaries constituting 1% or more of the consolidated assets of the Company or 1% or more of the consolidated revenues of the Company, whether in a single transaction or series of related transactions (an "Acquisition Transaction"), (ii) solicit or initiate the submission of a proposal or offer in respect of, or engage in negotiations concerning, an Acquisition Transaction, or (iii) furnish or cause to be furnished to any corporation, partnership, person or other entity or group (other than Diamond Shamrock, the Purchaser and their representatives) any non-public information concerning the business, operations, properties or assets of the Company in connection with an Acquisition Transaction. The Merger Agreement also provides that the Company will inform Diamond Shamrock promptly, and in any event within one day, of its receipt of any proposal or bid in respect of any Acquisition Transaction and provide Diamond Shamrock with copies of any written proposal or bid. The Merger Agreement further provides that the Company and its officers, directors, Subsidiaries, representatives and agents may engage in discussions or negotiations with, and may furnish information to, a third party or its 26 30 representative who makes a written proposal with respect to an Acquisition Transaction if (a) the Company's Board of Directors determines in good faith after consultation with its financial advisors that such proposal may reasonably be expected to result in a transaction that is financially superior to the transactions contemplated in the Merger Agreement and (b) the Board of Directors of the Company determines in good faith after receipt of a written opinion of outside counsel that such actions are required by its fiduciary duties under applicable law. Certain Other Agreements. Pursuant to the Merger Agreement and subject to the terms and conditions thereof and to the fiduciary duties of their respective Boards of Directors under applicable laws as advised in the written opinion of outside counsel, each of the Company, the Purchaser and Diamond Shamrock has agreed to use its reasonable best efforts to take, or cause to be taken, all appropriate action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by the Merger Agreement, including all action reasonably required under the HSR Act; provided however, that Diamond Shamrock is not required, among other things, to waive any condition to the Offer, including taking any action that would require Diamond Shamrock, the Company or any of their respective Subsidiaries or affiliates to dispose of or hold separate all or any significant portion of Diamond Shamrock's or the Company's respective businesses, assets or properties. See Section 6. Directors/Officers Indemnification and Insurance. The Merger Agreement provides that the Company will defend, indemnify and hold harmless, and after the Effective Time, the Parent and the Surviving Corporation, jointly and severally, will defend, indemnify and hold harmless, certain present and former directors and officers of the Company as identified in the Merger Agreement to the full extent required or permitted under (i) Delaware law, (ii) as provided in the Company Charter and Restated By-Laws of the Company, and (iii) as otherwise provided for or permitted pursuant to any agreement in effect on November 8, 1995 and identified therein. Pursuant to the Merger Agreement, such rights to be defended, indemnified and held harmless will continue in full force and effect without time limitation from and after the Effective Time and without amendment or modification of the terms of any of the agreements referred to in clause (iii) of the immediately preceding sentence. The Merger Agreement further provides that the Company, after consultation in good faith with Diamond Shamrock, or Diamond Shamrock will purchase, as promptly as practicable and in any event prior to the Effective Time and without any lapse in coverage, policies of directors' and officers' "run-off" liability insurance (or policies which contain terms and conditions that are no less advantageous to the directors and officers and former directors and officers of the Company as the directors' and officers' liability insurance policies that are in effect at the Company on November 8, 1995), which insurance will remain in effect for a period of not less than six years from and after the Effective Time; provided, however, that in the event any claim or claims are asserted or made within such six-year period, Diamond Shamrock and the Surviving Corporation will cause such insurance to be continued in respect of any such claim until final disposition of any and all such claims. Employee and Benefit Matters. The Merger Agreement provides that Diamond Shamrock will honor, and cause the Surviving Corporation and its Subsidiaries to honor (in accordance with the terms thereof), all contracts, agreements, arrangements, policies, plans and commitments of the Company (or any of its Subsidiaries) in effect as of November 8, 1995 that are applicable to any officer or employee or former officer or employee or any director or former director of the Company (or any of its Subsidiaries or former Subsidiaries) and identified in the Merger Agreement (collectively, the "Agreements"). Pursuant to the Merger Agreement, Diamond Shamrock has agreed to perform and pay, or cause the Surviving Corporation and its Subsidiaries to perform and pay, when due any and all amounts payable pursuant to the terms of the Agreements. The Merger Agreement also provides that for a period of one year immediately following the Effective Time, the Parent will cause the Surviving Corporation and its Subsidiaries to continue to maintain (except as required by law) the employee benefit plans for employees and former employees of the Company and its Subsidiaries described in the Merger Agreement or other plans that, on a plan-by-plan basis, provide benefits that are no less favorable to such employees than the benefits currently in effect with respect to such employees under the plans described in the Merger Agreement; provided, however, at Diamond Shamrock's election, the Surviving Corporation may (i) elect to become a nonsubscriber under the Texas Workers' 27 31 Compensation Act and implement Diamond Shamrock's Work Injury Program and (ii) implement Diamond Shamrock's Dialogue Dispute Resolution Program. The Merger Agreement also provides that if any employee of the Company or any of its Subsidiaries becomes a participant in any employee benefit plan, practice or policy of Diamond Shamrock or the Surviving Corporation, such employee shall be given credit under such plan for all service prior to the Effective Time with the Company and its Subsidiaries, or any predecessor employer (to the extent such credit was given by the Company), for purposes of eligibility and vesting (but not for benefit accrual purposes) for which such service is either taken into account or recognized. Post-Merger Treatment of Warrants. The Surviving Corporation will, following the Effective Time and subject to the conditions of the Warrant Agreement, make available, as necessary, sufficient funds to pay, and will pay, to holders of Warrants, upon the exercise thereof, the amount of cash, without interest to which such holders would have been entitled pursuant to the Merger if such holders had exercised their Warrants and acquired Shares immediately prior to the Effective Time. Conditions to the Merger. Under the Merger Agreement, the respective obligations of each party to effect the Merger are subject to the satisfaction or waiver, where permissible, prior to the Effective Time of the following conditions: (i) the Merger Agreement shall have been adopted by the requisite vote of the stockholders of the Company in accordance with the Company Charter and applicable law, if such vote is required, (ii) no United States or state statute, rule, regulation, executive order, decree or injunction shall have been enacted, entered, promulgated or enforced by any Governmental Entity that is in effect and has the effect of making the acquisition or ownership of the Shares or Warrants illegal or otherwise prohibiting or materially restricting the consummation of the Offer or the Merger or that would make the acquisition or ownership by Diamond Shamrock or its Subsidiaries of the common stock of the Surviving Corporation illegal, and (iii) the waiting period applicable to the consummation of the Merger under the HSR Act shall have expired or been terminated. The Merger Agreement also provides that the obligation of the Company to effect the Merger is further subject to the satisfaction or waiver, where permissible, at or prior to the Effective Time, of the following conditions: (i) each of Diamond Shamrock and the Purchaser shall have performed in all material respects its respective covenants in the Merger Agreement, to the extent such covenants are to be performed prior to the Effective Time and (ii) the representations and warranties of Diamond Shamrock and the Purchaser shall be true and correct in all material respects at and as of the Effective Time as if made as of the Effective Time. The Merger Agreement also provides that the obligations of Diamond Shamrock and the Purchaser to effect the Merger are further subject to the satisfaction or waiver, where permissible, at or prior to the Effective Time, of the following conditions: (a) the Purchaser (or any permitted assignee) shall have accepted for payment and paid for Shares and Warrants tendered pursuant to the Offer, provided that this condition will be deemed satisfied if the Purchaser (or any permitted assignee) fails to accept for payment and pay for Shares and Warrants tendered pursuant to the Offer in violation of the terms of the Offer or the Merger Agreement and (b) the Company shall have performed in all material respects the covenants in the Merger Agreement, to the extent such covenants are to be performed prior to the Effective Time. Termination. The Merger Agreement may be terminated at any time prior to the Effective Time (i) by mutual consent of Diamond Shamrock and the Company by action of their respective Boards of Directors, (ii) by the Company if (a) the Offer expires or its terminated without any Shares or Warrants being purchased thereunder or (b) the Purchaser (or any permitted assignee) fails to purchase Shares or Warrants validly tendered and not withdrawn in violation of the terms and conditions of the Offer or the Merger Agreement, (iii) by either Diamond Shamrock or the Company if the Purchaser (or any permitted assignee) has not purchased the Shares or Warrants validly tendered and not withdrawn pursuant to the Offer in accordance with the terms thereof within 120 calendar days after the commencement of the Offer; provided, however, that the party seeking to terminate the Merger Agreement pursuant to this clause (iii) is not in material breach of the Merger Agreement (including without limitation any representation, warranty or covenant therein contained), (iv) by either Diamond Shamrock or the Company if the Merger is not consummated before March 31, 1996, despite the reasonable good faith effort of such party to effect such consummation; provided, however, that the party seeking to terminate the Merger Agreement pursuant to this clause (iv) is not in material breach of the Merger Agreement (including without limitation any representa- 28 32 tion, warranty or covenant therein contained), (v) by either Diamond Shamrock or the Company if any court of competent jurisdiction has issued an injunction permanently restraining, enjoining or otherwise prohibiting the consummation of the Offer or the Merger, which injunction has become final and nonappealable, (vi) by Diamond Shamrock if (a) the Board of Directors of the Company shall have withdrawn, modified or amended in any respect adverse to Diamond Shamrock its favorable recommendation of the Offer or the Merger or shall have resolved to do any of the foregoing, (b) prior to the expiration of the Offer, any of the representations and warranties of the Company contained in the Merger Agreement were incorrect in any material respect when made or have since become, and at the time of termination remain, incorrect in any material respect, or (c) there has been a material breach on the part of the Company in the covenants of the Company set forth herein, or any failure on the part of the Company to comply with its material obligations hereunder, including without limitation the obligation of the Company to redeem the Rights, and (vii) by the Company, prior to the expiration of the Offer, if (a)(1) any of the representations and warranties of Diamond Shamrock or the Purchaser contained in the Merger Agreement were incorrect in any material respect when made or have since become, and at the time of termination remain, incorrect in any material respect or (2) there has been a material breach on the part of Diamond Shamrock or the Purchaser in the covenants of Diamond Shamrock or the Purchaser set forth therein, or any failure on the part of Diamond Shamrock or the Purchaser to comply with its material obligations thereunder or (b) the Board of Directors of the Company, after consulting with its outside counsel and financial advisor, determines in good faith, and based in part on a written opinion of outside counsel that its fiduciary duties require that it withdraw, modify or amend in a manner adverse to Diamond Shamrock its favorable recommendation of the Offer or the Merger in order to approve an Acquisition Transaction with another party which the Board of Directors has determined in good faith is financially superior to the transaction contemplated by the Merger Agreement; provided, however, that the Company may not terminate the Merger Agreement pursuant to this clause (vii) until the Company has paid to Diamond Shamrock in full the amounts described under the caption "-- Fees and Expenses" below. In the event of the termination of the Merger Agreement as described above, no party thereto (or its directors or officers) will have any liability or further obligation under the Merger Agreement to any other party to the Merger Agreement, except as described under the caption "-- Fees and Expenses" below, and except any liability resulting from the willful breach of the Merger Agreement. Fees and Expenses. The Merger Agreement provides that, except as described in the following paragraph, whether or not the Offer or the Merger is consummated, all costs and expenses incurred in connection with the Merger Agreement and the transactions contemplated thereby will be paid by the party incurring such expenses. Pursuant to the Merger Agreement, (i) prior to the termination of the Merger Agreement by the Company as described in clause (vii) under the paragraph under the caption "-- Termination" above, or within two business days after any termination of the Merger Agreement by Diamond Shamrock or the Purchaser as described in clause (vi) of the paragraph under the caption "-- Termination" above, the Company will pay to Diamond Shamrock $7,000,000 in cash and (ii) after such termination (and in any event within two business days of receiving Diamond Shamrock's or the Purchaser's documented invoice) the Company will reimburse Diamond Shamrock and the Purchaser for the documented out-of-pocket costs and expenses incurred by Diamond Shamrock or the Purchaser in connection with the Offer and the other transactions contemplated by the Merger Agreement, including without limitation the fees and expenses of the financial advisors and counsel to Diamond Shamrock and the Purchaser and fees incurred by Diamond Shamrock or the Purchaser to obtain financing commitments for the Offer and the Merger. Amendment. The Merger Agreement may be amended at any time, but only by action taken by the Boards of Directors of Diamond Shamrock, the Purchaser and the Company and, if required by applicable law, by the stockholders of the Company. APPRAISAL RIGHTS. No appraisal rights are available in connection with the Offer. However, if the Merger is consummated, stockholders of the Company would have certain rights to dissent and demand appraisal of, and payment in cash of the fair value of, their Shares under the DGCL and Article IX of the Company's Charter ("Article IX"). Under the DGCL, such rights, if the statutory procedures were complied with, could lead to a judicial determination of the fair value (excluding any element of value arising from the 29 33 accomplishment or expectation of the Merger) required to be paid in cash to such dissenting holders for their Shares. Any such judicial determination of the fair value of Shares could be based upon considerations other than, or in addition to, the price paid in the Offer and the market value of the Shares, including asset values and the investment value of the Shares. The value so determined could be more or less than the purchase price per Share pursuant to the Offer or the consideration per Share to be paid in the Merger. Article IX provides dissenting stockholders with certain rights in addition to those provided under the DGCL. If the Offer is consummated, the Purchaser will become an Interested Stockholder (as defined below). As a result, dissenting stockholders will be entitled to the benefits of the provisions of Article IX. Among other things, Article IX provides that the Company must pay the costs and expenses incurred by stockholders in any appraisal proceeding and that the minimum fair value of the Shares in any appraisal proceeding will be the greater of (i) the highest price paid by the Interested Stockholder for any Shares or (ii) the highest closing price of the Shares during the 30-calendar-day periods prior to (a) the date of the announcement of the Merger and (b) the date on which the Interested Stockholder became an Interested Stockholder. For purposes of Article IX, an Interested Stockholder is defined as any person or entity who is (1) the beneficial owner of 15% or more of the Shares or (2) an Affiliate (as defined in Rule 12b-2 promulgated under the Exchange Act) of the Company who was the beneficial owner of 15% of more of the Shares at any time during the two-year period preceding the date of the announcement of a merger. GOING PRIVATE TRANSACTIONS. The Merger would have to comply with applicable federal law. Rule 13e-3 under the Exchange Act is applicable to certain "going private" transactions. The Purchaser does not believe that Rule 13e-3 will be applicable to the Merger unless the Merger is consummated more than one year after termination of the Offer and the Purchaser has become an affiliate of the Company as a result of the Offer, or the Merger provides for the payment of consideration less than that paid pursuant to the Offer. If applicable, Rule 13e-3 would require, among other things, that certain financial information concerning the Company and certain information relating to the fairness of such transaction and the consideration offered to minority stockholders be filed with the Commission and distributed to minority stockholders prior to the consummation of such transaction. 15. CERTAIN LEGAL MATTERS. GENERAL. Except as described below, based on information provided by the Company and other publicly available information concerning the Company, neither Diamond Shamrock nor the Purchaser is aware of any license or regulatory permit that appears to be material to the business of the Company and that might be adversely affected by the Purchaser's acquisition of Shares or Warrants pursuant to the Offer or the Merger, or of any approval or other action by any governmental authority or public body, domestic or foreign, that would be required for the acquisition or ownership of Shares or Warrants by the Purchaser pursuant to the Offer or the Merger (as provided for in the Merger Agreement as presently in effect) or any state takeover statute that is applicable to the Offer or the Merger. Should any such approval or other action be required, or any such state takeover statute be applicable, it is presently contemplated that such approval or action could be sought or compliance with such takeover statute would be effected, as applicable, except as described below under "State Takeover Statutes." While the Purchaser does not currently intend to delay acceptance for payment of Shares or Warrants tendered pursuant to the Offer pending the outcome of any such matter, there can be no assurance that any such approval or other action, if needed, would be obtained without substantial conditions or that adverse consequences might not result to the Company's business or that certain parts of Diamond Shamrock's or the Company's business might not have to be disposed of in the event that such approvals were not obtained or such other actions were not taken or in order to obtain any such approval or other action. If certain types of adverse action are taken with respect to the matters discussed below, the Purchaser could decline to accept for payment or pay for any Shares or Warrants tendered (see Section 6) or extend the period of time during which the Offer is open (see Section 1). HSR ACT. Under the HSR Act, certain acquisition transactions may not be consummated unless certain information has been furnished to the Antitrust Division and the FTC and certain waiting period requirements have been satisfied. The acquisition of Shares or Warrants pursuant to the Offer is subject to these requirements. See Section 6. 30 34 Under the HSR Act, the purchase of Shares pursuant to the Offer cannot be made until the expiration of a 15-calendar-day waiting period after the furnishing of certain required information and documentary material to the Antitrust Division and the FTC with respect to the Offer (unless earlier terminated pursuant to a request therefor). If, within such 15-calendar-day waiting period, either the Antitrust Division or the FTC requests additional information or documentary material relevant to the Offer from Diamond Shamrock or the Purchaser, the waiting period will be extended for an additional period of 10 calendar days following the date of substantial compliance with such request. Only one extension of the waiting period pursuant to a request for additional information is authorized by the rules promulgated under the HSR Act. Thereafter, such waiting period may be extended only by court order or by agreement of the Purchaser. A request for additional information issued to the Company cannot extend the waiting period. Diamond Shamrock filed a Notification and Report Form with respect to the Offer under the HSR Act on November 8, 1995, and the required waiting period with respect to the Offer will expire at 11:59 p.m., New York City time, on November 23, 1995, unless Diamond Shamrock or the Purchaser receives a request for additional information or documentary material prior thereto. Federal and state antitrust enforcement agencies frequently scrutinize the legality under the antitrust laws of transactions such as the proposed purchase of the Shares and Warrants by the Purchaser pursuant to the Offer. At any time before or after such purchase, any such agency could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the transaction or seeking divestiture of the Shares and Warrants so acquired or divestiture of substantial assets of Diamond Shamrock, the Purchaser or the Company. Litigation seeking similar relief could be brought by private parties under certain circumstances. There can be no assurance that a challenge to the Offer on antitrust grounds will not be made, or if such a challenge is made, what the result will be. See Section 6 for certain conditions to the Offer, including conditions with respect to litigation and certain governmental actions. STATE TAKEOVER STATUTES. A number of states have adopted "takeover" statutes that purport to apply to attempts to acquire corporations that are incorporated in such states, or whose business operations have substantial economic effects in such states, or which have substantial assets, securityholders, employees, principal executive offices or places of business in such states. The Purchaser does not know of any state takeover statute which, by its terms, purports to apply to the Offer, and has not complied with any such statute. To the extent that certain provisions of these statutes purport to apply to the Offer, the Purchaser believes that there are reasonable bases for contesting the validity of such application under the United States Constitution. If any person should seek to apply any state takeover statute, the Purchaser would take such action as then appears desirable, which action may include challenging the validity or applicability of any such statute in appropriate court proceedings. If it is asserted that one or more takeover statutes apply to the Offer, and it is not determined by an appropriate court that such statute or statutes do not apply or are invalid as applied to the Offer, the Purchaser might be required to file certain information with, or receive approvals from, the relevant state authorities, and the Purchaser might be unable to purchase or pay for Shares tendered pursuant to the Offer, or be delayed in continuing or consummating the Offer. In such case, the Purchaser also may not be obligated to accept for payment or pay for Shares or Warrants tendered. 16. FEES AND EXPENSES. Under the terms of its engagement letter with Wasserstein Perella & Co., Inc. ("WP&Co."), Diamond Shamrock has agreed to pay WP&Co. a fee of $1,000,000 upon the acquisition by Diamond Shamrock of 66 2/3% of the Shares. WP&Co. has received $125,000 of such fee in connection with financial advisory services provided to Diamond Shamrock pursuant to its engagement, including acting as Dealer Manager in connection with the Offer. Diamond Shamrock and the Purchaser have also agreed to reimburse WP&Co. for out-of-pocket expenses, including reasonable attorneys' fees, and WP&Co. will be indemnified against certain liabilities in connection with the Offer, including certain liabilities under the federal securities laws. The Purchaser has retained MacKenzie Partners, Inc. to act as the Information Agent and KeyCorp Shareholder Services, Inc. to act as the Depositary in connection with the Offer. The Information Agent may contact holders of Shares or Warrants by mail, telephone, telex, telegraph and personal interview and may 31 35 request brokers, dealers and other nominee stockholders to forward the Offer materials to beneficial owners. Each of the Information Agent and the Depositary will receive reasonable and customary compensation for services relating to the Offer. The Purchaser and Diamond Shamrock have also agreed to indemnify the Information Agent and the Depositary against certain liabilities and expenses in connection with the Offer, including certain liabilities under the federal securities laws. The Purchaser will not pay any fees or commissions to any broker or dealer or any other person for soliciting tenders of Shares or Warrants pursuant to the Offer (other than to the Dealer Manager and the Information Agent). Brokers, dealers, commercial banks and trust companies will, upon request, be reimbursed by the Purchaser for customary mailing and handling expenses incurred by them in forwarding offering materials to their customers. 17. MISCELLANEOUS. The Offer is being made to all holders of Shares or Warrants. The Purchaser is not aware of any jurisdiction where the making of the Offer is prohibited by administrative or judicial action pursuant to a valid statute. If the Purchaser becomes aware of any valid statute prohibiting the making of the Offer, the Purchaser will make a reasonable good faith effort to comply with such statute. If, after such reasonable good faith effort, the Purchaser cannot comply with such statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares or Warrants in such jurisdiction. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer will be made on behalf of the Purchaser by the Dealer Manager or one or more registered brokers or dealers that are licensed under the laws of such jurisdiction. No person has been authorized to give any information or make any representation on behalf of Diamond Shamrock, the Purchaser or the Company not contained in this Offer to Purchase or in the Letters of Transmittal and, if given or made, such information or representation must not be relied upon as having been authorized. Diamond Shamrock and the Purchaser have filed the Schedule 14D-1, together with all exhibits thereto, pursuant to Rule 14d-3 of the General Rules and Regulations under the Exchange Act, furnishing certain additional information with respect to the Offer. Such Tender Offer Statement and any amendments thereto, including exhibits, may be inspected and copies may be obtained from the offices of the Commission in the manner set forth in Section 10 (except that they will not be available at the regional offices of the Commission). Shamrock Acquisition Corp. November 14, 1995 32 36 ANNEX I 1. DIRECTORS AND EXECUTIVE OFFICERS OF DIAMOND SHAMROCK The following table sets forth the names, business addresses, present principal occupations or employments and material occupations, positions, offices or employments, during the last five years of the directors and executive officers of Diamond Shamrock. Unless otherwise indicated, all occupations, offices or positions of employment listed opposite an individual's name have been or were held by such individual during the course of the past five years. The principal address of Diamond Shamrock and the principal business address for each individual listed below is 9830 Colonnade Boulevard, San Antonio, Texas 78230. Unless otherwise indicated, each person identified below is employed by Diamond Shamrock. All of the persons listed below are United States citizens.
NAME AND POSITION OCCUPATION AND EMPLOYMENT HISTORY - --------------------------------- ---------------------------------------------------------- Roger R. Hemminghaus, Mr. Hemminghaus is Chairman of the Board, President and Chairman of the Board, Chief Executive Officer of Diamond Shamrock. Mr. President and Chief Executive Hemminghaus served as President of the refining and Officer marketing unit of the Company's predecessor from March 1985 until April 1987. Mr. Hemminghaus is a director of Luby's Cafeterias, Inc. and Southwestern Public Service Co. and is the Deputy Chairman of the board of directors of the Federal Reserve Bank of Dallas. Robert C. Becker, Mr. Becker has served as Vice President and Treasurer of Vice President and Treasurer Diamond Shamrock since April 1987. W. Paul Eisman, Mr. Eisman became Vice President and Group Vice President/Group Executive Executive -- Manufacturing in June 1995. During the five years prior to that time, Mr. Eisman served in various positions with Diamond Shamrock, including Director -- Crude Oil Supply, Assistant to the Chairman and Plant Manager of the McKee Refinery. Timothy J. Fretthold, Mr. Fretthold is Senior Vice President and General Counsel Senior Vice President and of Diamond Shamrock. He served as a Group Vice President General Counsel and General Counsel of Diamond Shamrock from April 1987 to June 1989 and as Senior Vice President/Group Executive and General Counsel from June 1989 through February 1995. Gary E. Johnson, Mr. Johnson has served as Vice President and Controller of Vice President and Controller Diamond Shamrock since April 1987. William R. Klesse, Mr. Klesse is Executive Vice President of Diamond Executive Vice President Shamrock. He served as Group Vice President -- Development and New Ventures of Diamond Shamrock from May 1988 to June 1989 and as Senior Vice President/Group Executive from that date until February 1995. Mr. Klesse served as Group Vice President -- Planning and Public Affairs of Diamond Shamrock from April 1987 through May 1988. J. Robert Mehall, Mr. Mehall is Executive Vice President of Diamond Executive Vice President Shamrock. He served as Group Vice President -- Supply of the Company from April 1987 to June 1989 and as Senior Vice President/Group Executive from that date until February 1995. A.W. O'Donnell, Mr. O'Donnell is President/Marketing and Senior Vice President/Marketing and President of Diamond Shamrock. He served as Group Vice Senior Vice President President -- Marketing of Diamond Shamrock from April 1987 to June 1989 and as Senior Vice President/Group Executive from that date until February 1995.
I-1 37
NAME AND POSITION OCCUPATION AND EMPLOYMENT HISTORY - --------------------------------- ---------------------------------------------------------- B. Charles Ames, Mr. Ames is a partner of Clayton & Dubilier, Inc. (an Director investment firm). Mr. Ames served as Chairman and Chief Executive Officer of The Uniroyal Goodrich Tire Company until May 1990 and as Chairman and/or Chief Executive Officer of Acme-Cleveland Corporation until October 1987. Mr. Ames is a director of M.A. Hanna Company, The Progressive Corporation and Warner-Lambert Company. E. Glenn Biggs, Mr. Biggs is President of Biggs & Co., (a corporation Director engaged in developmental projects and financial planning). He was the Chairman and Chief Executive Officer of Gill Companies until July 1989. Mr. Biggs served as the Vice Chairman of the Board and Chairman of the Executive Committee of InterFirst Bank, San Antonio, N.A. until May 1987. Mr. Biggs is a director of Central and Southwest Corporation, Southwestern Bancorp, Inc., Zachry, Inc., Bolivian Power Corporation, Beacon Group and Bradford National Life. W.E. Bradford, Mr. Bradford is President and Chief Operating Officer of Director Dresser Industries, Inc. Mr. Bradford has been with Dresser Industries, Inc. since 1970 and has held various positions in production and management. In 1988 Mr. Bradford was appointed President and Chief Executive Officer of Dresser-Rand Company. He was elected to his present position in March 1992. Mr. Bradford serves on the Board of Trustees of the Manufacturers' Alliance for Productivity and Innovation, is a member of the Board of Directors of the Petroleum Equipment Suppliers Association and is a member of the American Petroleum Institute. Mr. Bradford serves on the Board of Directors of Dresser Industries, Inc. and on the Board of Directors of Oryx Energy Company. Lauro F. Cavazos, Dr. Cavazos is adjunct Professor of Community Health and Director acting Chairman, Tufts University School of Medicine. He has been a management and education consultant since 1991. Dr. Cavazos was the United States Secretary of Education from September 1988 to December 1990. Prior to being appointed Secretary of Education, he served as President and Chief Executive Officer of Texas Tech University and Texas Tech University Health Sciences Center. Dr. Cavazos is a director of Luby's Cafeterias, Inc. W.H. Clark, Mr. Clark is the retired Chief Executive Officer and Director Chairman of the Board of Directors of Nalco Chemical Company. He was the President and Chief Executive Officer of Nalco Chemical Company from 1982 until 1990, and Chairman of the Board of Directors and Chief Executive Officer from 1984 until 1994. Mr. Clark is a member of the Board of Directors of NICOR, Inc. and its principal subsidiary, Northern Illinois Gas Company; USG Corporation and its subsidiary, United States Gypsum Co.; James River Corporation; Bethlehem Steel Corporation; and Merrill Lynch Corp. William L. Fisher, Dr. Fisher is Professor and the Leonidas T. Banous Chair Director in Mineral Resources at the University of Texas at Austin. Dr. Fisher served as the Director of the Bureau of Economic Geology from 1970 to 1994, with the exception of 1975-1977, when he served as Assistant Secretary for Energy and Minerals in the Department of the Interior. Dr. Fisher is a member of the National Academy of Engineering and is a director of Pogo Producing Company.
I-2 38
NAME AND POSITION OCCUPATION AND EMPLOYMENT HISTORY - --------------------------------- ---------------------------------------------------------- Bob Marbut, Mr. Marbut has been Chairman and Chief Executive Officer Director of Argyle Communications, Inc. since January 1992, Chief Executive Officer of Argyle Television Holding, Inc. since June 1993 and Chairman and Chief Executive Officer of Argle Television Holding, II since August 1994. Prior to 1992, Mr. Marbut was President and Chief Executive Officer of Harte-Hanks Communications, Inc. and served one year as Vice Chairman of that Company. He is a director of Premark International, Inc., Tracor, Inc., Argyle Television Hold- ing, Inc., Argyle Television Holding II and Katz Media Corporation. Katherine D. Ortega, Ms. Ortega was an alternate representative of the United Director States to the 45th General Assembly of the United Nations 1990-1991. She served as the 38th Treasurer of the United States, from 1983 to 1989. Prior to joining the Treasury Department as Treasurer, Ms. Ortega served as a Commissioner on the Copyright Royalty Tribunal and was a member of the President's Advisory Committee on Small and Minority Business. Ms. Ortega is a director of Ralston Purina Company, Long Island Lighting Company, The Paul Revere Corporation, Rayonier, Inc. and Kroger Co. She also serves as director of Catalyst, and is a member of the United States Comptroller General's Consultant Panel.
2. DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER The following table set forth the names, business addresses, present principal occupations or employments and material occupations, positions, offices or employments, during the last five years of the directors and executive officers of the Purchaser. The principal address of the Purchaser and the principal business address for each individual listed below is 9830 Colonnade Boulevard, San Antonio, Texas 78230. Unless otherwise indicated, each person identified below is employed by Diamond Shamrock. All of the persons listed below are United States citizens.
