<PAGE>
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-65909
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus supplement is not complete and may be +
+changed. This prospectus supplement is not an offer to sell these securities +
+and it is not soliciting an offer to buy these securities in any state where +
+the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED NOVEMBER 16, 2000
PROSPECTUS SUPPLEMENT
(To prospectus dated January 25, 1999)
$150,000,000
[PENNZOIL-QUAKER STATE LOGO]
% Notes due 2002
--------
The notes will bear interest at the rate of % per year. We will pay interest
on the notes twice a year on and , beginning , 2001. The
notes will mature on , 2002 and are not redeemable.
If we default, your right to payment under the notes will be equal to the
rights of holders of our other senior debt, whether current or future. We do
not intend to list the notes on any securities exchange.
--------
Investing in the notes involves certain risks. See "Risk Factors" beginning
on page 2 of the accompanying prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus supplement or the accompanying prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
--------
<TABLE>
<CAPTION>
Per Note Total
-------- -----
<S> <C> <C>
Public Offering Price % $
Underwriting Discount % $
Proceeds to Pennzoil-Quaker State Company (before expenses) % $
</TABLE>
Interest on the notes will accrue from , 2000.
--------
The underwriter is offering the notes subject to various conditions. The
underwriter expects to deliver the notes in book-entry form only through the
facilities of The Depository Trust Company against payment in New York, New
York on , 2000.
--------
Salomon Smith Barney
, 2000
<PAGE>
You should rely only on the information contained in or incorporated by
reference in this prospectus supplement and the accompanying prospectus.
Neither we nor the underwriter has authorized any other person to provide you
with additional or different information. If anyone provides you with different
or inconsistent information, you should not rely on it. Neither we nor the
underwriter is making an offer to sell these securities in any jurisdiction
where the offer or sale is not permitted. You should assume that the
information appearing in this prospectus supplement and the accompanying
prospectus is accurate only as of the date on the front cover of this
prospectus supplement and that the information we previously filed with the SEC
and incorporated by reference is accurate only as of the date of the document
incorporated by reference. Our business, financial condition, results of
operations and prospects may have changed since those dates.
------------
TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary.................................................................... S-1
Use of Proceeds............................................................ S-5
Capitalization............................................................. S-5
About Pennzoil-Quaker State Company........................................ S-6
Description of Notes....................................................... S-8
Underwriting............................................................... S-13
Legal Matters.............................................................. S-14
Experts.................................................................... S-14
Forward-Looking Statements................................................. S-14
Prospectus
The Company................................................................ 2
Risk Factors............................................................... 2
Use of Proceeds............................................................ 3
Ratios of Earnings to Fixed Charges........................................ 3
Description of Debt Securities............................................. 4
Capital Stock.............................................................. 14
Plan of Distribution....................................................... 22
Legal Matters.............................................................. 23
Experts.................................................................... 23
Where You Can Find More Information........................................ 23
Incorporation of Certain Documents by Reference............................ 24
</TABLE>
i
<PAGE>
SUMMARY
This summary highlights information about us and the offering. It does not
contain all information that is important to you. We encourage you to read this
prospectus supplement and the accompanying prospectus in their entirety as well
as the information we incorporate by reference before making an investment
decision.
Our Business
Pennzoil-Quaker State Company is a leading worldwide automotive consumer
products company. We have strong brand-name recognition in key product
categories such as motor oil with Pennzoil(R), Quaker State(R) and Wolf's
Head(R), fast oil change centers with Jiffy Lube(R) and car care products with
Slick 50(R), Rain-X(R), Blue Coral(R), Black Magic(R), Westley's(R), Medo(R),
Axius(TM), Gumout(R), Fix-A-Flat(R), The Outlaw(R), Snap(R), Classic(R) car
wax, Pennzoil Roadside(TM) Rescue(R) and others.
Our principal executive offices are located at Pennzoil Place, P.O. Box
2967, Houston, Texas 77252-2967, and our telephone number is (713) 546-4000.
The Offering
Securities Offered.......... $150 million aggregate principal amount of %
notes due 2002.
Maturity Date............... , 2002.
Interest Payment Dates...... Interest will accrue from and will be
payable semi-annually on and of each
year, commencing , 2001.
Ranking..................... The notes:
. are unsecured;
. rank equally in right of payment with all of
our existing and future senior indebtedness;
. are senior in right of payment to any future
subordinated indebtedness; and
. are effectively junior in right of payment to
future secured indebtedness, if any, and to all
existing and future indebtedness of our
subsidiaries, which as of September 30, 2000
totaled approximately $100 million (excluding
intercompany liabilities).
Covenants................... We will issue the notes under an indenture
containing covenants for your benefit. These
covenants restrict our ability to:
. incur indebtedness secured by liens, and
. engage in consolidations, mergers and sales of
assets.
For more details, see "Description of Notes--
Certain Covenants--Limitation on Liens" beginning
on page S-8 and "Description of Debt Securities--
Provisions Applicable to Both Senior and
Subordinated Debt Securities--Consolidation,
Merger and Sale of Assets" beginning on page 8 of
the accompanying prospectus.
S-1
<PAGE>
Use of Proceeds............. We intend to use the net proceeds of
approximately $149.4 million to reduce our
commercial paper borrowings and borrowings under
our money market lines. See "Use of Proceeds" on
page S-5.
No Public Market............ There is no existing market for the notes. We
cannot provide any assurance about:
. the liquidity of any markets that may develop
for the notes;
. your ability to sell your notes; or
. the prices at which you will be able to sell
your notes.
Future trading prices of the notes will depend on
many factors, including:
. prevailing interest rates;
. our operating results;
. ratings of the notes; and
. the market for similar securities.
The underwriter has advised us that it currently
intends to make a market in the notes after
completion of the offering. It does not, however,
have any obligation to do so, and it may
discontinue any market-making activities at any
time without any notice. We do not intend to
apply for listing of the notes on any securities
exchange or for quotation of the notes in any
automated dealer quotation system.
Risk Factors................ We urge you to carefully read the "Risk Factors"
section beginning on page 2 of the accompanying
prospectus before you make any investment
decision.
S-2
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data as of and for each of the years in
the three-year period ended December 31, 1999 is derived from our audited
consolidated financial statements. The information set forth below as of and
for the nine months ended September 30, 1999 and 2000 is derived from our
unaudited condensed consolidated financial statements that include, in our
opinion, all adjustments, consisting solely of normal recurring adjustments,
necessary for a fair presentation in all material respects of the financial
position and results for the interim periods. You should read the following
information in conjunction with our consolidated financial statements
incorporated by reference in this prospectus supplement and the accompanying
prospectus.
<TABLE>
<CAPTION>
Nine Months Ended
Years Ended December 31, September 30,
---------------------------------- ----------------------
1997 1998 1999 1999 2000
---------- ---------- ---------- ---------- ----------
(Expressed in thousands except
per share amounts) (Unaudited)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data (1)
Revenues (2)............ $2,013,160 $1,850,138 $2,988,932 $2,223,677 $2,437,346
Costs and expenses
Cost of sales.......... 1,182,742 1,279,220 2,182,632 1,608,275 1,835,603
Purchases from
affiliate (3)......... 336,413 115,703 -- -- --
Selling, general and
administrative........ 350,123 339,799 520,660 394,823 390,328
Restructuring charges
(4)................... -- -- -- -- 34,405
Depreciation and
amortization.......... 64,490 77,210 123,363 95,526 74,882
Acquisition related
expenses (5).......... -- 10,645 86,173 46,640 --
Impairment of long-
lived assets (6)...... -- 29,613 493,910 -- --
Taxes, other than
income................ 11,956 12,210 16,984 12,492 13,738
Interest charges....... 12,847 13,826 80,588 58,965 69,576
Affiliated interest
(7)................... 56,374 56,372 -- -- --
Interest capitalized... (7,441) (255) -- -- --
---------- ---------- ---------- ---------- ----------
Income (loss) before
income tax............. 5,656 (84,205) (515,378) 6,956 18,814
Income tax provision
(benefit).............. 6,245 (38,338) (194,447) 9,617 17,272
---------- ---------- ---------- ---------- ----------
Net income (loss)....... $ (589) $ (45,867) $ (320,931) $ (2,661) $ 1,542
========== ========== ========== ========== ==========
Balance Sheet Data (8)
Total current assets.... $ 399,360 $ 736,571 $ 686,038 $ 768,635 $ 770,435
Total assets............ $1,559,623 $3,144,994 $2,733,221 $3,074,799 $2,830,433
Total debt and capital
lease obligations (9).. $ 458,620 $1,105,617 $1,100,416 $1,065,480 $1,286,407
Shareholders' equity.... $ 256,380 $1,350,207 $ 949,868 $1,312,884 $ 912,173
Other Data (10)
Ratio of earnings to
fixed charges.......... -- -- -- 1.10 1.16
Amount by which fixed
charges exceed
earnings............... $ 493 $ 82,556 $ 513,868 -- --
</TABLE>
(1) The acquisition of Quaker State Corporation occurred at year-end 1998. The
statement of operations data of Pennzoil-Quaker State Company does not
include Quaker State's results of operations for years prior to 1999.
(2) The increase in revenues for the nine months ended September 30, 2000 as
compared to the same period in 1999 was primarily due to higher refined
product prices partially offset by lower Jiffy Lube revenues resulting from
fewer company operated service centers. The increase in revenues for the
year ended December 31, 1999 as compared to the year ended December 31,
1998 was primarily due to the acquisition of Quaker State on December 30,
1998. The decrease in revenues for the year ended December 31, 1998 as
compared to the year ended December 31, 1997 was primarily the result of
our contribution of most of our specialty industrial products business to
Penreco, a partnership with Conoco, in October 1997. Beginning in the
fourth quarter of 1997, our share of Penreco's earnings, net of expenses,
is reflected in revenues.
(3) Represents purchases of crude oil from Pennzoil Company at market prices.
(4) Represents accrued costs associated with a general and administrative cost
reduction effort. These charges primarily included severance for
approximately 400 administrative and operational employees, the accrual of
future lease obligations and consolidation costs of office space in
Houston.
(5) Pretax charges related to the December 30, 1998 acquisition of Quaker
State.
(6) In December 1999, the base oil and specialty products segment recorded a
pretax charge of $480.0 million related to the expected disposition of our
refineries, and the lubricants and consumer products segment recorded a
pretax charge of $13.9 million related to the closure of our Rouseville,
Pennsylvania blending and packaging plant. In December 1998, the Jiffy Lube
segment recorded a pretax charge of $29.6 million to reflect the impairment
of long-lived assets as required under Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of."
(7) Represents interest associated with affiliated debt between us and Pennzoil
Company prior to the December 1998 separation. The average interest rates
applicable to amounts outstanding under these credit arrangements during
1998 and 1997 were 9.8% and 9.8%, respectively.
(8) Balance sheet data of Pennzoil-Quaker State Company include the fair value
of assets and liabilities of Quaker State as of December 31, 1998.
(9) Includes current maturities of long-term and current portion of capital
lease obligations.
(10) The ratio of earnings to fixed charges has been computed by dividing
earnings available for fixed charges (earnings before income taxes plus
fixed charges and amortization of capitalized interest less capitalized
interest and undistributed equity earnings (losses) of joint ventures) by
fixed charges (interest expense plus capitalized interest and the portion
of rental expense that represents the interest factor).
S-3
<PAGE>
SELECTED UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS DATA
The following unaudited pro forma information has been prepared as if the
acquisition of Quaker State occurred on January 1, 1997 after including
amortization of goodwill, brands and other intangible assets, interest expense
and related income tax effects. The unaudited pro forma information does not
reflect adjustments for any estimated general and administrative expense
savings, operational efficiencies and costs related to the acquisition of
Quaker State. The unaudited pro forma information is not necessarily indicative
of results that would have actually occurred had the acquisition of Quaker
State been consummated on January 1, 1997 or future results of operations.
<TABLE>
<CAPTION>
Years Ended December
31,
----------------------
1998 1997
---------- ----------
(Expressed in
thousands except per
share amounts)
(Unaudited)
<S> <C> <C>
Revenues................................................ $3,021,565 $3,217,020
Net loss (1)............................................ (33,191) (1,729)
</TABLE>
--------
(1) The 1998 net loss includes after-tax charges of $82.5 million ($124.5
million pretax) related to the acquisition of Quaker State, impairment of
long-lived assets, restructuring charges and other matters.
S-4
<PAGE>
USE OF PROCEEDS
We expect the net proceeds from the offering of the notes to be
approximately $149.4 million, after deducting discounts to the underwriter and
estimated expenses of the offering that we will pay. We intend to use the net
proceeds to reduce our outstanding commercial paper borrowings, which have
maturities up to 90 days, and borrowings under our money market lines. At
September 30, 2000, our commercial paper borrowings totaled $361.2 million with
a weighted average interest rate of 7.08%, and borrowings under our money
market lines totaled $55.5 million with a weighted average interest rate of
7.00%.
CAPITALIZATION
The following table sets forth information as of September 30, 2000 with
respect to our capitalization and our adjusted capitalization after giving
effect to the proposed issuance of $150 million of notes and the application of
the net proceeds therefrom to reduce our outstanding commercial paper
borrowings and borrowings under our money market lines.
Our commercial paper borrowings and borrowings under our money market lines
are classified as long-term debt as of September 30, 2000 as a result of the
availability of committed long-term credit facilities to refinance these short-
term credit borrowings and our intent to maintain these commitments in excess
of one year. Our revolving credit facility with a group of banks provides for
up to $600.0 million of committed unsecured revolving credit borrowings through
December 14, 2000, with any outstanding borrowings on such date being converted
into a term credit facility terminating on November 14, 2001. There were no
borrowings outstanding under this revolving credit facility at December 31,
1999, at September 30, 2000 or on the date of this prospectus supplement. We
expect to replace this facility prior to December 14, 2000 with a new facility
providing for up to $450 million of committed unsecured revolving credit
borrowings.
