<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
<TABLE>
<S> <C>
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
PENNZOIL-QUAKER STATE COMPANY
-----------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
----------------------------------------------------------
(2) Aggregate number of securities to which transaction
applies:
----------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
----------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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</TABLE>
<PAGE>
[LOGO]
------------------------
ANNUAL MEETING OF SHAREHOLDERS
MAY 4, 2000
------------------------
DEAR SHAREHOLDER: March 29, 2000
You are cordially invited to attend the second annual meeting of
shareholders of Pennzoil-Quaker State Company to be held at the Alley Theatre,
615 Texas Avenue, Houston, Texas on Thursday, May 4, 2000 at 10:00 a.m. The
Alley Theatre is accessible to the disabled.
This booklet includes the Notice of Annual Meeting and Proxy Statement,
which contains information about the business to be conducted at the meeting.
It is important that your shares be represented at the meeting. Whether or
not you are able to attend in person, please vote as soon as possible.
Accordingly, please complete and mail promptly the enclosed proxy card, vote
your shares by calling a toll-free telephone number or vote over the Internet.
Please review the instructions on the proxy card regarding each of these voting
options.
On behalf of the Board of Directors, thank you for your continued support
and interest in Pennzoil-Quaker State Company.
<TABLE>
<CAPTION>
<S> <C>
[LOGO] [LOGO]
James J. Postl James L. Pate
PRESIDENT AND CHAIRMAN OF THE BOARD
CHIEF OPERATING OFFICER AND CHIEF EXECUTIVE OFFICER
</TABLE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS.................... 1
PROXY STATEMENT............................................. 2
I. Election of Directors.................................. 3
Nominees.............................................. 3
Directors with Terms Expiring in 2001 and 2002........ 4
Board Organization and Meetings....................... 6
Director Remuneration................................. 6
Certain Transactions.................................. 6
Security Ownership of Directors and Officers.......... 7
Compliance with Section 16(a) of the Exchange Act..... 7
Executive Compensation.................................... 7
Compensation Committee Interlocks and Insider
Participation........................................... 13
Report of Compensation Committee on Executive
Compensation............................................ 13
Performance Graph......................................... 15
II. Approval of Appointment of Independent Public
Accountants................................................. 16
III. Other Business........................................ 16
Additional Information...................................... 16
Security Ownership of Certain Shareholders................ 16
Shareholder Proposals for 2001 Meeting.................... 17
Advance Written Notice Required for Shareholder
Nominations and Proposals............................... 17
</TABLE>
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 4, 2000
TO THE SHAREHOLDERS OF March 29, 2000
PENNZOIL-QUAKER STATE COMPANY:
The annual meeting of shareholders of Pennzoil-Quaker State Company will be
held at the Alley Theatre, 615 Texas Avenue, Houston, Texas, on Thursday,
May 4, 2000 at 10:00 a.m., Houston time, for the following purposes:
1. To elect four directors.
2. To approve the appointment of Arthur Andersen LLP as independent public
accountants for 2000.
3. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on March 10, 2000 as
the record date for determining shareholders entitled to notice of and to vote
at the meeting. A list of shareholders entitled to vote at the meeting will be
available for inspection by any shareholder for any purpose germane to the
meeting during the meeting and during regular business hours beginning ten days
before the date of the meeting at the office of the Corporate Secretary of the
Company at the address below.
You are cordially invited to attend the meeting in person. Even if you plan
to attend the meeting, please sign, date and return the enclosed proxy, vote by
calling the toll-free telephone number printed on the proxy card or vote on the
Internet site shown on the proxy card.
By Order of the Board of Directors
Linda F. Condit
VICE PRESIDENT AND
CORPORATE SECRETARY
P. O. Box 2967
Houston, Texas 77252-2967
700 Milam
Houston, Texas 77002-2805
1
<PAGE>
[LOGO]
P. O. Box 2967 - Houston, Texas 77252-2967
713/546-4000
PROXY STATEMENT
This Proxy Statement and the accompanying proxy card are being mailed to
shareholders beginning on or about March 29, 2000. They are furnished in
connection with the solicitation by the Board of Directors of Pennzoil-Quaker
State Company (the "Company") of proxies from the holders of the Company's
common stock ("Common Stock") for use at the annual meeting of shareholders to
be held at the time and place and for the purposes set forth in the accompanying
notice. In addition to the solicitation of proxies by mail, proxies may be
solicited by telephone, telegram or personal interview by regular employees of
the Company. The Company has retained Morrow & Co., Inc. to solicit proxies at a
fee estimated not to exceed $6,000 plus reasonable expenses. The Company will
pay all costs of soliciting proxies. The Company will also reimburse brokers or
other persons holding stock in their names or in the names of their nominees for
their reasonable expenses in forwarding proxy materials to beneficial owners of
such stock.