NAME AND POSITION OCCUPATION AND EMPLOYMENT HISTORY - --------------------------------- ---------------------------------------------------------- Roger R. Hemminghaus See "Directors and Executive Officers of Diamond Shamrock" Chairman of the Board and Chief above. Executive Officer A. W. O'Donnell See "Directors and Executive Officers of Diamond Shamrock" President above. J. Robert Mehall See "Directors and Executive Officers of Diamond Shamrock" Executive Vice President above. William R. Klesse See "Directors and Executive Officers of Diamond Shamrock" Executive Vice President above. Timothy J. Fretthold See "Directors and Executive Officers of Diamond Shamrock" Vice President and Secretary above. Robert C. Becker See "Directors and Executive Officers of Diamond Shamrock" Treasurer above. Jerry D. King Mr. King is Assistant General Counsel and Secretary of Director and Assistant Diamond Shamrock. He has served as an attorney in the Secretary Diamond Shamrock legal department since 1987.
I-3 39 Manually signed facsimile copies of the Letters of Transmittal will be accepted. Letters of Transmittal and certificates for Shares or Warrants should be sent or delivered by each securityholder of the Company or his, her or its broker, dealer, commercial bank or trust company to the Depositary at one of its addresses set forth below: The Depositary for the Offer is: KEYCORP SHAREHOLDER SERVICES, INC. By Mail: By Overnight Mail: National Convenience Stores Inc. Tender Offer KeyCorp Shareholder Services, Inc. c/o KeyCorp Shareholder Services, Inc. 4900 Tiedeman Road P.O. Box 6477 Brooklyn, Ohio 44144 Cleveland, Ohio 44101-1477 Attn: ReOrg Department By Hand: KeyCorp Shareholder Services, Inc. KeyCorp Shareholder Services, Inc. 4900 Tiedeman Road c/o Society Trust Company of New York Brooklyn, Ohio 44144 5 Hanover Square, 10th Floor Attn: ReOrg Department New York, NY 10004
By Facsimile Transmission: (For Eligible Institutions Only) (216) 813-4268 For Confirmation (216) 813-4554 Questions and requests for assistance may be addressed to the Dealer Manager or the Information Agent at their respective addresses and telephone numbers set forth below. Additional copies of this Offer to Purchase, the Letters of Transmittal or other tender offer materials, may be obtained from the Information Agent at its address and telephone number set forth below. Holders of Shares or Warrants may also contact brokers, dealers, commercial banks or trust companies for assistance concerning the Offer. The Information Agent for the Offer is: MACKENZIE PARTNERS, INC. 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (call collect) or CALL TOLL FREE (800) 322-2885 The Dealer Manager for the Offer is: WASSERSTEIN PERELLA & CO., INC. 31 West 52nd Street New York, New York 10019 Call Collect: (212) 969-2700 I-4 EX-99.A2 3 LETTER OF TRANSMITTAL COMMON STOCK 1 LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED RIGHTS TO PURCHASE PREFERRED STOCK) OF NATIONAL CONVENIENCE STORES INCORPORATED PURSUANT TO THE OFFER TO PURCHASE DATED NOVEMBER 14, 1995 BY SHAMROCK ACQUISITION CORP. A WHOLLY OWNED SUBSIDIARY OF DIAMOND SHAMROCK, INC. *************************************************************************** * * * THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW * * YORK CITY TIME, ON WEDNESDAY, DECEMBER 13, 1995, UNLESS THE OFFER IS * * EXTENDED. * * * *************************************************************************** The Depositary for the Offer is: KEYCORP SHAREHOLDER SERVICES, INC. By Mail: By Overnight Mail: National Convenience Stores Inc. Tender Offer KeyCorp Shareholder Services, Inc. c/o KeyCorp Shareholder Services, Inc. 4900 Tiedeman Road P.O. Box 6477 Brooklyn, Ohio 44144 Cleveland, Ohio 44101-1477 Attn: ReOrg Department By Hand: KeyCorp Shareholder Services, Inc. KeyCorp Shareholder Services, Inc. 4900 Tiedeman Road c/o Society Trust Company of New York Brooklyn, Ohio 44144 5 Hanover Square, 10th Floor Attn: ReOrg Department New York, NY 10004
By Facsimile Transmission: (For Eligible Institutions Only) (216) 813-4268 For Confirmation (216) 813-4554 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS TO A FACSIMILE NUMBER OTHER THAN ONE LISTED ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF TRANSMITTAL IN THE APPROPRIATE SPACE PROVIDED THEREFOR AND COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH BELOW. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. This Letter of Transmittal is to be used either if certificates for Shares (as such term is defined below) are to be forwarded herewith or, unless an Agent's Message (as defined in the Offer to Purchase) is utilized, if delivery of the Shares is to be made by book-entry transfer to the account maintained by the Depositary at The Depository Trust Company, the Midwest Securities Trust Company or the Philadelphia Depository Trust Company (individually, a "Book-Entry Transfer Facility" and, collectively, the "Book-Entry Transfer Facilities") pursuant to the procedures set forth in Section 2 of the Offer to Purchase. Stockholders whose certificates for Shares are not immediately available or who cannot deliver their certificates or deliver confirmation of the book-entry transfer of their Shares into the Depositary's account at a Book-Entry Transfer Facility ("Book-Entry Confirmation") and all other documents required hereby to the Depositary on or prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase) must tender their Shares according to the guaranteed delivery procedures set forth in Section 2 of the Offer to Purchase. See Instruction 2. Delivery of documents to a Book-Entry Transfer Facility does not constitute delivery to the Depositary. 2 ______________________________________________________________________________________________________________________________ DESCRIPTION OF SHARES TENDERED ______________________________________________________________________________________________________________________________ NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN, IF BLANK, EXACTLY AS SHARES TENDERED NAME(S) APPEAR(S) ON CERTIFICATE(S)) (ATTACH ADDITIONAL LIST IF NECESSARY) _____________________________________________________________________________________________________________________________ TOTAL NUMBER OF SHARES NUMBER CERTIFICATE REPRESENTED BY OF SHARES NUMBER(S)* CERTIFICATE(S)* TENDERED** _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ TOTAL SHARES _____________________________________________________________________________________________________________________________ * Need not be completed by stockholders tendering by book-entry transfer. ** Unless otherwise indicated, it will be assumed that all Shares being delivered to the Depositary are being tendered. See Instruction 4. _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution: _______________________________________________ Check box of applicable Book-Entry Transfer Facility: / / The Depository Trust Company / / Midwest Securities Trust Company / / Philadelphia Depository Trust Company Account Number: ________________________________________________________________ Transaction Code Number: _______________________________________________________ / / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s): _____________________________________________ Window Ticket Number (if any): _______________________________________________ Date of Execution of Notice of Guaranteed Delivery: __________________________ Name of Institution that Guaranteed Delivery: ________________________________ If delivered by book-entry transfer, check box of applicable Book-Entry Facility: / / The Depository Trust Company / / Midwest Securities Trust Company / / Philadelphia Depository Trust Company Account Number: _______________________________________________________________ Transaction Code Number: ______________________________________________________ 2 3 NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ CAREFULLY THE ACCOMPANYING INSTRUCTIONS. Ladies and Gentlemen: The undersigned hereby tenders to Shamrock Acquisition Corp. (the "Purchaser"), a wholly owned subsidiary of Diamond Shamrock, Inc. ("Diamond Shamrock"), the above-described shares of Common Stock, par value $.01 per share (the "Shares"), of National Convenience Stores Incorporated (the "Company"), together with an equal number of the associated rights to purchase preferred stock (the "Rights") issued pursuant to the Rights Agreement, dated as of August 31, 1995 (the "Rights Agreement"), between the Company and Boatmen's Trust Company, as Rights Agent, pursuant to the Purchaser's offer to purchase all of the outstanding Shares at the purchase price of $27.00 per Share (and associated Right), net to the tendering stockholder (pre-tax) in cash without interest, on the terms and subject to the conditions set forth in the Offer to Purchase, dated November 14, 1995 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in accordance with this Letter of Transmittal (which, together with any amendments or supplements thereto and the Letter of Transmittal to be used to tender Warrants to purchase Shares, collectively constitute the "Offer"). All references herein to Rights include all benefits that may inure to stockholders of the Company pursuant to the Rights Agreement, and unless the context requires otherwise, all references herein to Shares include the associated Rights. The undersigned understands that the Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to Diamond Shamrock or one or more direct or indirect subsidiaries or affiliates of Diamond Shamrock the right to purchase Shares pursuant to this Offer. Subject to, and effective upon, acceptance for payment of the Shares tendered herewith in accordance with the terms and subject to the conditions of the Offer, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Purchaser all right, title and interest in and to all the Shares that are being tendered hereby (and any and all dividends on the Shares or other shares, rights or other securities or distributions issued or issuable in respect of such Shares that are declared or paid on or after November 8, 1995, including without limitation the amounts payable upon redemption of the Rights (collectively, "Distributions")), and irrevocably constitutes and appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares (and any Distributions) with full power of substitution and resubstitution (such power of attorney is an irrevocable power coupled with an interest in the tendered Shares), to (i) deliver certificates for such Shares (and any Distributions), or transfer ownership of such Shares (and any Distributions) on the account books maintained by a Book-Entry Transfer Facility, together, in either such case, with all accompanying evidences of transfer and authenticity to, or upon the order of, the Purchaser upon receipt by the Depositary, as the undersigned's agent, of the purchase price (adjusted, if appropriate, as provided in the Offer to Purchase), (ii) present such Shares (and any Distributions) for transfer on the books of the Company, and (iii) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares (and any Distributions), all in accordance with the terms of the Offer. The undersigned hereby irrevocably appoints J. Robert Mehall and Timothy J. Fretthold, and each of them or any other designee of the Purchaser as the attorney-in-fact and proxy of the undersigned, each with full power of substitution and resubstitution, to vote in such manner as each such attorney and proxy or his substitute shall in his sole discretion deem proper, and otherwise act (including pursuant to written consent) with respect to all the Shares tendered hereby which have been accepted for payment by the Purchaser prior to the time of such vote or action (and any Distributions), which the undersigned is entitled to vote at any meeting of stockholders (whether annual or special and whether or not an adjourned meeting) of the Company, or consent in lieu of any such meeting, or otherwise. This power of attorney and proxy is coupled with an interest in the Company and in the Shares and is irrevocable and is granted in consideration of, and is effective upon, the Purchaser's oral or written notice to the Depositary of its acceptance for payment of such Shares in accordance with the terms of the Offer. Such acceptance for payment shall revoke all prior proxies granted by the undersigned at any time with respect to such Shares (and any Distributions) and no subsequent proxies will be given (and if given will be deemed not to be effective) with respect thereto by the undersigned. The undersigned acknowledges that the Purchaser expressly reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon the acceptance for payment of such Shares, the Purchaser or the Purchaser's designee is able to exercise full voting and other rights of a record and beneficial holder with respect to such Shares (and any Distributions). The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered hereby (and any Distributions) and that, when the same are accepted for payment by the Purchaser, the Purchaser will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and the same will not be subject to any adverse claim. The undersigned, upon request, will execute and deliver any signature guarantee and any additional documents deemed by the Depositary or the Purchaser to be necessary or desirable to complete or confirm the sale, assignment and transfer of the Shares tendered hereby (and any Distributions). In addition, the undersigned shall promptly remit and transfer to the Depositary for the account of the Purchaser any and all Distributions issued or issuable in respect of the Shares declared or paid on or after November 8, 1995, accompanied by appropriate documentation of transfer, and, pending such remittance or appropriate assurance thereof, the Purchaser shall be entitled to all rights and privileges as owner of such Distributions and may withhold the entire purchase price or deduct from the purchase price the amount or value thereof, as determined by the Purchaser in its sole discretion. All authority conferred or agreed to be conferred by this Letter of Transmittal shall not be affected by, and shall survive, the death or incapacity of the undersigned and any obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators, trustees in bankruptcy and personal and legal representatives of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable. The undersigned understands that the Purchaser's acceptance for payment of Shares tendered pursuant to any one of the procedures described in Section 2 of the Offer to Purchase and in the instructions hereto will constitute a binding agreement between the undersigned and the Purchaser on the terms and subject to the conditions of the Offer. Without limiting the foregoing, if the price to be paid in the Offer is amended in accordance with the Offer, the price to be paid to the undersigned will be the amended price notwithstanding the fact that a different price is stated in the Letter of Transmittal. Unless otherwise indicated herein under "Special Payment Instructions," please issue the check for the purchase price and/or any certificates for Shares not tendered or accepted for payment in the name(s) of the undersigned. Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail the check for the purchase price and/or return any certificates for Shares not tendered or accepted for payment (and accompanying documents, as appropriate) to the undersigned at the address shown below the undersigned's signature. In the event that both the Special Delivery Instructions and the Special Payment Instructions are completed, please issue the check for the purchase price and/or any certificates for Shares not tendered or accepted for payment in the name of, and deliver said check and/or return such certificates to the person or persons so indicated. Unless otherwise indicated under "Special Payment Instructions," in the case of a book-entry delivery of Shares, please credit the account maintained at the Book-Entry Transfer Facility indicated above with any Shares not accepted for payment. The undersigned recognizes that the Purchaser has no obligation pursuant to the Special Payment Instructions to transfer any Shares from the name of the registered holder thereof if the Purchaser does not accept for payment any of the Shares so tendered. 3 4 ________________________________________________________________________________ SPECIAL PAYMENT INSTRUCTIONS (See Instructions 1, 4, 5, 6 and 7) (SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE) To be completed ONLY if certificates for Shares not tendered or not accepted for payment or the check for the purchase price of Shares (including the associated Rights) purchased are to be issued in the name of someone other than the undersigned, or if Shares delivered by book-entry transfer which are not accepted for payment are to be returned by credit to an account maintained at a Book-Entry Transfer Facility other than the account indicated above. Issue: / / Check / / Certificates to: Name: _______________________________________________________________________ (PLEASE PRINT) Address: ____________________________________________________________________ ____________________________________________________________________________ (INCLUDE ZIP CODE) ____________________________________________________________________________ (TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER) / / Credit unpurchased Shares delivered by book-entry transfer to the Book-Entry Transfer Facility account set forth below. Check appropriate box: / / The Depository Trust Company / / Midwest Securities Trust Company / / Philadelphia Depository Trust Company ____________________________________________________________________________ (BOOK-ENTRY TRANSFER FACILITY ACCOUNT NUMBER, IF APPLICABLE) ________________________________________________________________________________ ________________________________________________________________________________ SPECIAL DELIVERY INSTRUCTIONS (See Instructions 1, 4, 5, 6 and 7) (SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE) To be completed ONLY if certificates for Shares not tendered or not accepted for payment and/or the check for the purchase price of Shares (including the associated Rights) purchased are to be sent to someone other than the undersigned, or to the undersigned at an address other than that shown above. Mail: / / Check / / Certificates to: Name: _______________________________________________________________________ (PLEASE PRINT) Address: ____________________________________________________________________ ____________________________________________________________________________ (INCLUDE ZIP CODE) ____________________________________________________________________________ (TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER) ________________________________________________________________________________ 4 5 ________________________________________________________________________________ IMPORTANT STOCKHOLDER SIGN HERE (COMPLETE SUBSTITUTE FORM W-9 ON REVERSE SIDE) ________________________________________________________________________________ ________________________________________________________________________________ (SIGNATURE(S) OF STOCKHOLDER(S)) Dated:______________________________, 1995 (Must be signed by registered holder(s) exactly as name(s) appear(s) on certificate(s) for the Shares or on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by trustees, executors, administrators, guardians, attorneys-in-fact, agents, officers of corporations or others acting in a fiduciary or representative capacity, please provide the following information. See Instruction 5.) Name(s): _______________________________________________________________________ (PLEASE PRINT) Capacity (full title): _________________________________________________________ (IF REQUIRED -- SEE INSTRUCTION 5) Address: _______________________________________________________________________ (INCLUDE ZIP CODE) Area Code and Telephone Number: ________________________________________________ Tax Identification or Social Security No.: ___________________________________________________________ GUARANTEE OF SIGNATURE(S) (IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5) Authorized Signature: __________________________________________________________ Name: __________________________________________________________________________ (PLEASE PRINT) Title: _________________________________________________________________________ Name of Firm: __________________________________________________________________ Address: _______________________________________________________________________ (INCLUDING ZIP CODE) Area Code and Telephone Number: ________________________________________________ Dated:______________________________, 1995 ________________________________________________________________________________ 5 6 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of Transmittal is required if (i) this Letter of Transmittal is signed by the registered holder(s) (which term, for purposes of the Offer includes any participant in a Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Shares) of the Shares tendered herewith, unless such registered holder(s) has completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" herein or (ii) such Shares are tendered for the account of a financial institution (including most commercial banks, savings and loan associations and brokerage houses) that is a member of a signature guarantee program within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (collectively, "Eligible Institutions"). In all other cases, all signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution. If the certificates are registered in the name of a person other than the signer of this Letter of Transmittal, or if payment is to be made or certificates for any untendered or unpurchased Shares are to be issued to a person other than the registered holder, then the tendered certificates for Shares must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered owner(s) appear(s) on the certificates with the signatures on the certificates or stock powers guaranteed as aforesaid. See Instruction 5. 2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of Transmittal is to be completed by stockholders either if certificates are to be forwarded herewith or if tenders of Shares are to be made pursuant to the procedures for delivery by book-entry transfer set forth in Section 2 of the Offer to Purchase. Certificates for all physically tendered Shares, or any Book-Entry Confirmation of Shares, as well as a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof), unless an Agent's Message (as defined in Section 2 of the Offer to Purchase) is utilized, together with any required signature guarantees and any other documents required by this Letter of Transmittal, must be received by the Depositary at one of its addresses set forth herein on or prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase), or the tendering stockholder must comply with the guaranteed delivery procedures set forth below. Stockholders whose certificates for Shares are not immediately available or who cannot deliver their certificates and all other required documents to the Depositary on or prior to the Expiration Date, or who cannot complete the procedure for book-entry transfer on or prior to the Expiration Date, may tender their Shares by properly completing and duly executing the Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedure set forth in Section 2 of the Offer to Purchase. Pursuant to such procedure, (i) such tender must be made by or through an Eligible Institution, (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Purchaser, must be received by the Depositary on or prior to the Expiration Date, and (iii) the certificates for all physically tendered Shares, in proper form for transfer, or Book-Entry Confirmation of Shares, together with a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof), unless an Agent's Message is utilized, with any required signature guarantees and any other documents required by this Letter of Transmittal, must be received by the Depositary within three New York Stock Exchange, Inc. trading days after the date of execution of such Notice of Guaranteed Delivery, as provided in Section 2 of the Offer to Purchase. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE CERTIFICATES FOR SHARES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH A BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER AND, EXCEPT AS OTHERWISE PROVIDED IN THIS INSTRUCTION 2, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative, conditional or contingent tenders will be accepted and no fractional Shares will be purchased. All tendering stockholders, by execution of this Letter of Transmittal (or facsimile thereof), waive any right to receive any notice of the acceptance of their Shares for payment. 3. INADEQUATE SPACE. If the space provided herein is inadequate, the certificate numbers and/or the number of Shares should be listed on a separate signed schedule attached hereto. 4. PARTIAL TENDERS. (Not applicable to stockholders who tender by book-entry transfer.) If fewer than all the Shares evidenced by any certificate submitted are to be tendered, fill in the number of Shares which are to be tendered in the box entitled "Number of Shares Tendered." In any such case, new certificate(s) for the remainder of the Shares that were evidenced by the old certificate(s) will be sent to the registered holder, unless otherwise provided in the appropriate box on this Letter of Transmittal, as soon as practicable after the Expiration Date. All Shares represented by certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond exactly with the name(s) as written on the face of the certificate(s) without alteration, enlargement or any change whatsoever. If any of the Shares tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any tendered Shares are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of certificates. If this Letter of Transmittal or any certificates or stock powers are signed by a trustee, executor, administrator, guardian, attorney-in-fact, agent, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to the Purchaser of such person's authority so to act must be submitted. When this Letter of Transmittal is signed by the registered owner(s) of the Shares listed and transmitted hereby, no endorsements of certificates or separate stock powers are required unless payment is to be made or certificates for Shares 6 7 not tendered or purchased are to be issued to a person other than the registered owner(s). Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered owner(s) of the Shares listed, the certificate(s) must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered owner or owners appear on the certificates. Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution. 6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6, the Purchaser will pay or cause to be paid any stock transfer taxes with respect to the transfer and sale of purchased Shares to it or its order pursuant to the Offer. If payment of the purchase price is to be made to, or if certificates for Shares not tendered or purchased are to be registered in the name of, any person(s) other than the registered holder, or if tendered certificates are registered in the name of any person other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder or such person) payable on account of the transfer to such person(s) will be deducted from the purchase price unless satisfactory evidence of the payment of such taxes or exemption therefrom is submitted. EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF TRANSMITTAL. 7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check and/or certificates for unpurchased or untendered Shares are to be issued in the name of a person other than the signer of this Letter of Transmittal or if a check is to be sent and/or such certificates are to be returned to someone other than the signer of this Letter of Transmittal or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. Stockholders tendering Shares by book-entry transfer may request that Shares not purchased be credited to such account maintained at a Book-Entry Transfer Facility as such stockholder may designate under "Special Payment Instructions" herein. If no such instructions are given, such Shares not purchased will be returned by crediting the account at the Book-Entry Transfer Facility designated above. 8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance may be directed to the Dealer Manager or the Information Agent at their respective addresses and telephone numbers set forth below. Additional copies of the Offer to Purchase, this Letter of Transmittal, the Notice of Guaranteed Delivery and the Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 may be obtained from the Information Agent at its address and telephone number set forth below or from your broker, dealer, commercial bank or trust company. 9. WAIVER OF CONDITIONS. The conditions of the Offer (except for the Minimum Condition (as defined in the Offer to Purchase)) may be waived by the Purchaser, in whole or in part, at any time and from time to time in the Purchaser's sole discretion, in the case of any Shares tendered. 10. SUBSTITUTE FORM W-9. The tendering stockholder (or other payee) is required to provide the Depositary with a correct Taxpayer Identification Number ("TIN") on Substitute Form W-9 below, and to certify that the stockholder (or other payee) is not subject to backup withholding of federal income tax. If a tendering stockholder is subject to backup withholding, the stockholder must cross out item (2) of the Certification box of the Substitute Form W-9. Failure to provide the information on the Substitute Form W-9 may subject the tendering stockholder to 31% federal income tax withholding on the payment of the purchase price and to a $50 penalty imposed by the Internal Revenue Service (the "IRS"). The box in Part 2 of the Substitute Form W-9 may be checked if the tendering stockholder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the stockholder does not provide a TIN by the time of payment, 31% of all reportable payments made to such stockholder (or other payee) will be withheld. However, such amounts will be refunded to the stockholder (or other payee) if he or she provides a TIN within 60 days. 11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate(s) representing Shares has been lost, destroyed or stolen, the stockholder should promptly notify the Depositary. The stockholder will then be instructed as to the steps that must be taken in order to replace the certificate(s). This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost or destroyed certificates have been followed. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A MANUALLY EXECUTED FACSIMILE THEREOF), TOGETHER WITH CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY, ON OR PRIOR TO THE EXPIRATION DATE. 7 8 IMPORTANT TAX INFORMATION Backup Withholding. Under federal income tax law, a stockholder whose tendered Shares are accepted for payment is required to provide the Depositary with such stockholder's correct TIN on Substitute Form W-9, which in the case of a surrendering stockholder who is an individual, is his or her social security number, and to certify that the stockholder is not subject to backup withholding. If the Depositary is not provided with the correct TIN, the stockholder may be subject to a $50 penalty imposed by the IRS. In addition, payments that are made to such stockholder with respect to Shares purchased pursuant to the Offer may be subject to 31% backup withholding. Certain stockholders (including, among others, all corporations and certain foreign individuals and entities) are not subject to these backup withholding and reporting requirements and should indicate their status by writing "exempt" across the face of the Substitute Form W-9. In order for a noncorporate foreign stockholder to qualify as an exempt recipient, that stockholder must complete and sign the main signature form and submit a Form W-8, Certificate of Foreign Status, signed under penalties of perjury, attesting to that stockholder's exempt status. A Form W-8 may be obtained from the Depositary. Exempt stockholders, other than noncorporate foreign stockholders, should furnish their TIN, write "Exempt" on the face of the Substitute Form W-9 below and sign, date and return the Substitute Form W-9 to the Depositary. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. If backup withholding applies, the Depositary is required to withhold 31% of any payments made to the stockholder or other payee. Backup withholding is not an additional income tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the IRS. If the stockholder does not provide a TIN by the time of payment, 31% of all reportable payments made to such stockholder (or other payee) will be withheld. However, such amounts will be refunded to the stockholder (or other payee) if he or she provides a TIN within 60 days. Purpose of Substitute Form W-9. To prevent backup withholding on payments that are made to a stockholder or other payee with respect to Shares purchased pursuant to the Offer, the stockholder is required to provide the Depositary with his or her correct TIN (or the TIN of any other payee) by completing the form below certifying that the TIN provided on the Substitute Form W-9 is correct (or that such stockholder is awaiting a TIN) and that the stockholder is not subject to backup withholding because (i) the stockholder is exempt from backup withholding, (ii) the stockholder has not been notified by the IRS that the stockholder is subject to backup withholding as a result of a failure to report all interest or dividends, or (iii) the IRS has notified the stockholder that the stockholder is no longer subject to backup withholding. What Number to Give the Depositary. The stockholder is required to give the Depositary the TIN (e.g., social security number or employer identification number) of the record owner of the tendered Shares or of the most recent transferee of the tendered Shares as evidenced by endorsements on the certificates representing such Shares or any accompanying instruments of transfer. If the Shares are registered in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for information on which number to report. 8 9 PAYOR'S NAME: KEYCORP SHAREHOLDER SERVICES, INC. __________________________________________________________________________________________________________________________________ SUBSTITUTE NAME: ______________________________________ FORM W-9 PART 1 - PLEASE PROVIDE YOUR NAME, ADDRESS AND TIN IN THE BOX AT RIGHT AND CERTIFY BY ADDRESS: ___________________________________ SIGNING AND DATING BELOW. TIN: _______________________________________ Social Security Number or Employer Identification Number __________________________________________________________________________________________ Department of the Treasury Internal Revenue Service PART 2 - Awaiting TIN / / __________________________________________________________________________________________ PART 3 -- CERTIFICATION: Under penalties of perjury, I certify that (1) the number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me) and (2) I am not subject to backup withholding because (a) I am Payor's Request for exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Taxpayer Identification Service (the "IRS") that I am subject to backup withholding as a result of failure to Number (TIN) and report all interest or dividends, or (c) the IRS has notified me that I am no longer Certification subject to backup withholding. (You must cross out Item (2) above if you have been notified by the IRS that you are currently subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS that you are no longer subject to backup withholding, do not cross out Item (2)). Signature: ____________________________________ Date: __________________________________ __________________________________________________________________________________________________________________________________
________________________________________________________________________________ NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. ________________________________________________________________________________ YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 2 OF SUBSTITUTE FORM W-9 ________________________________________________________________________________ CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 31% of all reportable payments made to me will be withheld, but that such amounts will be refunded to me if I provide a taxpayer identification number within 60 days from the date of this certificate. ______________________________________ ______________________________________ Signature Date ________________________________________________________________________________ 9 10 Questions and requests for assistance may be addressed to the Dealer Manager or the Information Agent as set forth below. Additional copies of the Offer to Purchase, this Letter of Transmittal and other tender offer materials may be directed to the Information Agent as set forth below. The Information Agent for the Offer is: MACKENZIE PARTNERS, INC. 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (call collect) or CALL TOLL FREE (800) 322-2885 The Dealer Manager for the Offer is: WASSERSTEIN PERELLA & CO., INC. 31 West 52nd Street New York, New York 10019 Call Collect: (212) 969-2700 10 EX-99.A3 4 LETTER OF TRANSMITTAL WARRANTS 1 LETTER OF TRANSMITTAL TO TENDER WARRANTS TO PURCHASE SHARES OF COMMON STOCK OF NATIONAL CONVENIENCE STORES INCORPORATED PURSUANT TO THE OFFER TO PURCHASE DATED NOVEMBER 14, 1995 BY SHAMROCK ACQUISITION CORP. A WHOLLY OWNED SUBSIDIARY OF DIAMOND SHAMROCK, INC. *************************************************************************** * * * THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW * * YORK CITY TIME, ON WEDNESDAY, DECEMBER 13, 1995, UNLESS THE OFFER IS * * EXTENDED. * * * *************************************************************************** The Depositary for the Offer is: KEYCORP SHAREHOLDER SERVICES, INC. By Mail: By Overnight Delivery: National Convenience Stores Inc. Tender Offer KeyCorp Shareholder Services, Inc. c/o KeyCorp Shareholder Services, Inc. 4900 Tiedeman Road P.O. Box 6477 Brooklyn, Ohio 44144 Cleveland, Ohio 44101-1477 Attn: ReOrg Department
By Hand: KeyCorp Shareholder Services, Inc. KeyCorp Shareholder Services, Inc. 4900 Tiedeman Road c/o Society Trust Company of New York Brooklyn, Ohio 44144 5 Hanover Square, 10th Floor Attn: ReOrg Department New York, NY 10004