<TABLE>
<CAPTION>
September 30, 2000
---------------------
As
Historical Adjusted
---------- ----------
(expressed in
thousands)
<S> <C> <C>
Short-term debt
Current maturities of long-term debt and current
portion of capital lease obligations.................. $ 16,575 $ 16,575
---------- ----------
Long-term debt, excluding current maturities
% notes due 2002.................................. -- 150,000
6.625% notes due 2005.................................. 100,000 100,000
6.750% notes due 2009.................................. 200,000 200,000
7.375% debentures due 2029............................. 400,000 400,000
Pollution control bonds................................ 50,553 50,553
Commercial paper and money market lines................ 416,726 267,326
Capital lease obligations.............................. 63,289 63,289
Other.................................................. 39,264 39,264
---------- ----------
Total long-term debt and capital lease obligations... 1,269,832 1,270,432
---------- ----------
Shareholders' equity..................................... 912,173 912,173
---------- ----------
Total capitalization..................................... $2,198,580 $2,199,180
========== ==========
</TABLE>
S-5
<PAGE>
ABOUT PENNZOIL-QUAKER STATE COMPANY
We are a leading worldwide automotive consumer products company. We are
engaged primarily in the manufacturing and marketing of lubricants and other
automotive consumer products and in the franchising, ownership and operation of
fast oil change centers. We have strong brand-name recognition in key product
categories such as motor oil with Pennzoil(R), Quaker State(R) and Wolf's
Head(R), fast oil change centers with Jiffy Lube(R), and car care products with
Slick 50(R), Rain-X(R), Blue Coral(R), Black Magic(R), Westley's(R), Medo(R),
Axius(TM), Gumout(R), Fix-A-Flat(R), The Outlaw(R), Snap(R), Classic(R) car
wax, Pennzoil Roadside(TM) Rescue(R) and others.
Pennzoil-Quaker State Company is the result of the separation on December
30, 1998 of the lubricants and consumer products, fast lube and base oil and
specialty products operations of Pennzoil Company and the acquisition by
Pennzoil-Quaker State Company of Quaker State Corporation.
Our businesses are organized, managed and reported in four segments: (1)
lubricants and consumer products, (2) Jiffy Lube, (3) Excel and (4) base oil
and specialty products.
Lubricants and Consumer Products
Our lubricants and consumer products segment manufactures and markets
lubricants and other automotive consumer products.
Lubricants. We manufacture and market Pennzoil(R), Quaker State(R), Wolf's
Head(R) and other motor oils. We also manufacture and market other lubricants
such as transmission fluids, gear lubricants and greases, as well as specialty
lubricants designed for sport utility vehicles, marine craft, motorcycles and
snowmobiles. These other lubricants are sold under the Pennzoil(R) and Quaker
State(R) brand names and certain private label and proprietary brand names. We
also market automobile consumer products manufactured by third parties such as
oil filters, air filters and antifreeze.
The primary markets for our lubricants are mass merchandisers, auto parts
stores, oil change centers and automobile dealerships. Secondary markets
include convenience stores, drug stores, grocery stores, tire stores and
independent automotive repair facilities.
We are currently pursuing the divestiture of our lubricants business for
heavy duty agricultural and construction equipment as well as other non-core
lubricants assets.
Consumer Products. We manufacture and market automotive polishes and car
wash products, automotive air fresheners and fragrance products and automotive
seat covers and cushions. We market automobile engine and fuel treatments,
automotive window shades, automotive glass treatments, tire inflators and other
automotive accessories. Our consumer products are marketed under brand names
such as Slick 50(R), Rain-X(R), Blue Coral(R), Black Magic(R), Westley's(R),
Medo(R), Axius(TM), Gumout(R), Fix-A-Flat(R), The Outlaw(R), Snap(R),
Classic(R) car wax and Pennzoil Roadside(TM) Rescue(R).
Our consumer products are marketed primarily to the consumer through mass
merchandisers and auto parts stores, and secondarily through the installed
market (oil change centers, service stations, automobile dealerships, etc.).
Jiffy Lube
We provide fast automotive preventive maintenance services in the United
States through Jiffy Lube(R) service centers and in Canada through Q Lube(R)
service centers. As of September 30, 2000, 2,172 Jiffy Lube(R) service centers
were open in metropolitan areas throughout the United States. Franchisees
operated 1,661 of these service centers and the other 511 service centers were
owned and operated by Jiffy Lube.
S-6
<PAGE>
Excel
We and Conoco, Inc. are equal partners in Excel Paralubes, which operates a
state-of-the-art base oil hydrocracker facility located at Conoco's refinery
near Lake Charles, Louisiana. The facility is capable of producing
approximately 20,000 barrels per day of high-quality base oils, the base
ingredient in finished lubricants. We purchase 50% or more of the base oil
production volume of Excel Paralubes at contract rates based on prevailing
market prices.
Base Oil and Specialty Products
Our base oil and specialty products segment includes our Shreveport,
Louisiana refining and related fuels marketing operations, our interest in our
Penreco partnership with Conoco and our interest in VASSA, a Venezuelan light
oil production joint venture.
During 1999, we completed a strategic review of our manufacturing assets and
businesses, including refineries, partnerships and packaging plants. During the
review, we evaluated the strategic and financial advantages and disadvantages
we derive from the vertical integration of our manufacturing and marketing
capabilities. Based on the results of this review, we decided to withdraw from
the refining business and to dispose of our refineries and related assets.
We are currently pursuing the divestiture of our Shreveport, Louisiana
manufacturing facility, which produces the paraffinic base oil used in the
blending of motor oil and other lubricants sold to industrial customers. The
manufacturing facility also produces gasoline, distillates, waxes, petrolatums,
special cut kerosenes, transformer oils, process oils and other naphthenic base
oils for use in producing specialty industrial products or for sale to
industrial customers.
In April 2000, we completed the sale of our Rouseville, Pennsylvania wax
processing facilities and the related assets at the Rouseville facility. Also
included in the sale was our share of the Bareco Products partnership with
Baker Petrolite Corporation. We received net proceeds of $27.6 million from the
sale.
We are currently pursuing the divestiture of our interest in our Penreco
partnership with Conoco. In October 1997, we contributed to Penreco our
operations related to petrolatums, white oils, ink solvents, sulfonates and
other specialty petroleum products, including manufacturing facilities in Karns
City, Pennsylvania and Dickinson, Texas. Conoco contributed to Penreco its
solvents business, which sells products primarily into the drilling fluids,
mining and cleaning products markets and as carrier oils for many consumer
products. Products from Penreco are marketed under the Penreco(R), Magie
Bros(R), Conosol(R) and LVT(R) brand names. Penreco markets to manufacturers
and end-users directly and through licensed distributors. We are also currently
pursuing the divestiture of our interest in VASSA.
S-7
<PAGE>
DESCRIPTION OF NOTES
The following description of the notes supplements, and to the extent
inconsistent therewith replaces, the description of the general terms and
provisions of the senior debt securities set forth in the accompanying
prospectus, to which description reference is hereby made. We will issue the
notes as a separate series of senior debt securities under the indenture dated
as of February 1, 1999 that we have entered into with The Chase Manhattan Bank
(successor to Chase Bank of Texas, National Association), as trustee, which is
more fully described in the accompanying prospectus. We will issue the notes
pursuant to a resolution of our board of directors setting forth specific terms
applicable to the notes. The statements under this caption relating to the
notes, the indenture and the board resolution are brief summaries only, are not
complete and are subject to, and are qualified in their entirety by reference
to, all of the provisions of the indenture and the notes, forms of which are
available from us.
General
The notes will be limited to $150,000,000 in aggregate principal amount and
will mature on , 2002. The notes will bear interest from , 2000, at
the annual rate for such series set forth on the cover page of this prospectus
supplement. We will pay interest semiannually on and of each year,
commencing , 2001, to the holders of record of the notes at the close of
business on the preceding or , whether or not such day is a
business day. All payments of interest and principal will be payable by us in
United States dollars. We will issue the notes only in book-entry form. See "--
Book-Entry System" below and "Description of Debt Securities--Provisions
Applicable to Both Senior and Subordinated Notes--Securities in Global Form" on
page 10 of the accompanying prospectus. If the notes are no longer in book-
entry form, principal and interest on the notes will be payable at the
corporate trust office of the trustee in Dallas, Texas. The notes will not be
subject to redemption and will not have the benefit of any sinking fund.
The notes will be senior unsecured obligations and will rank equally in
right of payment to all our other senior indebtedness, whether current or
future. The notes will rank senior in right of payment to our future
subordinated indebtedness, if any, and will be effectively junior in right of
payment to our future secured indebtedness, if any, and to all our existing and
future indebtedness and other liabilities of subsidiaries. As of September 30,
2000, our subsidiaries had approximately $100 million of indebtedness,
excluding intercompany liabilities. As of September 30, 2000, as adjusted to
give effect to the issuance of the notes and the anticipated use of proceeds
therefrom, we would have had an aggregate of $1.27 billion of consolidated
indebtedness. See "Capitalization" on page S-5.
Certain Covenants
The indenture does not limit the amount of indebtedness or other obligations
that may be incurred by us and our subsidiaries. The indenture does not contain
any covenants or other provisions that are intended to afford holders of the
notes special protection in the event of a highly leveraged transaction by us
or a decline in the credit rating of the notes resulting from a takeover,
recapitalization or similar restructuring.
Limitation on Liens. We will covenant that, as long as any notes are
outstanding, we will not, and will not permit any of our material subsidiaries
to, pledge, mortgage, hypothecate or grant a security interest in, or permit
any lien upon, any of our property or assets or the property or assets of any
material subsidiary to secure any indebtedness, without making effective
provision whereby the notes shall (so long as such other indebtedness shall be
so secured) be equally and ratably secured with any and all such other
indebtedness and any other debt similarly entitled to be equally and ratably
secured (including any other series of outstanding senior debt under the
indenture).
The only current "material subsidiary" under the terms of the indenture is
Jiffy Lube International, Inc. Therefore, the restriction on liens only applies
to Pennzoil-Quaker State Company and Jiffy Lube and does not apply to any other
of our subsidiaries. The indenture contains no restriction on our disposition
of the stock or assets of a material subsidiary or any other subsidiary of
ours. Moreover, the indenture does not prohibit us or any material subsidiary
from (a) doing business through any existing or new subsidiary that is not a
material
S-8
<PAGE>
subsidiary and, therefore, not subject to the restriction on liens in the
indenture or (b) transferring assets or businesses to those subsidiaries.
The restriction on liens will not apply to:
(a) any lien upon any property or assets (together with receivables and
intangibles related to such property or assets and the cash proceeds
thereof) created at the time of the acquisition or construction of such
property or assets by us or any material subsidiary of ours or within one
year after such time to secure all or a portion of the purchase price or
construction costs (or indebtedness incurred to finance such purchase price
or construction costs) for such property or assets;
(b) any lien upon any property or assets (together with receivables and
intangibles related to such property or assets and the cash proceeds
thereof) existing on that property or assets at the time of the acquisition
of that property or assets by us or any material subsidiary of ours
(whether or not the obligations secured by that property or assets are
assumed by us or any subsidiary of ours);
(c) any lien upon any property or assets (together with receivables and
intangibles related to such property or assets and the cash proceeds
thereof), whenever acquired, of any person or entity that becomes a
material subsidiary after the date of the first issuance of the notes,
provided that (i) the instrument creating such lien shall be in effect
prior to the time such person or entity becomes a material subsidiary and
(ii) such lien shall only apply to properties or assets (together with
receivables and intangibles related to such property or assets and the cash
proceeds thereof) owned by such person or entity at the time it becomes a
material subsidiary or thereafter acquired by it from sources other than us
or another material subsidiary;
(d) any extension, renewal or refunding of any lien permitted by clause
(a), (b) or (c) above on substantially the same property or assets
theretofore subject thereto;
(e) any lien in favor of us and any lien created or assumed by a
subsidiary of ours in favor of another subsidiary of ours;
(f) any lien created or assumed by us or a material subsidiary of ours
in connection with the issuance of a debt security, the interest on which
is excludable from gross income of the holder of such security pursuant to
the Internal Revenue Code of 1986, as amended, for the purpose of
financing, in whole or in part, the acquisition or construction of property
or assets to be used by us or a subsidiary of ours;
(g) any lien existing in connection with any sale, securitization or
monetization of receivables or other rights to receive payment by us and
any of our subsidiaries, so long as such sale, securitization or
monetization is treated as a sale pursuant to applicable financial
accounting standards; or
(h) any lien securing any indebtedness in an amount which, together with
all other indebtedness secured by a lien that is not otherwise permitted
under the terms of clause (a), (b), (c), (d), (e) or (f) above does not at
the time of the incurrence of the indebtedness so secured exceed 5% of our
consolidated net tangible assets as of the end of the most recent quarter.
Consolidation, Merger and Sale of Assets. See "Description of Debt
Securities--Provisions Applicable to Both Senior and Subordinated Debt
Securities--Consolidation, Merger and Sale of Assets" beginning on page 8 of
the accompanying prospectus for terms of the notes relating to consolidation,
merger or sale of assets.
Definitions
The following terms have these specified meanings under our indenture.
"Capital lease obligations" of any person means the obligations of such
person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such person under
generally accepted accounting principles, and the amount of such
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obligation shall be the capitalized amount thereof determined in accordance
with generally accepted accounting principles.