All duly executed proxies received prior to or at the meeting will be voted
in accordance with the choices specified thereon. As to any matter for which no
choice has been specified in a duly executed proxy, the shares represented
thereby will be voted FOR the election as directors of the nominees listed
herein, FOR approval of the appointment of Arthur Andersen LLP as the Company's
independent public accountants and in the discretion of the persons named in the
proxy in connection with any other business that may properly come before the
annual meeting. A shareholder giving a proxy may revoke it at any time before it
is voted at the annual meeting by filing with the Corporate Secretary an
instrument revoking the proxy, by delivering a duly executed proxy bearing a
later date (including a telephone or Internet vote) or by appearing at the
annual meeting and voting in person.
As of March 10, 2000, the record date for determining shareholders entitled
to vote at the annual meeting, the Company had outstanding and entitled to vote
77,905,268 shares of Common Stock. Each share entitles the holder to one vote on
each matter submitted to a vote of shareholders. The requirement for a quorum at
the annual meeting is the presence in person or by proxy of holders of a
majority of the outstanding shares of Common Stock. Information regarding the
vote required for approval of other particular matters is set forth in the
discussion of those matters appearing elsewhere in this Proxy Statement.
The Annual Report to Shareholders, which includes financial statements of
the Company for the year ended December 31, 1999, has been mailed to all
shareholders. The Annual Report is not a part of the proxy solicitation
materials.
2
<PAGE>
I. ELECTION OF DIRECTORS
Four directors are to be elected at the annual meeting of shareholders.
Messrs. Howard H. Baker, Jr., James L. Pate, Gerald B. Smith, and Lorne R.
Waxlax will be nominated, and the persons named in the proxy will vote in favor
of such nominees unless authority to vote in the election of directors, or for
particular directors, is withheld. All four nominees are currently directors of
the Company. The term of office for all directors to be elected will be a
three-year term expiring on the date of the annual meeting in 2003 (or until
their respective successors are duly elected and qualified).
The persons named in the proxy may act with discretionary authority if any
nominee should become unavailable for election. In accordance with the Company's
By-laws, the four directors will be elected by a plurality of the votes cast.
NOMINEES -- The following summaries set forth information concerning the
four nominees for election as directors at the meeting, including each nominee's
age, position with the Company, if any, and business experience during the past
five years.
<TABLE>
<CAPTION>
NAME, AGE AND BUSINESS EXPERIENCE
---------------------------------
<S> <C>
HOWARD H. BAKER, JR. has been a partner with the law firm of
[PHOTO] Baker, Donelson, Bearman & Caldwell since 1988. From 1987 to
1988, he was Chief of Staff to the President of the United
States. Mr. Baker also served three terms as a member of the
United States Senate and was Senate Majority Leader from
1981 to 1985 and Minority Leader from 1977 to 1981. He has
served as a director of the Company since December 1998 and
is a member of the Executive Committee of the Board.
Mr. Baker is a regent of the Smithsonian Institution. He is
74 years of age and lives in Huntsville, Tennessee.
JAMES L. PATE was named Chairman of the Board and Chief
[PHOTO] Executive Officer of the Company in December 1998. He served
as Chairman of the Board of Pennzoil Company (renamed
PennzEnergy Company) from 1994 to 1999, was Chief Execu-
tive Officer from 1990 to 1998 and was President from 1990
until 1997. Mr. Pate has served as a director of the
Company since December 1998 and is Chairman of the Executive
Committee of the Board. Mr. Pate is also Chairman of the
Board of Devon Energy Corporation and a director of Bowater
Incorporated and Crown Cork & Seal Company, Inc. He is 64
years of age and lives in Houston.