By Facsimile Transmission: (For Eligible Institutions Only) (216) 813-4268 For Confirmation (216) 813-4554 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS TO A FACSIMILE NUMBER OTHER THAN ONE LISTED ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF TRANSMITTAL IN THE APPROPRIATE SPACE PROVIDED THEREFOR AND COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH BELOW. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. This Letter of Transmittal is to be used either if certificates for Warrants (as such term is defined below) are to be forwarded herewith or, unless an Agent's Message (as defined in the Offer to Purchase) is utilized, if delivery of the Warrants is to be made by book-entry transfer to the account maintained by the Depositary at The Depository Trust Company, the Midwest Securities Trust Company or the Philadelphia Depository Trust Company (individually, a "Book-Entry Transfer Facility" and, collectively, the "Book-Entry Transfer Facilities") pursuant to the procedures set forth in Section 2 of the Offer to Purchase. Warrantholders whose certificates for Warrants are not immediately available or who cannot deliver their certificates or deliver confirmation of the book-entry transfer of their Warrants into the Depositary's account at a Book-Entry Transfer Facility ("Book-Entry Confirmation") and all other documents required hereby to the Depositary on or prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase) must tender their Warrants according to the guaranteed delivery procedures set forth in Section 2 of the Offer to Purchase. See Instruction 2. Delivery of documents to a Book-Entry Transfer Facility does not constitute delivery to the Depositary. 2 __________________________________________________________________________________________________________________________________ DESCRIPTION OF WARRANTS TENDERED __________________________________________________________________________________________________________________________________ NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN, IF BLANK, EXACTLY AS WARRANT(S) TENDERED NAME(S) APPEAR(S) ON CERTIFICATE(S)) (ATTACH ADDITIONAL LIST IF NECESSARY) __________________________________________________________________________________________________________________________________ TOTAL NUMBER OF WARRANTS NUMBER OF CERTIFICATE REPRESENTED BY WARRANTS NUMBER(S)* CERTIFICATE(S)* TENDERED** __________________________________________________________________________________________________________________________________ __________________________________________________________________________________________________________________________________ __________________________________________________________________________________________________________________________________ __________________________________________________________________________________________________________________________________ __________________________________________________________________________________________________________________________________ TOTAL WARRANTS __________________________________________________________________________________________________________________________________ * Need not be completed by warrantholders tendering by book-entry transfer. ** Unless otherwise indicated, it will be assumed that all Warrants being delivered to the Depositary are being tendered. See Instruction 4. __________________________________________________________________________________________________________________________________
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution: _______________________________________________ Check box of applicable Book-Entry Transfer Facility: / / The Depository Trust Company / / Midwest Securities Trust Company / / Philadelphia Depository Trust Company Account Number: ________________________________________________________________ Transaction Code Number: _______________________________________________________ / / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s): _____________________________________________ Window Ticket Number (if any): _______________________________________________ Date of Execution of Notice of Guaranteed Delivery: __________________________ Name of Institution that Guaranteed Delivery: ________________________________ If delivered by book-entry transfer, check box of applicable Book-Entry Facility: / / The Depository Trust Company / / Midwest Securities Trust Company / / Philadelphia Depository Trust Company Account Number: ________________________________________________________________ Transaction Code Number: _______________________________________________________ 2 3 NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ CAREFULLY THE ACCOMPANYING INSTRUCTIONS. Ladies and Gentlemen: The undersigned hereby tenders to Shamrock Acquisition Corp. (the "Purchaser"), a wholly owned subsidiary of Diamond Shamrock, Inc. ("Diamond Shamrock"), the above described warrants (the "Warrants") to purchase shares of Common Stock, par value $.01 per share (the "Shares"), of National Convenience Stores Incorporated (the "Company"), issued pursuant to the Warrant Agreement, dated as of March 9, 1993 (the "Warrant Agreement"), between the Company and Boatmen's Trust Company, as Warrant Agent, pursuant to the Purchaser's offer to purchase all of the outstanding Warrants at the purchase price of $9.25 per Warrant, net to the tendering warrantholder (pre-tax) in cash without interest, on the terms and subject to the conditions set forth in the Offer to Purchase, dated November 14, 1995 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in accordance with this Letter of Transmittal (which, together with any amendments or supplements thereto and the Letter of Transmittal to be used to tender Shares, collectively constitute the "Offer"). The undersigned understands that the Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to Diamond Shamrock or one or more direct or indirect subsidiaries or affiliates of Diamond Shamrock the right to purchase Warrants pursuant to this Offer. Subject to, and effective upon, acceptance for payment of the Warrants tendered herewith in accordance with the terms and subject to the conditions of the Offer, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Purchaser all right, title and interest in and to all the Warrants that are being tendered hereby (and any and all other warrants or other securities or rights issued or issuable in respect of such Warrants on or after November 8, 1995, (collectively, "Distributions")) and irrevocably constitutes and appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Warrants (and any Distributions) with full power of substitution and resubstitution (such power of attorney is an irrevocable power coupled with an interest in the tendered Warrants) to (i) deliver certificates for such Warrants (and any Distributions), or transfer ownership of such Warrants (and any Distributions) on the account books maintained by a Book-Entry Transfer Facility, together, in either such case, with all accompanying evidences of transfer and authenticity to or upon the order of, the Purchaser upon receipt by the Depositary, as the undersigned's agent, of the purchase price (adjusted, if appropriate, as provided in the Offer to Purchase), (ii) present such Warrants (and any Distributions) for transfer on the books of the Company, and (iii) receive all benefits and otherwise exercise all rights of beneficial ownership of such Warrants (and any Distributions), all in accordance with the terms of the Offer. The undersigned hereby irrevocably appoints J. Robert Mehall and Timothy J. Fretthold and each of them or any other designee of the Purchaser as the attorney-in-fact and proxy of the undersigned, each with full power of substitution and resubstitution, to vote in such manner as each such attorney and proxy or his substitute shall in his sole discretion deem proper, and otherwise act (including pursuant to written consent) with respect to all the Warrants tendered hereby which have been accepted for payment by the Purchaser prior to the time of such vote or action (and any Distributions), which the undersigned is entitled to vote at any meeting of stockholders (whether annual or special and whether or not an adjourned meeting) of the Company, or consent in lieu of any such meeting, or otherwise. This power of attorney and proxy is coupled with an interest in the Company and in the Warrants and is irrevocable and is granted in consideration of, and is effective upon, the Purchaser's oral or written notice to the Depositary of its acceptance for payment of such Warrants in accordance with the terms of the Offer. Such acceptance for payment shall revoke all prior proxies granted by the undersigned at any time with respect to such Warrants (and any Distributions) and no subsequent proxies will be given (and if given will be deemed not to be effective) with respect thereto by the undersigned. The undersigned acknowledges that the Purchaser expressly reserves the right to require that, in order for Warrants to be deemed validly tendered, immediately upon the acceptance for payment of such Warrants, the Purchaser or the Purchaser's designee is able to exercise full voting and other rights of a record and beneficial holder with respect to such Warrants (and any Distributions). The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Warrants tendered hereby (and any Distributions) and that, when the same are accepted for payment by the Purchaser, the Purchaser will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and the same will not be subject to any adverse claim. The undersigned, upon request, will execute and deliver any signature guarantee and any additional documents deemed by the Depositary or the Purchaser to be necessary or desirable to complete or confirm the sale, assignment and transfer of the Warrants (and any Distributions) tendered hereby. In addition, the undersigned shall promptly remit and transfer to the Depositary for the account of the Purchaser any and all Distributions issued or issuable in respect of the Warrants on or after November 8, 1995, accompanied by appropriate documentation of transfer, and, pending such remittance or appropriate assurance thereof, the Purchaser shall be entitled to all rights and privileges as owner of such other Distributions and may withhold the entire purchase price or deduct from the purchase price the amount or value thereof, as determined by the Purchaser in its sole discretion. All authority conferred or agreed to be conferred by this Letter of Transmittal shall not be affected by, and shall survive, the death or incapacity of the undersigned and any obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators, trustees in bankruptcy and personal and legal representatives of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable. The undersigned understands that the Purchaser's acceptance for payment of Warrants tendered pursuant to any one of the procedures described in Section 2 of the Offer to Purchase and in the instructions hereto will constitute a binding agreement between the undersigned and the Purchaser on the terms and subject to the conditions of the Offer. Without limiting the foregoing, if the price to be paid in the Offer is amended in accordance with the Offer, the price to be paid to the undersigned will be the amended price notwithstanding the fact that a different price is stated in the Letter of Transmittal. Unless otherwise indicated herein under "Special Payment Instructions," please issue the check for the purchase price and/or any certificates for Warrants not tendered or accepted for payment in the name(s) of the undersigned. Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail the check for the purchase price and/or return any certificates for Warrants not tendered or accepted for payment (and accompanying documents, as appropriate) to the undersigned at the address shown below the undersigned's signature. In the event that both the Special Delivery Instructions and the Special Payment Instructions are completed, please issue the check for the purchase price and/or any certificates for Warrants not tendered or accepted for payment in the name of, and deliver said check and/or return such certificates to the person or persons so indicated. Unless otherwise indicated under "Special Payment Instructions," in the case of a book-entry delivery of Warrants, please credit the account maintained at the Book-Entry Transfer Facility indicated above with any Warrants not accepted for payment. The undersigned recognizes that the Purchaser has no obligation pursuant to the Special Payment Instructions to transfer any Warrants from the name of the registered holder thereof if the Purchaser does not accept for payment any of the Warrants so tendered. 3 4 ________________________________________________________________________________ SPECIAL PAYMENT INSTRUCTIONS (See Instructions 1, 4, 5, 6 and 7) (SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE) To be completed ONLY if certificates for Warrants not tendered or not accepted for payment or the check for the purchase price of Warrants purchased are to be issued in the name of someone other than the undersigned, or if Warrants delivered by book-entry transfer which are not accepted for payment are to be returned by credit to an account maintained at a Book-Entry Transfer Facility other than the account indicated above. Issue: / / Check / / Certificate(s) to: Name: _______________________________________________________________________ (PLEASE PRINT) Address: ____________________________________________________________________ _____________________________________________________________________________ (INCLUDE ZIP CODE) _____________________________________________________________________________ (TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER) / / Credit unpurchased Warrants delivered by book-entry transfer to the Book-Entry Transfer Facility account set forth below. Check appropriate box: / / The Depository Trust Company / / Midwest Securities Trust Company / / Philadelphia Depository Trust Company _____________________________________________________________________________ (BOOK-ENTRY TRANSFER FACILITY ACCOUNT NUMBER, IF APPLICABLE) ________________________________________________________________________________ ________________________________________________________________________________ SPECIAL DELIVERY INSTRUCTIONS (See Instructions 1, 4, 5, 6 and 7) (SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE) To be completed ONLY if certificates for Warrants not tendered or not accepted for payment and/or the check for the purchase price of Warrants purchased are to be sent to someone other than the undersigned, or to the undersigned at an address other than that shown above. Mail: / / Check / / Certificate(s) to: Name: _______________________________________________________________________ (PLEASE PRINT) Address: ____________________________________________________________________ _____________________________________________________________________________ (INCLUDE ZIP CODE) _____________________________________________________________________________ (TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER) ________________________________________________________________________________ 4 5 _______________________________________________________________________________ IMPORTANT WARRANTHOLDER SIGN HERE (COMPLETE SUBSTITUTE FORM W-9 ON REVERSE SIDE) ________________________________________________________________________________ ________________________________________________________________________________ (SIGNATURE(S) OF WARRANTHOLDER(S)) Dated: _____________________, 1995 (Must be signed by registered holder(s) as name(s) appear(s) on the certificate(s) for the Warrants or on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by trustees, executors, administrators, guardians, attorneys-in-fact, agents, officers of corporations or others acting in a fiduciary or representative capacity, please provide the following information. See Instruction 5.) Name(s): _______________________________________________________________________ ________________________________________________________________________________ (PLEASE PRINT) Capacity (Full Title): _________________________________________________________ (IF REQUIRED -- SEE INSTRUCTION 5) Address: _______________________________________________________________________ (INCLUDE ZIP CODE) Area Code and Telephone Number: ________________________________________________ Tax Identification or Social Security Number: __________________________________ GUARANTEE OF SIGNATURE(S) (IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5) Authorized Signature: __________________________________________________________ Name: __________________________________________________________________________ ________________________________________________________________________________ (PLEASE PRINT) Title: _________________________________________________________________________ Name of Firm: __________________________________________________________________ Address: _______________________________________________________________________ ________________________________________________________________________________ (INCLUDE ZIP CODE) Area Code and Telephone Number: ________________________________________________ Dated: _____________________, 1995 ________________________________________________________________________________ 5 6 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of Transmittal is required if (i) this Letter of Transmittal is signed by the registered holder(s) (which term, for purposes of the Offer includes any participant in a Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Warrants) of the Warrants tendered herewith, unless such registered holder(s) has completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" herein or (ii) such Warrants are tendered for the account of a financial institution (including most commercial banks, savings and loan associations and brokerage houses) that is a member of a signature guarantee program within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (collectively, "Eligible Institutions"). In all other cases, all signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution. If the certificates are registered in the name of a person other than the signer of this Letter of Transmittal, or if payment is to be made or certificates for any untendered or unpurchased Warrants are to be issued to a person other than the registered holder, then the tendered certificates for Warrants must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered owner or owners appear(s) on the certificates with the signatures on the certificates or stock powers guaranteed as aforesaid. See Instruction 5. 2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of Transmittal is to be completed by warrantholders either if certificates are to be forwarded herewith or if a tender of Warrants is to be made pursuant to the procedures for delivery by book-entry transfer set forth in Section 2 of the Offer to Purchase. Certificates for all physically tendered Warrants, or any Book-Entry Confirmation of Warrants, as the case may be, as well as a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof), unless an Agent's Message (as defined in Section 2 of the Offer to Purchase) is utilized, together with any required signature guarantees and any other documents required by this Letter of Transmittal, must be received by the Depositary at one of its addresses set forth herein on or prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase), or the tendering warrantholder must comply with the guaranteed delivery procedures set forth below. Warrantholders whose certificates for Warrants are not immediately available or who cannot deliver their certificates and all other required documents to the Depositary on or prior to the Expiration Date, or who cannot complete the procedure for book-entry transfer on or prior to the Expiration Date, may tender their Warrants by properly completing and duly executing the Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedure set forth in Section 2 of the Offer to Purchase. Pursuant to such procedure, (i) such tender must be made by or through an Eligible Institution, (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Purchaser, must be received by the Depositary on or prior to the Expiration Date, and (iii) the certificates for all physically tendered Warrants, in proper form for transfer, or Book-Entry Confirmation of Warrants, as the case may be, together with a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof), unless an Agent's Message is utilized, with any required signature guarantees and any other documents required by this Letter of Transmittal, must be received by the Depositary within three New York Stock Exchange, Inc. trading days after the date of execution of such Notice of Guaranteed Delivery as provided in Section 2 of the Offer to Purchase. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE CERTIFICATES FOR WARRANTS AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH A BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING WARRANTHOLDER AND, EXCEPT AS OTHERWISE PROVIDED IN THIS INSTRUCTION 2, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative, conditional or contingent tenders will be accepted and no fractional Warrants will be purchased. All tendering warrantholders, by execution of this Letter of Transmittal (or facsimile thereof), waive any right to receive any notice of the acceptance of their Warrants for payment. 3. INADEQUATE SPACE. If the space provided herein is inadequate, the certificate numbers and/or the number of Warrants should be listed on a separate signed schedule attached hereto. 4. PARTIAL TENDERS. (Not applicable to warrantholders who tender by book-entry transfer.) If fewer than all the Warrants evidenced by any certificate submitted are to be tendered, fill in the number of Warrants which are to be tendered in the box entitled "Number of Warrants Tendered." In such case, new certificate(s) for the remainder of the Warrants that were evidenced by the old certificate(s) will be sent to the registered holder, unless otherwise provided in the appropriate box on this Letter of Transmittal, as soon as practicable after the Expiration Date. All Warrants represented by certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holder(s) of the Warrants tendered hereby, the signature(s) must correspond exactly with the name(s) as written on the face of the certificate(s) without alteration, enlargement or any change whatsoever. If any of the Warrants tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any tendered Warrants are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of certificates. If this Letter of Transmittal or any certificates or stock powers are signed by a trustee, executor, administrator, guardian, attorney-in-fact, agent, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to the Purchaser of such person's authority so to act must be submitted. When this Letter of Transmittal is signed by the registered owner(s) of the Warrants listed and transmitted hereby, 6 7 no endorsements of certificates or separate stock powers are required unless payment is to be made or certificates for Warrants not tendered or purchased are to be issued to a person other than the registered owner(s). Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered owner(s) of the Warrants listed, the certificate(s) must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered owner or owners appear on the certificates. Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution. 6. WARRANT TRANSFER TAXES. Except as set forth in this Instruction 6, the Purchaser will pay or cause to be paid any transfer taxes with respect to the transfer and sale of purchased Warrants to it or its order pursuant to the Offer. If payment of the purchase price is to be made to, or if certificates for Warrants not tendered or purchased are to be registered in the name of, any person(s) other than the registered holder, or if tendered certificates are registered in the name of any person other than the person(s) signing this Letter of Transmittal, the amount of any transfer taxes (whether imposed on the registered holder or such person) payable on account of the transfer to such person(s) will be deducted from the purchase price unless satisfactory evidence of the payment of such taxes or exemption therefrom is submitted. EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF TRANSMITTAL. 7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check and/or certificates for unpurchased or untendered Warrants are to be issued in the name of a person other than the signer of this Letter of Transmittal or if a check is to be sent and/or such certificates are to be returned to someone other than the signer of this Letter of Transmittal or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. Warrantholders tendering Warrants by book-entry transfer may request that Warrants not purchased be credited to such account maintained at a Book-Entry Transfer Facility as such warrantholder may designate under "Special Payment Instructions" herein. If no such instructions are given, such Warrants not purchased will be returned by crediting the account at the Book-Entry Transfer Facility designated above. 8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance may be directed to the Dealer Manager or the Information Agent at their respective addresses and telephone numbers set forth below. Additional copies of the Offer to Purchase, this Letter of Transmittal, the Notice of Guaranteed Delivery and the Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 may be obtained from the Information Agent at its address and telephone number set forth below or from your broker, dealer, commercial bank or trust company. 9. WAIVER OF CONDITIONS. The conditions of the Offer (except for the Minimum Condition (as defined in the Offer to Purchase)) may be waived by the Purchaser, in whole or in part, at any time and from time to time in the Purchaser's sole discretion, in the case of any Warrants tendered. 10. SUBSTITUTE FORM W-9. The tendering warrantholder (or other payee) is required to provide the Depositary with a correct Taxpayer Identification Number ("TIN"), generally the warrantholder's social security or federal employer identification number, and with certain other information on Substitute Form W-9 which is provided under "Important Tax Information" below, and to certify that the warrantholder (or other payee) is not subject to backup withholding of federal income tax. If a tendering warrantholder is subject to backup withholding, the warrantholder must cross out Item (2) of the Certification box of the Substitute Form W-9. Failure to provide the information on the Substitute Form W-9 may subject the tendering warrantholder to 31% federal income tax withholding on the payment of the purchase price and to a $50 penalty imposed by the Internal Revenue Service (the "IRS"). The box in Part 2 of the Substitute Form W-9 may be checked if the tendering warrantholder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the warrantholder does not provide a TIN by the time of payment, 31% of all reportable payments made to such warrantholder (or other payee) will be withheld. However, such amounts will be refunded to the warrantholder (or other payee) if he or she provides a TIN within 60 days. 11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate(s) representing Warrants has been lost, destroyed or stolen, the warrantholder should promptly notify the Depositary. The warrantholder will then be instructed as to the steps that must be taken in order to replace the certificate(s). This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost or destroyed certificates have been followed. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A MANUALLY EXECUTED FACSIMILE THEREOF), TOGETHER WITH CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY, ON OR PRIOR TO THE EXPIRATION DATE. 7 8 IMPORTANT TAX INFORMATION Backup Withholding. Under federal income tax law, a warrantholder whose tendered Warrants are accepted for payment is required to provide the Depositary with such warrantholder's correct TIN on Substitute Form W-9 below, which in the case of a surrendering warrantholder who is an individual, is his social security number, and to certify that the warrantholder is not subject to backup withholding. If the Depositary is not provided with the correct TIN, the warrantholder may be subject to a $50 penalty imposed by the IRS. In addition, payments that are made to such warrantholder with respect to Warrants purchased pursuant to the Offer may be subject to 31% backup withholding. Certain warrantholders (including, among others, all corporations and certain foreign individuals and entities) are not subject to these backup withholding and reporting requirements and should indicate their status by writing "exempt" across the face of the Substitute Form W-9. In order for a noncorporate foreign warrantholder to qualify as an exempt recipient, that warrantholder must complete and sign the main signature form and submit a Form W-8, Certificate of Foreign Status, signed under penalties of perjury, attesting to that warrantholder's exempt status. A Form W-8 may be obtained from the Depositary. Exempt warrantholders, other than noncorporate foreign warrantholders, should furnish their TIN, write "Exempt" on the face of the Substitute Form W-9 below and sign, date and return the Substitute Form W-9 to the Depositary. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. If backup withholding applies, the Depositary is required to withhold 31% of any payments made to the warrantholder or other payee. Backup withholding is not an additional income tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the IRS. If the warrantholder does not provide a TIN by the time of payment, 31% of all reportable payments made to such warrantholder (or other payee) will be withheld. However, such amounts will be refunded to the warrantholder (or other payee) if he or she provides a TIN within 60 days. Purpose of Substitute Form W-9. To prevent backup withholding on payments that are made to a warrantholder or other payee with respect to Warrants purchased pursuant to the Offer, the warrantholder is required to provide the Depositary with his or her correct TIN (or the TIN of any other payee) by completing the form below certifying that the TIN provided on the Substitute Form W-9 is correct (or that such warrantholder is awaiting a TIN) and that the warrantholder is not subject to backup withholding because (i) the warrantholder is exempt from backup withholding, (ii) the warrantholder has not been notified by the IRS that he or she is subject to backup withholding as a result of a failure to report all interest or dividends, or (iii) the IRS has notified the warrantholder that the warrantholder is no longer subject to backup withholding. What Number to Give the Depositary. The warrantholder is required to give the Depositary the TIN (e.g., social security number or employer identification number) of the record owner of the Warrants or of the most recent transferee of the tendered Warrants as evidenced by endorsements on the Certificates representing such Warrants or any accompanying instruments of transfer. If the Warrants are registered in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for information on which number to report. If the tendering warrantholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, he or she should check the box in Part 2 of the Substitute Form W-9. 8 9 PAYOR'S NAME: KEYCORP SHAREHOLDER SERVICES, INC. __________________________________________________________________________________________________________________________________ SUBSTITUTE NAME: ______________________________________ FORM W-9 PART 1 - PLEASE PROVIDE YOUR NAME, ADDRESS AND TIN IN THE BOX AT RIGHT AND CERTIFY BY ADDRESS: ___________________________________ SIGNING AND DATING BELOW. TIN: _______________________________________ Social Security Number or Employer Identification Number __________________________________________________________________________________________ Department of the Treasury Internal Revenue Service PART 2 - Awaiting TIN / / __________________________________________________________________________________________ PART 3 - CERTIFICATION: Under penalties of perjury, I certify that (1) the number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me) and (2) I am not subject to backup withholding because (a) I am Payor's Request for exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Taxpayer Identification Service (the "IRS") that I am subject to backup withholding as a result of a failure to Number (TIN) and report all interest or dividends, or (c) the IRS has notified me that I am no longer Certification subject to backup withholding. (You must cross out Item (2) above if you have been notified by the IRS that you are currently subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS that you are no longer subject to backup withholding, do not cross out Item (2)). Signature: ___________________________________ Date: ___________________________________ __________________________________________________________________________________________________________________________________