"Consolidated net tangible assets" means the total amount of assets,
including all cash received from asset sales during the 12 months prior to
the date of determination to the extent that such cash has not been
reinvested, by us and our subsidiaries on a consolidated basis (less
applicable reserves and other properly deductible items) after deducting
therefrom (a) all current liabilities (excluding any which are, by their
terms, extendable or renewable at the option of the obligor thereon to a
time more than 12 months after the time as of which the amount thereof is
being computed) and (b) all goodwill, trade names, trademarks, patents,
unamortized debt premium or discount and expense and other like intangible
assets, determined in accordance with generally accepted accounting
principles.
A "guarantee" of or by any person (the "guarantor") means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any indebtedness or other obligation of any
other person (the "primary obligor") in any manner, whether directly or
indirectly, and including any obligation of the guarantor, direct or
indirect, (a) to purchase or pay (or advance or supply funds for the
purchase or payment of) such indebtedness or other obligation or to
purchase (or to advance or supply funds for the purchase of) any security
for the payment thereof, (b) to purchase or lease property, securities or
services for the purpose of assuring the owner of such indebtedness or
other obligation of the payment thereof, (c) to maintain working capital,
equity capital or any other financial statement condition or liquidity of
the primary obligor so as to enable the primary obligor to pay such
indebtedness or other obligation or (d) as an account party in respect of
any letter of credit or letter of guaranty issued to support such
indebtedness or obligation; provided, that the term guarantee shall not
include endorsements for collection or deposit in the ordinary course of
business.
"Indebtedness" of any person means, without duplication, (a) all
obligations of such person for borrowed money or with respect to deposits
or advances of any kind, (b) all obligations of such person evidenced by
bonds, debentures, notes or similar instruments, (c) all obligations of
such person upon which interest charges are customarily paid, (d) all
obligations of such person under conditional sale or other title retention
agreements relating to property acquired by such person, (e) all
obligations of such person in respect of the deferred purchase price of
property or services (excluding current accounts payable incurred in the
ordinary course of business), (f) all indebtedness of others secured by (or
for which the holder of such indebtedness has an existing right, contingent
or otherwise, to be secured by) any lien on property owned or acquired by
such person, whether or not the indebtedness secured thereby has been
assumed, (g) all guarantees by such person of indebtedness or others, (h)
all capital lease obligations of such person, (i) all obligations,
contingent or otherwise, of such person as an account party in respect of
letters of credit and letters of guaranty and (j) all obligations,
contingent or otherwise, of such person in respect of bankers acceptances.
The indebtedness of any person shall include the indebtedness of any other
entity (including any partnership in which such person is a general
partner) to the extent such person is liable therefor as a result of such
person's ownership interest in or other relationship with such entity,
except to the extent the terms of such indebtedness provide that such
person is not liable therefor.
A "lien" means (x) with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, hypothecation, encumbrance, charge or security
interest in, on or of such asset and (b) the interest of a vendor or a
lessor under any conditional sale agreement or title retention agreement
(or any financing lease having substantially the same economic effect as
any of the foregoing) relating to such asset, and (y) the interest of the
lessor under a lease incurred after the date of the first issuance of the
notes with a term of three years or more that should be, in accordance with
generally accepted accounting principles, recorded as a capital lease.
A "material subsidiary" means each of (a) any subsidiary of ours whose
percentage of the consolidated net tangible assets represented by such
subsidiary's portion of such consolidated net tangible assets (after
intercompany eliminations) exceeds 10% as of the end of the most recently
completed fiscal quarter, and
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(b) any other subsidiary which at the time shall have been designated as a
material subsidiary by us in an officers' certificate delivered to the
trustee for such purpose.
A "person" means any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership,
governmental authority or other entity.
A "subsidiary" means, with respect to us at any date, any corporation,
limited liability company, partnership, association or other entity, the
accounts of which would be consolidated with ours in our consolidated
financial statements if such financial statements were prepared in
accordance with generally accepted accounting principles as of such date,
as well as any other corporation, limited liability company, partnership,
association or other entity (a) of which securities or other ownership
interests representing more than 50% of the equity or more than 50% of the
ordinary voting power or, in the case of a partnership, more than 50% of
the general partnership interests are, as of such date, owned, controlled
or held, or (b) that is, as of such date, otherwise controlled, by us or
one or more subsidiaries of ours or by us and one or more subsidiaries of
ours.
Book-Entry System
We will issue the notes in the form of one or more global notes in fully
registered form initially in the name of Cede & Co., as nominee of The
Depository Trust Company, or such other name as may be requested by an
authorized representative of DTC. The global notes will be deposited with DTC
and may not be transferred except as a whole by DTC to a nominee of DTC or by a
nominee of DTC to DTC or another nominee of DTC or by DTC or any nominee to a
successor of DTC or a nominee of such successor.
DTC has advised us and the underwriter as follows:
. DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934, as amended.
. DTC holds securities that its participants deposit with DTC and
facilitates the settlement among direct participants of securities
transactions, such as transfers and pledges, in deposited securities,
through electronic computerized book-entry changes in direct
participants' accounts, thereby eliminating the need for physical
movement of securities certificates.
. Direct participants include securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations.
. DTC is owned by a number of its direct participants and by the New York
Stock Exchange, Inc., the American Stock Exchange LLC, and the National
Association of Securities Dealers, Inc.
. Access to the DTC system is also available to others such as securities
brokers and dealers, banks, and trust companies that clear through or
maintain a custodial relationship with a direct participant, either
directly or indirectly.
. The rules applicable to DTC and its direct and indirect participants are
on file with the Securities and Exchange Commission.
Purchases of notes under the DTC system must be made by or through direct
participants, which will receive a credit for the notes on DTC's records. The
ownership interest of each actual purchaser of notes is in turn to be recorded
on the direct and indirect participants' records. Beneficial owners of the
notes will not receive written confirmation from DTC of their purchase, but
beneficial owners are expected to receive written confirmations providing
details of the transaction, as well as periodic statements of their holdings,
from the direct or indirect participants through which the beneficial owner
entered into the transaction. Transfers of
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ownership interests in the notes are to be accomplished by entries made on the
books of direct and indirect participants acting on behalf of beneficial
owners. Beneficial owners will not receive certificates representing their
ownership interests in the notes, except in the event that use of the book-
entry system for the notes is discontinued.
To facilitate subsequent transfers, all notes deposited by direct
participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. or such other name as may be requested by an authorized
representative of DTC. The deposit of notes with DTC and their registration in
the name of Cede & Co. or such other nominee do not effect any change in
beneficial ownership. DTC has no knowledge of the actual beneficial owners of
the notes; DTC's records reflect only the identity of the direct participants
to whose accounts such notes are credited, which may or may not be the
beneficial owners. The direct and indirect participants will remain responsible
for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants, and by direct
participants and indirect participants to beneficial owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote
with respect to the global notes. Under its usual procedures, DTC mails an
omnibus proxy to the issuer as soon as possible after the record date. The
omnibus proxy assigns Cede & Co.'s consenting or voting rights to those direct
participants to whose accounts the notes are credited on the record date
(identified in the listing attached to the omnibus proxy).
Principal and interest payments on the global notes will be made to Cede &
Co., or such other nominee as may be requested by an authorized representative
of DTC. DTC's practice is to credit direct participants' accounts upon DTC's
receipt of funds and corresponding detail information from us or the trustee on
payment dates in accordance with their respective holdings shown on DTC's
records. Payments by participants to beneficial owners will be governed by
standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street
name," and will be the responsibility of such participant and not of DTC, us or
the trustee, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of principal and interest to Cede & Co. (or
such other nominee as may be requested by an authorized representative of DTC)
shall be the responsibility of us or the trustee. Disbursement of such payments
to direct participants shall be the responsibility of DTC, and disbursement of
such payments to the beneficial owners shall be the responsibility of direct
and indirect participants.
DTC may discontinue providing its service as securities depositary with
respect to the notes at any time by giving reasonable notice to us or the
trustee. In addition, we may decide to discontinue use of the system of book-
entry transfers through DTC (or a successor securities depositary). Under such
circumstances, in the event that a successor securities depositary is not
obtained, note certificates in fully registered form are required to be printed
and delivered to beneficial owners of the global notes representing such notes.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that we believe to be reliable (including DTC),
but we take no responsibility for the accuracy thereof.
Neither we, the trustee nor the underwriter will have any responsibility or
obligation to direct participants, or the persons for whom they act as
nominees, with respect to the accuracy of the records of DTC, its nominee or
any direct participant with respect to any ownership interest in the notes, or
payments to, or the providing of notice to direct participants or beneficial
owners.
So long as the notes are in DTC's book-entry system, secondary market
trading activity in the notes will settle in immediately available funds. All
applicable payments of principal and interest on the notes issued as global
notes will be made by us in immediately available funds.
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<PAGE>
UNDERWRITING
Subject to the terms and conditions stated in the underwriting agreement
dated , 2000, Salomon Smith Barney Inc. has agreed to purchase, and we
have agreed to sell to such underwriter, the entire principal amount of notes.
The underwriting agreement provides that the obligation of the underwriter
to purchase the notes included in this offering is subject to approval of
certain legal matters by counsel and to certain other conditions. The
underwriter is obligated to purchase all the notes if it purchases any of the
notes.
The underwriter proposes to offer some of the notes directly to the public
at the public offering price set forth on the cover page of this prospectus
supplement and some of the notes to certain dealers at the public offering
price less a concession not in excess of % of the principal amount of the
notes. The underwriter may allow, and such dealers may reallow, a concession
not in excess of % of the principal amount of the notes on sales to certain
other dealers. After the initial offering to the public, the public offering
price and such concessions may be changed by the representatives.
In connection with the offering, the underwriter may purchase and sell notes
in the open market. These transactions may include overallotment, covering
transactions and stabilizing transactions. Overallotment involves sales of
notes in excess of the principal amount of notes to be purchased by the
underwriter in the offering, which creates a short position. Covering
transactions involve purchases of the notes in the open market after the
distribution has been completed in order to cover short positions. Stabilizing
transactions consist of certain bids or purchases of notes made for the purpose
of preventing or retarding a decline in the market price of the notes while the
offering is in progress.
Any of these activities may cause the price of the notes to be higher than
the price that otherwise would exist in the open market in the absence of such
transactions. These transactions may be effected in the over-the-counter market
or otherwise and, if commenced, may be discontinued at any time.
The notes are a new series of securities with no established trading market.
We do not intend to apply for listing of the notes on any securities exchange
or for quotation of the notes in any automated dealer quotation system. The
underwriter has advised us that it intends to make a market in the notes, but
the underwriter is under no obligation to do so and such market-making
activities may be terminated at any time without notice. Therefore, no
assurance can be given as to the liquidity of, or the trading market for, the
notes.
We estimate that our total expenses of this offering will be $125,000.
We have agreed to indemnify the underwriter against certain civil
liabilities, including liabilities under the Securities Act of 1933, as
amended, and to contribute to payments which the underwriter might be required
to make in respect of any of those liabilities.
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<PAGE>
LEGAL MATTERS
Certain legal matters in connection with the notes offered hereby will be
passed upon for us by Baker Botts L.L.P., Houston, Texas, and for the
underwriter by Vinson & Elkins L.L.P., Houston, Texas.
EXPERTS
The audited consolidated financial statements of Pennzoil-Quaker State
Company as of December 31, 1999 and 1998 and for each of the three years in the
period ended December 31, 1999 incorporated by reference in this prospectus
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said reports.
The financial statements of Excel Paralubes as of December 31, 1999 and
1998, and for each of the three years in the period ended December 31, 1999,
incorporated by reference in this prospectus by reference to the Annual Report
on Form 10-K of Pennzoil-Quaker State Company for the year ended December 31,
1999, have been so incorporated by reference in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts in auditing and accounting.
FORWARD-LOOKING STATEMENTS
This prospectus summary and the accompanying prospectus, including the
information incorporated by reference, contain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended, that
reflect our current views on future events and financial performance. These
forward-looking statements are subject to certain risks and uncertainties,
including those identified in "Risk Factors" in the accompanying prospectus, as
well as the following:
. general economic, financial and business conditions, which could affect
our financial condition and results of operations;
. commodity pricing variations, including crude oil prices, which affect,
directly or indirectly, margins, supply and demand, and results of
operations in our motor oil and refined products segment;
. vigorous competition within our product market, including pricing and
promotional, advertising or other activities designed to preserve or gain
market share, the timing and intensity of which cannot be foreseen;
. the costs, effects and liabilities associated with legal, regulatory or
administrative proceedings and any required remedial action, anticipated
or unanticipated.
These risks and uncertainties could cause actual results or events to differ
materially from historical results or those anticipated. You can identify
forward-looking statements by the use of words such as "expect," "estimate,"
"intend," "project," "budget," "forecast," "anticipate," "plan" and similar
expressions. Forward-looking statements include all statements regarding our
expected financial position, results of operations, cash flows, dividends,
financing plans, business strategies, operating efficiencies or synergies,
budgets, capital and other expenditures, competitive positions, growth
opportunities for existing products, plans and objectives of management, and
markets for stock. We caution you not to place undue reliance on these forward-
looking statements, which speak only as of their dates. We undertake no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise.
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<PAGE>
PROSPECTUS
$1,000,000,000
Pennzoil-Quaker State Company
Debt Securities
Common Stock
Preferred Stock
Warrants
Pennzoil-Quaker State Company may offer from time to time its (1) unsecured
debt securities consisting of senior notes and debentures and subordinated
notes and debentures, and/or other unsecured evidences of indebtedness in one
or more series; (2) shares of common stock; (3) shares of preferred stock, in
one or more series, which may be convertible into or exchangeable for common
stock or debt securities; and (4) warrants to purchase debt securities,
preferred stock, common stock or other securities.