GERALD B. SMITH has been Chairman and Chief Executive
[PHOTO] Officer of Smith, Graham & Co. Asset Managers L.P., a fixed
income investment management firm, for more than the past
five years. He has served as a director of the Company since
December 1998 and is a member of the Executive Committee of
the Board. He is a member of the management board of Rorento
N.V. and a member of the Audit Committee of Northern Borders
Partners, L.P. He is 49 years of age and lives in Houston.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE AND BUSINESS EXPERIENCE
---------------------------------
<S> <C>
LORNE R. WAXLAX served as Executive Vice President of the
[PHOTO] Gillette Company until his retirement in 1993. He has served
as a director of the Company since December 1998 and is
Chairman of the Audit Committee of the Board. Mr. Waxlax is
also a director of BJ's Wholesale Club, Inc., Clean
Harbors, Inc., HomeBase, Inc., and Hon Industries, Inc. He
is 66 years of age and lives in Vero Beach, Florida.
</TABLE>
DIRECTORS WITH TERMS EXPIRING IN 2001 AND 2002 -- The following summaries
set forth information concerning the eight directors of the Company whose
present terms of office will continue until 2001 or 2002, including each
director's age, position with the Company, if any, and business experience
during the past five years.
<TABLE>
<CAPTION>
NAME, AGE AND BUSINESS EXPERIENCE
---------------------------------
<S> <C>
W. L. LYONS BROWN, JR. served as Chairman of the Board of
[PHOTO] Brown-Forman Corporation, a producer and marketer of
diversified consumer products, until his retirement in 1995.
He was also Chief Executive Officer of Brown-Forman Corpo-
ration from 1975 until 1993. He has served as a director of
the Company since December 1998 and is a member of the Audit
Committee of the Board. Mr. Brown is also a director of
Westvaco Corporation and an advisory director of Bessemer
Holdings, L.P. He is 63 years of age and lives in Prospect,
Kentucky. Mr. Brown's current term as a director of the
Company expires in 2001.
ERNEST H. COCKRELL has been engaged for more than the past
[PHOTO] five years in oil and gas exploration and production. He has
served as a director of the Company since December 1998 and
is Chairman of the Compensation Committee and a member of
the Audit Committee of the Board. Mr. Cockrell is also a
director of Denali Incorporated, Southwest Bancorporation of
Texas, Inc. and Southwest Bank of Texas, N.A. He is 54 years
of age and lives in Houston. Mr. Cockrell's current term as
a director of the Company expires in 2001.
ALFONSO FANJUL has been Chairman of the Board and Chief
[PHOTO] Executive Officer of Florida Crystals Corporation (sugar)
for more than the past five years. He is also Chairman of
the Board, President and Chief Executive Officer of Central
Romana Corporation, Ltd. (sugar, cattle, real estate and
resorts). He has served as a director of the Company since
December 1998 and is on the Compensation Committee of the
Board. He is 62 years of age and lives in Palm Beach,
Florida. His current term as a director of the Company
expires in 2002.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE AND BUSINESS EXPERIENCE
---------------------------------
<S> <C>
FORREST R. HASELTON served as President -- Retail of the
[PHOTO] Sears Merchandise Group, a division of Sears Roebuck and
Company, until his retirement in 1993. He has served as a
director of the Company since December 1998 and is on the
Compensation Committee of the Board. Mr. Haselton is 61
years of age and lives in Vero Beach, Florida. His current
term as a director of the Company expires in 2002.
BERDON LAWRENCE was named Chairman of the Board of Kirby
[PHOTO] Corporation, an operator of tank barges and tow boats, in
October 1999. Prior to that time, he was President of
Hollywood Marine, Inc. for more than the past five years. He
has served as a director of the Company since December 1998
and is on the Executive Committee of the Board.
Mr. Lawrence is 57 years of age and lives in Houston. His
current term as a director of the Company expires in 2002.
JAMES J. POSTL was named President and Chief Operating
[PHOTO] Officer of the Company in December 1998. He served as
President of Pennzoil Products Company from October 1998 to
December 1998, President of Nabisco Biscuit Company from
1995 to early 1998 and President of Nabisco International
from 1994 to 1995. Prior to that time, he held various
management positions with PepsiCo, Inc. and Procter & Gamble
Company. Mr. Postl has served as a director of the Company
since December 1998 and is a member of the Executive
Committee of the Board. He is 54 years of age and lives in
Houston. His current term as a director of the Company
expires in 2001.