________________________________________________________________________________ NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. ________________________________________________________________________________ YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 2 OF SUBSTITUTE FORM W-9 ________________________________________________________________________________ CERTIFICATE OF AWAITING TAX IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 31% of all reportable payments made to me will be withheld, but that such amounts will be refunded to me if I provide a taxpayer identification number within 60 days from the date of this certificate. ______________________________________ ______________________________________ Signature Date ________________________________________________________________________________ 9 10 Questions and requests for assistance may be addressed to the Dealer Manager or the Information Agent as set forth below. Additional copies of the Offer to Purchase, this Letter of Transmittal and other tender offer materials may be directed to the Information Agent as set forth below. The Information Agent for the Offer is: MACKENZIE PARTNERS, INC. 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (call collect) or CALL TOLL FREE (800) 322-2885 The Dealer Manager for the Offer is: WASSERSTEIN PERELLA & CO., INC. 31 West 52nd Street New York, New York 10019 Call Collect: (212) 969-2700 10 EX-99.A4 5 BROKER DEALER LETTER SENT TO DEALER MANAGER 1 WASSERSTEIN PERELLA & CO., INC. 31 WEST 52ND STREET NEW YORK, NEW YORK 10019 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED RIGHTS TO PURCHASE PREFERRED STOCK) AND ALL OUTSTANDING WARRANTS TO PURCHASE COMMON STOCK OF NATIONAL CONVENIENCE STORES INCORPORATED BY SHAMROCK ACQUISITION CORP. A WHOLLY OWNED SUBSIDIARY OF DIAMOND SHAMROCK, INC. AT $27.00 NET PER SHARE AND $9.25 NET PER WARRANT *************************************************************************** * * * THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW * * YORK CITY TIME, ON WEDNESDAY, DECEMBER 13, 1995, UNLESS THE OFFER IS * * EXTENDED. * * * *************************************************************************** To Brokers, Dealers, Commercial Banks, November 14, 1995 Trust Companies and Other Nominees: We have been engaged to act as Dealer Manager in connection with the offer by Shamrock Acquisition Corp. (the "Purchaser"), a wholly owned subsidiary of Diamond Shamrock, Inc. ("Diamond Shamrock"), to purchase (i) all outstanding shares of Common Stock, par value $.01 per share (the "Shares"), of National Convenience Stores Incorporated (the "Company"), together with the associated rights to purchase preferred stock (the "Rights") issued pursuant to the Rights Agreement, dated as of August 31, 1995 (the "Rights Agreement"), between the Company and Boatmen's Trust Company, as Rights Agent, at the purchase price of $27.00 per Share (and the associated Right), and (ii) all outstanding Warrants to purchase Shares (the "Warrants") issued pursuant to the Warrant Agreement, dated as of March 9, 1993, between the Company and Boatmen's Trust Company, as Warrant Agent, at the purchase price of $9.25 per Warrant, in each case, net to the tendering securityholder (pre-tax) in cash without interest thereon, on the terms and subject to the conditions set forth in the Offer to Purchase, dated November 14, 1995 (the "Offer to Purchase"), and the related Letters of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"). Unless the context otherwise requires, all references herein to Shares shall include the Rights. Please furnish copies of the enclosed materials to those of your clients for whom you hold Shares or Warrants registered in your name or in the name of your nominee. Enclosed herewith for your information and forwarding to your clients for whom you hold Shares or Warrants registered in your name or in the name of your nominee or who hold Shares or Warrants registered in their own names, are copies of the following documents: 2 1. The Offer to Purchase, dated November 14, 1995; 2. The GREEN Letter of Transmittal for your use to tender Shares and the BLUE Letter of Transmittal for your use to tender Warrants and for information of your clients (manually signed facsimile copies of the applicable Letter of Transmittal may be used to tender Shares or Warrants); 3. A printed form of a letter which may be sent to your clients for whose accounts you hold Shares or Warrants in your name or in the name of a nominee, with space provided for obtaining such clients' instructions with regard to the Offer; 4. The Notices of Guaranteed Delivery to be used to accept the Offer if certificates for Shares or Warrants are not immediately available or time will not permit all required documents to reach KeyCorp Shareholder Services, Inc. (the "Depositary") prior to the Expiration Date (as defined in the Offer to Purchase), or if the procedures for book-entry transfer cannot be completed prior to the Expiration Date; 5. Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9; 6. The Letter to Securityholders of the Company from the President and Chief Executive Officer of the Company, accompanied by the Company's Solicitation/Recommendation Statement on Schedule 14D-9; and 7. A return envelope addressed to the Depositary. The Offer is conditioned upon, among other things (i) there being validly tendered and not withdrawn prior to the Expiration Date that number of Shares and Warrants representing at least two-thirds of the total number of outstanding Shares of the Company on a fully diluted basis and (ii) the Rights having been redeemed by the Board of Directors of the Company. The Offer is also subject to other terms and conditions contained in the Offer to Purchase. See Section 6 of the Offer to Purchase. The Company has agreed to (a) take all action necessary to defer the Distribution Date (as defined in the Rights Agreement) to prevent the occurrence of the Distribution Date as a result of the commencement of the Offer or the consummation of the transactions contemplated by the Merger Agreement (as defined in the Offer to Purchase) and (b) redeem the Rights effective immediately prior to the Purchaser's acceptance for payment of Shares and Warrants pursuant to the Offer. Neither Diamond Shamrock nor the Purchaser will pay any fees or commissions to any broker or dealer or other person (other than the Dealer Manager as described in the Offer to Purchase) in connection with the solicitation of tenders of Shares or Warrants pursuant to the Offer. However, the Purchaser will, upon request, reimburse brokers, dealers, commercial banks and trust companies for customary mailing and handling expenses incurred by you in forwarding the enclosed materials to your clients. The Purchaser will pay or cause to be paid any transfer taxes payable on the transfer of Shares or Warrants to it pursuant to the Offer, except as otherwise provided in Instruction 6 of the enclosed Letters of Transmittal. YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, DECEMBER 13, 1995, UNLESS EXTENDED. In order to take advantage of the Offer, a duly executed and properly completed Letter of Transmittal with any required signature guarantees, or an Agent's Message (as defined in the Offer to Purchase) in connection with a book-entry transfer of Shares or Warrants, and any other required documents should be sent to the Depositary and certificates representing the tendered Shares or Warrants should be delivered, or such Shares or Warrants should be tendered by book-entry transfer, all in accordance with the instructions set forth in the Letters of Transmittal and the Offer to Purchase. 2 3 If holders of Shares or Warrants wish to tender their Shares or Warrants, but it is impracticable for them to forward their certificates or other required documents prior to the Expiration Date or if the procedures for book-entry transfer cannot be completed prior to the Expiration Date, a tender may be effected by following the guaranteed delivery procedures specified in Section 2 of the Offer to Purchase. Any inquiries you may have with respect to the Offer should be addressed to Wasserstein Perella & Co., Inc. (the "Dealer Manager") or to MacKenzie Partners, Inc. (the "Information Agent"), at their respective addresses and telephone numbers set forth on the back cover page of the Offer to Purchase. Additional copies of the enclosed materials may be obtained by calling the Information Agent at (800) 322-2885 or from brokers, dealers, commercial banks or trust companies. Very truly yours, WASSERSTEIN PERELLA & CO., INC. NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON AS AN AGENT OF THE PURCHASER, DIAMOND SHAMROCK, ANY AFFILIATE OF THE PURCHASER OR DIAMOND SHAMROCK, THE DEPOSITARY, THE INFORMATION AGENT OR THE DEALER MANAGER OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER, EXCEPT FOR THE DOCUMENTS ENCLOSED HEREWITH AND STATEMENTS EXPRESSLY MADE IN THE OFFER TO PURCHASE OR THE LETTERS OF TRANSMITTAL. 3 EX-99.A5 6 CLIENT LETTER 1 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED RIGHTS TO PURCHASE PREFERRED STOCK) AND ALL OUTSTANDING WARRANTS TO PURCHASE COMMON STOCK OF NATIONAL CONVENIENCE STORES INCORPORATED BY SHAMROCK ACQUISITION CORP. A WHOLLY OWNED SUBSIDIARY OF DIAMOND SHAMROCK, INC. AT $27.00 NET PER SHARE AND $9.25 NET PER WARRANT *************************************************************************** * * * THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW * * YORK CITY TIME, ON WEDNESDAY, DECEMBER 13, 1995, UNLESS THE OFFER IS * * EXTENDED. * * * *************************************************************************** To Our Clients: Enclosed for your consideration is the Offer to Purchase, dated November 14, 1995 (the "Offer to Purchase"), and the related Letters of Transmittal (which, together with any amendments or supplements thereto, constitute the "Offer") relating to the offer by Shamrock Acquisition Corp. (the "Purchaser"), a wholly owned subsidiary of Diamond Shamrock, Inc., to purchase for cash (i) all outstanding shares of Common Stock, par value $.01 per share (the "Shares"), of National Convenience Stores Incorporated (the "Company"), together with the associated rights to purchase preferred stock (the "Rights") issued pursuant to the Rights Agreement, dated as of August 31, 1995, between the Company and Boatmen's Trust Company, as Rights Agent (the "Rights Agreement"), at the purchase price of $27.00 per Share (and the associated Right), and (ii) all outstanding Warrants to purchase Shares (the "Warrants") issued pursuant to the Warrant Agreement, dated as of March 9, 1993, between the Company and Boatmen's Trust Company, as Warrant Agent, at the purchase price of $9.25 per Warrant, in each case, net to the tendering securityholder (pre-tax) in cash without interest, on the terms and subject to the conditions set forth in the Offer. Unless the context otherwise requires, all references herein to Shares shall include the Rights. We are the holder of record of Shares or Warrants held by us for your account. A TENDER OF SUCH SHARES OR WARRANTS CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTERS OF TRANSMITTAL ARE FURNISHED TO YOU FOR YOUR INFORMATION ONLY BY US AS THE HOLDER OF RECORD. THE LETTERS OF TRANSMITTAL CANNOT BE USED BY YOU TO TENDER SHARES OR WARRANTS HELD BY US FOR YOUR ACCOUNT. Accordingly, we request instructions as to whether you wish to have us tender on your behalf any or all of the Shares or Warrants held by us for your account, pursuant to the terms and conditions set forth in the Offer. Your attention is directed to the following: 1. The tender price for Shares is $27.00 per Share (and the associated Right), net to you (pre-tax) in cash. 2. The tender price for Warrants is $9.25 per Warrant, net to you (pre-tax) in cash. 2 3. The Offer is being made for all outstanding Shares (including the associated Rights) and all outstanding Warrants. 4. The Offer and withdrawal rights will expire at 12:00 midnight, New York City time, on Wednesday, December 13, 1995, unless the Offer is extended. 5. The Offer is conditioned upon, among other things (i) there being validly tendered and not withdrawn prior to the Expiration Date that number of Shares and Warrants representing at least two-thirds of the total number of outstanding Shares on a fully diluted basis and (ii) the Rights having been redeemed by the Board of Directors of the Company. The Offer is also subject to other terms and conditions contained in the Offer to Purchase. See Section 6 of the Offer to Purchase. The Company has agreed to (a) take all action necessary to defer the Distribution Date (as defined in the Rights Agreement) to prevent the occurrence of the Distribution Date as a result of the commencement of the Offer or the consummation of the transactions contemplated by the Merger Agreement (as defined in the Offer to Purchase) and (b) redeem the Rights effective immediately prior to the Purchaser's acceptance for payment of Shares and Warrants pursuant to the Offer. 6. Securityholders who tender Shares or Warrants will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letters of Transmittal, transfer taxes on the purchase of Shares or Warrants by the Purchaser pursuant to the Offer. 7. The Board of Directors of the Company as presently constituted, (i) has unanimously approved the Offer and the Merger (as defined in the Offer to Purchase), (ii) has determined that the Offer and Merger are in the best interests of the Company's securityholders, and (iii) unanimously recommends that securityholders accept the Offer and tender their Shares and Warrants pursuant to the Offer. The Offer is being made to all holders of Shares or Warrants. The Purchaser is not aware of any jurisdiction where the making of the Offer is prohibited by administrative or judicial action pursuant to any valid statute. If the Purchaser becomes aware of any valid statute prohibiting the making of the Offer or the acceptance of the Shares or Warrants pursuant thereto, the Purchaser will make a reasonable good faith effort to comply with any such statute or seek to have such statute declared inapplicable to the Offer. If, after such reasonable good faith effort, the Purchaser cannot comply with any such statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares or Warrants in such jurisdiction. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer will be deemed to be made on behalf of the Purchaser by Wasserstein Perella & Co., Inc. or one or more registered brokers or dealers licensed under the laws of such jurisdiction. If you wish to have us tender any or all of your Shares or Warrants, please so instruct us by completing, signing, detaching and returning the form attached to this letter. An envelope to return your instructions to us is enclosed. Your instructions to us should be forwarded promptly to permit us to submit a tender on your behalf prior to the expiration of the Offer. If you authorize the tender of your Shares or Warrants, all such Shares or Warrants will be tendered unless otherwise specified on the form set forth on the reverse side of this letter. 2 3 (Detach and Return) INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED RIGHTS TO PURCHASE PREFERRED STOCK) AND ALL OUTSTANDING WARRANTS TO PURCHASE COMMON STOCK OF NATIONAL CONVENIENCE STORES INCORPORATED BY SHAMROCK ACQUISITION CORP. A WHOLLY OWNED SUBSIDIARY OF DIAMOND SHAMROCK, INC. The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase of Shamrock Acquisition Corp. (the "Purchaser"), a wholly owned subsidiary of Diamond Shamrock, Inc., dated November 14, 1995, and the related Letters of Transmittal (which together constitute the "Offer") relating to the offer by the Purchaser to purchase (i) all outstanding shares of Common Stock, par value $.01 per share (the "Shares"), of National Convenience Stores Incorporated at a purchase price of $27.00 per Share, together with the associated rights to purchase preferred stock (the "Rights"), and (ii) all outstanding Warrants to purchase Shares (the "Warrants") at the purchase price of $9.25 per Warrant, in each case, net to the tendering securityholders (pre-tax) in cash without interest. This will instruct you to tender to the Purchaser the number of Shares (and the associated Rights) or Warrants indicated below (or if no number is indicated below, all Shares (and the associated Rights) or Warrants that are held by you for the account of the undersigned), on the terms and subject to the conditions set forth in the Offer. Number of Shares (and the associated Rights) SIGN HERE to be tendered:* _______________________________________________ _________ Shares _______________________________________________ Signature(s) Number of Warrants to be tendered:* _______________________________________________ Account Number: _______________________________________________ _________ Warrants Please print name(s) and address(es) here _______________________________________________ Dated:_______________________________, 1995 Area Code and Telephone Number _______________________________________________ Tax Identification or Social Security Number(s)
- --------------- * Unless otherwise indicated, it will be assumed that all of your Shares (and the associated Rights) or Warrants held by us for your account are to be tendered. 3 EX-99.A6 7 NOTICE OF GUARANTEED DELIVERY COMMON STOCK 1 NOTICE OF GUARANTEED DELIVERY FOR TENDER OF SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED RIGHTS TO PURCHASE PREFERRED STOCK) OF NATIONAL CONVENIENCE STORES INCORPORATED TO SHAMROCK ACQUISITION CORP. A WHOLLY OWNED SUBSIDIARY OF DIAMOND SHAMROCK, INC. (Not to be used for Signature Guarantee) As set forth in Section 2 of the Offer to Purchase (as defined below), this form, or one substantially equivalent hereto, must be used to accept the Offer (as defined below) if certificates representing shares of Common Stock, par value $.01 per share (the "Shares"), of National Convenience Stores Incorporated (the "Company"), together with the associated rights to purchase preferred stock (the "Rights") issued pursuant to the Rights Agreement, dated August 31, 1995, between the Company and Boatmen's Trust Company, as Rights Agent, are not immediately available, or if the procedure for book-entry transfer cannot be completed on a timely basis, or if time will not permit all required documents to reach the Depositary prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase). Such form may be delivered by hand or transmitted by facsimile transmission or mail to the Depositary and must include a signature guaranteed by an Eligible Institution (as defined below) in the form set forth herein. See Section 2 of the Offer to Purchase. Unless the context otherwise requires, all references herein to Shares shall include the associated Rights. The Depositary for the Offer is: KEYCORP SHAREHOLDER SERVICES, INC. By Mail: By Overnight Mail: National Convenience Stores Inc. Tender Offer KeyCorp Shareholder Services, Inc. c/o KeyCorp Shareholder Services, Inc. 4900 Tiedeman Road P.O. Box 6477 Brooklyn, Ohio 44144 Cleveland, Ohio 44101-1477 Attn: ReOrg Department
By Hand: KeyCorp Shareholder Services, Inc. KeyCorp Shareholder Services, Inc. 4900 Tiedeman Road c/o Society Trust Company of New York Brooklyn, Ohio 44144 5 Hanover Square, 10th Floor Attn: ReOrg Department New York, NY 10004
By Facsimile Transmission: (For Eligible Institutions Only) (216) 813-4268 For Confirmation (216) 813-4554 DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. 2 This form is not to be used to guarantee signatures. If a signature on a Letter of Transmittal for Shares is required to be guaranteed by an Eligible Institution under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal for Shares. Ladies and Gentlemen: The undersigned hereby tenders to Shamrock Acquisition Corp., a wholly owned subsidiary of Diamond Shamrock, Inc., on the terms and subject to the conditions set forth in the Offer to Purchase, dated November 14, 1995 (the "Offer to Purchase"), and the related Letters of Transmittal (which together constitute the "Offer"), receipt of which is hereby acknowledged, the number of Shares indicated below pursuant to the guaranteed delivery procedures set forth in Section 2 of the Offer to Purchase. Number of Shares: _________________________ Name(s) of Record Holder(s): _______________________ Certificate No(s). for Shares (if available): ____________________________________________________ ___________________________________________ ____________________________________________________ Please Type or Print ___________________________________________ Check ONE box if Shares will be tendered by Address: ___________________________________________ book-entry transfer: ____________________________________________________ / / The Depository Trust Company Zip Code / / Midwest Securities Trust Company / / Philadelphia Depository Trust Company Area Code and Tel. No.: ____________________________ Account Number: ___________________________ Signature(s): ______________________________________ Dated: _____________________________ , 1995 ____________________________________________________
2 3 GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a member of a signature guarantee program within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act") (as such, an "Eligible Institution"), hereby guarantees (i) that the above named person(s) has a long position in the Shares being tendered within the meaning of Rule 14e-4 promulgated under the Exchange Act, (ii) that such tender of Shares complies with Rule 14e-4, and (iii) delivery to the Depositary, at one of its addresses set forth above, of certificates representing the Shares (and the associated Rights) tendered hereby in proper form for transfer, or confirmation of book-entry transfer of such Shares into the Depositary's accounts at The Depository Trust Company, the Midwest Securities Trust Company or the Philadelphia Depository Trust Company (pursuant to the procedures set forth in Section 2 of the Offer to Purchase), in each case with the delivery of a properly completed and duly executed Letter of Transmittal for Shares (or manually signed facsimile thereof), and any other required documents within three New York Stock Exchange, Inc. trading days after the date hereof. The Eligible Institution that completes this form must communicate the guarantee to the Depositary and must deliver the Letter of Transmittal (for Shares and associated Rights) and certificates for Shares to the Depositary within the time period shown herein. __________________________________ __________________________________ Name of Firm Authorized Signature __________________________________ __________________________________ Address Name (Please Type or Print) __________________________________ __________________________________ Zip Code Title __________________________________ __________________________________ Area Code and Telephone Number Date
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL. 3 EX-99.A7 8 NOTICE OF GUARANTEED DELIVERY WARRANTS 1 NOTICE OF GUARANTEED DELIVERY FOR TENDER OF WARRANTS TO PURCHASE SHARES OF COMMON STOCK OF NATIONAL CONVENIENCE STORES INCORPORATED TO SHAMROCK ACQUISITION CORP. A WHOLLY OWNED SUBSIDIARY OF DIAMOND SHAMROCK, INC. (Not to be used for Signature Guarantee) As set forth in Section 2 of the Offer to Purchase (as defined below), this form, or one substantially equivalent hereto, must be used to accept the Offer (as defined below) if certificates representing Warrants to purchase shares of Common Stock, par value $.01 per share, of National Convenience Stores Incorporated (the "Company") issued pursuant to the Warrants Agreement, dated as of March 9, 1993, between the Company and Boatmen's Trust Company, as Warrant Agent (the "Warrants"), are not immediately available, or if the procedure for book-entry transfer cannot be completed on a timely basis, or if time will not permit all required documents to reach the Depositary prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase). Such form may be delivered by hand or transmitted by facsimile transmission or mail to the Depositary and must include a signature guaranteed by an Eligible Institution (as defined below) in the form set forth herein. See Section 2 of the Offer to Purchase. The Depositary for the Offer is: KEYCORP SHAREHOLDER SERVICES, INC. By Mail: By Overnight Mail: National Convenience Stores Inc. Tender Offer KeyCorp Shareholder Services, Inc. c/o KeyCorp Shareholder Services, Inc. 4900 Tiedeman Road P.O. Box 6477 Brooklyn, Ohio 44144 Cleveland, Ohio 44101-1477 Attn: ReOrg Department
By Hand: KeyCorp Shareholder Services, Inc. KeyCorp Shareholder Services, Inc. 4900 Tiedeman Road c/o Society Trust Company of New York Brooklyn, Ohio 44144 5 Hanover Square, 10th Floor Attn: ReOrg Department New York, NY 10004
By Facsimile Transmission: (For Eligible Institutions Only) (216) 813-4268 For Confirmation (216) 813-4554 DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. 2 This form is not to be used to guarantee signatures. If a signature on a Letter of Transmittal for Warrants is required to be guaranteed by an Eligible Institution under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal for Warrants. Ladies and Gentlemen: The undersigned hereby tenders to Shamrock Acquisition Corp., a wholly owned subsidiary of Diamond Shamrock, Inc., on the terms and subject to the conditions set forth in the Offer to Purchase, dated November 14, 1995 (the "Offer to Purchase"), and the related Letters of Transmittal (which together constitute the "Offer"), receipt of which is hereby acknowledged, the number of Warrants indicated below pursuant to the guaranteed delivery procedures set forth in Section 2 of the Offer to Purchase. Number of Warrants: _______________________ Name(s) of Record Holder(s): _______________________ Certificate No(s). for Warrants (if available): ____________________________________________________ ___________________________________________ ____________________________________________________ Please Type or Print ___________________________________________ Check ONE box if Warrants will be tendered Address: ___________________________________________ by book-entry transfer: ____________________________________________________ / / The Depository Trust Company Zip Code / / Midwest Securities Trust Company / / Philadelphia Depository Trust Company Area Code and Tel. No.: ____________________________ Account Number: ___________________________ Signature(s): ______________________________________ Dated: _____________________________ , 1995 ____________________________________________________
2 3 GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a member of a signature guarantee program within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act") (as such, an "Eligible Institution"), hereby guarantees (i) that the above named person(s) has a long position in the Warrants being tendered within the meaning of Rule 14e-4 promulgated under the Exchange Act, (ii) that such tender of Warrants complies with Rule 14e-4, and (iii) delivery to the Depositary, at one of its addresses set forth above, of certificates representing the Warrants tendered hereby in proper form for transfer, or confirmation of book-entry transfer of such Warrants into the Depositary's accounts at The Depository Trust Company, the Midwest Securities Trust Company or the Philadelphia Depository Trust Company (pursuant to the procedures set forth in Section 2 of the Offer to Purchase), in each case with the delivery of a properly completed and duly executed Letter of Transmittal for Warrants (or manually signed facsimile thereof), and any other required documents within three New York Stock Exchange, Inc. trading days after the date hereof. The Eligible Institution that completes this form must communicate the guarantee to the Depositary and must deliver the Letter of Transmittal (for Warrants) and certificates for Warrants to the Depositary within the time period shown herein. __________________________________ __________________________________ Name of Firm Authorized Signature __________________________________ __________________________________ Address Name (Please Type or Print) __________________________________ __________________________________ Zip Code Title __________________________________ __________________________________ Area Code and Telephone Number Date
NOTE: DO NOT SEND CERTIFICATES FOR WARRANTS WITH THIS NOTICE. CERTIFICATES SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL. 3 EX-99.A8 9 FORM W-9 1 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER. Social Security numbers have nine digits separated by two hyphens: i.e., 000-00-0000. Employer Identification numbers have nine digits separated by only one hyphen: i.e., 00-0000000. The table below will help determine the number to give the payer.
============================================================= GIVE THE SOCIAL SECURITY FOR THIS TYPE OF ACCOUNT: NUMBER OF -- - ------------------------------------------------------------- GIVE THE EMPLOYER IDENTIFICATION FOR THIS TYPE OF ACCOUNT: NUMBER OF -- - ------------------------------------------------------------- 1. An individual's account The individual 2. Two or more individuals The actual owner of the (joint account) account or, if combined funds, any one of the individuals(1) 3. Husband and wife (joint The actual owner of the account account or, if joint funds, either person(1) 4. Custodian account of a minor The minor(2) (Uniform Gift to Minors Act) 5. Adult and minor (joint The adult or, if the account) minor is the only contributor, the minor(1) 6. Account in the name of The ward, minor or guardian or committee for a incompetent person(3) designated ward, minor or incompetent person 7. a. The usual revocable The grantor-trustee(1) savings trust account (grantor is also trustee) b. So-called trust account The actual owner(1) that is not a legal or valid trust under state law 8. Sole proprietorship account The owner(4) 9. A valid trust, estate, or The legal entity (Do pension trust not furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)(5) 10. Corporate The corporation 11. Religious, charitable or The organization educational organization account 12. Partnership account held in The partnership the name of the business 13. A broker or registered The broker or nominee nominee 14. Account with the Department The public entity of Agriculture in the name of a public entity (such as a state or local government, school district, or prison) that receives agriculture program payments =============================================================
(1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (4) Show the name of the owner. (5) List first and circle the name of the legal trust, estate, or pension trust. NOTE: If no name is circled when more than one name is listed, the number will be considered to be that of the first name listed. 2 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 Section references are to the Internal Revenue Code. OBTAINING A NUMBER If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service (the "IRS") and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING The following is a list of payees exempt from backup withholding and for which no information reporting is required. For interest and dividends, all listed payees are exempt except item (9). For broker transactions, payees listed in (1) through (13) and a person registered under the Investment Advisers Act of 1940 who regularly acts as a broker are exempt. Payments subject to reporting under sections 6041 and 6041A are generally exempt from backup withholding only if made to payees described in items (1) through (7), except that a corporation that provides medical and health care services or bills and collects payments for such services is not exempt from backup withholding or information reporting. Only payees described in items (2) through (6) are exempt from backup withholding for barter exchange transactions, patronage dividends, and payments by certain fishing boat operators. (1) A corporation. (2) An organization exempt from tax under section 501(a), or an individual retirement plan ("IRA"), or a custodial account under 403(b)(7). (3) The United States or any of its agencies or instrumentalities. (4) A State, the District of Columbia, a possession of the United States, or any of their political subdivisions or instrumentalities. (5) A foreign government or any of its political subdivisions, agencies or instrumentalities. (6) An international organization or any of its agencies or instrumentalities. (7) A foreign central bank of issue. (8) A dealer in securities or commodities required to register in the United States or a possession of the United States. (9) A futures commission merchant registered with the Commodity Futures Trading Commission. (10) A real estate investment trust. (11) An entity registered at all times during the tax year under the Investment Company Act of 1940. (12) A common trust fund operated by a bank under section 584(a). (13) A financial institution. (14) A middleman known in the investment community as a nominee or listed in the most recent publication of the American Society of Corporate Secretaries, Inc., Nominee List. (15) A trust exempt from tax under section 664 or described in section 4947. Payments of dividends and patronage dividends generally not subject to backup withholding also include the following: - - Payments to nonresident aliens subject to withholding under section 1441. - - Payments to partnerships not engaged in a trade or business in the United States and that have at least one nonresident partner. - - Payments of patronage dividends not paid in money. - - Payments made by certain foreign organizations. Payments of interest generally not subject to backup withholding include the following: - - Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. - - Payments of tax-exempt interest (including exempt interest dividends under section 852). - - Payments described in section 6049(b)(5) to nonresident aliens. - - Payments on tax-free covenant bonds under section 1451. - - Payments made by certain foreign organizations. - - Mortgage interest paid by you. Payments that are not subject to information reporting are also not subject to backup withholding. For details see sections 6041, 6041A(a), 6042, 6044, 6045, 6049, 6050A and 6050N, and the regulations under such sections. PRIVACY ACT NOTICE Section 6109 requires you to give your correct taxpayer identification number to persons who must file information returns with the IRS to report interest, dividends, and certain other income paid to you, mortgage interest you paid, the acquisition or abandonment of secured property, cancellation of debt, or contributions you made to an IRA. The IRS uses the numbers for identification purposes and to help verify the accuracy of your tax return. You must provide your taxpayer identification number whether or not you are qualified to file a tax return. Payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If you make a false statement with no reasonable basis that results in no backup withholding, you are subject to a $500 penalty. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. (4) MISUSE OF TAXPAYER IDENTIFICATION NUMBER. If you disclose or use your taxpayer identification number in violation of federal law, you may be subject to civil and criminal penalties. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. EX-99.A9 10 PRESS RELEASE DATED NOVEMBER 8, 1995 1 FOR MORE INFORMATION CONTACT DIAMOND SHAMROCK: Katherine Hughes, Public Relations 210/641-8846 or Mary Hartman, Investor Relations 210/641-8840 DIAMOND SHAMROCK REACHES AGREEMENT TO ACQUIRE NATIONAL CONVENIENCE STORES SAN ANTONIO, TEXAS -- November 8, 1995 -- Diamond Shamrock, Inc. (NYSE:DRM) and National Convenience Stores Incorporated (NYSE:NCS) today jointly announced that they have entered into a definitive merger agreement providing for the acquisition of all shares of NCS' common stock at $27 per share in cash. Pursuant to the agreement unanimously approved by the Board of Directors of both companies, Diamond Shamrock will commence a tender offer to acquire all outstanding shares of NCS' common stock for $27 per share in cash and all outstanding warrants to purchase NCS common stock for $9.25 per warrant in cash. The tender offer will be commenced as promptly as practicable and, in any event, by Tuesday, November 14. The tender offer will be conditioned upon Diamond Shamrock acquiring at least two-thirds of NCS' fully diluted common shares, regulatory approvals, and other customary conditions. The merger agreement provides that all remaining NCS common stock will be acquired for the same $27 per share in cash in a merger in which NCS will become a wholly owned subsidiary of Diamond Shamrock. Warrants not tendered in the offer or not exercised prior to the completion of the merger will remain outstanding, but upon exercise will represent only the right to obtain $9.25 in cash rather than one share of common stock. The total value of the transaction is approximately $260 million, which assumes the cancellation of outstanding stock options for the spread over the exercise prices and includes net debt. Diamond Shamrock has arranged to finance the acquisition with Bank of America. Diamond Shamrock Chairman, CEO, and President Roger R. Hemminghaus commented, "The acquisition of NCS, with its 661 convenience stores, all of which are in Texas and over 90 percent of which sell gasoline, continues Diamond Shamrock's strategy of retail growth, as well as provides increased demand for our Advanced Formula gasolines. Once the operations are fully integrated, we anticipate that this acquisition will enhance Diamond Shamrock's financial strength by contributing significantly to cash flow and improved earnings per share." NCS President and CEO V. H. Van Horn commented, "The focus of our management team has been to maximize stockholder value while, to the extent consistent therewith, providing continuing opportunities for our employees, and this agreement with Diamond Shamrock fulfills those objectives. We are very pleased that Diamond Shamrock recognizes the achievements of our employees and company over the past several years." Hemminghaus said that Diamond Shamrock currently plans to retain most NCS personnel and foresees gaining many dedicated, experienced employees who will become important to Diamond Shamrock's operations. Following the acquisition, Diamond Shamrock will have over 10,000 employees and about 1,500 company operated convenience stores, including nearly 1,300 in Texas. Hemminghaus continued, "Stop N Go operates quality stores with high merchandise sales volumes that complement our stores' growing merchandise sales and strong gasoline sales volumes." He says that Diamond Shamrock plans to brand the NCS gasoline facilities "Diamond Shamrock" and integrate the units into its system 2 while retaining the Stop N Go store identification. Nearly 600 of the NCS stores sell gasoline. Hemminghaus commented, "We believe that providing quality `Diamond Shamrock' gasoline will increase per store gasoline sales volumes and revenues and offer more convenient locations to Diamond Shamrock customers. We have strong brand acceptance in Texas, loyal customers, and a large credit card base in markets where Stop N Go stores are located." Diamond Shamrock also has two Texas refineries with a throughput of 210,000 barrels per day, producing over 5 million gallons of gasoline daily. Because many of the stores will be directly supplied with gasoline from these refineries, Hemminghaus expects the company's refining business to benefit significantly from the acquisition. Diamond Shamrock, Inc., headquartered in San Antonio, is a leading refiner and marketer of petroleum products in the Southwest with a growing mix of related businesses. With annual sales of over $2.6 billion, Diamond Shamrock refines and markets gasoline through over 2,000 Diamond Shamrock branded locations, including 835 company operated Corner Stores that sell a full range of convenience items. National Convenience Stores Incorporated, headquartered in Houston, is the largest convenience store chain in Texas, operating primarily in the geographic area known as the "Texas Triangle," which encompasses Houston, Dallas/Fort Worth, and San Antonio. The company maintains its leading position through the operation of approximately 660 Stop N Go stores throughout Texas and employs approximately 5,000 people throughout the state. NCS sells gasoline at about 595 of its stores. * * * EX-99.A10 11 FORM OF SUMMARY NEWSPAPER AD 1 Exhibit 99(a)(10) THIS ANNOUNCEMENT IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION OF AN OFFER TO SELL SHARES OR WARRANTS. THE OFFER IS MADE SOLELY BY THE OFFER TO PURCHASE, DATED NOVEMBER 14, 1995, AND THE RELATED LETTERS OF TRANSMITTAL, AND IS BEING MADE TO ALL HOLDERS OF SHARES AND WARRANTS. THE OFFER IS NOT BEING MADE TO (NOR WILL TENDERS BE ACCEPTED FROM OR ON BEHALF OF) HOLDERS OF SHARES OR WARRANTS IN ANY JURISDICTION IN WHICH THE MAKING OF THE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION. IN ANY JURISDICTION WHERE THE SECURITIES, BLUE SKY OR OTHER LAWS REQUIRE THE OFFER TO BE MADE BY A LICENSED BROKER OR DEALER, THE OFFER SHALL BE DEEMED TO BE MADE ON BEHALF OF THE PURCHASER BY ONE OR MORE REGISTERED BROKERS OR DEALERS LICENSED UNDER THE LAWS OF SUCH JURISDICTION.