The aggregate initial offering price of the securities that we offer will
not exceed $1,000,000,000. We will offer the securities in amounts, at prices
and on terms to be determined by market conditions at the time of our offering.
We will provide the specific terms of the securities in supplements to this
Prospectus. You should read this Prospectus and the Prospectus Supplements
carefully before you invest in the securities. This Prospectus may not be used
to consummate sales of securities unless accompanied by a Prospectus
Supplement.
Consider carefully the risk factors beginning on page 2.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or determined if
this Prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
The date of this Prospectus is January 25, 1999
<PAGE>
THE COMPANY
Pennzoil-Quaker State Company (the "Company") is a premier worldwide
automotive aftermarket products and consumer car care company. The Company has
strong brand-name recognition in key product categories, such as motor oil with
Pennzoil(R) and Quaker State(R), fast oil changes with Jiffy Lube(R) and Q
Lube(R), and car care products with Slick 50(R), Rain-X(R), Blue Coral(R),
Black Magic(R), Westley's(R), Medo(R), Axius(R), Gumout(R), Fix-A-Flat(R),
Outlaw(R), Snap(R), Classic(R) Car Wax and others.
The Company is the result of the consolidation and separation (the "Spin-
off") of the motor oil, refined products and Jiffy Lube(R) fast lube operations
of PennzEnergy Company, formerly Pennzoil Company ("PennzEnergy"), and the
subsequent acquisition by the Company of Quaker State Corporation ("Quaker
State") through a merger (the "Merger").
The Company, incorporated in Delaware, maintains its principal executive
offices at Pennzoil Place, P.O. Box 2967, Houston, Texas 77252-2967, and its
telephone number is 713/546-4000.
RISK FACTORS
Potential Difficulties Resulting from the Merger
The Company and Quaker State have previously operated separately. The
management team of the Company has little experience with the combined
business. The Company may not be able to integrate the operations of the
Company and Quaker State without a loss of key employees, customers,
franchisees or suppliers; loss of revenues; increase in operating or other
costs; or other difficulties. In addition, the Company may not be able to
realize the operating efficiencies and other benefits sought from the Merger.
The Company will evaluate any plans to restructure its subsidiaries and
determine what aspects, if any, of those plans to undertake.
The franchise agreements used by Jiffy Lube and Q Lube, Inc. grant certain
exclusive territorial rights to the franchisees. In addition to these rights,
some franchisees of Jiffy Lube and Q Lube, Inc. have additional exclusive
territories encompassing larger geographic areas; there are 16 such additional
exclusive territories. Franchisees may claim that contractual or other rights
are impaired as a result of the Merger, even if the Company and Quaker State
franchise operations are each operated post-Merger on an independent, stand-
alone basis.
Recent Losses
The Company incurred net losses from continuing operations for each of the
years ended December 31, 1997, 1996, 1995 and 1994. Quaker State incurred net
losses from continuing operations before extraordinary items for the years
ended December 31, 1997 and 1995. There can be no assurance that the Company
will be profitable.
Different Factors Affecting the Company's Business
The combined businesses of the Company and Quaker State include a range of
products and services, scope of operations, customers, competitors and
suppliers that is more diverse than those of either the Company or Quaker State
before the Merger. Accordingly, the results of operations and prospects for the
Company following the Merger, as well as its stock price, may be affected by
factors that are different from those that have affected the Company or Quaker
State in the past.
Year 2000 Issues
Like most other companies, the Company strives to ensure that its
information systems are able to recognize and process date-sensitive
information properly as the year 2000 approaches. Systems that do not properly
recognize and process this information could generate erroneous data or even
fail. The Company is
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conducting reviews of its key computer systems and has identified a number of
systems that could be affected by the year 2000 issue. The Company is
undertaking to upgrade these systems to allow them to function properly. If
these steps are not completed successfully in a timely manner, the Company's
operations and financial performance could be adversely affected through
disruptions in operations.
Tax Risks
If the Spin-off is considered part of a plan or a series of related
transactions pursuant to which one or more persons acquire, directly or
indirectly, a 50% or greater interest in the Company or PennzEnergy (an
"Ownership Change"), PennzEnergy will recognize gain under section 355(e) of
the Internal Revenue Code of 1986, as amended, as if it had sold the stock of
the Company for an amount equal to its fair market value. Under a tax
separation agreement between the Company and PennzEnergy, the Company will be
liable to PennzEnergy for any such tax arising from an Ownership Change of the
Company, unless the Ownership Change results from an act of PennzEnergy or any
of its subsidiaries or affiliates. The amount of this liability could be
substantial. The Company believes that there is no plan that would cause gain
to be recognized in this manner. Acquisitions that occur within the four-year
period beginning two years before the date of the Spin-off will be presumed to
be part of such a plan, however, and such a plan could be deemed to exist even
if the Company is not aware of it.
Certain Antitakeover Provisions
The Restated Certificate of Incorporation and Amended and Restated By-laws
of the Company, among other things, provide for a classified Board of Directors
with staggered terms, restrict the ability of stockholders to take action by
written consent and authorize the Board of Directors to set the terms of
preferred stock. In addition, the Company's Restated Certificate of
Incorporation and the Delaware General Corporation Law contain provisions that
impose restrictions on business combinations with interested parties. The
Company has also adopted a stockholders' rights plan. The stockholders' rights
plan, the provisions of the Restated Certificate of Incorporation and Amended
and Restated By-laws of the Company, and the Delaware General Corporation Law
may have the effect of delaying, deferring or preventing a change in control of
the Company.
USE OF PROCEEDS
Except as otherwise described in any Prospectus Supplement, the net proceeds
from the sale of securities offered from time to time using this Prospectus
("Securities") will be used for general corporate purposes, which may include
repayment or refinancing of indebtedness, working capital, capital
expenditures, acquisitions and repurchases and redemptions of securities.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the computation of ratio of earnings to fixed
charges for the periods shown (a) on a pro forma basis as if the merger with
Quaker State occurred as of January 1, 1997 and (b) on a historical basis for
the Company.
<TABLE>
<CAPTION>
Pennzoil-Quaker State
Company Pennzoil-Quaker State Company
Pro Forma Historical
---------------------------- -------------------------------------------------
Nine months Nine months
ended Year ended ended
September 30, December 31, September 30, Years ended December 31,
------------- ------------ ------------- ---------------------------------
1998 1997 1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
1.80 1.09 1.25 -- -- -- -- 1.24
</TABLE>
The ratio of earnings to fixed charges has been computed by dividing
earnings available for fixed charges (earnings before income taxes plus fixed
charges and amortization of capitalized interest less capitalized interest and
undistributed equity earnings (losses) of joint ventures) by fixed charges
(interest expense plus capitalized
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interest and the portion of rental expense that represents the interest
factor). On a historical basis, the Company's fixed charges exceed earnings by
approximately $.5 million for the year ending December 31, 1997, $5.7 million
for the year ending December 31, 1996, $73.5 million for the year ending
December 31, 1995 and $17.1 million for the year ending December 31, 1994.
DESCRIPTION OF DEBT SECURITIES
The following description of the Company's unsecured debt securities, which
may consist of senior notes and debentures and subordinated notes and
debentures (the "Debt Securities"), sets forth certain general terms and
provisions of the Debt Securities to which any Prospectus Supplement may relate
("Offered Debt Securities"). The particular terms of the Offered Debt
Securities and the extent to which such general provisions may apply will be
described in a Prospectus Supplement relating to such Offered Debt Securities.
The Debt Securities will be general unsecured obligations of the Company and
will constitute either senior debt securities or subordinated debt securities.
In the case of Debt Securities that will be senior debt securities ("Senior
Debt Securities"), the Debt Securities will be issued under an Indenture (the
"Senior Indenture") between the Company and Chase Bank of Texas, National
Association ("Chase"), Trustee under the Senior Indenture (the "Senior
Trustee"). In the case of Debt Securities that will be subordinated debt
securities ("Subordinated Debt Securities"), the Debt Securities will be issued
under an Indenture (the "Subordinated Indenture") between the Company and
Chase, Trustee under the Subordinated Indenture (the "Subordinated Trustee").
The Senior Indenture and the Subordinated Indenture are sometimes hereinafter
referred to herein individually as an "Indenture" and collectively as the
"Indentures," and the Senior Trustee and the Subordinated Trustee are sometimes
referred to as the "Trustee." The statements under this caption relating to the
Debt Securities and the Indentures are summaries only and do not purport to be
complete. Such summaries make use of terms defined in the Indentures. Wherever
such terms are used herein or particular provisions of the Indentures are
referred to, such terms or provisions, as the case may be, are incorporated by
reference as part of the statements made herein, and such statements are
qualified in their entirety by such reference. Certain defined terms in the
Indentures are capitalized herein.
Provisions Applicable to Both Senior and Subordinated Debt Securities
General
The Indentures do not limit the aggregate principal amount of Debt
Securities which can be issued thereunder and provide that Debt Securities may
be issued from time to time thereunder in one or more series, each in an
aggregate principal amount authorized by the Company prior to issuance. The
Indentures do not limit the amount of other unsecured indebtedness or
securities which may be issued by the Company. Unless otherwise indicated in a
Prospectus Supplement, the Debt Securities will not benefit from any covenant
or other provision that would afford Holders of such Debt Securities special
protection in the event of a highly leveraged transaction involving the
Company.
Reference is made to the Prospectus Supplement for the following terms of
the Offered Debt Securities, which will be issued in registered form:
(1) the title of the Offered Debt Securities, which may include medium-
term notes, and the aggregate principal amount of the Offered Debt
Securities;
(2) whether such Offered Debt Securities will be issued in the form of
one or more global securities and whether such global securities are to be
issuable in temporary global form or permanent global form;
(3) the date or dates on which the principal of and premium, if any, on
the Offered Debt Securities is payable or the method of determination
thereof;
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(4) the rate or rates, or the method of determination thereof, at which
the Offered Debt Securities will bear interest, if any;
(5) whether and under what circumstances Additional Amounts with respect
to the Offered Debt Securities will be payable;
(6) the date or dates from which such interest will accrue;
(7) the interest payment dates on which such interest will be payable
and the record date for the interest payable on any Offered Debt Securities
on any interest payment date;
(8) the place or places where the principal of, premium and interest, if
any, on and any Additional Amounts with respect to the Offered Debt
Securities will be payable;
(9) the period or periods within which, the price or prices at which and
the terms and conditions upon which Offered Debt Securities may be
redeemed, in whole or in part, at the option of the Company, if the Company
is to have that option;
(10) the obligation, if any, of the Company to redeem or purchase
Offered Debt Securities pursuant to any sinking fund or analogous
provisions or at the option of a holder thereof and the period or periods
within which, the price or prices at which and the terms and conditions
upon which Offered Debt Securities will be redeemed or purchased in whole
or in part pursuant to such obligation;
(11) the currency or currencies (including composite currencies), if
other than U.S. dollars, or the form, including equity securities, other
debt securities (including Debt Securities), warrants or any other
securities or property of the Company or any other Person, in which payment
of principal of, premium (if any) and interest on and any Additional
Amounts with respect to the Offered Debt Securities will be payable;
(12) if such payments are to be payable, at the election of the Company
or a holder thereof, in a currency or currencies other than that in which
the Offered Debt Securities are stated to be payable, the currency or
currencies in which such payments as to which such election is made will be
payable, and the periods within which and the terms and conditions upon
which such election is to be made;
(13) if the amount of such payments may be determined with reference to
any commodities, currencies or indices, values, rates or prices or any
other index or formula, the manner in which such amounts will be
determined;
(14) if other than the entire principal amount thereof, the portion of
the principal amount of Offered Debt Securities that will be payable upon
declaration of acceleration of the maturity thereof;
(15) any additional means of satisfaction and discharge of the
applicable Indenture with respect to the Offered Debt Securities and any
additional conditions to discharge;
(16) any deletions or modifications of or additions to the definitions,
Events of Default or covenants of the Company pertaining to the Offered
Debt Securities;
(17) if the Offered Debt Securities are to be convertible into or
exchangeable for equity securities, other debt securities (including Debt
Securities), warrants or any other securities or property of the Company or
any other Person, at the option of the Company or the Holder or upon the
occurrence of any condition or event, the terms and conditions for such
conversion or exchange;
(18) whether any of the Offered Debt Securities will be subject to
certain optional interest rate reset provisions;
(19) the additions or changes, if any, to the Indenture with respect to
the Offered Debt Securities as shall be necessary to permit or facilitate
the issuance of the Offered Debt Securities in bearer form, registered or
not registrable as to principal, and with or without interest coupons; and
(20) any other terms of the Offered Debt Securities.
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Reference is also made to the Prospectus Supplement for information with
respect to any material United States federal income tax consequences with
respect to the ownership and disposition of Offered Debt Securities.
No service charge will be made for any registration of transfer or exchange
of the Offered Debt Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
The Company conducts some of its operations through subsidiaries. The
Holders of Debt Securities will have a junior position to any creditors of the
Company's subsidiaries.
Offered Debt Securities may be sold at a discount (which may be substantial)
below their stated principal amount bearing no interest or interest at a rate
that at the time of issuance is below market rates. Any material United States
federal income tax consequences and other special considerations applicable
thereto will be described in the Prospectus Supplement relating to any such
Offered Debt Securities.
If any of the Offered Debt Securities are sold for any foreign currency or
currency unit or if the principal of, or premium or interest, if any, on, or
any Additional Amounts with respect to any of the Offered Debt Securities is
payable in any foreign currency or foreign currency unit, the restrictions,
elections, tax consequences, specific terms and other information with respect
to such Offered Debt Securities and such foreign currency or foreign currency
unit will be set forth in the Prospectus Supplement relating thereto.