TERRY L. SAVAGE is the founder and has been president of
[PHOTO] Terry Savage Productions, Ltd. and a syndicated columnist,
speaker and author on personal finance for more than the
past five years. She has served as a director of the Company
since March 2000. Ms. Savage is also a director of
McDonald's Corporation. She is 55 years of age and lives in
Chicago, Illinois. Her current term as a director of the
Company expires in 2001.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE AND BUSINESS EXPERIENCE
---------------------------------
<S> <C>
BRENT SCOWCROFT is President of the Scowcroft Group, Inc., a
[PHOTO] firm consulting on national and international security
affairs. From 1989 to 1993, he was Assistant to the
President of the United States for National Security
Affairs. He has served as a director of the Company since
1999. Mr. Scowcroft is also a director of Devon Energy
Corporation and QUALCOMM Incorporated. He is 75 years of age
and lives in Bethesda, Maryland. Mr. Scowcroft's current
term as a director of the Company expires in 2002.
</TABLE>
BOARD ORGANIZATION AND MEETINGS -- The members of the Audit Committee and
the Compensation Committee of the Board of Directors, all of whom are identified
in the above summaries, are not employees of the Company. The Audit Committee
recommends the appointment of independent public accountants to conduct audits
of the Company's financial statements, reviews with the independent accountants
the plan and results of the auditing engagement, approves other professional
services provided by the independent accountants and evaluates the independence
of the accountants. The Audit Committee also reviews the scope and results of
procedures for internal auditing of the Company and the adequacy of the
Company's system of internal accounting controls. The Compensation Committee
approves, or in some cases recommends to the Board, remuneration arrangements
and compensation plans involving the Company's directors, executive officers and
certain other employees whose compensation exceeds specified levels. The
Compensation Committee also acts on the granting of stock options and
conditional stock units under the Company's stock option plans and conditional
stock award programs. The Board does not have a standing nominating committee.
During 1999, the Board of Directors held six meetings. During 1999, the
Audit Committee met two times, and the Compensation Committee met six times.
During 1999, all members of the Board of Directors attended at least 75% of the
total of all Board meetings and applicable committee meetings.
DIRECTOR REMUNERATION -- Each director, other than a regularly employed
officer of the Company, receives a director's fee of $30,000 per annum for
service on the Board of Directors and a committee fee of $2,000 per committee
per annum for service on the Audit, Executive and Compensation Committees. Each
such director also receives an additional fee of $1,000 for each Board,
Executive Committee or other committee meeting attended. All directors are
reimbursed for their travel and other expenses involved in attendance at Board
and committee meetings.
CERTAIN TRANSACTIONS -- Mr. Baker is a partner in the law firm of Baker,
Donelson, Bearman & Caldwell, which provides legal services to the Company from
time to time in connection with certain matters.
6
<PAGE>
SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS -- The following table sets
forth the shares of Common Stock of the Company beneficially owned directly or
indirectly as of March 10, 2000 (i) by the Company's nominees for director,
other directors, chief executive officer and five other most highly compensated
executive officers and (ii) by all the foregoing and other current executive
officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
OWNERSHIP (1)
-------------------- PERCENTAGE
NAME DIRECT OTHER OF CLASS
---- --------- -------- ----------
<S> <C> <C> <C>
Howard H. Baker, Jr......................................... 5,000 -- *
Clyde W. Beahm.............................................. 85,906 -- *
W. L. Lyons Brown, Jr....................................... 6,500 3,321 *
Ernest H. Cockrell.......................................... 409,066 10,000 *
Alfonso Fanjul.............................................. 200 30,500 *
Forrest R. Haselton......................................... 6,796 -- *
Thomas P. Kellagher......................................... 19,733 -- *
Berdon Lawrence............................................. 15,000 -- *
James L. Pate............................................... 537,740 -- *
James J. Postl.............................................. 133,795 -- *
Terry L. Savage............................................. 2,000 -- *
Brent Scowcroft............................................. 3,500 -- *
James W. Shaddix............................................ 123,216 -- *
Gerald B. Smith............................................. 2,000 -- *
Lorne R. Waxlax............................................. 31,364 -- *
All the above and all other current executive officers
as a group (23 persons).................................... 1,495,067 43,821 2.0%
</TABLE>
- ------------
(1) Pursuant to regulations of the Securities and Exchange Commission (the
"SEC"), securities must be listed as beneficially owned by a person who
directly or indirectly holds or shares the power to vote or dispose of the
securities, whether or not the person has any economic interest in the
securities. In addition, a person is deemed a beneficial owner if he has the
right to acquire beneficial ownership within 60 days, including upon
exercise of a stock option or conversion of a convertible security. Shares
of Common Stock listed under the "Direct" column include those owned by the
individuals and members of their immediate families, or held by any of them
in family trusts. Securities owned by certain family members are included in
the foregoing table even where the possession or sharing of voting or
dispositive power is not acknowledged. The "Direct" column also includes
shares subject to stock options exercisable within 60 days (70,975 for
Mr. Beahm, 12,833 for Mr. Kellagher, 438,920 for Mr. Pate, 106,245 for
Mr. Postl, 92,923 for Mr. Shaddix, and 793,783 for all the above and all
other current executive officers as a group). Shares shown under the "Other"
column include ownership through corporations or subsidiaries of
corporations in which the named individual is controlling shareholder or
charitable foundations in which the named individual is an officer, director
or trustee.