NOTICE OF OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED RIGHTS TO PURCHASE PREFERRED STOCK) AND ALL OUTSTANDING WARRANTS TO PURCHASE COMMON STOCK OF NATIONAL CONVENIENCE STORES INCORPORATED BY SHAMROCK ACQUISITION CORP. A WHOLLY OWNED SUBSIDIARY OF DIAMOND SHAMROCK, INC. AT $27.00 NET PER SHARE AND $9.25 NET PER WARRANT Shamrock Acquisition Corp.(the "Purchaser"), a wholly owned subsidiary of Diamond Shamrock, Inc. ("Diamond Shamrock"), is offering to purchase (i) all outstanding shares of Common Stock, par value $.01 per share (the "Shares"), of National Convenience Stores Incorporated (the "Company"), together with the associated rights to purchase preferred stock (the "Rights") issued pursuant to the Rights Agreement, dated as of August 31, 1995 (the "Rights Agreement"), between the Company and Boatmen's Trust Company, as Rights Agent, at the purchase price of $27.00 per Share (and associated Right) (the "Share Offer Price") and (ii) all outstanding Warrants to purchase Shares (the "Warrants") issued pursuant to the Warrant Agreement, dated as of March 9, 1993 (the "Warrant Agreement"), between the Company and Boatmen's Trust Company, as Warrant Agent, at the purchase price of $9.25 per Warrant (the "Warrant Offer Price"), in each case, net to the tendering securityholder (pre-tax) in cash, without interest thereon, on the terms and subject to the conditions set forth in the Offer to Purchase, dated November 14, 1995 (the "Offer to Purchase"), and in the related Letters of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"). Unless the context otherwise requires, all references herein to Shares shall include the Rights. Tendering securityholders will not be obligated to pay brokerage commissions, solicitation fees or, except as set forth in Instruction 6 of the Letters of Transmittal, transfer taxes on the purchase of Shares or Warrants pursuant to the Offer. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, DECEMBER 13, 1995, UNLESS THE OFFER IS EXTENDED. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of November 8, 1995 (the "Merger Agreement"), by and among Diamond Shamrock, the Purchaser and the Company pursuant to 2 which, as soon as practicable after the completion of the Offer and the satisfaction or waiver of certain conditions, the Purchaser will be merged with and into the Company (the "Merger") and the Company will become a wholly owned subsidiary of Diamond Shamrock. At the effective time of the Merger (the "Effective Time"), each then-outstanding Share (other than Shares owned by Diamond Shamrock, the Purchaser or any other direct or indirect subsidiary of Diamond Shamrock or held in the treasury of the Company, all of which will be cancelled, and Shares held by stockholders who comply with all of the relevant provisions of Article IX of the company's Restated Certificate of Incorporation and who perfect their appraisal rights under Section 262 of the Delaware General Corporation Law) will be converted into the right to receive $27.00 per Share without interest thereon, (or such greater amount paid per share pursuant to the Offer), net to the holder (pre-tax) in cash (the "Merger Consideration"). Pursuant to the terms of the Warrant Agreement, at the Effective Time, each then-outstanding Warrant will remain outstanding following the Merger and, from and after the Effective Time, holders of Warrants (the "Warrantholders") will have the right to obtain upon exercise of each Warrant, in lieu of the one Share theretofore issuable upon exercise of such Warrant, the Merger Consideration, net to the Warrantholder (pre-tax) in cash, without interest thereon. THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED EACH OF THE OFFER AND THE MERGER AND HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR AND IN THE BEST INTERESTS OF THE COMPANY'S SECURITYHOLDERS AND UNANIMOUSLY RECOMMENDS THAT SECURITYHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES AND WARRANTS PURSUANT TO THE OFFER. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS (I) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED BELOW) THAT NUMBER OF SHARES AND WARRANTS REPRESENTING AT LEAST TWO-THIRDS OF THE TOTAL NUMBER OF OUTSTANDING SHARES OF THE COMPANY ON A FULLY DILUTED BASIS AND (II) THE RIGHTS HAVING BEEN REDEEMED BY THE BOARD OF DIRECTORS OF THE COMPANY. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS CONTAINED IN THE OFFER TO PURCHASE. SEE SECTION 6 OF THE OFFER TO PURCHASE. In the Merger Agreement, the Company agreed to (i) take all action necessary to defer the Distribution Date (as defined in the Rights Agreement) to prevent the occurrence of the Distribution Date as a result of the commencement of the Offer or the consummation of the transactions contemplated by the Merger Agreement and (ii) redeem the Rights effective immediately prior to the Purchaser's acceptance for payment of the Shares and the Warrants pursuant to the Offer. The term "Expiration Date" means 12:00 midnight, New York City time, on Wednesday, December 13, 1995, unless and until the Purchaser, in its sole discretion, shall have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by the Purchaser, shall expire. Subject to the terms of the Merger Agreement, the Purchaser expressly reserves the right to (i) extend the period of time during which the Offer is open if any condition thereto is not satisfied and thereby delay acceptance for payment of, and the payment for, any Shares or Warrants by giving oral or written notice of such extension to KeyCorp Shareholder Services, Inc. (the "Depositary") or (ii) increase the Share Offer Price or Warrant Offer Price to be paid in the Offer by giving oral or written notice of such amendment to the Depositary. The Purchaser shall not have any obligation to pay interest on the purchase price for tendered Shares or Warrants in the event the period of time during which the Offer is open is extended for any reason. Any such extension will be followed as promptly as practicable by a public announcement thereof to be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. During any such extension, all Shares or Warrants previously tendered and not withdrawn will remain subject to the Offer, subject to the right of a tendering securityholder to withdraw such securityholder's Shares or Warrants. For purposes of the Offer, the Purchaser shall be deemed to have accepted for payment (and thereby purchased) Shares or Warrants validly tendered and not withdrawn pursuant to the Offer when, as and if the Purchaser gives oral or written notice to the Depositary of its acceptance for payment of such Shares or Warrants. In all cases, on the terms and subject to the conditions of the Offer, payment for Shares and Warrants so accepted will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering securityholders for the purposes of receiving payment from the Purchaser and transmitting payment to tendering securityholders. In all cases, payment for Shares or Warrants accepted for payment pursuant to the -2- 3 Offer will be made only after timely receipt by the Depositary of (i) certificates for such Shares or Warrants or a timely confirmation (a "Book-Entry Confirmation") of book-entry transfer of such Shares or Warrants into the Depositary's account at a Book-Entry Transfer Facility (as defined in Section 2 of the Offer to Purchase) with respect to such Shares or Warrants; (ii) a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) with any required signature guarantees (or in the case of a book-entry transfer, an Agent's Message (as defined in Section 2 of the Offer to Purchase)); and (iii) any other documents required by the applicable Letter of Transmittal. See Section 2 of the Offer to Purchase. Under no circumstances will interest be paid on the purchase price of the Shares or Warrants to be paid by the Purchaser by reason of any delay in making such payments. If the Purchaser extends the Offer or if the Purchaser (whether before or after its acceptance for payment of Shares and Warrants tendered pursuant to the Offer) is delayed in its payment for Shares or Warrants or is unable to pay for the Shares or Warrants tendered pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer, the Depositary may retain tendered Shares and Warrants on behalf of the Purchaser, and such Shares and Warrants may not be withdrawn except to the extent tendering securityholders are entitled to withdrawal rights as described in Section 3 of the Offer to Purchase. Any such delay will be by an extension of the Offer to the extent required by law. If certain events occur, the Purchaser will not be obligated to accept for payment or pay for any Shares or Warrants tendered pursuant to the Offer. See Section 6 of the Offer to Purchase. If any tendered Shares or Warrants are not purchased pursuant to the Offer for any reason or if certificates submitted represent more Shares or Warrants than are tendered, certificates representing unpurchased or untendered Shares or Warrants will be returned (or, in case of Shares or Warrants delivered by book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility, as described in Section 2 of the Offer to Purchase, such Shares or Warrants will be credited to an account maintained with such Book-Entry Transfer Facility), without expense to the tendering securityholder, as promptly as practicable following the expiration or termination of the Offer, as the case may be. Tenders of Shares or Warrants pursuant to the Offer will be irrevocable, except that Shares and Warrants tendered pursuant to the Offer may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment by the Purchaser pursuant to the Offer, may also be withdrawn at any time on or after January 13, 1996. For a withdrawal to be effective, a written, telegraphic, telex or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of the Offer to Purchase. Any notice of withdrawal must specify the name of the person who tendered the Shares or Warrants to be withdrawn, the number of Shares or Warrants to be withdrawn and the name in which such Shares or Warrants are registered, if different from the name of the person who tendered the Shares or Warrants. If certificates for Shares or Warrants to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such certificates, the serial numbers shown on such certificates must also be furnished to the Depositary and, unless such Shares or Warrants have been tendered by an Eligible Institution (as defined in Section 2 of the Offer to Purchase), the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares or Warrants have been tendered pursuant to the procedures for book-entry transfer as set forth in Section 2 of the Offer to Purchase, any notice of withdrawal must specify the name and number of the account at the appropriate Book-Entry Transfer Facility to be credited with the withdrawn Shares or Warrants and must otherwise comply with such Book-Entry Transfer Facility's procedures. Withdrawals of tenders of Shares or Warrants may not be rescinded, and any Shares or Warrants properly withdrawn will thereafter be deemed not validly tendered for any purposes of the Offer. However, withdrawn Shares or Warrants may be retendered by again following one of the procedures described in Section 2 of the Offer to Purchase at any time on or prior to the Expiration Date. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by the Purchaser in its sole discretion, whose determination will be final and binding. The Company has provided the Purchaser with the Company's stockholder list, its Warrantholder list and security position listings for the purpose of disseminating the Offer to the holders of Shares and Warrants. -3- 4 The Offer to Purchase and the related Letters of Transmittal and other relevant materials will be mailed by the Purchaser to record holders of Shares and Warrants and furnished by the Purchaser to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholder list, Warrantholder list or, if applicable, who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial owners of Shares or Warrants. The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is incorporated herein by reference. THE OFFER TO PURCHASE AND THE RELATED LETTERS OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. Requests for copies of the Offer to Purchase, the Letters of Transmittal and all other tender offer materials may be directed to the Information Agent at its address and telephone number listed below, and copies will be furnished promptly at the Purchaser's expense. Questions or requests for assistance may be directed to the Information Agent or the Dealer Manager. The Purchaser will not pay any fees or commissions to any broker, dealer or other person (other than the Dealer Manager and the Information Agent) for soliciting tenders of Shares or Warrants pursuant to the Offer. The Information Agent for the Offer is: [MACKENZIE PARTNERS LOGO] 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (call collect) or Call Toll-Free (800) 322-2885 The Dealer Manager for the Offer is: WASSERSTEIN PERELLA & CO., INC. 31 West 52nd Street New York, New York 10019 Call Collect: (212) 969-2700 November 14, 1995 -4- EX-99.B1 12 COMMITMENT LETTER DATED NOVEMBER 2, 1995 1 Exhibit 99(b)(1) BA BankAmerica CONFIDENTIAL November 2, 1995 Diamond Shamrock, Inc. 9830 Colonnade Blvd. San Antonio, TX 78230 Attn: Robert C. Becker Gentlemen: Bank of America NT & SA ("Bank of America") is pleased to advise you that it is willing, subject to the terms and conditions contained in this letter and in the Summary of Terms and Conditions attached to this letter as Exhibit A (the "Term Sheet"), to commit the full $340,000,000 of a senior unsecured credit facility (the "Facility") to Diamond Shamrock (the "Company") to acquire all of the stock or the assets of the company we have previously discussed Subject Company. Upon your acceptance of this commitment, Bank of America's commitment will be in part syndicated by BA Securities, Inc. ("BA Securities"), as arranger, to a group of financial institutions (together with Bank of America, the "Banks") acceptable to the Company and to Bank of America as agent ("Agent"). As previously discussed, BA Securities is a wholly-owned, direct subsidiary of BankAmerica Corporation, the parent company of Bank of America, and is a registered broker-dealer. Please refer to the attached "Special Disclosure Statement" for important additional information on this relationship. The fees payable to BA Securities and to Agent in connection with the Facility are set forth in a separate letter of even date herewith (the "Fee Letter"). To assist BA Securities in its syndication efforts, you agree to provide upon its request all information in your possession that is reasonably deemed necessary by it to complete successfully the syndication of the Facility, including but not limited to, information prepared by you or on your behalf relating to the transactions contemplated hereby. You hereby agree to actively assist BA Securities in achieving a syndication that 2 is satisfactory to BA Securities, Bank of America and you and will authorize the commencement of that effort as soon as reasonably practicable. BA Securities, as arranger, reserves the right (in consultation with the Company and Bank of America) to allocate the commitments offered by the Banks. In addition to the conditions to funding or closing set forth in the Term Sheet, Bank of America's commitment to provide financing hereunder is subject to (i) the negotiation and execution of a definitive bank loan agreement, and other related documentation, satisfactory to the Banks and Agent, and (ii) there being no material adverse change in the consolidated financial condition, business, operations, properties or prospects of the Company and its subsidiaries (including for this purpose Subject Company and its consolidated subsidiaries) taken as a whole from the date of the audited financial statements most recently provided prior to the date hereof. Whether or not the transactions contemplated hereby are consummated, the Company hereby agrees to indemnify and hold harmless each of Bank of America and BA Securities, and their respective directors, officers, employees and affiliates (each, an "indemnified person") from and against any and all losses, claims, damages, liabilities (or actions or other proceedings commenced or threatened in respect thereof) and expenses that arise out of, result from or in any way relate to this commitment letter, or the providing or syndication of the Facility, and to reimburse each indemnified person, upon its demand, for any legal or other expenses reasonably incurred in connection with investigating, defending or participating in any such loss, claim, damage, liability or action or other proceeding (whether or not such indemnified person is a party to any action or proceeding out of which any such expenses arise), other than any of the foregoing claimed by any indemnified person to the extent incurred by reason of the gross negligence or willful misconduct, violation of any law, breach of this agreement, or breach of any agreement under which the Facility is syndicated of or by such person. Neither Bank of America nor BA Securities shall be responsible or liable to the Company or any other person for any consequential damages which may be alleged. The obligations contained in this paragraph will survive the closing of the Facility. You may assume the defense of any such matter with counsel reasonably acceptable to Bank of America unless a conflict of interests would be presented in any such representation (in which event one law firm reasonably acceptable to you may be retained to represent all indemnified persons) and no indemnified person may settle any claim, action or proceeding without your prior written consent, which may not be unreasonably withheld. In addition, the Company hereby agrees to reimburse Bank of America and BA Securities from time to time upon demand for their reasonable out-of-pocket costs and expenses and reasonable legal expenses and fees incurred by Bank of America or BA Securities in connection with the Facility, regardless of whether the credit agreement is executed or the Facility closes. The Commitment may be satisfied by the execution and delivery of final loan documentation by Bank of America, or, in the alternative, by Bank of America Illinois, a subsidiary of Bank of America ("BAI"), as Bank of America and BAI may determine in 2 3 their discretion. If BAI elects to assume the role of lender hereunder, it shall, upon execution and delivery of such final loan documentation, be deemed to replace Bank of America for purposes of this letter and the Fee Letter (and Bank of America shall be released thereby) and shall be entitled to all rights and privileges accorded Bank of America herein and therein; provided, however, that Bank of America may at its option, notwithstanding such replacement, remain as "Agent" and shall, to such extent, continue to be entitled to the rights and privileges accorded it as Agent under this letter and the Fee Letter. The Company hereby consents to the sharing, among Bank of America, BAI and their affiliates, of financial and other information regarding the Company and its affiliates. If the foregoing is satisfactory to you, please indicate your agreement and acceptance below and return a copy of this letter to us. Upon your delivery to us of a signed copy of this letter and the Fee Letter and payment of the initial installment of the arrangement fee as set forth in the Fee Letter, this letter agreement shall become a binding agreement, under New York law, as of the date so accepted. All non-public information furnished by the Company or Subject Company hereunder or in connection with the transactions contemplated hereby will be maintained by BofA in confidence, subject to standard loan syndication procedures and to such disclosures as BofA may determine on the advice of legal counsel may be required by law or legal process, and no such information will be furnished or otherwise made available to any person employed by BofA with discretionary authority over trading in securities of the Company or Subject Company. The terms contained in this letter and the Term Sheet and the Fee Letter are confidential and, except for disclosure to your board of directors, officers and employees, to professional advisors retained by you in connection with this transaction, or as may be required by law based on the advice of counsel, may not be disclosed in whole or in part to any other person or entity without our prior written consent which may not be unreasonably withheld; provided however, that no disclosure of the Fee Letter or information relating to fees will be disclosed without reviewing such disclosure with Bank of America and BA Securities. To the extent disclosure is required by law based on the advice of your counsel, we hereby consent to your disclosure of the terms and conditions set forth in this letter and the Term Sheet, or to your disclosure of a copy of this letter and the Term Sheet, in filings required to be made by the Company with the Securities and Exchange Commission, provided that no information relating to fees is disclosed without reviewing such disclosure with Bank of America and BA Securities. No consent by us shall create any third-party beneficiary as to our commitment. This offer will terminate on November 28, 1995 unless on or before that date you sign and return an enclosed counterpart of this letter and the Fee Letter and pay the initial installment of the arrangement fee described above. If accepted, this commitment will expire on March 31, 1996 if a credit agreement has not been executed on or before 3 4 that date, provided, however, that the commitment hereunder may be terminated at any time by the Company upon written notice to Bank of America. We are pleased to have this opportunity and look forward to working with you. Very truly yours, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: ----------------------------------- Title: Vice President BA SECURITIES, INC., as Arranger By: ----------------------------------- Title: Managing Director ACCEPTED AND AGREED TO: this day of , 1995 ------ ------------- DIAMOND SHAMROCK, INC. By: ---------------------------------------- Title: ------------------------------------- 4 5 CONFIDENTIAL DIAMOND SHAMROCK, INC. SUMMARY OF TERMS AND CONDITIONS $340 MILLION REVOLVING CREDIT FACILITY BORROWER: Diamond Shamrock, referred herein as "DSI" or the "Borrower". GUARANTORS: Guarantors of the Credit Agreement dated as of April 14, 1987 and amended as of March 31, 1995. ARRANGER: BA Securities, Inc. ("BASI"). AGENT: Bank of America NT & SA ("BofA"), in such capacity, the "Agent". AMOUNT: Up to $340,000,000. FACILITY: Reducing revolving line of credit (the "Facility"). The commitment and any corresponding outstandings shall be reduced in four equal semi- annual installments beginning on September 30, 1999 (assumes a March 31, 1996 closing date). PURPOSE: The Facility will be used for acquiring the common stock or 100% of the assets of Subject Company and to pay related fees and expenses. MATURITY: Five (5) years from closing. COLLATERAL: Unsecured. PRICING: The LIBOR and Base Rate margins are specified in the Pricing Chart attached as Annex I to this Summary of Terms and Conditions. The margins shall vary based on the Borrower's senior unsecured long-term debt ratings ("Senior Debt Rating") by Standard & Poor's Corporation ("S&P") and Moody's Investor Service, Inc. ("Moody's"), as set forth in the Pricing Chart attached as Annex I to this Summary of Terms and Conditions. 6 CONFIDENTIAL COMMITMENT FEE: A Commitment Fee shall be payable on the unused amount of the Facility commitment during the revolving period payable quarterly in arrears, on a 360-day basis, to the Banks pro rata on their respective shares of the Facility. The Commitment Fee will be based on the Borrower's Senior Debt Rating by S&P and Moody's as set forth in the Pricing Chart attached as Annex I to this Summary of Terms and Conditions. BORROWING OPTIONS: BASE RATE: the higher of (a) the rate as publicly announced from time to time by Bank of America as its Reference Rate and (b) the Federal Funds Rate + 1/2% p.a. Interest on Base Rate advances shall accrue on the basis of a 365/366-day year and actual days elapsed and shall be payable quarterly in arrears. LIBOR: the London Interbank Offered Rate for 1-, 2-, 3- or 6-month offshore dollar deposits as offered by Bank of America to major banks in the London Interbank Market, rounded upwards or downwards, if necessary, to the nearest 1/16%, and adjusted for the cost of reserves, if any. Interest on LIBOR advances shall accrue on the basis of a 360-day year and shall be payable at the end of each applicable interest period or at the end of each quarter, whichever occurs sooner. PREPAYMENT: Prepayments during LIBOR periods will be subject to reimbursement to the Banks for any funding losses. Base Rate loans may be prepaid at any time. OPTIONAL COMMITMENT REDUCTION: At the option of the Borrower, the Facility may be permanently reduced in a minimum amount of $10 million at any time, subject to the Prepayment section above, provided that any outstandings which would exceed the reduced commitment must be prepaid together with any relevant funding losses. DOCUMENTATION & LEGAL COUNSEL: Butler & Binion, L.L.P., Theresa Einhorn, Partner (cap to be established). REPRESENTATIONS & WARRANTIES: Substantially the same as provided in Diamond Shamrock's Credit Agreement dated as of April 14, 1987 and amended as of March 31, 1995. -2- 7 CONFIDENTIAL CONDITIONS PRECEDENT: Substantially the same as provided in Diamond Shamrock's Credit Agreement dated as of April 14, 1987 and amended as of March 31, 1995. AFFIRMATIVE COVENANTS: Substantially the same as provided in Diamond Shamrock's Credit Agreement dated as of April 14, 1987 and amended as of March 31, 1995. -3- 8 CONFIDENTIAL NEGATIVE COVENANTS: Substantially the same as provided in Diamond Shamrock's Credit Agreement dated as of April 14, 1987 and amended as of March 31, 1995, summarized as follows: Indebtedness - Funded Debt shall not exceed 63% of Funded Debt plus Consolidated Tangible Net Worth. Negative Pledge - Borrower is permitted a lien basket equal to 10% of the difference between Consolidated Net Tangible Assets and debt secured by purchase money liens on acquired or newly constructed property. Asset Disposition - Sale of assets exceeding 10% of Consolidated Net Tangible Assets in any 12-month period is prohibited unless approved by the Required Banks, with the exception of the sale of up to $100 million of accounts receivable outstanding at any one time on a non-recourse basis and assets sold as part of the consolidation of Subject Company and the Company. Investments, Loans and Advances - Borrower shall be permitted an investment basket equal to 10% of Consolidated Net Tangible Assets, along with Permitted Investments and Subsidiaries, and certain additional investments limited by dollar value of initial investment in certain foreign entities. Restricted Payments - Limited to the sum of (a) 50% (or minus 100% in the event of a deficit) of Consolidated Net Income since 12/31/94, (b) proceeds from the issuance or sale of capital stock and debt converted to capital stock, and (c) $200,000,000. Consolidated Tangible Net Worth - Shall at all times exceed the sum of $350,000,000 plus 50% of Consolidated Net Income since 12/31/94. Interest Coverage Ratio - Borrower's EBITDA for the latest four calendar quarters must cover interest during the same period by a minimum of 3.0 times. Current Ratio - Borrower shall at all times maintain a ratio of Current Assets to Current Liabilities of no less than 1.25:1. -4- 9 CONFIDENTIAL EVENTS OF DEFAULT: Substantially the same as provided in Diamond Shamrock's Credit Agreement dated as of April 14, 1987 and amended as of March 31, 1995. ASSIGNMENTS AND PARTICIPATIONS: Substantially the same as provided in Diamond Shamrock's Credit Agreement dated as of April 14, 1987 and amended as of March 31, 1995. COST AND YIELD PROTECTION: Substantially the same as provided in Diamond Shamrock's Credit Agreement dated as of April 14, 1987 and amended as of March 31, 1995. EXPENSES: All reasonable legal and out-of-pocket expenses of Agent are for the account of the Borrower. LAW: New York. This Summary of Terms and Conditions is not meant to be, nor should it be construed as, an attempt to define all of the terms and conditions of the transaction contemplated hereby, nor is intended to reflect specific document phrasing that will exist in the Credit Agreement. It is intended only to outline the basic points of business understanding around which binding legal documentation will be structured. -5- 10 ANNEX I DIAMOND SHAMROCK PRICING CHART (EXPRESSED IN BASIS POINTS PER ANNUM)
================================================================================================== Pricing Level Level 1 Level 2 Level 3 Level 4 Level 5 - -------------------------------------------------------------------------------------------------- LIBOR Margin 30.0 37.5 42.5 47.5 75.0 - -------------------------------------------------------------------------------------------------- Base Rate Margin 0 0 0 0 0 - -------------------------------------------------------------------------------------------------- Commitment Fee 10.0 12.5 14.0 17.5 25.0 ==================================================================================================
Pricing Level Description:
S&P Moody's --- ------- Level 1: Means: Greater Than A- Greater Than A3 Equal to Equal To Level 2: Means: BBB+ Baa1 Level 3: Means: BBB Baa2 Level 4: Means: BBB- Baa3 Level 5: Means: Less Than BB+ Less Than Ba1 Equal To Equal To
DEFAULT INTEREST: Interest will accrue at a premium of 200 basis points p.a. above the Base Rate plus any margin over the Base Rate during any period of default. In the event of a split rating, the committed pricing and Facility Fee will be based on the lower of the two ratings. If the Borrower's senior unsecured long-term debt is unrated by either rating Agency, the Facility Fee will be that corresponding to Level 5. Any change in the pricing shall be effective as of the date on which the applicable rating agency announces the applicable change in ratings. -6- EX-99.C1 13 AGREEMENT & PLAN OF MERGER DATED NOVEMBER 8, 1995 1 _________________________________________________________________________ AGREEMENT AND PLAN OF MERGER DATED AS OF NOVEMBER 8, 1995 BY AND AMONG DIAMOND SHAMROCK, INC. SHAMROCK ACQUISITION CORP. AND NATIONAL CONVENIENCE STORES INCORPORATED _______________________________________________________________________ 2 TABLE OF CONTENTS ARTICLE I THE TENDER OFFER 1.1 The Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.2 Offer Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.3 Consent and Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.4 Dissemination of Offer Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.5 Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 ARTICLE II THE MERGER 2.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.2 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.3 Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.4 Certificate of Incorporation and By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.5 Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.6 Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.7 Conversion of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.8 Conversion of Sub Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.9 Stockholders' Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.10 Commit to Vote Shares in Favor of Merger; Exercise of Warrants . . . . . . . . . . . . . . . . . . . 7 2.11 Merger Without Meeting of Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.12 Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.13 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 ARTICLE III DISSENTING SHARES; PAYMENT FOR SECURITIES 3.1 Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.2 Payment for Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY 4.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3 4.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.3 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 4.4 Consents and Approvals; No Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 4.5 Commission Reports and Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 4.6 Information in Other Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 4.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 4.8 No Material Adverse Change; Material Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 4.9 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 4.10 Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 4.11 Company Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 4.12 DGCL Section 203 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 ARTICLE V REPRESENTATIONS, WARRANTIES AND COVENANTS OF PARENT AND SUB 5.1 Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 5.2 Authority Relative to this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 5.3 Offer Documents; Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 5.4 Consents and Approvals; No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 5.5 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 5.6 Status as an Interested Stockholder or an Acquiring Person . . . . . . . . . . . . . . . . . . . . . 21 5.7 Interim Operations of the Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 ARTICLE VI COVENANTS 6.1 Conduct of Business of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 6.2 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 6.3 Reasonable Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 6.4 Indemnification and Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 6.5 Certain Agreements, Employee Benefits, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 6.6 Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 6.7 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 6.8 Post Merger Treatment of Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 6.9 Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 6.10 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
-ii- 4 6.11 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 6.12 Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 ARTICLE VII CONDITIONS TO CONSUMMATION OF THE MERGER 7.1 Conditions to Each Party's Obligation to Effect the Merger . . . . . . . . . . . . . . . . . . . . . 29 7.2 Conditions to Obligations of the Company to Effect the Merger . . . . . . . . . . . . . . . . . . . . 29 7.3 Conditions to Obligations of the Parent and Sub to Effect the Merger . . . . . . . . . . . . . . . . 29 ARTICLE VIII TERMINATION AND AMENDMENT 8.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 8.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 8.3 Certain Termination Fees; Certain Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . 31 ARTICLE IX MISCELLANEOUS 9.1 Non-survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 9.2 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 9.3 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 9.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 9.5 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 9.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 9.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 9.8 Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 9.9 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 9.10 Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 9.11 Entire Agreement; No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 ANNEX I Conditions to the Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
-iii- 5 ANNEX II Amended and Restated Certificate of Incorporation of National Convenience Stores Incorporated... 40
-iv- 6 SCHEDULE OF DEFINED TERMS
Defined Term Location - ------------ -------- Acquiring Person Section 5.6 Acquisition Transaction Section 6.9(a) Agreement Preamble Agreements Section 6.5(a) Article IX Section 3.1 Certificates Section 3.2(b) Claims Section 6.4 Closing Section 2.13 Code Section 4.8 Commission Section 1.1 Common Stock Preamble Company Preamble Confidentiality Agreement Section 6.2(b) Continuing Directors Section 9.2 DGCL Section 2.1 Disclosure Schedule Section 4.1(a) Dissenting Shares Section 3.1 Distribution Date Section 4.11 Effective Time Section 2.2 Environmental Laws Section 4.4(c) Exchange Act Section 1.2 Governmental Entity Section 4.4(a) HSR Act Section 4.4(a) Indemnified Parties Section 6.4 Instrument of Merger Section 2.2 Interested Stockholder Section 5.6 IRS Section 4.9(a) Merger Section 2.1 Merger Consideration Section 2.7(a) Minimum Condition Annex I NYSE Section 1.5 Offer Preamble Offer Documents Section 1.2 Offer to Purchase Section 1.1 Option Plan Section 2.12 Options Section 2.12
7 Parent Preamble Paying Agent Section 3.2(a) Payment Fund Section 3.2(a) Per Share Amount Preamble Person Section 6.9(a) Proxy Statement Section 4.6(b) Rights Section 4.2 Rights Agreement Section 4.2 Schedule 14D-1 Section 1.2 Schedule 14D-9 Section 1.3 SEC Documents Section 4.5 Securities Act Section 4.5 Securities Preamble Special Meeting Section 2.9(a)(i) Sub Preamble Subsidiary Section 4.1(a) Surviving Corporation Section 2.1 Taxes Section 4.9(b) Tax Returns Section 4.9(b) Voting Debt Section 4.2 Warrant Agreement Preamble Warrants Preamble