Events of Default
Unless otherwise provided with respect to any series of Debt Securities, the
following are or will be Events of Default under each Indenture with respect to
the Debt Securities of such series issued under such Indenture:
(1) failure to pay principal of or premium, if any, on any Debt Security
of such series when due;
(2) failure to pay any interest on or any Additional Amounts with
respect to any Debt Security of such series when due, continued for 30
days;
(3) failure to deposit any sinking fund payment, when due, in respect of
the Debt Securities of such series, continued for 30 days;
(4) failure to perform any other covenant of the Company in the
applicable Indenture (other than a covenant included in such Indenture for
the benefit of a series of Debt Securities other than such series),
continued for 90 days after written notice as provided in such Indenture;
(5) certain events of bankruptcy, insolvency or reorganization; and
(6) any other Event of Default as may be specified with respect to Debt
Securities of such series.
If an Event of Default with respect to any outstanding series of Debt
Securities occurs and is continuing, either the Trustee or the Holders of at
least 25% in principal amount of the outstanding Debt Securities of such series
(in the case of an Event of Default described in clause (1), (2), (3) or (6)
above) or at least 25% in principal amount of all outstanding Debt Securities
under the applicable Indenture (in the case of an Event of Default described in
clause (4) above) may declare the principal amount of all the Debt Securities
of the applicable series (or of all outstanding Debt Securities under the
applicable Indenture, as the case may be) to be due and payable immediately. If
an Event of Default described in clause (5) above occurs, the principal amount
of the outstanding Debt Securities of all series ipso facto shall become
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder. At any time after a declaration of acceleration has
been made, but before a judgment has been obtained, the Holders of a majority
in principal amount of the outstanding Debt Securities of such series (or of
all outstanding Debt Securities under the
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applicable Indenture, as the case may be) may, under certain circumstances,
rescind and annul such acceleration. Depending on the terms of other
indebtedness of the Company outstanding from time to time, an Event of Default
under the Indentures may give rise to cross defaults on such other indebtedness
of the Company.
Each Indenture provides that, within 90 days after the occurrence of a
default with respect to any series of Debt Securities, the Trustee will give to
the Holders of the Debt Securities of such series notice of all uncured and
unwaived defaults known to it; provided, however, that, except in the case of a
default in the payment of the principal of or premium, if any, or any interest
on, or any Additional Amounts or sinking fund installment with respect to, any
Debt Securities of such series, the Trustee will be protected in withholding
such notice if it in good faith determines that the withholding of such notice
is in the interest of the Holders of the Debt Securities of such series; and
provided, further, that such notice shall not be given until at least 30 days
after the occurrence of a default in the performance or breach of any covenant
or warranty of the Company under such Indenture other than for the payment of
the principal of or premium, if any, or any interest on, or any Additional
Amounts or sinking fund installment with respect to, any Debt Securities of
such series. For the purpose of this provision, "default" with respect to Debt
Securities of any series means any event that is, or after notice or lapse of
time, or both, would become, an Event of Default with respect to the Debt
Securities of such series.
The Holders of a majority in principal amount of the outstanding Debt
Securities of any series (or, in certain cases, all outstanding Debt Securities
under the applicable Indenture) have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee with respect to the Debt
Securities of such series (or of all outstanding Debt Securities under the
applicable Indenture), subject to certain limitations specified in the
applicable Indenture. Each Indenture provides that in case an Event of Default
shall occur and be continuing, the Trustee shall exercise such of its rights
and powers under the applicable Indenture and use the same degree of care and
skill in its exercise as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs. Subject to such provisions,
the Trustee will not be under an obligation to exercise any of its rights or
powers under the respective Indenture at the request of any of the Holders of
the Debt Securities unless they have offered to the Trustee reasonable security
or indemnity against the costs, expenses and liabilities that might be incurred
by it in compliance with such request.
The Holders of a majority in principal amount of the outstanding Debt
Securities of any series (or, in certain cases, all outstanding Debt Securities
under the applicable Indenture) may on behalf of the Holders of all Debt
Securities of such series (or of all outstanding Debt Securities under the
applicable Indenture) waive any past default under the applicable Indenture,
except (1) a default in the payment of the principal of or premium, if any, or
interest on or any Additional Amounts with respect to any Debt Security or (2)
in respect of a provision that under the applicable Indenture cannot be
modified or amended without the consent of the Holder of each outstanding Debt
Security affected. The Holders of a majority in principal amount of the
outstanding Debt Securities affected thereby may on behalf of the Holders of
all such Debt Securities waive compliance by the Company with certain
restrictive provisions of the Indentures.
The Company is required to furnish to the Trustee annually a statement as to
the performance by the Company of certain of its obligations under the
applicable Indenture and as to any default in such performance.
Remedies
The Indentures provide that no Holder of any Debt Security of any series
will have any right to institute any proceeding, judicial or otherwise, with
respect to the respective Indenture, or for the appointment of a receiver or
trustee, or for any other remedy thereunder, unless
(1) an Event of Default with respect to Debt Securities of that series
has occurred and continues and such Holder has previously given written
notice to the Trustee of the continuing Event of Default;
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(2) the Holders of not less than 25% in principal amount of the
outstanding Debt Securities of that series have made written request to the
Trustee to institute proceedings in respect of such Event of Default in its
own name as Trustee;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the outstanding Debt Securities of that series.
Modification
Modifications and amendments of each Indenture may be made by the Company
and the Trustee with the consent of the Holders of a majority in principal
amount of the outstanding Debt Securities under the applicable Indenture
affected thereby; provided, however, that no such modification or amendment
may, without the consent of the Holder of each outstanding Debt Security
affected thereby,
(1) change the stated maturity date of the principal of, or any
installment of principal of or interest on, or any Additional Amounts with
respect to any Debt Security,
(2) reduce the principal amount of, or the premium (if any) or interest
on, or any Additional Amounts with respect to any Debt Security,
(3) change the place or currency, currencies, or currency unit or units
of payment of principal of, or premium (if any) or interest on, or any
Additional Amounts with respect to any Debt Security,
(4) impair the right to institute suit for the enforcement of any
payment on or with respect to any Debt Security or
(5) reduce the percentage in principal amount of outstanding Debt
Securities, the consent of the Holders of which is required for
modification or amendment of the Indenture or for waiver of compliance with
certain provisions of the Indentures or for waiver of certain defaults.
Each Indenture provides that the Company and the Trustee may, without the
consent of any Holders of Debt Securities, enter into supplemental indentures
for the purposes, among other things, of adding to the Company's covenants,
adding additional Events of Default, establishing the form or terms of Debt
Securities or curing ambiguities or inconsistencies in the applicable
Indenture, provided that such action to cure ambiguities or inconsistencies
shall not adversely affect the interests of the Holders of the Debt Securities
in any material respect.
Consolidation, Merger and Sale of Assets
Without the consent of any Holders of outstanding Debt Securities, the
Company may consolidate with or merge into, or convey, transfer or lease its
properties and assets substantially as an entirety to, any Person, provided
that
(1) the Person formed by such consolidation or into which the Company is
merged or that acquires or leases the properties and assets of the Company
substantially as an entirety is a Person that assumes by supplemental
indenture the Company's obligations on the Debt Securities and under each
Indenture,
(2) after giving effect to the transaction, no Event of Default and no
event that, after notice or lapse of time or both, would become an Event of
Default has occurred and is continuing, and
(3) certain other conditions are met.
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Upon compliance with these provisions by a successor Person, the Company
will (except in the case of a lease) be relieved of its obligations under each
Indenture and the Debt Securities.
Discharge and Defeasance
The Company may terminate its obligations under each Indenture, other than
its obligation to pay the principal of, premium, if any, and interest on and
any Additional Amounts with respect to the Debt Securities of any series and
certain other obligations, provided that it
(1) irrevocably deposits or causes to be irrevocably deposited with the
Trustee as trust funds money or U.S. Government Obligations maturing as to
principal and interest sufficient to pay the principal of, premium, if any,
and any interest on, and any Additional Amounts and mandatory sinking funds
with respect to, all outstanding Debt Securities of such series on the
stated maturity of such payments or on any redemption date and
(2) complies with any additional conditions specified to be applicable
with respect to the covenant defeasance of Debt Securities of such series.
The terms of any series of Debt Securities may also provide for legal
defeasance pursuant to the applicable Indenture. In such case, if the Company
(1) irrevocably deposits or causes to be irrevocably deposited money or
U.S. Government Obligations as described above,
(2) makes a request to the Trustee to be discharged from its obligations
on the Debt Securities of such series and
(3) complies with any additional conditions specified to be applicable
with respect to legal defeasance of Debt Securities of such series,
then the Company shall be deemed to have paid and discharged the entire
indebtedness on all the outstanding Debt Securities of such series, the
obligations of the Company under the applicable Indenture and the Debt
Securities of such series to pay the principal of, premium, if any, and
interest on and any Additional Amounts with respect to the Debt Securities of
such series shall cease, terminate and be completely discharged, and the
Holders thereof shall thereafter be entitled only to payment out of the money
or U.S. Government Obligations deposited with the Trustee as aforesaid, unless
the Company's obligations are revived and reinstated because the Trustee is
unable to apply such trust fund by reason of any legal proceeding, order or
judgment.
The term "U.S. Government Obligations" is or will be defined in each
Indenture as direct noncallable obligations of, or noncallable obligations the
payment of principal of and interest on which is guaranteed by, the United
States of America, or to the payment of which obligations or guarantees the
full faith and credit of the United States of America is pledged, or beneficial
interests in a trust the corpus of which consists exclusively of money or such
obligations or a combination thereof.
Form, Exchange, Registration and Transfer
Debt Securities of any series will be exchangeable for other Debt Securities
of the same series and of a like aggregate principal amount and tenor of
different authorized denominations. Debt Securities may be presented for
registration of transfer (with the form of transfer endorsed thereon duly
executed), at the office of the Security Registrar or at the office of any
transfer agent designated by the Company for such purpose with respect to any
series of Debt Securities and referred to in an applicable Prospectus
Supplement, without service charge and upon payment of any taxes and other
governmental charges as described in the applicable Indenture. Such transfer or
exchange will be effected upon the Security Registrar or such transfer agent,
as the case may be, being satisfied with the documents of title and identity of
the Person making the request. The Company will appoint the Trustee under each
Indenture as Security Registrar for Debt Securities issued thereunder. If a
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Prospectus Supplement refers to any transfer agents (in addition to the
Security Registrar) initially designated by the Company with respect to any
series of Debt Securities, the Company may at any time rescind the designation
of any such transfer agent or approve a change in the location through which
any such transfer agent acts. The Company is required to maintain an office or
agency for registration of transfer or exchange in each Place of Payment for
such series. The Company may at any time designate additional offices or
agencies for registration of transfer or exchange with respect to any series of
Debt Securities.
In the event of any redemption in part, the Company shall not be required to
(1) issue, register the transfer of or exchange Debt Securities of any series
during a period beginning at the opening of business 15 days prior to the
selection of Debt Securities of that series for redemption and ending on the
close of business on the day of mailing of the relevant notice of redemption or
(2) register the transfer of or exchange any Debt Security, or portion thereof,
called for redemption, except the unredeemed portion of any Debt Security being
redeemed in part.
Payment and Paying Agents
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of, premium, if any, and interest on and any Additional Amounts
with respect to Debt Securities will be made in the designated currency or
currency unit at the office of such Paying Agent or Paying Agents as the
Company may designate from time to time, except that, at the option of the
Company, payment of any interest may be made by check mailed to the address of
the Person entitled thereto as such address appears in the Security Register.
Unless otherwise indicated in an applicable Prospectus Supplement, payment of
any installment of interest on Debt Securities will be made to the Person in
whose name such Debt Security is registered at the close of business on the
Regular Record Date for such interest.
Unless otherwise indicated in an applicable Prospectus Supplement, the
Corporate Trust Office of the Trustee in New York, New York will be designated
as a Paying Agent for the Company for payments with respect to Debt Securities
issued under the applicable Indenture. The Company may at any time designate
additional Paying Agents or rescind the designation of any Paying Agent or
approve a change in the office through which any Paying Agent acts, except that
the Company will be required to maintain a Paying Agent in each Place of
Payment for such series.
All moneys paid by the Company to a Paying Agent for the payment of
principal of, premium, if any, or interest on and any Additional Amounts with
respect to any Debt Security that remain unclaimed at the end of three years
after such principal, premium, interest or Additional Amounts have become due
and payable will (subject to applicable escheat laws) be repaid to the Company,
and the Holder of such Debt Security or any coupon will thereafter look only to
the Company for payment thereof.
Securities in Global Form
The Debt Securities of a series may be issued, in whole or in part, in the
form of one or more global Debt Securities that would be deposited with a
depositary or its nominee identified in the applicable Prospectus Supplement.
Global Debt Securities may be issued in either temporary or permanent form. The
specific terms of any depositary arrangement with respect to any portion of a
series of Debt Securities and the rights of, and limitations on, owners of
beneficial interests in any such global Debt Security representing all or a
portion of a series of Debt Securities will be described in the applicable
Prospectus Supplement.