* Less than 1%.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT -- Section 16(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires the
Company's directors, executive officers and beneficial owners of 10% or more of
the Common Stock to file with the SEC and the New York Stock Exchange initial
reports of ownership and reports of changes in ownership of Common Stock. Based
solely on a review of the copies of such reports furnished to the Company and
written representations that no other reports were required, the Company
believes that all such persons required to file during 1999 complied on a timely
basis with all applicable filing requirements under Section 16(a) of the
Exchange Act.
EXECUTIVE COMPENSATION -- Set forth below is information regarding the
compensation of the Company's Chief Executive Officer (the "CEO") and the other
five most highly compensated executive officers of the Company (together with
the CEO, the "named officers"). Until December 30, 1998, the named officers were
all officers of Pennzoil Company, the Company's former parent company, except
for
7
<PAGE>
Mr. Postl and Mr. Kellagher. All compensation for 1997 and 1998 set forth below
was paid by Pennzoil Company.
SUMMARY COMPENSATION TABLE. The summary compensation table set forth below
contains information regarding the compensation of each of the named officers
for services rendered in all capacities during 1997, 1998 and 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------ ----------------------- --------
SECURITIES
OTHER UNDERLYING ALL
ANNUAL RESTRICTED OPTIONS/ OTHER
COMPEN- STOCK SARS COMPEN-
NAME AND BONUS SATION AWARDS (SHARES) LTIP SATION
PRINCIPAL POSITION YEAR SALARY (1) (2) (3) (4) PAYOUTS (5)
- ------------------ -------- -------- -------- -------- ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James L. Pate 1999 $846,600 $720,050 $194,100 $424,500 147,700 $ 0 $ 72,100
Chairman of the Board and 1998 807,200 0 157,700 409,200 26,500 0 130,600
Chief Executive Officer 1997 761,200 757,300 183,000 358,800 30,000 368,100 98,900
David P. Alderson II (6) 1999 $294,800 $217,200 $ 84,300 $ 95,400 31,600 $ 0 $1,371,200
1998 300,700 0 83,100 80,800 5,200 0 45,200
1997 284,600 315,600 61,200 62,200 5,200 78,000 31,000
Clyde W. Beahm 1999 $322,000 $181,900 $ 67,300 $ 87,300 27,600 $ 0 $ 23,300
Executive Vice
President- 1998 283,200 0 66,100 66,800 4,500 0 34,400
Lubricants and Consumer 1997 263,800 172,900 61,200 56,500 4,300 72,900 24,600
Products
Thomas P. Kellagher 1999 $223,800 $125,900 $ 24,900 $ 51,900 38,500 $ 0 $ 1,300
Group Vice President and 1998 -- -- -- -- -- -- --
Chief Financial Officer 1997 -- -- -- -- -- -- --
James J. Postl 1999 $509,400 $431,000 $ 99,700 $236,300 318,700 $ 0 $ 2,900
President and Chief 1998 96,200 296,800 0 0 0 0 700
Operating Officer 1997 -- -- -- -- -- -- --
James W. Shaddix 1999 $327,200 $227,200 $ 84,300 $ 95,400 31,600 0 $ 26,100
General Counsel 1998 300,700 0 95,900 80,800 5,200 0 45,300
1997 284,600 315,600 61,200 62,200 5,200 78,000 31,100
</TABLE>
- ------------
(1) The 1999 bonuses paid to corporate officers were a direct result of economic
profit and synergies achieved as a result of the business combination with
Quaker State Corporation. A portion of the bonus shown for 1999 was paid in
shares of Common Stock as follows: 33,735 shares for Mr. Pate, 5,850 shares
for Mr. Beahm, 3,884 shares for Mr. Kellagher, 17,315 shares for Mr. Postl
and 6,644 shares for Mr. Shaddix.