-ii- 8 AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER, dated as of November 8, 1995 (this "Agreement"), by and among Diamond Shamrock, Inc., a Delaware corporation ("Parent"), Shamrock Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of the Parent ("Sub"), and National Convenience Stores Incorporated, a Delaware corporation (the "Company"). WHEREAS, the respective Boards of Directors of the Parent and the Company have determined that the acquisition of the Company by the Parent would be advantageous and beneficial to their respective corporations and stockholders, and that such transaction is consistent with and in furtherance of such entities' respective long-term business strategies; WHEREAS, in furtherance thereof, it is proposed that the Parent and the Sub will make a cash tender offer to acquire (a) all of the outstanding shares of the Company's Common Stock, par value $.01 per share (the "Common Stock"), together with the attached Rights (as defined in Section 4.2), for $27.00 per share of Common Stock (and attached Right) net to the seller (pre-tax) in cash (such amount, or any greater amount per share of Common Stock (and attached Right) pursuant to such cash tender offer, being hereinafter referred to as the "Per Share Amount") and (b) all of the outstanding Warrants to Purchase Common Stock (the "Warrants") issued pursuant to the Warrant Agreement dated as of March 9, 1993, between the Company and Boatmen's Trust Company, as Warrant Agent (the "Warrant Agreement"), for $9.25 per Warrant net to the seller (pre-tax) in cash (such amount, or any greater amount per Warrant pursuant to such cash tender offer, being hereinafter referred to as the "Per Warrant Amount") (the Common Stock (and attached Rights) and the Warrants being hereinafter collectively referred to as the "Securities"), in accordance with the terms and subject to the conditions provided herein and in the Offer Documents (as defined in Section 1.2) (the "Offer"); WHEREAS, it is proposed that, following consummation of the Offer, there be a merger of the Sub with and into the Company with the Company surviving as a subsidiary of the Parent; WHEREAS, for convenience and simplicity, references to the "Parent" in Article I of this Agreement shall be deemed to include the "Sub", unless the context otherwise requires; NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, the parties hereto agree as follows: 9 ARTICLE I THE TENDER OFFER 1.1 The Offer. Provided that this Agreement has not been terminated in accordance with Section 8.1, the Parent will commence the Offer as promptly as practicable after the date hereof, but in no event later than November 14, 1995. The Offer will have an initial expiration date which is 20 business days (as defined in the relevant rules of the Securities and Exchange Commission (the "Commission")) after the commencement thereof. The obligation of the Parent to accept for payment any Securities tendered pursuant to the Offer will be subject only to the satisfaction of the conditions set forth in Annex I hereto. The Parent expressly reserves the right to increase the Per Share Amount and the Per Warrant Amount to be paid in the Offer or to extend the Offer if any condition thereto is not satisfied. Without the prior written consent of the Company, the Parent will not (a) decrease the Per Share Amount or the Per Warrant Amount, (b) decrease the number of Securities to be purchased in the Offer, (c) change the form of consideration payable in the Offer, (d) add to or change the conditions to the Offer set forth in Annex I hereto, (e) change or waive the Minimum Condition (as defined in Annex I hereto) or (f) make any other change in the terms or conditions of the Offer which is materially adverse to the holders of the Securities. The conditions set forth in Annex I are for the benefit of the Parent, and may be asserted by the Parent or, subject to the immediately preceding sentence, may be waived by the Parent, in whole or in part, at any time and from time to time in its discretion and regardless of the circumstances relating thereto. The Offer will be made by means of an offer to purchase (the "Offer to Purchase") containing the terms set forth in this Agreement and only the conditions set forth in Annex I hereto. Subject to the terms of the Offer and this Agreement and the satisfaction of all the conditions of the Offer set forth in Annex I hereto as of any expiration date of the Offer, the Parent will accept for payment and pay for all Securities validly tendered and not withdrawn pursuant to the Offer as soon as practicable after such expiration date of the Offer. Subject to Section 8.1, if the conditions set forth in Annex I hereto are not satisfied or, to the extent permitted by this Agreement, waived by the Parent, as of the date the Offer would otherwise have expired, the Parent will extend the Offer from time to time until the earlier of the consummation of the Offer or the date which is 60 days from the commencement of the Offer. 1.2 Offer Documents. On the date of commencement of the Offer, the Parent will file with the Commission a Tender Offer Statement on Schedule 14D-1 (together with all amendments and supplements thereto, the "Schedule 14D-1") with respect to the Offer pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Schedule 14D-1 will contain (including as an exhibit) or will incorporate by reference the Offer to Purchase and forms of the related letters of transmittal and summary advertisement (which Schedule 14D-1, Offer to Purchase and other documents, together with any supplements or amendments -2- 10 thereto, are referred to herein collectively as the "Offer Documents"). The Parent will disseminate the Offer to Purchase, related letters of transmittal and other related Offer Documents to holders of the Securities. Each of the Parent and the Company will promptly correct any information provided by it for use in the Offer Documents that becomes false or misleading in any material respect and the Parent will promptly take all steps necessary to cause the Schedule 14D-1 as so corrected to be filed with the Commission and the other Offer Documents as so corrected to be disseminated to holders of the Securities, in each case as and to the extent required by applicable law. The Parent will provide the Company and its counsel in writing with any comments the Parent or its counsel may receive from the Commission or its staff with respect to the Offer Documents promptly after the receipt of such comments. To the extent reasonably practicable, the Parent and its counsel will provide the Company and its counsel with a reasonable opportunity to participate in all material communications with the Commission and its staff, including any meetings and telephone conferences relating to the Offer Documents, the Offer, the Merger (as defined in Section 2.1) or this Agreement. 1.3 Consent and Recommendation. The Company's Board of Directors has determined that the Offer and the Merger are fair to, and are in the best interests of, the holders of the Securities. Accordingly, the Company hereby approves and consents to the Offer. The Company will file with the Commission, as promptly as practicable after the filing by the Parent of the Schedule 14D-1 (but in any event on the same business day), a Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9") pursuant to the Exchange Act, reflecting the recommendation of the Company's Board of Directors that holders of Securities tender their Securities pursuant to the Offer and will disseminate the Schedule 14D-9 as required by Rule 14d-9 promulgated under the Exchange Act, all subject to the fiduciary duties of the Board of Directors of the Company under applicable laws as advised in the written opinion of outside counsel to the Company. Each of the Company and the Parent will promptly correct any information provided by it for use in the Schedule 14D-9 that becomes false or misleading in any material respect, and the Company will promptly take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the Commission and disseminated to holders of the Securities, in each case as and to the extent required by applicable law. The Company will provide the Parent and its counsel in writing with any comments the Company or its counsel may receive from the Commission or its staff with respect to the Schedule 14D-9 promptly after the receipt of such comments. To the extent reasonably practicable, the Company and its counsel will provide the Parent and its counsel with a reasonable opportunity to participate in all material communications with the Commission and its staff, including any meetings and telephone conferences relating to the Schedule 14D-9, the Merger or this Agreement. -3- 11 1.4 Dissemination of Offer Documents. (a) The Company will (i) promptly furnish the Parent with mailing labels containing the names and addresses of all record holders of Securities as of a recent date and of those persons becoming record holders after such date, together with copies of all security position listings and computer files and all other information in the Company's control regarding the beneficial owners of Securities that the Parent may reasonably request and (ii) furnish to the Parent such other assistance as the Parent or its agents may reasonably request in communicating the Offer to holders of Securities. (b) Subject to the requirements of law, and except for such steps as are necessary to disseminate the Offer Documents, the Parent shall, and shall cause each of its Subsidiaries (as defined in Section 4.1(a)) to, hold in confidence the information contained in any of such labels and lists, use such information only in connection with the Offer and, if this Agreement is terminated, deliver to the Company all copies of, and extracts or summaries from, such information then in their possession. 1.5 Directors. Effective upon the acceptance for payment by the Parent of the Securities pursuant to the Offer, and from time to time thereafter so long as the Parent and/or any of its wholly owned Subsidiaries (as defined in Section 4.1(a)) (including the Sub) owns a majority of the outstanding shares of Common Stock, the Parent will be entitled, subject to compliance with applicable law, the Restated Certificate of Incorporation of the Company and the provisions of the next sentence, to designate at its option up to that number of directors, rounded up to the nearest whole number, of the Company's Board of Directors as will make the percentage of the Company's directors designated by the Parent equal to the percentage of outstanding shares of Common Stock held by the Parent and any of its wholly owned Subsidiaries (including the Sub), including shares of Common Stock accepted for payment pursuant to the Offer. The Company will, upon the request of the Parent, promptly increase the size of its Board of Directors and/or use its reasonable best efforts to secure the resignation of such number of directors as is necessary to enable the Parent's designees to be elected to the Company's Board of Directors and will use its reasonable best efforts to cause the Parent's designees to be so elected, subject in all cases to Section 14(f) of the Exchange Act, it being understood that the Company agrees to comply with such Section of the Exchange Act as promptly as practicable after the date hereof, provided that, prior to the Effective Time (as defined in Section 2.2), the Company will use its reasonable best efforts to assure that the Company's Board of Directors always has at least two members who are directors of the Company as of the date hereof. At such times, the Company will use its reasonable best efforts, subject to any limitations imposed by applicable laws or rules of the New York Stock Exchange, Inc. (the "NYSE"), to cause persons designated by the Parent to constitute the same percentage as such persons represent on the Company's Board of Directors of (a) each -4- 12 committee of the Board of Directors of the Company, (b) each board of directors or board of management of each Subsidiary of the Company and (c) each committee of each such board. ARTICLE II THE MERGER 2.1 The Merger. Upon the terms and subject to the conditions hereof, and in accordance with the relevant provisions of the Delaware General Corporation Law (the "DGCL"), the Sub shall be merged with and into the Company (the "Merger") as soon as practicable following the satisfaction or waiver, if permissible, of the conditions set forth in Article VII hereof. Subject to the terms and conditions hereof (including the qualifications in Section 6.3), each of the parties will use its reasonable best efforts to cause the Merger to occur within 90 days after the purchase of the Securities pursuant to the Offer. Following the Merger, the Company shall continue as the surviving corporation (the "Surviving Corporation") under the name "National Convenience Stores Incorporated" and shall continue its existence under the laws of Delaware, and the separate corporate existence of the Sub shall cease. 2.2 Effective Time. The Merger shall be consummated by filing with the Secretary of State of the State of Delaware a certificate of merger or a certificate of ownership and merger, as appropriate (the "Instrument of Merger"), in such form as is required by, and executed in accordance with, the relevant provisions of, the DGCL (the time of such filing or such other time specifically set forth therein being the "Effective Time"). 2.3 Effects of the Merger. The Merger shall have the effects set forth in Section 259 of the DGCL. 2.4 Certificate of Incorporation and By-Laws. (a) The Restated Certificate of Incorporation of the Company in effect at the Effective Time will be amended in its entirety to read as set forth in Annex II hereto, and, as such, will be the Restated Certificate of Incorporation of the Surviving Corporation, until amended in accordance with applicable law to the extent permitted by Section 2.4(c). (b) The Restated By-Laws of the Company in effect at the Effective Time will be the By-Laws of the Surviving Corporation until amended in accordance with applicable law to the extent permitted by Section 2.4(c). (c) The Company, the Parent and the Sub each agrees that, as long as the Company, the Parent or the Surviving Corporation has any liability pursuant to Section 6.4 to -5- 13 defend, indemnify and hold harmless any Indemnified Parties (as defined in Section 6.4), it will not amend or permit the amendment of Article XI of the Company's Restated Certificate of Incorporation or Article VII of the Company's Restated By-Laws, in each case as in effect on the date of this Agreement. 2.5 Directors. The directors of the Sub at the Effective Time shall be the directors of the Surviving Corporation until their successors are duly elected and qualified or until their earlier death, resignation or removal in accordance with the terms of Surviving Corporation's Certificate of Incorporation and By-Laws and the DGCL. 2.6 Officers. The officers of the Company at the Effective Time shall be the officers of the Surviving Corporation until their respective successors are duly elected and qualified or until their earlier death, resignation or removal in accordance with the terms of Surviving Corporation's Certificate of Incorporation and By-Laws and the DGCL. 2.7 Conversion of Securities. (a) Each share of Common Stock issued and outstanding immediately prior to the Effective Time (other than shares owned by the Parent, the Sub or any other direct or indirect Subsidiary of the Parent or held in the treasury of the Company, all of which shall be cancelled, and Dissenting Shares (as defined in Section 3.1)) shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into the right to receive the Per Share Amount without interest thereon, net (pre-tax) to the holder in cash (sometimes, the "Merger Consideration") payable to the holder thereof upon surrender of the certificate representing such share. (b) Each Warrant issued and outstanding immediately prior to the Effective Time (other than Warrants held in the treasury of the Company, which shall be cancelled) shall remain outstanding following, and be unaffected by, the Merger, except that, as provided in Section 10.1(a) of the Warrant Agreement, from and after the Effective Time each holder of Warrants shall have the right to obtain upon the exercise of each Warrant, in lieu of the one share of Common Stock theretofore issuable upon exercise of such Warrant, the Per Share Amount without interest thereon, net to the holder in cash. 2.8 Conversion of Sub Common Stock. Each share of common stock, par value $0.01 per share, of the Sub issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into one share of common stock of the Surviving Corporation. -6- 14 2.9 Stockholders' Meeting. (a) If required by applicable law in order to consummate the Merger, the Company, acting through its Board of Directors, shall, in accordance with applicable law and the Company's Restated Certificate of Incorporation and Restated By-Laws: (i) subject to its fiduciary duties under applicable law as advised in the written opinion of outside counsel to the Company, duly call, give notice of, convene and hold a special meeting (the "Special Meeting") of the holders of Common Stock as soon as practicable following the acceptance for payment of Securities in the Offer solely for the purpose of considering and taking action on this Agreement and the transactions contemplated hereby; (ii) subject to its fiduciary duties under applicable law as advised in the written opinion of outside counsel to the Company, include in the Proxy Statement (as defined in Section 4.6(b)) the recommendation of its Board of Directors that holders of Common Stock vote in favor of the approval and adoption of this Agreement and the transactions contemplated hereby; and (iii) (x) as promptly as practicable after the date hereof, obtain and furnish the information required to be included by it in the Proxy Statement, and after consultation with the Parent, respond promptly to any comments made by the Commission or its staff with respect to the Proxy Statement and any preliminary version thereof, (y) cause the Proxy Statement to be mailed to its stockholders at the earliest practicable time following the acceptance for payment of Securities in the Offer, and (z) subject to the fiduciary duties of the Board of Directors under applicable law as advised in the written opinion of outside counsel to the Company, use its best efforts to obtain the necessary approval of the Merger by its stockholders. 2.10 Commit to Vote Shares in Favor of Merger; Exercise of Warrants. The Parent and the Sub each agrees that, at the Special Meeting, all of the shares of Common Stock acquired directly or indirectly pursuant to the Offer or otherwise by the Parent, the Sub or any other Subsidiary of the Parent will be voted in favor of the approval and adoption of this Agreement and the Merger. The Parent also agrees that it or the Sub will, prior to the record date for the Special Meeting, exercise such number of Warrants as may be necessary to assure that no affirmative vote of any holder of Common Stock other than the Parent or the Sub is required for adoption of this Agreement. -7- 15 2.11 Merger Without Meeting of Stockholders. Notwithstanding the matters set forth in Section 2.9, in the event that the Sub shall acquire at least 90 percent of the outstanding shares of Common Stock pursuant to the Offer or otherwise, the Parent agrees, subject to Sections 7.1 and 7.3, to take all necessary and appropriate action (including the exercise of Warrants to the extent necessary to achieve the 90 percent threshold) to cause the Merger to become effective as soon as practicable after the acceptance for payment of Securities in the Offer, but in no event later than 10 business days (or such other time as the Company (acting through the Continuing Directors (as that term is defined in Section 9.2)) and Parent may agree) thereafter in accordance with Section 253 of the DGCL. 2.12 Stock Options. Each option ("Option") to acquire shares of Common Stock that has been granted pursuant to the Company's 1993 Non-Qualified Stock Option Plan dated as of March 9, 1993 (the "Option Plan") whether or not otherwise exercisable, shall, subject to the prior written approval of each optionee, be cancelled and each optionee shall be entitled to receive promptly after the acceptance of Securities for payment in the Offer, in cancellation and settlement of such Option, a cash payment from the Company in an amount equal to the difference between the Per Share Amount and the per share exercise price of such option, multiplied by the number of shares of Common Stock covered by such Option. The Board of Directors has taken all necessary action under the Option Plan to fix the Effective Time as the date on which Options granted under the Option Plan which are not cancelled as provided in the preceding sentence shall terminate pursuant to Section 10.2 of the Option Plan, and the Company will give prompt notice thereof to the holders of such Options. 2.13 Closing. Upon the terms and subject to the conditions hereof, as soon as practicable after consummation of the Offer, and if required by law, after the vote of the holders of the Common Stock in favor of the adoption of this Agreement has been obtained, the Company and the Sub shall execute in the manner required by the DGCL and deliver to the Secretary of State of the State of Delaware a duly executed and verified Instrument of Merger, as required by the DGCL, and the parties shall take all such other and further actions as may be required by law to make the Merger effective. Prior to the filing referred to in this Section 2.13, a closing (the "Closing") will be held at the office of the Company, 100 Waugh Drive, Houston, Texas 77007 (or such other place as the parties may agree) for the purpose of confirming all the foregoing. ARTICLE III DISSENTING SHARES; PAYMENT FOR SECURITIES 3.1 Dissenting Shares. Notwithstanding anything in this Agreement to the contrary, shares of Common Stock that are issued and outstanding immediately prior to the Effective -8- 16 Time and that are held by holders of Common Stock who did not vote in favor of the Merger, and owned of record by the holders who comply with all of the relevant provisions of Article IX of the Company's Restated Certificate of Incorporation ("Article IX") and Section 262 of the DGCL (the "Dissenting Shares"), shall not be converted into the right to receive the Merger Consideration for such shares, unless and until such holders shall have failed to perfect or shall have effectively withdrawn or lost their rights to appraisal under Article IX and the DGCL. If any such holder shall have failed so to perfect or shall have effectively withdrawn or lost such right, such holder's Dissenting Shares shall thereupon be deemed to have been converted into the right to receive, as of the Effective Time, the Merger Consideration for such Dissenting Shares without any interest thereon. 3.2 Payment for Securities. (a) Prior to the Effective Time, the Parent shall designate KeyCorp Shareholder Services, Inc. or a United States bank or trust company reasonably satisfactory to the Company to act as paying agent in the Merger (the "Paying Agent"). At the Effective Time, the Parent shall deposit in trust with the Paying Agent cash in an aggregate amount necessary to make the payments pursuant to Section 2.7(a) hereof to holders (other than the Parent or the Sub or any of their respective Subsidiaries) of shares of Common Stock that are issued and outstanding immediately prior to the Effective Time (such amounts being hereinafter referred to as the "Payment Fund"), and will deposit from time to time thereafter cash sufficient to make the appropriate cash payments, if any, to holders of Dissenting Shares. Promptly following the date which is six months after the Effective Time, the Paying Agent shall return to the Surviving Corporation all cash in its possession that constitutes any portion of the Payment Fund, and the Paying Agent's duties shall terminate. Thereafter, each holder of a Certificate (as defined in Section 3.2(b)) may surrender such certificate to the Surviving Corporation and (subject to applicable abandoned property, escheat and similar laws) receive in exchange therefor the Merger Consideration, without interest, but shall have no greater rights against the Surviving Corporation than may be accorded to general creditors of the Surviving Corporation under applicable law. (b) Promptly after the Effective Time, the Surviving Corporation shall cause the Paying Agent to mail to each record holder, as of the Effective Time, of an outstanding certificate or certificates that immediately prior to the Effective Time represented shares of Common Stock (the "Certificates"), a form of letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Paying Agent) and instructions for use in effecting the surrender of the Certificate(s) and payment therefor. Upon surrender to the Paying Agent of a Certificate, together with such letter of transmittal duly executed, the holder of such Certificate shall be paid in exchange therefor cash in an amount equal to the product of the -9- 17 number of shares of Common Stock formerly represented by such Certificate multiplied by the Merger Consideration, and such Certificate shall forthwith be cancelled. No interest will be paid or accrued on the cash payable upon the surrender of the Certificates. If payment is to be made to a person other than the person in whose name the Certificate surrendered is registered, it shall be a condition of payment that the Certificate so surrendered shall be properly endorsed or otherwise in proper form for transfer and that the person requesting such payment shall pay any transfer or other taxes required by reason of the payment to a person other than the registered holder of the Certificate surrendered or establish to the satisfaction of the Surviving Corporation that such tax has been paid or is not applicable. Until surrendered in accordance with the provisions of this Section 3.2(b), each Certificate (other than Certificates representing shares of Common Stock owned by the Parent, the Sub or any other Subsidiary of the Parent, and Dissenting Shares) shall represent for all purposes the right to receive an amount in cash equal to the Merger Consideration multiplied by the number of shares of Common Stock formerly evidenced by such Certificate, without any interest thereon. From and after the Effective Time, holders of Certificates immediately prior to the Effective Time will have no right to vote or to receive any dividends or other distributions with respect to any shares of Common Stock which were theretofore represented by such Certificates, and will have no other rights other than as provided herein or by applicable law. (c) After the Effective Time, there shall be no transfers of shares of Common Stock that were outstanding immediately prior to the Effective Time on the stock transfer books of the Surviving Corporation. If, after the Effective Time, Certificates are presented to the Surviving Corporation, they shall be cancelled and exchanged for cash as provided in this Article III. At the close of business on the day of the Effective Time, the stock ledger of the Company with respect to Common Stock shall be closed. ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY The Company represents, warrants and covenants to the Parent and the Sub as follows: 4.1 Organization. (a) Each of the Company and its Subsidiaries (as defined in this Section 4.1(a)) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted, except where the failure to be so organized, existing or in good standing or to have such power and authority would not, individually or in the aggregate, have a material adverse effect on the -10- 18 Company and its Subsidiaries. As used in this Agreement, the word "Subsidiary" means, with respect to the Company or the Parent, any corporation or other organization, whether incorporated or unincorporated, of which (i) such party or any other Subsidiary of such party is a general partner (excluding partnerships, the general partnership interests of which held by such party or any Subsidiary of such party do not have a majority of the voting interest in such partnership) or (ii) at least a majority of the securities or other interests having by their terms ordinary voting power to elect a majority of the Board of Directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such party, by any one or more of its Subsidiaries, or by such party and one or more of its Subsidiaries. A list of all direct or indirect Subsidiaries of the Company, including their jurisdiction of incorporation or organization, capitalization and equity owners is set forth in Section 4.1(a) of the Disclosure Schedule delivered by the Company to the Parent pursuant to this Agreement (the "Disclosure Schedule"). Except as set forth in Section 4.1(a) of the Disclosure Schedule, the Company does not own, directly or indirectly, or have any voting rights with respect to, any capital stock or other securities of any corporation or any direct or indirect equity or other ownership interest in any business. References to a wholly owned Subsidiary of an entity include a Subsidiary all of the common equity of which is owned directly or through "wholly owned" Subsidiaries by such entity. As used in this Agreement, any reference to any event, change or effect being material or having a material adverse effect on or with respect to an entity (or such entity and its Subsidiaries) means such event, change or effect which is materially adverse to the business, assets, prospects, results of operations or financial condition of such entity (or, if with respect to such entity and its Subsidiaries, such group of entities taken as a whole), but does not include any adverse change or effect on the prospects of such entity or group of entities resulting from general economic or industry conditions. Each of the Company and its Subsidiaries is duly qualified or licensed to do business and in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary, except where the failure to be so duly qualified or licensed and in good standing would not, individually or in the aggregate, have a material adverse effect on the Company and its Subsidiaries. (b) The Company has heretofore provided to the Parent a complete and correct copy of the charter and by-laws, each as amended to date, of the Company and each of its Subsidiaries. Such charters and by-laws are in full force and effect. Neither the Company nor any of its Subsidiaries is in violation of any provision of its charter or by-laws, except for such violations that would not, individually or in the aggregate, have a material adverse effect on the Company and its Subsidiaries. 4.2 Capitalization. The authorized capital stock of the Company consists of (i) 50,000,000 shares of Common Stock of which, as of November 6, 1995, 6,090,389 shares were -11- 19 issued and outstanding and no shares were held in the Company's treasury and (ii) 1,000,000 shares of Preferred Stock, $1.00 par value, of which, as of November 6, 1995, 100,000 shares had been designated as the Company's Series A Junior Participating Preferred Stock, none of which was then issued and outstanding but all of which had been reserved for issuance upon the exercise of the Company's Rights to Purchase Preferred Stock (the "Rights") pursuant to the Rights Agreement, dated as of August 31, 1995, between the Company and Boatmen's Trust Company, as Rights Agent (the "Rights Agreement"). Also, as of November 6, 1995, the Company had reserved for issuance (a) 1,349,611 shares of Common Stock upon exercise of the Warrants, (b) 775,000 shares of Common Stock upon exercise of then-outstanding Options under the Option Plan and (c) 35,000 shares of Common Stock in respect of future grants of Options pursuant to the Option Plan. Since March 9, 1993, the Company has not issued any shares of its capital stock, except for issuances of Common Stock upon the exercise of Warrants or Options granted under the Option Plan, and has not repurchased, redeemed or otherwise retired any shares of its capital stock. All the outstanding shares of the Company's capital stock are, and all shares which may be issued pursuant to the Warrant Agreement, the Rights Agreement and the Option Plan will be, when issued and paid for in accordance with the respective terms thereof, duly authorized, validly issued, fully paid and nonassessable and not subject to any preemptive rights of third parties in respect thereto. No bonds, debentures, notes or other indebtedness having the right to vote under ordinary circumstances (or convertible into securities having such right to vote) ("Voting Debt") of the Company or any of its Subsidiaries are issued or outstanding. Except as set forth above, as disclosed in the SEC Documents (as defined in Section 4.5) filed prior to November 1, 1995 or as set forth in Section 4.2 of the Disclosure Schedule, there are no existing options, warrants, calls, subscriptions, rights, commitments or other agreements of any character obligating the Company or any of its Subsidiaries to issue, transfer or sell or cause to be issued, transferred or sold any shares of capital stock, Voting Debt or other interests of the Company or of any of its Subsidiaries or securities convertible into or exchangeable for such shares or other securities or interests or obligating the Company or any of its Subsidiaries to grant, extend or enter into any such option, warrant, call, subscription, right, agreement or commitment. There are no outstanding contractual obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock of the Company or any of its Subsidiaries. Each of the outstanding shares of capital stock of each of the Company's Subsidiaries is duly authorized, validly issued, fully paid, nonassessable and free of any preemptive rights in respect thereto (and in the case of partnership interests, not subject to current or future capital calls), and, except as set forth in Section 4.2 of the Disclosure Schedule or as disclosed in the SEC Documents filed prior to November 1, 1995, such shares and other interests are owned by the Company or by a Subsidiary of the Company free and clear of any lien, claim, option, charge, security interest, limitation on voting or transfer rights and encumbrance of any kind, except which would not, individually or in the aggregate, have a material adverse effect on the Company and its Subsidiaries. -12- 20 4.3 Authority. The Company has the requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby (other than any adoption of this Agreement by the holders of such shares of Common Stock as may be required by applicable law). The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the Merger and of the other transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions so contemplated, other than, with respect to the Merger, any required stockholder action as noted above, and the filing and recordation of the Instrument of Merger with the Secretary of State of the State of Delaware. This Agreement has been duly executed and delivered by the Company and, assuming this Agreement constitutes a valid and binding obligation of the Parent and the Sub, constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. 4.4 Consents and Approvals; No Violations. (a) Except as set forth in Section 4.4(a) of the Disclosure Schedule and except for filings, permits, authorizations, notices, consents and approvals as may be required under, and other applicable requirements of, the Exchange Act and the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the filing and recordation of the Instrument of Merger in accordance with the DGCL, neither the execution, delivery or performance of this Agreement by the Company nor the consummation by the Company of the transactions contemplated hereby and compliance by the Company with any of the provisions hereof will (i) conflict with or result in any breach of any provisions of the charter documents or by-laws of the Company or any of its Subsidiaries, (ii) require any filing with, or permit, authorization, consent or approval of, any court, arbitral tribunal, administrative agency or commission or other governmental or other regulatory authority or agency (a "Governmental Entity") (except where the failure to obtain such permits, authorizations, consents or approvals or to make such filings would not prevent consummation of the Offer or the Merger and would not, individually or in the aggregate, have a material adverse effect on the Company and its Subsidiaries), (iii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, amendment, cancellation or acceleration) under, or result in the creation of any lien or other encumbrance on any property or asset of the Company or any of its Subsidiaries pursuant to, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, contract, agreement or other instrument or obligation to which the Company or any of its Subsidiaries is a party or by which any of them or any of their properties or assets may be bound or (iv) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any -13- 21 of its Subsidiaries is bound, except, in the case of clauses (iii) and (iv), for violations, breaches, defaults or other occurrences which would not prevent consummation of the Offer or the Merger and would not, individually or in the aggregate, have a material adverse effect on the Company and its Subsidiaries. (b) Except as disclosed in the SEC Documents filed prior to November 1, 1995 or as set forth in Section 4.4(b) of the Disclosure Schedule, neither the Company nor any of its Subsidiaries is in default under or in violation of (i) any order, writ, injunction, decree, statute, rule or regulation of any Governmental Entity applicable to the Company or any of its Subsidiaries or by which any of them or any of their properties or assets may be bound or (ii) any note, bond, mortgage, indenture, lease, license, contract, agreement or other instrument or obligation to which the Company or any of its Subsidiaries is a party or by which any of them or any of their properties or assets may be bound, except in each case for any such defaults or violations which, individually or in the aggregate, would not have a material adverse effect on the Company and its Subsidiaries. (c) Except as disclosed in the SEC Documents filed prior November 1, 1995 or as set forth in Section 4.4(c) of the Disclosure Schedule, (i) the Company and its Subsidiaries are in compliance with all applicable statutes, ordinances, rules and regulations of any Governmental Entity relating to protection of the environment and human health including, without limitation, with respect to air, surface water, ground water, land and subsurface strata (collectively, "Environmental Laws") except for non-compliance which, individually or in the aggregate, would not have a material adverse effect on the Company and its Subsidiaries and (ii) neither the Company nor any of its Subsidiaries has received written notice of, or is the subject of, any action, cause of action, claim, investigation, demand or notice by any person or entity alleging liability under or non-compliance by the Company or any of its Subsidiaries with any Environmental Law which, individually or in the aggregate, would have a material adverse effect on the Company and its Subsidiaries. (d) Skipper Beverage Company, Inc. is in compliance in all material respects with the rules and regulations of the Texas Liquor Control Board. 4.5 Commission Reports and Financial Statements. Since June 30, 1993, the Company has filed with the Commission all forms, reports and documents required to be filed by it under the Exchange Act or the Securities Act of 1933, as amended (the "Securities Act"), and has heretofore provided to the Parent true and complete copies of all such forms, reports and documents (as they have been amended since the time of their filing and prior to the date hereof, collectively, the "SEC Documents"). The SEC Documents, including without limitation any financial statements or schedules included therein, at the time filed, and any forms, reports or other documents filed by the Company with the Commission after the date of this -14- 22 Agreement, (i) did not at the time they were filed, or will not at the time they are filed, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading and (ii) complied or will be prepared in compliance, in each case in all material respects, with the applicable requirements of the Exchange Act or the Securities Act, as the case may be. The financial statements of the Company included in the SEC Documents have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto or, in the case of the unaudited statements, to normal audit adjustments) and fairly present (subject, in the case of the unaudited statements, to normal audit adjustments) the consolidated financial position of the Company and its consolidated Subsidiaries as at the dates thereof and the consolidated results of their operations and cash flows for the periods then ended. Except as reflected, reserved against or otherwise disclosed in the financial statements of the Company included in the SEC Documents or as otherwise disclosed in the SEC Documents, in each case filed prior to November 1, 1995, or as set forth in Section 4.5 of the Disclosure Schedule, as of the date hereof, neither the Company nor any of its Subsidiaries had any liabilities or obligations (absolute, accrued, fixed, contingent or otherwise) that would be required to be reflected on a balance sheet, or the notes thereto, prepared in accordance with generally accepted accounting principles, other than liabilities incurred in the ordinary course of business consistent with past practice. 