Meetings
Each Indenture contains provisions for convening meetings of the Holders of
Debt Securities of a series. A meeting may be called at any time by the
Trustee, and also, upon request, by the Company or the Holders of at least 10%
in principal amount of the Outstanding Debt Securities of such series, in any
such case upon notice given as described under "--Notices" below. Except for
any consent that must be given by the Holder of each
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Outstanding Debt Security affected thereby, as described under "--Modification"
above, any resolution presented at a meeting or adjourned meeting at which a
quorum is present may be adopted by the affirmative vote of the Holders of a
majority in principal amount of the Outstanding Debt Securities of that series;
provided, however, that, except for any consent that must be given by the
Holder of each Outstanding Debt Security affected thereby, as described under
"--Modification" above, any resolution with respect to any request, demand,
authorization, direction, notice, consent, waiver or other action that may be
made, given or taken by the Holders of a specified percentage, which is less
than a majority in principal amount of the Outstanding Debt Securities of a
series, may be adopted at a meeting or adjourned meeting duly reconvened at
which a quorum is present by the affirmative vote of the Holders of such
specified percentage in principal amount of the Outstanding Debt Securities of
that series. Subject to the proviso set forth above, any resolution passed or
decision taken at any meeting of Holders of Debt Securities of any series duly
held in accordance with the applicable Indenture will be binding on all Holders
of Debt Securities of that series and any related coupons. The quorum at any
meeting called to adopt a resolution, and at any reconvened meeting, will be
Persons holding or representing a majority in principal amount of the
Outstanding Debt Securities of a series.
Governing Law
Each Indenture and the Debt Securities will be governed by and construed in
accordance with the laws of the State of New York.
Notices
Notices to Holders of Debt Securities will be given by mail to the addresses
of such Holders as they appear in the Security Register.
Trustee
Each Indenture contains certain limitations on the right of the Trustee, as
a creditor of the Company, to obtain payment of claims in certain cases and to
realize on certain property received with respect to any such claims, as
security or otherwise. The Trustee is or will be permitted to engage in other
transactions, except that, if it acquires any conflicting interest (as
defined), it must eliminate such conflict or resign.
The Trustee has made loans to the Company and its subsidiaries and
affiliates from time to time in the ordinary course of business and at
prevailing interest rates under agreements with commercial bank groups. In
addition, the Trustee may from time to time serve as a depositary of funds of,
and perform other services for, the Company.
Provisions Applicable Solely to Subordinated Debt Securities
The payment of the principal of, premium, if any, and interest on and any
Additional Amounts with respect to the Subordinated Debt Securities will be
expressly subordinated, to the extent and in the manner set forth in the
Subordinated Indenture, to the prior payment in full of all Senior Indebtedness
of the Company.
The Subordinated Indenture will provide that no payment may be made by the
Company on account of the principal of, premium, if any, or interest on or any
Additional Amounts with respect to the Subordinated Debt Securities, or to
acquire any of the Subordinated Debt Securities (including repurchases of
Subordinated Debt Securities at the option of the Holder thereof) for cash or
property (other than certain junior securities of the Company), or on account
of the redemption provisions of the Subordinated Debt Securities, in the event
of (1) default in the payment of any principal of, premium, if any, or interest
on any Senior Indebtedness of the Company when it becomes due and payable,
whether at maturity or at a date fixed for prepayment or by declaration or
otherwise (a "Payment Default"), unless and until such Payment Default has been
cured or waived or otherwise has ceased to exist, or (2) any other event of
default with respect to any Designated Senior
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Indebtedness permitting the holders of such Designated Senior Indebtedness (or
a trustee or other representative on behalf of the holders thereof) to declare
such Designated Senior Indebtedness due and payable prior to the date on which
it would otherwise have become due and payable, upon written notice thereof to
the Company and the Subordinated Trustee by any holders of such Designated
Senior Indebtedness (or a trustee or other representative on behalf of the
holders thereof) (the "Payment Notice"), unless and until such event of default
shall have been cured or waived or otherwise has ceased to exist, provided that
such payments may not be prevented under clause (2) above for more than 179
days after an applicable Payment Notice has been received by the Subordinated
Trustee unless the Designated Senior Indebtedness in respect of which such
event of default exists has been declared due and payable in its entirety, in
which case no such payment may be made until such acceleration has been
rescinded or annulled or such Designated Senior Indebtedness has been paid in
full. No event of default that existed or was continuing on the date of any
Payment Notice (whether or not such event of default is on the same issue of
Designated Senior Indebtedness) may be made the basis for the giving of a
second Payment Notice, and only one such Payment Notice may be given in any
365-day period.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company (other than certain Junior Securities of
the Company) is received by the Subordinated Trustee or the Holders of
Subordinated Debt Securities at a time when such payment or distribution is
prohibited by the foregoing provisions, then, unless such payment or
distribution is no longer prohibited by the foregoing provisions, such payment
or distribution shall be received and held in trust by the Subordinated Trustee
or such Holders or the Paying Agent for the benefit of the holders of Senior
Indebtedness of the Company, and shall be paid or delivered by the Subordinated
Trustee or such Holders or the Paying Agent, as the case may be, to the holders
of the Senior Indebtedness of the Company remaining unpaid or unprovided for or
their representative or representatives, or to the trustee or trustees under
any indenture pursuant to which any instruments evidencing such Senior
Indebtedness of the Company may have been issued, ratably according to the
aggregate amounts remaining unpaid on account of the Senior Indebtedness of the
Company held or represented by each, for application to the payment of all
Senior Indebtedness in full after giving effect to any concurrent payment or
distribution to or for the holders of such Senior Indebtedness.
Upon any distribution of assets of the Company or upon any dissolution,
winding up, total or partial liquidation or reorganization of the Company,
whether voluntary or involuntary, in bankruptcy, insolvency, receivership or a
similar proceeding or upon assignment for the benefit of creditors, (1) the
holders of all Senior Indebtedness of the Company will first be entitled to
receive payment in full before the Holders of Subordinated Debt Securities are
entitled to receive any payment on account of the principal of, premium, if
any, and interest on or any Additional Amounts with respect to the Subordinated
Debt Securities (other than certain junior securities of the Company) and (2)
any payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities (other than certain junior securities
of the Company) to which the Holders of Subordinated Debt Securities or the
Subordinated Trustee on behalf of such Holders would be entitled, except for
the subordination provisions contained in the Subordinated Indenture, will be
paid by the liquidating trustee or agent or other person making such a payment
or distribution directly to the holders of Senior Indebtedness of the Company
or their representative, ratably according to the respective amounts of Senior
Indebtedness held or represented by each, to the extent necessary to make
payment in full of all such Senior Indebtedness remaining unpaid, after giving
effect to any concurrent payment or distribution to the holders of such Senior
Indebtedness.
No provision of the Subordinated Indenture or the Subordinated Debt
Securities will affect the obligation of the Company, which is absolute and
unconditional, to pay, when due, principal of, premium, if any, and interest on
and any Additional Amounts with respect to the Subordinated Debt Securities.
The subordination provisions of the Subordinated Indenture and the Subordinated
Debt Securities will not prevent the occurrence of any default or Event of
Default under the Subordinated Indenture or limit the rights of the
Subordinated Trustee or any Holder of Subordinated Debt Securities, subject to
the two preceding paragraphs, to pursue any other rights or remedies with
respect to the Subordinated Debt Securities.
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As a result of these subordination provisions, in the event of the
liquidation, bankruptcy, reorganization, insolvency, receivership or similar
proceeding or an assignment for the benefit of the creditors of the Company or
any of its subsidiaries or a marshaling of assets or liabilities of the Company
and its subsidiaries, Holders of Subordinated Debt Securities may receive
ratably less than other creditors.
The term "Indebtedness," as applied to any Person, unless otherwise provided
with respect to the Subordinated Debt Securities of a series and described in
the Prospectus Supplement relating thereto, will be defined in the Subordinated
Indenture as, without duplication, the following:
(1) all liabilities and obligations, contingent or otherwise, of any
such Person
(a) in respect of borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a
portion thereof),
(b) evidenced by bonds, notes, debentures or similar instruments,
(c) representing the balance deferred and unpaid of the purchase
price of any property or services, except such as would constitute
trade payables to trade creditors in the ordinary course of business
that are not more than 90 days past their original due date,
(d) evidenced by banker's acceptances or similar instruments issued
or accepted by banks,
(e) for the payment of money relating to rental obligations under a
lease required to be capitalized in accordance with generally accepted
accounting principles or
(f) evidenced by a letter of credit or a reimbursement obligation of
such Person with respect to any letter of credit;
(2) all net obligations of such Person under certain interest swap and
hedging obligations;
(3) all liabilities of others of the kind described in the preceding
clause (1) or (2) that such Person has guaranteed or that is otherwise its
legal liability and all obligations to purchase, redeem or acquire any
capital stock of any Person; and
(4) any and all deferrals, renewals, extensions, refinancings, refunds
(whether direct or indirect) of, or amendments, modifications or
supplements to, any liability of the kind described in any of the preceding
clause (1), (2) or (3), or this clause (4), whether or not between or among
the same parties.
The term "Senior Indebtedness" of the Company, unless otherwise provided
with respect to the Subordinated Debt Securities of a series and described in
the Prospectus Supplement relating thereto, will be defined in the Subordinated
Indenture as
(1) all Indebtedness of the Company unless, by the terms of the
instrument creating or evidencing such Indebtedness, it is provided that
such Indebtedness is not superior in right of payment to the Subordinated
Debt Securities or to other Indebtedness which is pari passu with or
subordinated to the Subordinated Debt Securities and
(2) any modifications, refunding, deferrals, renewals or extensions of
any such Indebtedness or securities, notes or other evidences of
Indebtedness issued in exchange for such Indebtedness; provided that in no
event shall "Senior Indebtedness" include
(a) Indebtedness of the Company owed or owing to any subsidiary of
the Company or any officer, director or employee of the Company or any
subsidiary of the Company,
(b) Indebtedness to trade creditors or
(c) any liability for taxes owed or owing by the Company.
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The term "Designated Senior Indebtedness," unless otherwise provided with
respect to the Subordinated Debt Securities of a series and described in the
Prospectus Supplement relating thereto, will be defined in the Subordinated
Indenture to mean any Senior Indebtedness of the Company that (1) in the
instrument evidencing the same or the assumption or guarantee thereof (or
related documents to which the Company is a party) is expressly designated as
"Designated Senior Indebtedness" for purposes of the Subordinated Indenture or
(unless otherwise provided) the Indenture governing the Company's convertible
subordinated debentures, and (2) satisfies such other conditions as may be
provided with respect to the Subordinated Debt Securities of such series
(provided that such instrument or documents may place limitations and
conditions on the rights of the holders of such Senior Indebtedness to exercise
the rights of Designated Senior Indebtedness).
If Subordinated Debt Securities are issued under the Subordinated Indenture,
the aggregate principal amount of Senior Indebtedness outstanding as of a
recent date will be set forth in the Prospectus Supplement. The Subordinated
Indenture will not restrict the amount of Senior Indebtedness that the Company
may incur.
CAPITAL STOCK
The authorized capital stock of the Company consists of 100 million shares
of Common Stock, par value $0.10 per share (the "Common Stock"), and 10 million
shares of Preferred Stock, par value $1.00 per share (the "Preferred Stock").
The following summary of the material terms of the capital stock of the Company
does not purport to be complete and is qualified by reference to the Company's
Restated Certificate of Incorporation and Amended and Restated Bylaws, which
are filed as exhibits to the Registration Statement of which this Prospectus is
a part.
Provisions of the Certificate of Incorporation and By-Laws
The Company's Restated Certificate of Incorporation provides for a
classified Board of Directors, consisting of three classes as nearly equal in
size as practicable. Each class holds office until the third annual
stockholders' meeting for election of directors following the most recent
election of such class. The Company's Restated Certificate of Incorporation
also provides that no action required or permitted to be taken at any annual or
special meeting of stockholders of the Company may be taken without a meeting,
and the power of stockholders to act by written consent is specifically denied.
The Company's Amended and Restated By-Laws provide that special meetings of
stockholders may be called only by the Chairman of the Board of Directors, the
President, or by the Board of Directors pursuant to a resolution adopted by a
majority of the then-authorized number of directors.
Section 203 of the Delaware General Corporation Law
The Company is a Delaware corporation subject to Section 203 of the Delaware
General Corporation Law (the "DGCL"). Generally, Section 203 prohibits a
publicly held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person became an interested stockholder, unless
(1) prior to such date, either the business combination or such transaction
which resulted in the stockholder becoming an interested stockholder is
approved by the board of directors of the corporation, (2) upon consummation of
the transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owns at least 85% of the outstanding
voting stock, or (3) on or after such date, the business combination is
approved by the board of directors of the corporation and by the affirmative
vote at least 66 2/3% of the outstanding voting stock that is not owned by the
interested stockholder. A "business combination" includes mergers, asset sales
and other transactions resulting in a financial benefit to the interested
stockholder. An "interested stockholder" is a person who, together with
affiliates and associates, owns (or, within three years, did own) 15% or more
of the corporation's outstanding voting stock.
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Limitation on Changes in Control
Certain of the above provisions of the Company's Restated Certificate of
Incorporation and Amended and Restated By-Laws and the provisions of Section
203 of the DGCL could have the effect of delaying, deferring or preventing a
change in control of the Company or the removal of existing management or
deterring potential acquirors from making an offer to stockholders of the
Company. This could be the case notwithstanding that a majority of the
stockholders might benefit from such a change in control or offer. In addition,
the issuance of shares of Preferred Stock, or the issuance of rights to
purchase such shares, could be used to discourage an unsolicited acquisition
proposal. For instance, the issuance of a series of Preferred Stock might
impede a business combination by including class voting rights that would
enable the holder to block such a transaction, or facilitate a business
combination by including voting rights that would provide a required percentage
vote of the stockholders. In addition, under certain circumstances, the
issuance of Preferred Stock could adversely affect the voting power of the
holders of Common Stock.