(2) Amounts shown for 1999 include aircraft usage charges of $105,900 for
Mr. Pate and $40,300 for Mr. Postl; a perquisite allowance of $59,400 for
Messrs. Pate, Alderson, Postl and Shaddix and $42,400 for Mr. Beahm; and
excess medical coverage of $24,900 for Messrs. Pate, Alderson, Beahm,
Kellagher and Shaddix. Amounts shown for 1998 include aircraft usage costs
of $69,800 for Mr. Pate; a perquisite allowance of $59,400 for
Messrs. Pate, Alderson and Shaddix and $42,400 for Mr. Beahm; and excess
medical coverage of $23,700 for Messrs. Pate, Alderson, Beahm and Shaddix.
Amounts shown for 1997 include aircraft usage costs of $98,900 for
Mr. Pate; a perquisite allowance of $59,400 for Mr. Pate and $42,400 for
Messrs. Alderson, Beahm and Shaddix; and excess medical coverage of $18,800
for Messrs. Pate, Alderson, Beahm and Shaddix.
(3) Amounts shown under Restricted Stock Awards are the aggregate market values
on January 1 of the year indicated of shares of Common Stock underlying
common stock units awarded on such date under the Company's Conditional
Stock Award Programs. Each common stock unit awarded in 1997 and 1998 became
a common stock unit award of the Company and vested as a result of
(FOOTNOTES ON FOLLOWING PAGE)
8
<PAGE>
the separation from Pennzoil Company and will be distributed in the form of
a share of Common Stock at the end of the original five-year vesting period.
Each common stock unit awarded in 1999 will be distributed in the form of a
share of Common Stock at the end of a five-year period, provided certain
conditions as to continued employment are met. In the interim, participants
receive dividend equivalents on their common stock units as though they were
shares of Common Stock. The aggregate common stock units held at the end of
1999 and their values were 28,780 units, $293,200 for Mr. Pate; 6,470 units,
$65,900 for Mr. Alderson; 5,920 units, $60,300 for Mr. Beahm; 3,520 units,
$35,900 for Mr. Kellagher; 16,020 units, $163,200 for Mr. Postl; and 6,470
units, $65,900 for Mr. Shaddix. Such values are calculated by multiplying
the closing stock price of the common stock on December 31, 1999 ($10.1875)
by the number of common stock units held at such date.
(4) All options were granted in tandem with stock appreciation rights, but there
is currently in effect a moratorium on the exercise of any such stock
appreciation rights.
(5) Amounts shown under All Other Compensation include (i) amounts contributed
or accrued for 1999 under the Company's Savings and Investment Plan and
related supplemental agreements ($67,200 for Mr. Pate, $23,100 for
Mr. Alderson, $21,400 for Mr. Beahm, and $24,200 for Mr. Shaddix) and
(ii) amounts paid by the Company in 1999 for certain premiums on term life
insurance ($4,900 for Mr. Pate, $1,700 for Mr. Alderson, $1,900 for
Mr. Beahm, $1,300 for Mr. Kellagher, $2,900 for Mr. Postl and $1,900 for
Mr. Shaddix.) Mr. Alderson also received $1,009,800 as severance and
$336,600 as part of a separation agreement to provide consulting services.
(6) Mr. Alderson was Group Vice President and Chief Financial Officer of the
Company until November 1999.
OPTION/SAR GRANTS. Shown below is further information on grants of stock
options during 1999 to the named officers reflected in the Summary Compensation
Table on pages 8-9.