4.6 Information in Other Documents. (a) Neither the Schedule 14D-9 nor any of the information supplied by the Company and any of its affiliates specifically for inclusion in the Offer Documents will, at the respective times the Schedule 14D-9 or the Offer Documents are filed with the Commission or are first published, sent or given to stockholders, as the case may be, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Schedule 14D-9 will comply as to form in all material respects with the applicable requirements of the Exchange Act and the rules and regulations thereunder. (b) Any proxy or information statement used in connection with the Special Meeting and the Merger (as it may be amended from time to time, the "Proxy Statement") will not, at the date mailed to the Company's stockholders and at the time of the Special Meeting, contain any statement, which at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false and misleading. The Proxy Statement will, when filed with the Commission by the Company, comply as to form -15- 23 in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder. (c) Notwithstanding the foregoing, the Company makes no representation with respect to statements made in any of the foregoing documents based on information supplied by the Parent or the Sub specifically for inclusion therein. 4.7 Litigation. Except as disclosed in the SEC Documents filed prior to November 1, 1995 or in Section 4.7 of the Disclosure Schedule, there is no suit, claim, action, proceeding or investigation pending or, to the best knowledge of the Company, threatened, against the Company or any of its Subsidiaries which, individually or in the aggregate, would have a material adverse effect on the Company and its Subsidiaries or affect adversely in any material respect the ability of the Company to consummate the transactions contemplated by this Agreement. Except as disclosed in the SEC Documents filed prior to November 1, 1995 or in Section 4.7 of the Disclosure Schedule, neither the Company nor any of its Subsidiaries is subject to any outstanding order, writ, injunction or decree which, individually or in the aggregate, would have a material adverse effect on the Company and its Subsidiaries or affect adversely in any material respect the ability of the Company to consummate the transactions contemplated hereby. 4.8 No Material Adverse Change; Material Agreements. Except as disclosed in the SEC Documents filed prior to November 1, 1995 or as set forth in Section 4.8 of the Disclosure Schedule, (a) since June 30, 1995, there has not been (i) any action which would be prohibited under Section 6.1 were it to occur after the date of this Agreement nor (ii) any material adverse change in the assets, business, prospects (other than changes in prospects arising from general economic or industry conditions), results of operations or financial condition of the Company and its Subsidiaries, and (b) neither the Company nor any of its Subsidiaries has become a party to any agreement or amendment to an existing agreement which would be required to be filed by the Company as an exhibit to its next Annual Report on Form 10-K other than this Agreement. Except as disclosed in the SEC Documents filed prior to November 1, 1995 or as set forth in Section 4.8 of the Disclosure Schedule, the transactions contemplated by this Agreement will not constitute a "change of control" under, require the consent from or the giving of notice to a third party pursuant to, or accelerate vesting or repurchase rights under the terms, conditions or provisions of any note, bond, mortgage, indenture, license, lease, contract, agreement or other instrument or obligation to which the Company or any of its Subsidiaries is a party or by which any of them or any of its properties or assets may be bound, except where the adverse consequences resulting from such change of control or where the failure to obtain such consents or provide such notices would not, individually or in the aggregate, have a material adverse effect on the Company and its Subsidiaries; provided, however, that the immediately preceding exception will not be -16- 24 applicable to any employment, compensation, termination or severance agreement, or other instrument or obligation of the Company or any of its Subsidiaries. Section 4.8 of the Disclosure Schedule sets forth a good faith estimate of the total amounts payable to officers and directors of the Company as a result of the transactions contemplated by this Agreement and/or any subsequent employment termination (excluding any consideration received for Common Stock and Warrants and any cash-out or acceleration of options but including any "gross-up" payments applicable to "excess parachute payments" pursuant to Section 280G of the Internal Revenue Code of 1986, as amended ("Code"), with respect thereto); and such amounts (x) are based on compensation data applicable as of the date hereof, calculated assuming effective tax rates of 41.05%, and including, without limitation, amounts payable pursuant to employment agreements, bonus plans and retirement plans and any "gross-up" payments applicable to "excess parachute payments" pursuant to Section 280G of the Code, and (y) will not exceed the amounts set forth in Section 4.8 of the Disclosure Schedule, except to the extent noted therein. 4.9 Taxes. (a) The Company and its Subsidiaries each has duly filed all federal, state, local and foreign Tax Returns (as defined in Section 4.9(b)) required to be filed by it, and, except as set forth in Section 4.9 of the Disclosure Schedule, the Company has duly paid or caused to be paid all Taxes (as defined in Section 4.9(b)) shown to be due on such Tax Returns in respect of the periods covered by such returns and has made adequate provision in the Company's financial statements included in the SEC Documents for payment of all Taxes anticipated to be payable in respect of all taxable periods or portions thereof ending on or before the date hereof. Section 4.9 of the Disclosure Schedule lists the periods through which the Tax Returns required to be filed by the Company have been examined by the Internal Revenue Service (the "IRS") or other appropriate taxing authority, or the period during which any assessments may be made by the IRS or other appropriate taxing authority has expired. Except as set forth in Section 4.9 of the Disclosure Schedule, all material deficiencies and assessments asserted as a result of such examinations or other audits by federal, state, local or foreign taxing authorities have been paid, fully settled or adequately provided for in the Company's financial statements included in the SEC Documents, and no issue or claim has been asserted in writing for Taxes by any taxing authority for any prior period, the adverse determination of which would result in a deficiency which, individually or in the aggregate, would have a material adverse effect on the Company and its Subsidiaries, other than those heretofore paid or provided for in the Company's financial statements included in the SEC Documents filed prior to November 1, 1995. Except as set forth in Section 4.9 of the Disclosure Schedule, there are no outstanding agreements or waivers extending the statutory period of limitation applicable to any Tax Return of the Company or its Subsidiaries. Neither the Company nor any of its Subsidiaries has made an election, pursuant to Section 382(l)(5)(H) -17- 25 of the Code, not to have the provisions of Section 382(l)(5) apply. Since March 9, 1993, an "ownership change" within the meaning of Section 382(g) of the Code has not occurred with respect to the ownership of the stock of the Company or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries has filed a consent pursuant to Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as such term is defined in Section 341(f)(4) of the Code) owned by the Company or any of its Subsidiaries. Except as set forth in Section 4.9 of the Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party to any agreement, contract or arrangement that could result, separately or in the aggregate, in the payment of any "excess parachute payments" within the meaning of Section 280G of the Code or any payment that will not be deductible under Section 162(m) of the Code. Except as set forth in Section 4.9 of the Disclosure Schedule, neither the Company nor any of its Subsidiaries (i) has been a member of a group filing consolidated returns for federal income tax purposes, or (ii) is a party to a tax sharing or tax indemnity agreement or any other agreement of a similar nature that remains in effect. (b) For purposes of this Agreement, the term "Taxes" means all taxes, charges, fees, levies or other assessments, including, without limitation, income, gross receipts, excise, property, sales, use, transfer, license, payroll, withholding, capital stock, franchise, employment, severance, stamp, custom duties, profits, withholding, social security (or similar) unemployment, disability, alternative or minimum, estimated or other similar obligation imposed by the United States or any state, local or foreign government or subdivision or agency thereof, including any interest, penalties or additions thereto. For purposes of this Agreement, the term "Tax Return" means any report, return or other information or document required to be supplied to a taxing authority in connection with Taxes. 4.10 Opinion of Financial Advisor. The Company has received the opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated, its financial advisor, to the effect that, as of the date of such opinion, the cash consideration to be received pursuant to the Offer and the Merger, as the case may be, by the holders of the Securities is fair to such holders from a financial point of view. 4.11 Company Rights Agreement. Assuming the accuracy of the Parent's representation contained in Section 5.6 (without giving effect to the knowledge qualification thereof) and the redemption of the Rights as provided in Section 6.6 hereof, none of the transactions contemplated in this Agreement will result in a "Distribution Date" as defined in the Rights Agreement, nor shall the Rights become exercisable as a result of the Offer, the Merger or any other transactions contemplated by this Agreement. 4.12 DGCL Section 203. Assuming the accuracy of the Parent's representation contained in Section 5.6 (without giving effect to the knowledge qualification thereof), the -18- 26 Board of Directors of the Company has approved the transactions to be effected in accordance with this Agreement pursuant to Section 203(a)(1) of the DGCL, and determined that such approval satisfies the requirements of Section 203(a)(1) of the DGCL and, as a result, renders the other provisions of Section 203(a) of the DGCL inapplicable to the Offer, the Merger and this Agreement. ARTICLE V REPRESENTATIONS, WARRANTIES AND COVENANTS OF PARENT AND SUB The Parent and the Sub, jointly and severally, represent, warrant and covenant to the Company as follows: 5.1 Organization and Qualification. Each of the Parent and the Sub is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has the requisite corporate power to carry on its business as it is now being conducted. 5.2 Authority Relative to this Agreement. Each of the Parent and the Sub has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the respective Boards of Directors of the Parent and the Sub, and by the Parent as the sole stockholder of the Sub, and no other corporate proceedings on the part of the Parent or the Sub are necessary to authorize this Agreement, to commence the Offer or to consummate the transactions so contemplated by this Agreement (including the Offer and the Merger). This Agreement has been duly and validly executed and delivered by each of the Parent and the Sub and, assuming this Agreement constitutes a valid and binding obligation of the Company, this Agreement constitutes a valid and binding agreement of each of the Parent and the Sub, enforceable against each of the Parent and the Sub in accordance with its terms. 5.3 Offer Documents; Proxy Statement. (a) None of the Offer Documents nor any of the information supplied by the Parent, the Sub or any of the Parent's other Subsidiaries specifically for inclusion in the Schedule 14D-9 will, at the respective times the Offer Documents (including any amendments or supplements thereto) or the Schedule 14D-9 are filed with the Commission or are first published, sent or given to stockholders, as the case may be, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements included therein, in the light of the circumstances under which they were made, not misleading. The Offer Documents and the Offer will comply as to form -19- 27 in all material respects with the applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder. (b) The information supplied by the Parent and its affiliates specifically for inclusion or incorporation by reference in the Proxy Statement, if required, will not, at the time the Proxy Statement is mailed to the Company's stockholders and at the time of the Special Meeting, contain any statement, which at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false and misleading. (c) Notwithstanding the foregoing, the Parent and the Sub make no representation with respect to statements made in any of the foregoing documents based on information supplied by the Company specifically for inclusion therein. 5.4 Consents and Approvals; No Violation. Neither the execution and delivery of this Agreement by the Parent and the Sub nor the consummation of the transactions contemplated hereby will (a) conflict with or result in any breach of any provision of the respective certificates of incorporation or by-laws of the Parent or the Sub or any of the Parent's other Subsidiaries; (b) require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, except (i) in connection with the HSR Act, (ii) pursuant to the Exchange Act, (iii) the filing of the Instrument of Merger pursuant to the DGCL or (iv) where the failure to obtain such consent, approval, authorization or permit, or to make such filing or notification, would not (x) prevent the consummation of the Offer or the Merger, (y) have a material adverse effect on the terms of the Offer or the Merger or (z) individually or in the aggregate have a material adverse effect on the financial condition, business or results of operations of the Parent and its Subsidiaries; (c) result in a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, license, agreement or other instrument or obligation to which the Parent, the Sub or the Parent's other Subsidiaries is a party or by which the Parent, the Sub or the Parent's other Subsidiaries, or any of their respective assets may be bound, except for such defaults (or rights of termination, cancellation or acceleration) as to which requisite waivers or consents have been obtained or that would not (x) prevent the consummation of the Offer or the Merger, (y) have a material adverse effect on the terms of the Offer or the Merger or (z) individually or in the aggregate have a material adverse effect on the financial condition, business or results of operations of the Parent and its Subsidiaries; or (d) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Parent, the Sub and the Parent's other Subsidiaries or any of their respective assets, except for violations that would not (x) prevent the consummation of the Offer or the Merger, (y) have a material adverse effect on the terms of the Offer or the Merger or (z) individually or in the -20- 28 aggregate have a material adverse effect on the financial condition, business or results of operations of the Parent and its Subsidiaries. 5.5 Financing. The Parent has received a firm written commitment from a financially responsible third party to obtain the funds necessary to consummate the Offer and the Merger, and to pay related fees and expenses. 5.6 Status as an Interested Stockholder or an Acquiring Person. As of the date of this Agreement, neither the Parent nor the Sub nor, to the best knowledge of the Parent, any of the Parent's affiliates is an "Interested Stockholder" as such term is defined in Section 203 of the DGCL, or an "Acquiring Person" as such term is defined in the Rights Agreement. 5.7 Interim Operations of the Sub. The Sub was formed solely for the purpose of engaging in the transactions contemplated hereby, has engaged in no other business activities and has conducted its operations only as contemplated hereby. ARTICLE VI COVENANTS 6.1 Conduct of Business of the Company. Except as contemplated by this Agreement or with the prior written consent of the Parent, during the period from the date of this Agreement to the Effective Time, the Company will, and will cause each of its Subsidiaries to, conduct its operations only in the ordinary and usual course of business consistent with past practice and will use all reasonable efforts, and will cause each of its Subsidiaries to use all reasonable efforts, to preserve intact its present business organization, keep available the services of its present officers and employees and preserve its material relationships with licensors, licensees, customers, suppliers, employees and any others having business dealings with it. Without limiting the generality of the foregoing, and except as otherwise expressly provided in this Agreement, without the prior written consent of the Parent, the Company will not, and will not permit any of its Subsidiaries to, prior to the Effective Time: (a) adopt any amendment to its certificate of incorporation or by-laws or comparable organizational documents or to the Rights Agreement; (b) issue, reissue, sell or pledge or authorize or propose the issuance, reissuance, sale or pledge of any shares of capital stock of any class, or securities convertible into capital stock of any class, or any rights, warrants or options to acquire any convertible securities or capital stock, other than the issuance of shares of Common Stock (and attached Rights) upon the exercise of Warrants and Options issued pursuant to the Option Plan outstanding on the -21- 29 date of this Agreement and identified in Section 6.1(b) of the Disclosure Schedule, in each case in accordance with their present terms; (c) declare, set aside or pay any dividend or other distribution (whether in cash, securities or property or any combination thereof) in respect of any class or series of its capital stock, except that any wholly owned Subsidiary of the Company may pay dividends and make distributions to the Company or any of the Company's wholly owned Subsidiaries; (d) adjust, split, combine, subdivide, reclassify or redeem, purchase or otherwise acquire, or propose to redeem or purchase or otherwise acquire, any shares of its capital stock, except that the Company may redeem the Rights in accordance with Section 6.6; (e) (i) incur, assume or pre-pay any long-term debt or incur or assume any short-term debt, except that the Company and its Subsidiaries may incur or pre-pay debt in the ordinary course of business consistent with past practice under existing lines of credit, (ii) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person or entity except in the ordinary course of business consistent with past practice, or (iii) make any loans, advances or capital contributions to, or investments in, any other person or entity except for loans, advances, capital contributions or investments between the Company and any of its wholly owned Subsidiaries or between wholly owned Subsidiaries of the Company in the ordinary course of business consistent with past practice; (f) settle or compromise any suit or claim or threatened suit or claim relating to the transactions contemplated hereby; (g) except for (i) increases in salary, wages and benefits of employees of the Company or its Subsidiaries (other than officers and directors of the Company) in accordance with past practice and (ii) increases in salary, wages and benefits granted to employees of the Company or its Subsidiaries (other than officers and directors of the Company) in conjunction with promotions or other changes in job status consistent with past practice or required under existing agreements, increase the compensation or fringe benefits payable or to become payable to its directors, officers or employees (whether from the Company or any of its Subsidiaries), or pay any benefit not required by any existing plan or arrangement (including, the granting of, or waiver of performance or other vesting criteria under, stock options, or grant any severance or termination pay to (except pursuant to existing agreements or policies), or enter into any employment or severance agreement with, any director, officer or employee of the Company or any of its Subsidiaries) or establish, adopt, enter into, terminate or amend any bonus, profit sharing, thrift, compensation, stock option, pension, retirement, welfare, deferred compensation, employment, termination, severance or other employee benefit plan, agreement, -22- 30 trust, fund, policy or arrangement for the benefit or welfare of any directors, officers or current or former employees, except to the extent such termination or amendment is required by applicable law; provided, however, that nothing herein will be deemed to prohibit the payment of benefits as they become payable under existing plans, agreements, trusts, funds, policies or arrangements in accordance with their terms; (h) acquire (except as otherwise permitted by clause (j) below), sell, lease, or dispose of or pledge, mortgage or encumber any assets (including licenses, permits and other rights) of the Company and its Subsidiaries other than in the ordinary course of business consistent with past practice and in each case not exceeding $250,000, or enter into any commitment or transaction outside the ordinary course of business consistent with past practice other than transactions between a wholly owned Subsidiary of the Company and the Company or between wholly owned Subsidiaries of the Company; (i) (i) modify, amend or terminate any contract, license or permit, (ii) waive, release, relinquish or assign any contract (including any insurance policy) or other license, permit, right or claim, or (iii) cancel or forgive any indebtedness owed to the Company or its Subsidiaries, other than in each case in a manner in the ordinary course of business consistent with past practice and which is not material to the business of the Company and its Subsidiaries; (j) authorize, commit to or make any capital expenditures except pursuant to and in accordance with the capital budget previously provided to the Parent; (k) make any tax election not required by law or settle or compromise any tax liability, in either case that is material to the Company and its Subsidiaries; (l) change any of the accounting principles or practices used by it except as required by the Commission or the Financial Accounting Standards Board; or (m) agree in writing or otherwise to take any of the foregoing actions or any action which would make any representation or warranty in this Agreement untrue or incorrect in any material respect. 6.2 Access. (a) Between the date of this Agreement and the Effective Time, the Company will (i) give the Parent and its authorized representatives reasonable access during regular business hours upon reasonable notice to all stores, offices, warehouses and other facilities and to all books and records of the Company and its Subsidiaries, (ii) permit the Parent to make -23- 31 such inspections as it may reasonably require and (iii) cause its officers and those of its Subsidiaries to furnish the Parent with such financial and operating data and other information with respect to the business and properties of the Company and its Subsidiaries as the Parent may from time to time reasonably request, provided that no investigation pursuant to this Section 6.2 or otherwise will affect or be deemed to modify any of the representations and warranties made by the Company in this Agreement. (b) Information obtained by the Parent pursuant to this Section 6.2 shall be subject to the provisions of the Confidentiality Agreement between the Parent and the Company dated October 2, 1995 (the "Confidentiality Agreement"), which Confidentiality Agreement remains in full force and effect; provided, however, that (i) the Company will not request that the Parent return the Evaluation Materials (as that term is defined in the Confidentiality Agreement) prior to 30 calendar days after the date that this Agreement is terminated in accordance with Section 8.1 and (ii) effective as of the date hereof, the Confidentiality Agreement is hereby amended to delete Sections 4, 6 and 8 thereof in their entirety. 6.3 Reasonable Best Efforts. Subject to the terms and conditions of this Agreement, and to the fiduciary duties of their respective Boards of Directors under applicable laws as advised in the written opinion of their outside counsel, each of the parties hereto agrees to use its reasonable best efforts to take, or cause to be taken, all appropriate action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement, including taking all action reasonably required under the HSR Act. In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and directors of each party to this Agreement shall take all such necessary action. Notwithstanding the foregoing, neither the Company, the Parent nor the Sub shall be obligated to waive any of its rights under this Agreement, including without limitation those specified in Article VII of this Agreement or in Annex I hereto. All actions, judgments and determinations of the parties hereto required or permitted hereby or by the Offer Documents or otherwise contemplated by this Agreement shall be made in good faith. 6.4 Indemnification and Insurance. It is understood and agreed that the Company shall defend, indemnify and hold harmless, and after the Effective Time, the Surviving Corporation and the Parent shall, jointly and severally, defend, indemnify and hold harmless, each person listed under "Indemnity Agreements" in Section 6.5(a) of the Disclosure Schedule (the "Indemnified Parties") to the full extent required or permitted under (a) Delaware law, (b) as provided in the Restated Certificate of Incorporation and Restated By-Laws of the Company and (c) as otherwise provided for or permitted pursuant to any agreement in effect at the date hereof listed in Section 6.5(a) of the Disclosure Schedule. The rights to be defended, -24- 32 indemnified and held harmless pursuant to this Section 6.4 shall survive the Merger and shall continue in full force and effect without time limitation from and after the Effective Time and without amendment or modification of the terms of any of the agreements referred to in clause (c) above. Without limiting the foregoing, the Company, and after the Effective Time the Surviving Corporation and the Parent, will periodically advance expenses as incurred with respect to the foregoing, to the fullest extent permitted by applicable law; provided the person to whom the expenses are advanced provides an undertaking to repay such advances if it is ultimately determined that such person is not entitled to indemnification. The Company, after consultation in good faith with the Parent so as to minimize the cost thereof, or the Parent shall purchase, as promptly as practicable and in any event prior to the Effective Time and without any lapse in coverage, policies of directors' and officers' "run-off" liability insurance (or policies which contain terms and conditions that are no less advantageous to the directors and officers and former directors and officers of the Company as the directors' and officers' liability insurance policies that are in effect at the Company on the date hereof), which insurance shall remain in effect for a period of not less than six years from and after the Effective Time; provided that, in the event that any claim or claims (a "Claim" or "Claims") are asserted or made within such six-year period, the Parent and the Surviving Corporation shall cause such insurance to be continued in respect of any such Claim or Claims until final disposition of any and all such Claims. 6.5 Certain Agreements, Employee Benefits, etc.. (a) The Parent hereby agrees to honor, and to cause the Surviving Corporation and its Subsidiaries to honor (in accordance with the terms thereof), all contracts, agreements, arrangements, policies, plans and commitments of the Company (or any of its Subsidiaries) in effect as of the date hereof that are applicable to any officer or employee or former officer or employee or any director or former director of the Company (or any of its Subsidiaries or former Subsidiaries) (collectively, the "Agreements"). A list of all Agreements is set forth in Section 6.5(a) of the Disclosure Schedule. Without limiting the generality of the foregoing, the Parent hereby unconditionally agrees to perform and pay, or cause the Surviving Corporation and its Subsidiaries to perform and pay, when due any and all amounts payable pursuant to the terms of the Agreements. (b) The Parent hereby agrees that for a period of one year immediately following the Effective Time, it shall cause the Surviving Corporation and its Subsidiaries to continue to maintain (except as required by law) the employee benefit plans for employees and former employees of the Company and its Subsidiaries listed under Section 6.5(b) of the Disclosure Schedule, or other plans that, on a plan-by-plan basis, provide benefits that are no less favorable to such employees than the benefits currently in effect with respect to such employees under the plans listed under Section 6.5(b) of the Disclosure Schedule. -25- 33 Notwithstanding anything contained in this Agreement to the contrary, at the Parent's election, the Surviving Corporation (i) may elect to become a nonsubscriber under the Texas Workers' Compensation Act and implement the Parent's Work Injury Program, and (ii) implement the Parent's Dialogue Dispute Resolution Program. (c) If any employee of the Company or any of its Subsidiaries becomes a participant in any employee benefit plan, practice or policy of the Parent or the Surviving Corporation, such employee shall be given credit under such plan for all service prior to the Effective Time with the Company and its Subsidiaries, or any predecessor employer (to the extent such credit was given by the Company), for purposes of eligibility and vesting (but not for benefit accrual purposes) for which such service is either taken into account or recognized. (d) Notwithstanding anything to the contrary contained herein, from and after the Effective Time, the Surviving Corporation shall have sole discretion over the hiring, promotion, retention, firing and other terms and conditions of the employment of officers and employees of the Surviving Corporation. 6.6 Rights Agreement. The Board of Directors of the Company shall take all action necessary to defer the Distribution Date (as that term is defined in the Rights Agreement) to prevent the occurrence of the Distribution Date as a result of the commencement of the Offer, this Agreement or the consummation of the transactions contemplated hereby (including the Offer and the Merger). The Company will redeem the Rights effective immediately prior to the Parent's acceptance for payment of Securities pursuant to the Offer and will not otherwise redeem the Rights, or amend or terminate the Rights Agreement unless required to do so by a court of competent jurisdiction. The record date for determining holders of record of Common Stock entitled to receive the redemption price for the Rights shall be established in accordance with the regulations of the NYSE. 6.7 Public Announcements. The initial press release announcing this Agreement will be a joint press release and thereafter the Parent, the Sub and the Company will use reasonable efforts to consult with each other before issuing any press release or similar public announcement with respect to the Offer, the Merger or the other transactions contemplated hereby and in connection with making any filings with the Commission or any other Governmental Entity or the NYSE and shall not issue any such press release or make any such public announcement or filing prior to such consultation without providing the other party with notice and a reasonable opportunity to comment thereon, except as may be required by law or by obligations pursuant to any listing agreement with any national securities exchange. 6.8 Post Merger Treatment of Warrants. Following the Effective Time and subject to the terms and conditions of the Warrant Agreement, the Parent will cause the Surviving -26- 34 Corporation to make available, as necessary, sufficient funds to pay, and will pay, to holders of Warrants, upon the exercise thereof, the amount of cash, without interest, to which such holders would have been entitled pursuant to the Merger if such holders had exercised their Warrants and acquired shares of Common Stock immediately prior to the Effective Time. 6.9 Exclusivity. (a) Except as provided in Section 6.9(b), until the earlier of the termination of this Agreement pursuant to Section 8.1 or the Effective Time, the Company will not, and will cause its officers, directors, Subsidiaries, affiliates, representatives or agents, directly or indirectly, not to, do any of the following: (i) negotiate, undertake, authorize, propose or enter into, either as the proposed surviving, merged, acquiring or acquired corporation, any transaction (other than the Offer and the Merger) involving any sale, transfer or other disposition or other change of ownership (whether by tender or exchange offer or otherwise) of any securities of the Company or any of its Subsidiaries, or any assets of the Company or any of its direct or indirect Subsidiaries constituting one percent or more of the consolidated assets of the Company or one percent or more of the consolidated revenues of the Company, whether in a single transaction or series of related transactions (an "Acquisition Transaction"); (ii) solicit or initiate the submission of a proposal or offer in respect of, or engage in negotiations concerning, an Acquisition Transaction; or (iii) furnish or cause to be furnished to any corporation, partnership, person or other entity or group (other than the Parent, the Sub and their representatives) (a "Person") any non-public information concerning the business, operations, properties or assets of the Company in connection with an Acquisition Transaction; provided nothing herein will prohibit the Company's Board of Directors from taking and disclosing to the Company's securityholders a position with respect to a tender offer pursuant to Rule 14d-9 promulgated under the Exchange Act. The Company will inform the Parent by telephone (confirmed in writing) promptly, and in any event within one day of its receipt of any proposal or bid in respect of any Acquisition Transaction and provide the Parent with copies of any written proposals or bids. Nothing in this Section 6.9(a) will (i) permit the Company to enter into any agreement with respect to an Acquisition Transaction for so long as this Agreement remains in effect (it being agreed that for as long as this Agreement remains in effect, the Company will not enter into any agreement with any Person that provides for, or in any way facilitates, an Acquisition Transaction), or (ii) affect any other obligation of the Company under this Agreement. (b) Notwithstanding anything else contained in this Section 6.9, the Company and its officers, directors, Subsidiaries, representatives and agents may engage in discussions or negotiations with, and may furnish information to, a third party or its representative who makes a written proposal with respect to an Acquisition Transaction if (i) the Company's Board of Directors determines in good faith after consultation with its financial advisors that such -27- 35 proposal may reasonably be expected to result in a transaction that is financially superior to the transactions contemplated by this Agreement, and (ii) the Board of Directors of the Company determines in good faith after receipt of a written opinion of outside counsel that such actions are required by its fiduciary duties under applicable law. 6.10 Fees and Expenses. Except as provided in Section 8.3, whether or not the Offer or the Merger is consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby will be paid by the party incurring such expenses. 6.11 Brokers or Finders. Each of the Parent and the Company represents and warrants, as to itself, its Subsidiaries and its affiliates, that no agent, broker, investment banker, financial advisor or other firm or person is or will be entitled to any brokers' or finders' fee or any other commission or similar fee in connection with any of the transactions contemplated by this Agreement except Merrill Lynch, Pierce, Fenner & Smith Incorporated, whose fees and expenses will be paid by the Company in accordance with the Company's agreement with such firm, a copy of which has been provided to the Parent, and Wasserstein Perella & Co. Inc., whose fees and expenses will be paid by the Parent in accordance with the Parent's agreement with such firm, a copy of which has been provided to the Company. 6.12 Notification of Certain Matters. The Company will give prompt notice to the Parent and the Parent will give prompt notice to the Company of (a) the occurrence, or non-occurrence, of any event the occurrence, or non- occurrence, of which would be likely to cause (i) any representation or warranty contained in this Agreement to be untrue or inaccurate in any material respect or (ii) any covenant, condition or agreement contained in this Agreement not to be complied with or satisfied in any material respect, (b) any failure of the Company or the Parent or the Sub, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder in any material respect, (c) any written notice or other written communication from any third party alleging that the consent of such third party is or may be required in connection with the transactions contemplated by this Agreement and (d) any written notice or other written communication from the Commission or any other Governmental Entity in connection with the transactions contemplated by this Agreement; provided, however, that the delivery of any notice pursuant to this Section 6.12 will not limit or otherwise affect the remedies available hereunder to the party receiving such notice. -28- 36 ARTICLE VII CONDITIONS TO CONSUMMATION OF THE MERGER 7.1 Conditions to Each Party's Obligation to Effect the Merger. The respective obligations of each party to effect the Merger are subject to the satisfaction or waiver, where permissible, prior to the Effective Time, of the following conditions: (a) this Agreement shall have been adopted by the affirmative vote of the stockholders of the Company by the requisite vote in accordance with the Company's Restated Certificate of Incorporation and applicable law, if such vote is required; (b) no United States or state statute, rule, regulation, executive order, decree or injunction shall have been enacted, entered, promulgated or enforced by any Governmental Entity that is in effect and has the effect of making the acquisition or ownership of the Securities illegal or otherwise prohibiting or materially restricting the consummation of the Offer or the Merger or that would make the acquisition or ownership by the Parent or its Subsidiaries of the common stock of the Surviving Corporation illegal; and (c) the waiting period applicable to the consummation of the Merger under the HSR Act shall have expired or been terminated. 