Common Stock
Each share of Common Stock possesses ordinary voting rights for the election
of directors and for other corporate matters, each share being entitled to one
vote. Cumulative voting rights are denied. The Common Stock does not carry
preemptive rights and is not convertible, redeemable or assessable, or entitled
to the benefits of any sinking fund. Subject to any preferential rights of the
Preferred Stock, the holders of Common Stock are entitled to receive dividends
in such amounts and at such times as may be declared by the Board of Directors
out of funds legally available therefor and to share ratably in the assets of
the Company legally available for distribution to its stockholders in the event
of its liquidation, dissolution or winding-up.
The Company's Restated Certificate of Incorporation provides that
stockholders may not act by written consent in lieu of a meeting. The Restated
Certificate of Incorporation further provides that the number of directors
shall not be fewer than three (3) nor more than fifteen (15) and provides for a
classified Board of Directors, consisting of three classes as nearly equal in
size as practicable. Each class holds office until the third annual
stockholders' meeting for election of directors following the most recent
election of such class, except that the initial terms of the three classes
expire in 1999, 2000 and 2001, respectively. A director may not be removed
without cause and may only be removed for cause by the affirmative vote of the
holders of 75% or more of the combined voting power of the then-outstanding
shares of voting stock, voting together as a single class. Special meetings of
the stockholders may be called by the Chairman of the Board, the President or
the Board of Directors, but may not be called by stockholders. The provisions
relating to capital stock, the Board of Directors, the Board of Directors'
power to amend the Bylaws, the calling of special meetings, actions taken by
written consent and limitation of liability of directors may be amended only by
the vote of the holders of at least 80% of the capital stock entitled to vote
for the election of directors.
Preferred Stock
The Board of Directors of the Company is empowered, without approval of the
stockholders, to cause shares of Preferred Stock to be issued in one or more
series, with the numbers of shares of each series to be determined by it. The
Board of Directors is authorized to fix or alter the designation, number,
voting powers, preferences and relative, participating, optional and other
rights, and the qualifications, limitations or restrictions of such rights.
Among the specific matters that may be determined by the Board of Directors are
the rate of dividends; the redemption price, if any; the terms of a sinking
fund or redemption or purchase account, if any; the amount payable in the event
of any voluntary liquidation, dissolution or winding up of the affairs of the
Company; conversion or exchange rights, if any; and voting powers, if any.
Although the Company has no present intention to issue additional shares of
Preferred Stock, the issuance of shares of the Preferred Stock, or the issuance
of rights to purchase such shares, could be used to discourage an unsolicited
acquisition proposal. For instance, the issuance of a series of Preferred Stock
might impede a
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business combination by including class voting rights that would enable the
holders to block such a transaction; or such issuance might facilitate a
business combination by including voting rights that would provide a required
percentage vote of the stockholders. In addition, under certain circumstances,
the issuance of Preferred Stock could adversely affect the voting power of the
holders of the Common Stock. Although the Board of Directors is required to
make any determination to issue such stock based on its judgment as to the best
interests of the stockholders of the Company, the Board of Directors could act
in a manner that would discourage an acquisition attempt or other transaction
that some or even a majority of the stockholders might believe to be in their
best interests or in which stockholders might receive a premium for their stock
over the then market price of such stock. The Board of Directors does not at
present intend to seek stockholder approval prior to any issuance of currently
authorized stock, unless otherwise required by law or the rules of any market
on which the Company's securities are traded.
Depositary Shares
The description set forth below and in any Prospectus Supplement of certain
provisions of the Deposit Agreement (as defined below) and of the Depositary
Shares (as defined below) and Depositary Receipts (as defined below) does not
purport to be complete and is subject to and qualified in its entirety by
reference to the forms of Deposit Agreement and Depositary Receipts relating to
each series of Preferred Stock which have been or will be filed with the
Commission in connection with the offering of such series of Preferred Stock.
General
The Company may, at its option, elect to offer fractional interests in
shares of Preferred Stock, rather than shares of Preferred Stock. In the event
such option is exercised, the Company will provide for the issuance by a
Depositary to the public of receipts for depositary shares ("Depositary
Shares"), each of which will represent fractional interests of a particular
series of Preferred Stock (which will be set forth in the Prospectus Supplement
relating to a particular series of Preferred Stock).
The shares of any series of Preferred Stock underlying the Depositary Shares
will be deposited under a separate Deposit Agreement (the "Deposit Agreement")
between the Company and a bank or trust company selected by the Company having
its principal office in the United States and having a combined capital and
surplus of at least $50,000,000 (the "Depositary"). The Prospectus Supplement
relating to a series of Depositary Shares will set forth the name and address
of the Depositary. Subject to the terms of the Deposit Agreement, each owner of
Depositary Shares will be entitled, in proportion to the applicable fractional
interests in shares of Preferred Stock underlying such Depositary Shares, to
all the rights and preferences of the Preferred Stock underlying such
Depositary Shares (including dividend, voting, redemption, conversion and
liquidation rights).
The Depositary Shares will be evidenced by depositary receipts issued
pursuant to the Deposit Agreement (the "Depositary Receipts"). Depositary
Receipts will be distributed to those persons purchasing the fractional
interests in shares of the related series of Preferred Stock in accordance with
the terms of the offering described in the related Prospectus Supplement.
Dividends and Other Distributions
The Depositary will distribute all cash dividends or other cash
distributions received in respect of Preferred Stock to the record holders of
Depositary Shares relating to such Preferred Stock in proportion to the numbers
of such Depositary Shares owned by such holders on the relevant record date.
The Depositary shall distribute only such amount, however, as can be
distributed without attributing to any holder of Depositary Shares a fraction
of one cent, and any balance not so distributed shall be added to and treated
as part of the next sum received by the Depositary for distribution to record
holders of Depositary Shares.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares
entitled thereto, unless the Depositary determines that it is not feasible to
make such distribution, in which case the Depositary may, with the approval of
the Company, sell such property and distribute the net proceeds from such sale
to such holders.
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The Deposit Agreement will also contain provisions relating to the manner in
which any subscription or similar rights offered by the Company to holders of
the Preferred Stock shall be made available to the holders of Depositary
Shares.
Redemption of Depositary Shares
If a series of the Preferred Stock underlying the Depositary Shares is
subject to redemption, the Depositary Shares will be redeemed from the proceeds
received by the Depositary resulting from the redemption, in whole or in part,
of such series of the Preferred Stock held by the Depositary. The Depositary
shall mail notice of redemption not less than 30 and not more than 60 days
prior to the date fixed for redemption to the record holders of the Depositary
Shares to be so redeemed at their respective addresses appearing in the
Depositary's books. The redemption price per Depositary Share will be equal to
the applicable fraction of the redemption price per share payable with respect
to such series of the Preferred Stock. Whenever the Company redeems shares of
Preferred Stock held by the Depositary, the Depositary will redeem as of the
same redemption date the number of Depositary Shares relating to shares of
Preferred Stock so redeemed. If less than all of the Depositary Shares are to
be redeemed, the Depositary Shares to be redeemed will be selected by lot or
pro rata as may be determined by the Depositary.
After the date fixed for redemption, the Depositary Shares so called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of the Depositary Shares will cease, except the right to receive the
moneys, securities or other property payable upon such redemption and any
money, securities or other property to which the holders of such Depositary
Shares were entitled upon such redemption upon surrender to the Depositary of
the Depositary Receipts evidencing such Depositary Shares.
Voting the Preferred Stock
Upon receipt of notice of any meeting at which the holders of the Preferred
Stock are entitled to vote, the Depositary will mail the information contained
in such notice of meeting to the record holders of the Depositary Shares
relating to such Preferred Stock. Each record holder of such Depositary Shares
on the record date (which will be the same date as the record date for the
Preferred Stock) will be entitled to instruct the Depositary as to the exercise
of the voting rights pertaining to the number of shares of Preferred Stock
underlying such holder's Depositary Shares. The Depositary will endeavor,
insofar as practicable, to vote the number of shares of Preferred Stock
underlying such Depositary Shares in accordance with such instructions, and the
Company will agree to take all action which may be deemed necessary by the
Depositary in order to enable the Depositary to do so.
Amendment and Termination of Depositary Agreement
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time be amended by agreement
between the Company and the Depositary. However, any amendment which materially
and adversely alters the rights of the existing holders of Depositary Shares
will not be effective unless such amendment has been approved by the record
holders of at least a majority of the Depositary Shares then outstanding. A
Deposit Agreement may be terminated by the Company or the Depositary only if
(1) all outstanding Depositary Shares relating thereto have been redeemed or
(2) there has been a final distribution in respect of the Preferred Stock of
the relevant series in connection with any liquidation, dissolution or winding
up of the Company and such distribution has been distributed to the holders of
the related Depositary Shares.
Charges of Depositary
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. The Company
will pay charges of the Depositary in connection with the initial deposit of
the Preferred Stock and any redemption of the Preferred Stock. Holders of
Depositary Shares will pay transfer and other taxes and governmental charges
and such other charges as are expressly provided in the Deposit Agreement to be
for their accounts.
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Resignation and Removal of Depositary
The Depositary may resign at any time by delivering to the Company notice of
its election to do so, and the Company may at any time remove the Depositary,
any such resignation or removal to take effect upon the appointment of a
successor Depositary and its acceptance of such appointment. Such successor
Depositary must be appointed within 60 days after delivery of the notice of
resignation or removal and must be a bank or trust company having its principal
office in the United States and having a combined capital and surplus of at
least $50,000,000.
Miscellaneous
The Depositary will forward to the holders of Depositary Shares all reports
and communications from the Company which are delivered to the Depositary and
which the Company is required to furnish to the holders of the Preferred Stock.
Neither the Depositary nor the Company will be liable if it is prevented or
delayed by law or any circumstance beyond its control in performing its
obligations under the Deposit Agreement. The obligations of the Company and the
Depositary under the Deposit Agreement will be limited to performance in good
faith of their duties thereunder and they will not be obligated to prosecute or
defend any legal proceeding in respect of any Depositary Shares or Preferred
Stock unless satisfactory indemnity is furnished. They may rely upon written
advice of counsel or accountants, or information provided by persons presenting
Preferred Stock for deposit, holders of Depositary Shares or other persons
believed to be competent and on documents believed to be genuine.
Warrants
The Company may issue warrants (the "Warrants"), including Warrants to
purchase Debt Securities ("Debt Warrants"), Warrants to purchase Common Stock
or Preferred Stock ("Stock Warrants"), and Warrants to purchase equity
securities issued by an unaffiliated corporation or other entity and held by
the Company. Warrants may be issued independently of or together with any other
Securities and may be attached to or separate from such Securities. Each series
of Warrants will be issued under a separate Warrant Agreement (each a "Warrant
Agreement") to be entered into between the Company and a Warrant Agent
("Warrant Agent"). The Warrant Agent will act solely as an agent of the Company
in connection with the Warrant of such series and will not assume any
obligation or relationship of agency for or with holders or beneficial owners
of Warrants. The following sets forth certain general terms and provisions of
the Warrants offered hereby. Further terms of the Warrants and the applicable
Warrant Agreement will be set forth in the applicable Prospectus Supplement.
Debt Warrants
The applicable Prospectus Supplement will describe the terms of any Debt
Warrants, including the following:
(1) the title of such Debt Warrants;
(2) the offering price for such Debt Warrants, if any;
(3) the aggregate number of such Debt Warrants;
(4) the designation and terms of such Debt Securities purchasable upon
exercise of such Debt Warrants;
(5) if applicable, the designation and terms of the Securities with
which such Debt Warrants are issued and the number of such Debt Warrants
issued with each such Security;
(6) if applicable, the date from and after which such Debt Warrants and
any Securities issued therewith will be separately transferable;
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(7) the principal amount of Debt Securities purchasable upon exercise of
a Debt Warrant and the price at which such principal amount of Debt
Securities may be purchased upon exercise;
(8) the date on which the right to exercise such Debt Warrants shall
commence and the date on which such right shall expire;
(9) if applicable, the minimum or maximum amount of such Debt Warrants
which may be exercised at any one time;
(10) whether the Debt Warrants represented by the Debt Warrant
certificates or Debt Securities that may be issued upon exercise of the
Debt Warrants will be issued in registered or bearer form;
(11) information with respect to book-entry procedures, if any;
(12) the currency, currencies or currency units in which the offering
price, if any, and the exercise price are payable;
(13) if applicable, a discussion of certain United States federal income
tax considerations;
(14) the antidilution provisions of such Debt Warrants, if any;
(15) the redemption or call provisions, if any, applicable to such Debt
Warrants; and
(16) any additional terms of the Debt Warrants, including terms,
procedures and limitations relating to the exchange and exercise of such
Debt Warrants.
Stock and Other Warrants
The applicable Prospectus Supplement will describe the terms of any Stock
Warrants or other Warrants to purchase equity securities issued by an
unaffiliated corporation or other entity and held by the Company, including the
following:
(1) the title of such Stock Warrants or other Warrants;
(2) the offering price of such Stock Warrants or other Warrants, if any;
(3) the aggregate number of such Stock Warrants or other Warrants;
(4) the designation and terms of the Common Stock, Preferred Stock or
equity securities issued by an unaffiliated corporation or other entity and
held by the Company purchasable upon exercise of such Stock Warrants or
other Warrants;
(5) if applicable, the designation and terms of the Securities with
which such Stock Warrants or other Warrants are issued and the number of
such Stock Warrants or other Warrants issued with each such Security;
(6) if applicable, the date from and after which such Stock Warrants or
other Warrants and any Securities issued therewith will be separately
transferrable;
(7) the number of shares of Common Stock, Preferred Stock or equity
securities issued by an unaffiliated corporation or other entity and held
by the Company purchasable upon exercise of a Stock Warrant or other
Warrant and the price at which such shares may be purchased upon exercise;
(8) the date on which the right to exercise such Stock Warrants or other
Warrants shall commence and the date on which such right shall expire;
(9) if applicable, the minimum or maximum amount of such Stock Warrants
or other Warrants which may be exercised at any one time;
(10) the currency, currencies or currency units in which the offering
price, if, any, and the exercise price are payable;
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(11) if applicable, a discussion of certain United States federal income
tax considerations;
(12) the antidilution provisions of such Stock Warrants or other
Warrants, if any;
(13) the redemption or call provisions, if any, applicable to such Stock
Warrants or other Warrants; and
(14) any additional terms of such Stock Warrants or other Warrants,
including terms, procedures and limitations relating to the exchange and
exercise of such Stock Warrants or other Warrants.