OPTION/SAR GRANTS IN 1999
<TABLE>
<CAPTION>
GRANT DATE
INDIVIDUAL GRANTS VALUE
----------------------------------------------------- ----------
NUMBER OF
SECURITIES PERCENT OF
UNDERLYING TOTAL
OPTIONS/SARS OPTIONS/SARS
GRANTED IN GRANTED TO EXERCISE GRANT DATE
1999 EMPLOYEES PRICE (PER EXPIRATION PRESENT
(SHARES)(1) IN 1999 SHARE)(2) DATE VALUE (3)
------------ ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
James L. Pate....................... 147,660 4.0% $ 15.625 1/4/2009 $ 772,200
David P. Alderson, II............... 31,600 0.9% $ 15.625 1/4/2009 $ 165,300
Clyde W. Beahm...................... 27,630 0.8% $ 15.625 1/4/2009 $ 144,500
Thomas P. Kellagher................. 38,500 1.0% $ 15.625 1/4/2009 $ 201,300
James J. Postl...................... 318,735 8.7% $ 15.625 1/4/2009 $1,666,900
James W. Shaddix.................... 31,600 0.9% $ 15.625 1/4/2009 $ 165,300
</TABLE>
- ------------
(1) The named officers were granted the above number of options to acquire
Common Stock of the Company on January 4, 1999. All such options were
granted in tandem with stock appreciation rights, but there is currently in
effect a moratorium on the exercise of any such stock appreciation rights.
(2) The option exercise price was determined by calculating a three-day average
price on January 4, 5, and 6, 1999 of the mean of the high and low trading
prices of the Common Stock on the New York Stock Exchange and may be paid in
cash or previously owned shares of Common Stock.
(3) Based on the Black-Scholes option pricing model adapted for use in valuing
executive stock options. The actual value, if any, that may be realized will
depend on the excess of the underlying stock price over the exercise price
on the date the option is exercised, so that there is no assurance that the
value realized will be at or near the value estimated by the Black-Scholes
model. The estimated values under the model are based on the following
assumptions: expected volatility based on a three-year historical volatility
of Pennzoil Company month-end Common Stock prices (28.9%), a risk-free rate
of return based on a 10-year zero-coupon U.S. Treasury rate at the time of
grant (6.25%), the prior dividend rate on the Pennzoil Company Common Stock
($1 per year), an option exercise period of 10 years (with the exercise
occurring at the end of such period) and no adjustment for the risk of
forfeiture over the three-year vesting period.
9
<PAGE>
OPTION EXERCISES AND 1999 YEAR-END OPTION/SAR HOLDINGS. Shown below is
information with respect to unexercised options to purchase Common Stock granted
in 1999 and prior years to the named officers and held by them at December 31,
1999. None of the named officers exercised options or tandem stock appreciation
rights in 1999.
YEAR-END 1999 OPTION/SAR HOLDINGS
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS HELD AT "IN-THE-MONEY" OPTIONS AT
DECEMBER 31, 1999 DECEMBER 31, 1999 (1)
--------------------------------- -------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE (2)
----------- ------------- ----------- -----------------
<S> <C> <C> <C> <C>
James L. Pate............................ 389,700 147,660 0 0
David P. Alderson, II.................... 112,400 0 0 0
Clyde W. Beahm........................... 61,765 27,630 0 0
Thomas P. Kellagher...................... 0 38,500 0 0
James J. Postl........................... 0 318,735 0 0
James W. Shaddix......................... 82,390 31,600 0 0
</TABLE>
- ------------
(1) The excess, if any, of the market value of Common Stock at December 31, 1999
($10.1875) over the option exercise price.
(2) All of these options become immediately exercisable upon a change in control
of the Company.
LONG-TERM INCENTIVE AWARDS. Shown below is information with respect to
awards in 1999 under the Company's long-term incentive arrangements.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE OR ESTIMATED FUTURE PAYOUTS UNDER
OTHER PERIOD NONSTOCK PRICE-BASED PLANS (1)
UNTIL MATURATION ---------------------------------
OR PAYOUT THRESHOLD TARGET MAXIMUM
---------------- --------- -------- ----------
<S> <C> <C> <C> <C>
James L. Pate.............................. 1 year $ 68,600 $268,700 $ 806,200
2 years 137,200 537,500 1,612,500
3 years 205,800 806,200 2,418,700
Clyde W. Beahm............................. 1 year 14,100 54,200 162,500
2 years 28,200 108,300 325,000
3 years 42,300 162,500 487,500
Thomas P. Kellagher........................ 1 year 9,200 35,800 107,500
2 years 18,300 71,700 215,000
3 years 27,500 107,500 322,500
James J. Postl............................. 1 year 36,700 146,700 440,000
2 years 73,300 293,300 880,000
3 years 110,000 440,000 1,320,000
James W. Shaddix........................... 1 year 15,700 60,600 181,800
2 years 31,400 121,200 363,500
3 years 47,100 181,800 545,300
</TABLE>
- ---------
(1) Payout of the 1999 long-term incentive awards will be determined by
comparing the Company's total shareholder return ("TSR") to a selected
group of 16 peer companies, designated at the time of grant. At the end of
the performance period, the Company and the peer companies will be ranked
based on their TSR. Maximum payout occurs if the Company is ranked third or
higher. Target payout is achieved if the Company is ranked eighth.