7.2 Conditions to Obligations of the Company to Effect the Merger. The obligation of the Company to effect the Merger is further subject to the satisfaction or waiver, where permissible, at or prior to the Effective Time, of the following conditions: (a) each of the Parent and the Sub shall have performed in all material respects its respective covenants in this Agreement, to the extent such covenants are to be performed prior to the Effective Time; and (b) the representations and warranties of the Parent and the Sub shall be true and correct in all material respects at and as of the Effective Time as if made as of the Effective Time. 7.3 Conditions to Obligations of the Parent and Sub to Effect the Merger. The obligations of the Parent and the Sub to effect the Merger are further subject to the satisfaction or waiver, where permissible, at or prior to the Effective Time, of the following conditions: -29- 37 (a) the Sub (or any permitted assignee) shall have accepted for payment and paid for Securities tendered pursuant to the Offer, provided that this condition will be deemed satisfied if the Sub (or any permitted assignee) fails to accept for payment and pay for Securities tendered pursuant to the Offer in violation of the terms hereof or thereof; and (b) the Company shall have performed in all material respects the covenants in this Agreement, to the extent such covenants are to be performed prior to the Effective Time. ARTICLE VIII TERMINATION AND AMENDMENT 8.1 Termination. This Agreement may be terminated at any time prior to the Effective Time, whether before or after any required adoption of this Agreement by the stockholders of the Company: (a) by mutual consent of the Parent and the Company by action of their respective Boards of Directors; (b) by the Company if (i) the Parent and the Sub fail to commence the Offer as provided in Section 1.1, (ii) the Offer expires or is terminated without any Securities being purchased thereunder, or (iii) the Sub (or any permitted assignee) fails to purchase Securities validly tendered and not withdrawn in violation of the terms and conditions of the Offer or this Agreement; (c) by either the Parent or the Company if the Sub (or any permitted assignee) has not purchased the shares of Common Stock validly tendered and not withdrawn pursuant to the Offer in accordance with the terms hereof within 120 calendar days after the commencement of the Offer; provided however, that the party (in the case of the Parent, together with the Sub) seeking to terminate this Agreement pursuant to this Section 8.1(c) is not in material breach of this Agreement (including without limitation any representation, warranty or covenant herein contained); (d) by either the Parent or the Company if the Merger is not consummated before March 31, 1996, despite the reasonable good faith effort of such party to effect such consummation; provided, however, that the party (in the case of the Parent, together with the Sub) seeking to terminate this Agreement pursuant to this Section 8.1(d) is not in material breach of this Agreement (including without limitation any representation, warranty or covenant herein contained); -30- 38 (e) by either the Parent or the Company if any court of competent jurisdiction has issued an injunction permanently restraining, enjoining or otherwise prohibiting the consummation of the Offer or the Merger, which injunction has become final and non-appealable; (f) by the Parent if (i) the Board of Directors of the Company shall have withdrawn, modified or amended in any respect adverse to the Parent its favorable recommendation of the Offer or the Merger or shall have resolved to do any of the foregoing, (ii) prior to the expiration of the Offer, any of the representations and warranties of the Company contained in this Agreement were incorrect in any material respect when made or have since become, and at the time of termination remain, incorrect in any material respect or (iii) there has been a material breach on the part of the Company in the covenants of the Company set forth herein, or any failure on the part of the Company to comply with its material obligations hereunder, including without limitation the obligation under Section 6.6 to redeem the Rights; or (g) by the Company, prior to the expiration of the Offer, if (i) (x) any of the representations and warranties of the Parent or the Sub contained in this Agreement were incorrect in any material respect when made or have since become, and at the time of termination remain, incorrect in any material respect, or (y) there has been a material breach on the part of the Parent or the Sub in the covenants of the Parent or the Sub set forth herein, or any failure on the part of the Parent or the Sub to comply with its material obligations hereunder, or (ii) the Board of Directors of the Company, after consulting with its outside counsel and financial advisor, determines in good faith, and based in part on a written opinion of outside counsel, that its fiduciary duties require that it withdraw, modify or amend in a manner adverse to the Parent its favorable recommendation of the Offer or the Merger in order to approve the execution of a definitive agreement with respect to an Acquisition Transaction with another party which the Board of Directors has determined in good faith is financially superior to the transactions contemplated by this Agreement; provided, however, that the Company may not terminate this Agreement pursuant to this Section 8.1(g)(ii) until the Company has paid to the Parent in full the amount referred to in Section 8.3(a). 8.2 Effect of Termination. In the event of a termination of this Agreement by either the Company or the Parent in accordance with Section 8.1, no party hereto (or its directors or officers) will have any liability or further obligation to any other party to this Agreement, except for obligations pursuant to Sections 6.2(b) and 8.3 and any liability resulting from the willful breach of any other covenant or agreement set forth herein. 8.3 Certain Termination Fees; Certain Costs and Expenses. (a) Prior to any termination of this Agreement by the Company pursuant to Section 8.1(g)(ii) or within two -31- 39 business days after any termination of this Agreement by the Parent or the Sub pursuant to Section 8.1(f)(i), the Company will pay to the Parent $7,000,000 in cash and (b) after such termination (and in any event within two business days of receiving the Parent or the Sub's documented invoice) the Company will reimburse the Parent and the Sub for the documented out-of-pocket costs and expenses incurred by the Parent or the Sub in connection with the Offer and the other transactions contemplated by this Agreement, including without limitation the fees and expenses of the financial advisors and counsel to the Parent and the Sub and fees incurred by the Parent or the Sub to obtain financing commitments for the Offer and the Merger. ARTICLE IX MISCELLANEOUS 9.1 Non-survival of Representations and Warranties. None of the representations and warranties in this Agreement or in any instrument delivered pursuant to this Agreement will survive the Effective Time. The covenants and agreements herein will survive termination of this Agreement and the Effective Time. 9.2 Amendment. This Agreement may be amended by the parties hereto by action taken or authorized by their respective Boards of Directors, at any time before or after approval of the matters presented in connection with the Merger by the stockholders of the Company, but, after any such approval, no amendment will be made which by law requires further approval by such stockholders without such further approval. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. Notwithstanding anything contained in this Agreement to the contrary, any action by the Company (a) to terminate this Agreement, (b) to waive or amend any provision of this Agreement and (c) to extend the time for the performance of any obligation under this Agreement, in each case following consummation of the Offer will require the approval of a majority of the directors of the Company then in office who are directors of the Company on the date hereof (the "Continuing Directors"). 9.3 Extension; Waiver. At any time prior to the Effective Time, the parties hereto, by action taken or authorized by their respective Boards of Directors, may, to the extent legally allowed, (a) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (b) waive any inaccuracies in the representations and warranties of the other parties hereto contained herein or in any document delivered pursuant hereto and (c) waive compliance with any of the agreements of the other parties hereto or conditions to their own obligations contained herein, other than satisfaction of the Minimum Condition. Any -32- 40 agreement on the part of a party hereto to any such extension or waiver will be valid only if set forth in a written instrument signed on behalf of such party. 9.4 Notices. All notices and other communications hereunder will be in writing and will be deemed given if delivered personally, telecopied (which is confirmed) or mailed by registered or certified (return receipt requested) to the parties at the following addresses (or at such other address for a party as is specified by like notice): (a) if to the Parent or the Sub: Diamond Shamrock, Inc. 9830 Colonnade Blvd. San Antonio, Texas 78230 Attention: Chairman and Chief Executive Officer Telecopy No.: 210/641-8885 with a copy to: Timothy J. Fretthold, Esq. Diamond Shamrock, Inc. 9830 Colonnade Blvd. San Antonio, Texas 78230 Telecopy No.: 210/641-8885 and Robert A. Profusek, Esq. Jones, Day, Reavis & Pogue 599 Lexington Avenue New York, New York 10022 Telecopy No.: 212/755-7306
-33- 41 and (b) if to the Company, to: National Convenience Stores Incorporated 100 Waugh Drive Houston, Texas 77007 Attention: Chief Executive Officer Telecopy No.: 713/880-0579 with a copy to: A. J. Gallerano Senior Vice President, General Counsel and Secretary National Convenience Stores Incorporated 100 Waugh Drive Houston, Texas 77007 Telecopy No.: 713/880-0579 and Edgar J. Marston III Bracewell & Patterson, L.L.P. South Tower Pennzoil Place 711 Louisiana Houston, Texas 77002-2871 Telecopy No.: 713/221-1212
9.5 Interpretation. When a reference is made in this Agreement to Sections, such reference will be to a Section of this Agreement unless otherwise indicated. The headings contained in this Agreement are for reference purposes only and will not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include," "includes," or "including" are used in this Agreement they will be deemed to be followed by the words "without limitation." The phrases "the date of this Agreement," "the date hereof" and terms of similar import, unless the context otherwise requires, will be deemed to refer to November 8, 1995. 9.6 Counterparts. This Agreement may be executed in two or more counterparts, all of which will be considered one and the same agreement and will become effective when two or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. -34- 42 9.7 Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of Delaware regardless of the laws that might otherwise govern under principles of conflict of laws applicable thereto. 9.8 Specific Performance. The parties hereto agree that if any provision of this Agreement is not performed in accordance with its specific terms or is otherwise breached, irreparable damage would occur, no adequate remedy at law would exist and damages would be difficult to determine, and that, subject to the provisions of Article VIII, the parties will be entitled to specific performance of the terms hereof, in addition to any other remedy at law or equity. 9.9 Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder may be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties, except that the Sub may assign, in its sole discretion, any or all rights, interests and obligations hereunder to the Parent or any direct or indirect wholly owned Subsidiary of the Parent incorporated under the laws of the State of Delaware. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. 9.10 Validity. The invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforcement of any other provisions hereof, which will remain in full force and effect. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other terms and provisions of this Agreement will nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner that is adverse to any party which is entitled to the benefit thereof and which has not been waived by such party. Upon any such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto will negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated by this Agreement are consummated to the extent possible. 9.11 Entire Agreement; No Third Party Beneficiaries. This Agreement (including the Disclosure Schedules, the Annexes and the other documents and the instruments referred to herein), and the Confidentiality Agreement (as hereby amended pursuant to Section 6.2(b)) (a) constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matters hereof, and (b) other than Sections 6.4 and 6.5 of this Agreement are not intended to confer upon any person other than the parties hereto and thereto any rights or remedies hereunder or thereunder. The -35- 43 covenants of the Parent and the Sub in Sections 6.4 and 6.5 of this Agreement may be enforced after the Effective Time by any of the Indemnified Parties. IN WITNESS WHEREOF, the Parent, the Sub and the Company have caused this Agreement to be signed by their respective officers thereunto duly authorized as of the date first written above. DIAMOND SHAMROCK, INC. By: /s/ A. W. O'DONNELL _____________________________________ A. W. O'Donnell Senior Vice President SHAMROCK ACQUISITION CORP. By: /s/ A.W. O'DONNELL _____________________________________ A.W. O'Donnell President NATIONAL CONVENIENCE STORES INCORPORATED By: /s/ V.H. VAN HORN III _____________________________________ V.H. Van Horn III President and Chief Executive Officer -36- 44 ANNEX I Conditions to the Offer Notwithstanding any other provision of the Offer, neither the Parent nor the Sub will be required to accept for payment, purchase or, subject to applicable rules and regulations of the Commission, including Rule 14e-1(c) under the Exchange Act, to pay for any Securities tendered pursuant to the Offer, and may, subject to the provisions of Section 1.1 of this Agreement, amend, extend or terminate the Offer or postpone the expiration date, the acceptance for payment of and/or the purchase or (subject to the applicable rules and regulations aforesaid) payment for Securities tendered, if as of the expiration of the Offer (as the Offer may have been extended pursuant to Section 1.1 of this Agreement) (i) at least two-thirds of the shares of the Common Stock on a fully-diluted basis (after giving effect to the exercise of all Warrants validly tendered pursuant to the Offer and not withdrawn) have not been validly tendered pursuant to the Offer and not withdrawn (the "Minimum Condition"), (ii) the waiting periods under the HSR Act applicable to the Offer and the Merger have not expired or been terminated or (iii) at any time on or after the date of this Agreement and at or prior to the time of payment for the Securities (whether or not any Securities have been accepted for payment or paid for pursuant to the Offer) any one or more of the events listed in the paragraphs below have occurred and are continuing; (a) there has been any action taken, or any statute, rule, regulation, judgment, order or injunction promulgated, enacted, entered or deemed applicable to the Offer or the Merger, by any Governmental Entity that in the sole judgment of the Parent (i) makes the acceptance for payment of or payment for Securities illegal, challenges the acquisition by the Parent or the Sub of the Securities or otherwise seeks to restrain or prohibit the consummation of the Offer or the Merger, (ii) renders the Parent unable to accept for payment, pay for or purchase the Securities, (iii) seeks to impose or imposes limitations on the ability of the Parent to acquire or hold, transfer or dispose of, or effectively to exercise any of its rights of ownership of, the Securities, including, without limitation, the right to vote the shares of Common Stock purchased by it on all matters properly presented to the stockholders of the Company, (iv) as a result of the Offer or the Merger, seeks to require or requires the Parent, the Company, or any of their respective Subsidiaries or affiliates to dispose of or hold separate or otherwise limits or affects the exercise of ordinary ownership or control rights in respect of all or any significant portion of the Company's or the Parent's respective businesses, assets or properties, each taken as a whole, or imposing any limitations on the ability of any such entities to conduct their respective businesses and own such assets and properties, or (v) seeks to impose or imposes any limitations on the ability of the Parent or any of its Subsidiaries effectively -37- 45 to control the business or operations of the Company or any of its Subsidiaries as a result of the Offer or the Merger; or (b) there has been instituted or pending any action, proceeding, claim or counterclaim by or before any Governmental Entity, or any other person or entity seeking to restrain or prohibit the making of the Offer or the Merger, seeking to obtain any significant damages from the Parent or its Subsidiaries, or the Company or its Subsidiaries or from any other person or entity to whom or to which any of the foregoing has an indemnity obligation arising from the Offer or the Merger or seeking to prohibit the ownership by the Parent or any of its Subsidiaries of the Securities or of any significant portion of their businesses or assets, taken as a whole or any significant portion of the business or assets of the Company and its Subsidiaries taken as a whole, or to compel the Parent, the Company or any of their affiliates to dispose of or hold separate all or a significant portion of any of their business or assets, taken as a whole, in each case as a result of the Offer or the Merger; or (c) there has occurred (i) any general suspension of, or limitation on prices for, trading in securities on the NYSE or the over-the-counter market, (ii) a decline of at least 20% in either the Dow Jones Average of Industrial Stocks or the Standard & Poor's 500 Index from the date of this Agreement, (iii) the declaration of a banking moratorium or any limitation or suspension of payments in respect of the extension of credit by banks or other lending institutions in the United States, (iv) any limitation by any Governmental Entity on, or any other event which in the sole judgment of the Parent may have a material adverse effect on the extension of credit by banks or other lending institutions, (v) a commencement of war, armed hostilities or other international or national calamity directly or indirectly involving the United States or (vi) in the case of any of the foregoing which exists at the time of the commencement of the Offer, a material acceleration or worsening thereof; or (d) any material adverse change has occurred since September 30, 1995 in the business, assets, results of operations, or financial condition or prospects (not including a change in prospects arising from general economic or industry conditions) of the Company and its Subsidiaries taken as a whole; or (e) the Company has breached or failed to perform in any material respect any of its obligations under this Agreement, including without limitation a failure to cause the Rights to be redeemed as provided for therein; or -38- 46 (f) any of the representations and warranties of the Company contained in this Agreement shall not have been true and correct when made or have since ceased to be true and correct and remain incorrect at the expiration date of the Offer; or (g) it shall have been publicly disclosed or the Parent shall have learned that any person or entity shall have entered into a definitive agreement or an agreement in principle with the Company with respect to a tender offer or exchange offer for any shares of capital stock of the Company (including without limitation the shares of Common Stock) or a merger, consolidation or other business combination or any acquisition or disposition of any material assets or any comparable event with or involving the Company or any of its Subsidiaries; or (h) the Company's Board of Directors shall have failed to recommend and approve, or shall no longer recommend and approve, the Offer or the adoption of this Agreement, or shall modify or amend its recommendation and approval with respect thereto, or shall have resolved to do any of the foregoing; or (i) this Agreement has terminated in accordance with its terms; or (j) the Parent and the Company agree that the Parent will amend or terminate the Offer; which, in the sole judgment of the Parent, and in each case regardless of the circumstances (including without limitation any inaction by the Parent or its affiliates other than a material breach by the Parent or its affiliates of this Agreement), with respect to each and every matter referred to above makes it inadvisable to proceed with the Offer or with such acceptance for payment or purchase of or such payment for the Securities. The foregoing conditions (i) may be asserted by the Parent or the Sub regardless of the circumstances (including any action or inaction by the Parent or any of its affiliates other than a material breach by the Parent or the Sub of this Agreement) giving rise to such condition and (ii) other than the Minimum Condition, are for the sole benefit of the Parent and its affiliates. The foregoing conditions, except or as otherwise provided in this Agreement, may be waived by the Parent in whole or in part at any time and from time to time in its sole discretion. The failure by the Parent at any time to exercise any of the foregoing rights will not be deemed a waiver of any right and each right will be deemed an ongoing right which may be asserted by the Parent at any time and from time to time. Any determination by the Parent concerning the events described in this Section will be final and binding upon all parties. -39- 47 ANNEX II AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF NATIONAL CONVENIENCE STORES INCORPORATED National Convenience Stores Incorporated, a Delaware corporation (the "Corporation"), does hereby certify that this Amended and Restated Certificate of Incorporation of National Convenience Stores Incorporated was duly adopted in accordance with Section 245 of the General Corporation Law of the State of Delaware; the Corporation was originally incorporated under the name of NCS Merging Corporation; and the Corporation's original Certificate of Incorporation was filed with the Delaware Secretary of State on June 21, 1979. The text of the Corporation's Restated Certificate of Incorporation as heretofore amended or supplemented is hereby restated and further amended to read in its entirety as follows: FIRST: The name of the Corporation (the "Corporation") is National Convenience Stores Incorporated. SECOND: The address of the Corporation's registered office in the State of Delaware is 1209 Orange Street, City of Wilmington, County of New Castle, Delaware 19801. The name of the Corporation's registered agent at such address is The Corporation Trust Company. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH: The total number of shares which the Corporation shall have authority to issue is 10,000,000 shares of Common Stock, par value $.01 per share. FIFTH: Elections of directors need not be by written ballot except and to the extent provided in the by-laws of the Corporation. 48 SIXTH: (1) Notwithstanding any contrary provision of Section 262(b) of the General Corporation Law of the State of Delaware, as in effect on August 1, 1983, any stockholder of the Corporation who complies with the requirements of Section 262 of the General Corporation Law of the State of Delaware, as in effect on August 1, 1983 ("Section 262"), shall be entitled to an appraisal by the Court of Chancery of the fair value of his shares of Common Stock (as hereinafter defined) and Preferred Stock (as hereinafter defined) under each of the circumstances described in subparagraphs (a), (b) and (c) below (an "Article Sixth Transaction"), all upon the terms and conditions set forth in this Article Sixth and in Section 262: (a) the merger or consolidation of the Corporation with (1) any Interested Stockholder (as hereinafter defined) or (2) any other corporation (whether or not itself an Interested Stockholder) which is, or after such merger or consolidation would be, an Affiliate (as hereinafter defined) of an Interested Stockholder; or (b) the sale, lease or exchange of all or substantially all of the property and assets of the Corporation (in one transaction or a series of transactions) to or with any Interested Stockholder or any Affiliate of any Interested Stockholder; or (c) any amendment of the Certificate of Incorporation of the Corporation which effects a reclassification of securities (including any reverse stock split) or a recapitalization of the Corporation, which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of Voting Stock (as hereinafter defined) which is beneficially owned (as hereinafter defined) by any Interested Stockholder or any Affiliate of any Interested Stockholder. (2) For the purposes of this Article Sixth: (a) The term "person" shall mean any individual, firm, corporation, partnership or other entity. (b) The term "Interested Stockholder" shall mean any person (other than the Corporation or any Subsidiary and other than any profit sharing, employee stock ownership or other employee benefit plan of the Corporation or any Subsidiary or any trustee of or fiduciary with respect to any such plan when acting in such capacity) who or which: (1) is the beneficial owner (as hereinafter defined) of 15 percent or more of the Voting Stock; or -41- 49 (2) is an Affiliate of the Corporation and at any time within the two-year period immediately prior to an Announcement Date (as hereinafter defined) was the beneficial owner of 15 percent or more of the Voting Stock; or (3) is the assignee of or has otherwise succeeded to any shares of Voting Stock which were at any time within the two-year period immediately prior to an Announcement Date beneficially owned by an Interested Stockholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933, as amended. (c) A specified person shall be a "beneficial owner" of and shall be deemed to "beneficially own" any Voting Stock: (1) which such specified person or any of its Affiliates or Associates (as hereinafter defined), directly or indirectly, through contract, arrangement, understanding, relationship or otherwise has or shares (A) voting power, which includes the power to vote, or to direct the voting of, such stock and/or (B) investment power, which includes the power to dispose of, or to direct the disposition of, such stock; or (2) which such specified person or any of its Affiliates or Associates has, directly or indirectly, the right to acquire (whether such right is then exercisable or becomes exercisable at some future time by the passage of time or upon the occurrence of a specified event) pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants, options or otherwise; or (3) which is subject to the exercise, directly or indirectly, of sole or shared voting and/or investment power as described in clause (1) above by any other person with which such specified person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Voting Stock. (d) For the purpose of determining whether a specified person is an Interested Stockholder pursuant to subparagraph (b) of this paragraph 2, the number of shares of Voting Stock deemed to be outstanding shall include unissued or issued but not outstanding shares deemed beneficially owned by such specified person through application of subparagraph (c) of this paragraph 2 but shall not include any other unissued or issued but not outstanding shares of Voting Stock which may be issuable or deliverable pursuant to any agreement, -42- 50 arrangement or upon exercise of conversion rights, exchange rights, warrants, options or otherwise. (e) The terms "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations, as in effect on August 1, 1983, promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended. (f) The term "Subsidiary" shall mean any corporation of which all the shares of each class of capital stock are beneficially owned, directly or indirectly, by the Corporation. (g) The term "Fair Market Value" shall mean (1) in the case of stock, the highest closing sale price during the 30-day period immediately preceding and including a Determination Date of a share of such stock on the Composite Tape for New York Stock Exchange - Listed Stock, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934, as amended, on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period immediately preceding and including a Determination Date on the National Association of Securities Dealers, Inc. Automated Quotation System or any system then in use, or, if no such quotations exist or are otherwise available, the fair market value on a Determination Date of a share of such stock as determined in good faith by an investment banking firm of national reputation retained by the Corporation following such firm's selection by a committee of at least three stockholders of the Corporation (other than the Interested Stockholder and any of its Affiliates and Associates) who shall beneficially own in the aggregate at least 5% of the then outstanding Common Stock and who shall be appointed by the Board of Directors of the Corporation ("Independent Advisor") and (2) in the case of property other than stock or cash, the fair market value of such property on a Determination Date as determined in good faith by an Independent Advisor. (h) The term "Voting Stock" shall include (1) each then outstanding share of Common Stock and (2) each then outstanding share of Preferred Stock which is entitled to vote in the election of the directors of the Corporation. (i) The term "Common Stock" shall mean any stock of any class of the Corporation which is entitled to vote in the election of directors of the Corporation, which has no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation and which is not subject to redemption by the Corporation. -43- 51 (j) The term "Preferred Stock" shall mean any class of capital stock of the Corporation (other than Common Stock) which may be from time to time authorized in or by the Certificate of Incorporation of the Corporation. (k) The term "Corporation" shall refer to the corporation created pursuant to this Certificate of Incorporation and any successor by merger, consolidation or otherwise. (l) The term "Determination Date" shall mean the date as of which a determination is made pursuant to subparagraph (g) of paragraph 2 of this Article Sixth concerning the Fair Market Value of any stock or other property. (3) (a) If within 115 days after the effective date of an Article Sixth Transaction no stockholder of the Corporation, who has complied with the provisions of Section 262 and is otherwise entitled to appraisal rights, shall have filed a petition in the Court of Chancery demanding a determination of the fair value of the Common Stock and/or Preferred Stock owned by all stockholders similarly situated, the Corporation shall promptly, and in any event within 120 days after the effective date of an Article Sixth Transaction, file such a petition. In any appraisal proceeding initiated by a stockholder or by the Corporation pursuant to Section 262 relating to an Article Sixth Transaction, the Corporation shall file appropriate pleadings which confirm and at all stages of the proceeding vigorously assert (1) that the fair value of each share of Common Stock subject to such proceeding, exclusive of interest, if any, is not less than the highest amount determined pursuant to subparagraph (b) below ("Minimum Fair Value Per Share of the Common Stock") and (2) that the fair value of each share of each class or series of Preferred Stock subject to such proceeding, exclusive of interest, if any, is not less than the highest amount determined pursuant to subparagraph (c) below for the shares of each such class of series ("Minimum Fair Value Per Share of Each Class or Series of Preferred Stock"). (b) The Minimum Fair Value Per Share of the Common Stock shall be equal to the higher amount determined under clauses (1) and (2) below: (1) (if applicable) the highest per share price (including brokerage commissions, placement agent fees, transfer taxes and soliciting dealers' fees) paid by the Interested Stockholder for any share of Common Stock acquired by it (A) within the two-year period immediately prior to the first public announcement of the proposed Article Sixth Transaction ("Announcement Date") or (B) in the transaction in which it became an Interested Stockholder, whichever is higher; and -44- 52 (2) the Fair Market Value per share of Common Stock (A) as of the Announcement Date or (B) as of the date on which the Interested Stockholder became an Interested Stockholder ("Inception Date"), whichever is higher. (c) The Minimum Fair Value Per Share of Each Class or Series of Preferred Stock shall be equal to the higher amount determined under clauses (1) and (2) below: (1) (if applicable) the highest per share price (including brokerage commissions, placement agent fees, transfer taxes, and soliciting dealers' fees) paid by an Interested Stockholder for any shares of such class or series of Preferred Stock acquired by it (A) within the two-year period immediately prior to the Announcement Date or (B) in the transaction in which it became an Interested Stockholder, whichever is higher; and (2) the Fair Market Value per share of such class or series of Preferred Stock as of the (A) Announcement Date or (B) Inception Date, whichever is higher. (d) If the Court of Chancery determines in any appraisal proceeding relating to an Article Sixth Transaction that the fair value, exclusive of interest, if any, of any share of Common Stock or Preferred Stock is less than the Minimum Fair Value Per Share of the Common Stock or the Minimum Fair Value Per Share of Each Class or Series of Preferred Stock, respectively, the Corporation shall nevertheless pay to stockholders who are entitled to receive the fair value of their shares in such appraisal proceeding an amount per share, before giving effect to any interest awarded by the Court of Chancery, equal to the Minimum Fair Value Per Share of the Common Stock or the Minimum Fair Value Per Share of Each Class or Series of Preferred Stock, as the case may be. (e) All per share amounts determined pursuant to this paragraph 3 shall be appropriately adjusted to reflect all stock dividends, property distributions, stock splits and combinations, and subdivisions and reclassifications of the outstanding capital stock of the Corporation. (4) The Corporation hereby acknowledges that it is equitable in the circumstances, and accordingly the Corporation shall pay all costs and expenses (including the reasonable fees and expenses of attorneys, the reasonable fees and expenses of experts and the costs of the proceeding) incurred by any stockholder of the Corporation in any appraisal proceeding involving an Article Sixth Transaction wherein the Fair Market Value of the per share consideration offered to stockholders of the Corporation in the Article Sixth Transaction is, in the opinion of the Court of Chancery, less than the Minimum Fair Value Per Share of the Common Stock or the Minimum Fair Value Per Share of Each Class or Series of Preferred Stock, as the case may be. -45- 53 (5) Notwithstanding any other provisions of this Certificate of Incorporation or the by-laws of the Corporation (and notwithstanding the fact that a lesser percentage may be specified by law, this Certificate of Incorporation or the by-laws of the Corporation), the affirmative vote of the holders of 66-2/3 percent or more of the shares of stock of the Corporation otherwise entitled to vote thereon and not beneficially owned by any Interested Stockholder or any of its Affiliates and Associates, voting as a class, shall be required to amend or repeal, or adopt any provisions inconsistent with, this Article Sixth. SEVENTH: No director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director; provided, however, that the foregoing clause shall not apply to any liability of a director (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. This Article Seventh shall not eliminate or limit the personal liability of a director for any act or omission occurring prior to the date this Article Seventh becomes effective. EIGHTH: In furtherance and not in limitation of the rights, powers, privileges, and discretionary authority granted or conferred by the General Corporation Law of the State of Delaware or other statutes or laws of the State of Delaware, the Board of Directors is expressly authorized to make, alter, amend or repeal the by-laws of the Corporation, without any action on the part of the stockholders, but the stockholders may make additional by-laws and may alter, amend or repeal any by-law whether adopted by them or otherwise. The Corporation may in its by-laws confer powers upon its Board of Directors in addition to the foregoing and in addition to the powers and authorities expressly conferred upon the Board of Directors by applicable law. NINTH: The Corporation reserves the right at any time and from time to time to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted, in the manner now or hereafter prescribed herein or by applicable law; and all rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors or any other persons whomsoever by and pursuant to this Certificate of Incorporation in its present form or as hereafter amended are granted subject to this reservation. -46- 54 IN WITNESS WHEREOF, I the undersigned, being a duly authorized officer of the Corporation, do hereby execute this Amended and Restated Certificate of Incorporation this _____ day of _________________, 1995. _______________________________________________ -47- -----END PRIVACY-ENHANCED MESSAGE-----