Stockholder Rights Plan
Each share of Common Stock includes one right to purchase Preferred Stock of
the Company ("Right"). Each Right entitles the registered holder to purchase
from the Company a unit consisting of one one-hundredth of a share (a
"Fractional Share") of Series A Junior Participating Preferred Stock, par value
$1.00 per share, of the Company (the "Series A Preferred Stock"), at a purchase
price per Fractional Share of $90, subject to adjustment (the "Purchase
Price"). The following summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement
between the Company and The Chase Manhattan Bank, Rights Agent (the "Rights
Agreement"), the form of which is filed as an exhibit to the Registration
Statement of which this Prospectus is a part and is incorporated herein by
reference.
The Rights will be separated from the Common Stock and a "Rights
Distribution Date" will occur, with certain exceptions, upon the earlier of (1)
10 days following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired, or obtained the right
to acquire, beneficial ownership of 15% or more of the outstanding shares of
the Company's Common Stock (the date of the announcement being the "Stock
Acquisition Date"), or (2) 10 business days following the commencement of a
tender offer or exchange offer that would result in a person becoming an
Acquiring Person. In certain circumstances, the Rights Distribution Date may be
deferred by the Board of Directors of the Company. Certain inadvertent
acquisitions will not result in a person becoming an Acquiring Person if the
person promptly divests itself of sufficient Common Stock. Until the Rights
Distribution Date, (1) the Rights are evidenced by the certificates
representing outstanding shares of Common Stock and will be transferred with
and only with such certificates, which contain a notation incorporating the
Rights Agreement by reference, and (2) the surrender for transfer of any
certificate for Common Stock will also constitute the transfer of the Rights
associated with the Common Stock represented by such certificate.
The Rights are not exercisable until the Rights Distribution Date and will
expire at the close of business 10 years after the Rights are issued, unless
earlier redeemed or exchanged by the Company as described below.
As soon as practicable after the Rights Distribution Date, Rights
Certificates will be mailed to holders of record of the Common Stock as of the
close of business on the Rights Distribution Date and, from and after the
Rights Distribution Date, the separate Rights Certificates alone will represent
the Rights. All shares of Common Stock issued prior to the Rights Distribution
Date will be issued with Rights. Shares of Common Stock issued after the Rights
Distribution Date in connection with certain employee benefit plans or upon
conversion of certain securities will be issued with Rights. Except as
otherwise determined by the Board of Directors of the Company, no other shares
of the Common Stock issued after the Rights Distribution Date will be issued
with Rights.
In the event (a "Flip-In Event") that a person becomes an Acquiring Person
(except pursuant to a tender or exchange offer for all outstanding shares of
Common Stock at a price and on terms that a majority of the independent
directors of the Company determines to be fair to and otherwise in the best
interests of the Company and its stockholders (a "Permitted Offer")), each
holder of a Right will thereafter have the right to receive, upon exercise of
such Right, a number of shares of Common Stock (or, in certain circumstances,
cash, property or other securities of the Company) having a Current Market
Price (as defined in the Rights Agreement) equal to two times the exercise
price of the Right as set by the Company's Board of Directors. Notwithstanding
the foregoing, following the occurrence of any Triggering Event (as defined
below), all Rights
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that are, or (under certain circumstances specified in the Rights Agreement)
were, beneficially owned by or transferred to an Acquiring Person (or by
certain related parties) will be null and void in the circumstances set forth
in the Rights Agreement. Rights are not exercisable following the occurrence of
any Flip-In Event, however, until such time as the Rights are no longer
redeemable by the Company as set forth below.
In the event (a "Flip-Over Event") that, at any time from and after the time
an Acquiring Person becomes such, (1) the Company is acquired in a merger or
other business combination transaction (other than certain mergers that follow
a Permitted Offer) or (2) 50% or more of the Company's assets or earning power
is sold or transferred, each holder of a Right (except Rights that are voided
as set forth above) shall thereafter have the right to receive, upon exercise,
a number of shares of common stock of the acquiring company having a Current
Market Price equal to two times the exercise price of the Right as set by the
Company's Board of Directors. Flip-In Events and Flip-Over Events are
collectively referred to as "Triggering Events."
The number of outstanding Rights associated with a share of Common Stock, or
the number of Fractional Shares of Series A Preferred Stock issuable upon
exercise of a Right and the Purchase Price, are subject to adjustment in the
event of a stock dividend on, or a subdivision, combination or reclassification
of, the Common Stock occurring prior to the Rights Distribution Date. The
Purchase Price payable, and the number of Fractional Shares of Series A
Preferred Stock or other securities or property issuable, upon exercise of the
Rights are subject to adjustment from time to time to prevent dilution in the
event of certain transactions affecting the Series A Preferred Stock.
At any time until ten days following the first date of public announcement
of the occurrence of a Flip-In Event, the Company may redeem the Rights in
whole, but not in part, at a price of $0.01 per Right, payable, at the option
of the Company, in cash, shares of Common Stock or such other consideration as
the Board of Directors of the Company may determine. Immediately upon the
effectiveness of the action of the Board of Directors ordering redemption of
the Rights, the Rights will terminate and the only right of the holders of
Rights will be to receive the $0.01 redemption price.
At any time after the occurrence of a Flip-In Event and prior to a person's
becoming the beneficial owner of 50% or more of the shares of Common Stock then
outstanding or the occurrence of a Flip-Over Event, the Company may exchange
the Rights (other than Rights owned by an Acquiring Person or an affiliate or
an associate of an Acquiring Person, which will have become void), in whole or
in part, at an exchange ratio of one share of Common Stock, and/or other equity
securities deemed to have the same value as one share of Common Stock, per
Right, subject to adjustment.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of the Company, including, without limitation, the right to
vote or to receive dividends. While the distribution of the Rights should not
be taxable to stockholders or to the Company, stockholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock (or other consideration of the Company) or for the
common stock of the acquiring company as set forth above or are exchanged as
provided in the preceding paragraph.
Other than the redemption price, any of the provisions of the Rights
Agreement may be amended by the Board of Directors of the Company as long as
the Rights are redeemable. Thereafter, the provisions of the Rights Agreement
other than the redemption price may be amended by the Board of Directors in
order to cure any ambiguity, defect or inconsistency, to make changes that do
not materially adversely affect the interests of holders of Rights (excluding
the interests of any Acquiring Person), or to shorten or lengthen any time
period under the Rights Agreement; provided, however, that no amendment to
lengthen the time period governing redemption shall be made at such time as the
Rights are not redeemable.
The Rights have certain antitakeover effects. They will cause substantial
dilution to any person or group that attempts to acquire the Company without
the approval of the Company's Board of Directors. As a result, the overall
effect of the Rights may be to render more difficult or discourage any attempt
to acquire the
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Company, even if such acquisition may be favorable to the interests of the
Company's stockholders. Because the Board of Directors of the Company can
redeem the Rights or approve a Permitted Offer, the Rights should not interfere
with a merger or other business combination approved by the Board. The Rights
were issued to protect the Company's stockholders from coercive or abusive
takeover tactics and inadequate takeover offers and to afford the Company's
Board of Directors more negotiating leverage in dealing with prospective
acquirors.
PLAN OF DISTRIBUTION
The Company may sell the Securities in and/or outside the United States: (1)
through underwriters or dealers; (2) directly to a limited number of purchasers
or to a single purchaser; or (3) through agents. The Prospectus Supplement with
respect to the Securities offered will set forth the terms of the offering,
including the name or names of any underwriters or agents, the purchase price
of the Securities offered and the proceeds to the Company from such sale, any
delayed delivery arrangements, any underwriting discounts and other items
constituting underwriters' compensation, any initial public offering price and
any discounts or concessions allowed or reallowed or paid to dealers. Any
initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
If underwriters are used in the sale, the Securities will be acquired by the
underwriters for their own account and may be resold from time to time in one
or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. The
Securities may be offered to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by one or more
firms acting as underwriters. The underwriter or underwriters with respect to a
particular underwritten offering of Securities to be named in the Prospectus
Supplement relating to such offering and, if an underwriting syndicate is used,
the managing underwriter or underwriters will be set forth on the cover of such
Prospectus Supplement. Unless otherwise set forth in the Prospectus Supplement
relating thereto, the obligations of the underwriters to purchase the
Securities offered will be subject to conditions precedent and the underwriters
will be obligated to purchase all the Securities offered if any are purchased.
If dealers are utilized in the sale of Securities in respect of which this
Prospectus is delivered, the Company will sell such Securities to the dealers
as principals. The dealers may then resell such Securities to the public at
varying prices to be determined by such dealers at the time of resale. The
names of the dealers and the terms of the transaction will be set forth in the
Prospectus Supplement relating thereto.
The Securities may be sold directly by the Company or through agents
designated by the Company from time to time. Any agent involved in the offer or
sale of the Securities in respect to which this Prospectus is delivered will be
named, and any commissions payable by the Company to such agent will be set
forth, in the Prospectus Supplement relating thereto. Unless otherwise
indicated in the Prospectus Supplement, any such agent will be acting on a best
efforts basis for the period of its appointment.
The Securities may be sold directly by the Company to institutional
investors or others, who may be deemed to be underwriters within the meaning of
the Securities Act with respect to any resale thereof. The terms of any such
sales will be described in the Prospectus Supplement relating thereto.
If so indicated in the Prospectus Supplement, the Company will authorize
agents, underwriters or dealers to solicit offers from certain types of
institutions to purchase Securities from the Company at the public offering
price set forth in the Prospectus Supplement pursuant to delayed delivery
contracts providing for payment and delivery on a specified date in the future.
Such contracts will be subject only to those conditions set forth in the
Prospectus Supplement, and the Prospectus Supplement will set forth the
commission payable for solicitation of such contracts.
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Agents, dealers and underwriters may be entitled under agreements entered
into with the Company to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act, or to contribution
with respect to payments which such agents, dealers or underwriters may be
required to make in respect thereof. Agents, dealers and underwriters may be
customers of, engage in transactions with, or perform services for the Company
in the ordinary course of business.
The Securities may or may not be listed on a national securities exchange.
No assurances can be given that there will be a market for the Securities.
LEGAL MATTERS
Certain legal matters in connection with the securities offered hereby will
be passed upon for the Company by Baker & Botts, L.L.P., counsel to the
Company, located at 910 Louisiana, Houston, Texas 77002.
EXPERTS
The Pennzoil Products Group combined financial statements incorporated by
reference in this Prospectus and elsewhere in the Registration Statement to the
extent and for the periods indicated in their report have been audited by
Arthur Andersen LLP, independent public accountants, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said report.
The consolidated financial statements and financial statement schedule of
Quaker State Corporation and its subsidiaries as of December 31, 1997 and 1996,
and for each of the three years in the period ended December 31, 1997,
incorporated by reference in this Registration Statement, have been
incorporated by reference herein in reliance on the report of
PricewaterhouseCoopers LLP, independent public accountants, given on the
authority of that firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
The Company files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). You may read and copy
any document filed by the Company at the Commission's public reference rooms
located at 450 Fifth Street, N.W., Judiciary Plaza, Room 1024, Washington, D.C.
20549; at regional offices of the Commission at the Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and at 7
World Trade Center, New York, New York 10048. The Company's filings are also
available to the public from the Commission's Internet web site at
http://www.sec.gov. Information concerning the Company also may be inspected at
the New York Stock Exchange offices located at 20 Broad Street, New York, New
York 10005.
We have filed with the Commission a Registration Statement (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Securities. This Prospectus does not
contain all of the information in the Registration Statement. For further
information with respect to the Company and the Securities, you should read the
Registration Statement and the exhibits attached to the Registration Statement.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Commission allows the Company to "incorporate by reference" the
information it files with them, which means that the Company can disclose
important information to you by referring you to those documents that are
considered part of this Prospectus. Later information the Company files with
the Commission will automatically update and supersede this information. The
Company incorporates by reference the following documents filed with the
Commission (File No. 1-14501):
(1) The Company's Form 10, as amended, declared effective by the
Commission on December 2, 1998;
(2) The Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998;
(3) The description of rights to purchase preferred stock contained in
the Company's Registration Statement on Form 8-A filed with the Commission
on December 18, 1998; and
(4) The Company's Current Reports on Form 8-K filed with the Commission
on December 18, 1998, December 29, 1998, and January 13, 1999, as amended
on January 20, 1999.
Any future filings we make with the Commission under Section 13(a), 13(c),
14 or 15(d) of the Exchange Act are incorporated by reference in this
Prospectus until we complete any offering of the securities.
We will provide, without charge, to each person to whom a copy of this
Prospectus has been delivered, a copy of any of the documents referred to above
as being incorporated by reference. You may request a copy by writing or
telephoning Ms. Linda F. Condit, Corporate Secretary, Pennzoil Place, P.O. Box
2967, Houston, Texas 77252-2967 (telephone 713/546-4000).
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$150,000,000
[PENNZOIL-QUAKER STATE LOGO]
% Notes due 2002
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PROSPECTUS SUPPLEMENT
, 2000
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Salomon Smith Barney
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