Threshold payout occurs if the Company is ranked thirteenth. The incentive
awards are targeted at the market 55th percentile. The Company must achieve
a minimum TSR of 6% per year (averaged over the performance cycle) before
any payments may be made. Awards, calculated as a percentage of base
salary, are paid (if earned) after the completion of the performance
cycles.
10
<PAGE>
RETIREMENT PLAN AND SUPPLEMENTAL AGREEMENTS. The Company has a
tax-qualified retirement plan applicable to salaried employees generally. The
retirement plan generally provides for annual retirement benefits approximating
between 1.1% and 1.6% of a calculated career average compensation multiplied by
the number of years of service. For purposes of the retirement plan, career
average compensation approximates the lesser of an employee's final five-year
average compensation and his 1997 annual compensation. The annual benefits under
the retirement plan are net of certain offsets based on social security benefits
and reflect limitations mandated by the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), on the maximum amounts payable. The Company has
agreements with Messrs. Pate, Beahm, Kellagher, Postl and Shaddix to supplement
their benefits under the tax-qualified retirement plan if and to the extent the
aforesaid limitations on annual benefits and compensation mandated by ERISA
reduce the retirement benefits otherwise payable under such plan. The Company
has agreements with each of Mr. Pate and Mr. Shaddix designed to bring his total
annual retirement benefits from all sources, including social security and other
benefits, to 57% of his annual salary at retirement. In addition, the agreements
provide for continuation of medical expense reimbursement plan coverage for the
participant, his spouse and dependents. Mr. Pate's benefits are currently vested
and will commence upon termination of employment. Mr. Shaddix's benefits will
commence upon termination of employment, except in the event of a termination
for cause. Mr. Shaddix's agreement also provides for a severance benefit in an
amount equal to three times his salary prior to any termination, reduced by any
benefits under the Company's other severance plans. Based on salaries as of
December 31, 1999, estimated annual benefits payable upon retirement at normal
retirement age (65) from all sources would be $488,900 for Mr. Pate, $74,500 for
Mr. Beahm, $82,900 for Mr. Kellagher, $104,600 for Mr. Postl and $202,800 for
Mr. Shaddix.
TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS. The Company
maintains an Executive Severance Plan for selected employees providing for
severance benefits upon a termination of employment for reasons other than cause
within two years after a change in control of the Company. Benefits are payable
only if each of the following events occur: (a) a change in control of the
Company, (b) a designation by the Board of Directors and the Compensation
Committee that the employee is likely to be adversely affected by the change in
control and (c) a subsequent termination of employment within two years for
reasons other than cause. Benefits are prorated if the employee is within three
years of normal retirement age (65) at termination of employment. Participants
in the plan include Messrs. Pate, Beahm, Kellagher, Postl and Shaddix. Such
severance benefits generally include a payment of up to three times a
participant's annual salary and incentive bonus and continuation of life
insurance and medical coverage for one year following termination of employment.
Many of the Company's executive compensation programs were established
before provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
imposed punitive taxes upon, in some cases, virtually all of the payments or
benefits that retiring or departing executive officers receive from the Company.
If the Company's executive compensation arrangements were settled upon a change
in control of the Company, such punitive excise taxes would be imposed in every
case. The Company has designed its programs with a view to providing these
payments and benefits taking into account prevailing tax rates. The imposition
of substantial unanticipated taxes upon the employees is inconsistent with that
planning.
To prevent benefits provided to the Company's executive officers under its
various compensation arrangements from being unfairly reduced by reason of
excise taxes imposed on such benefits under the Code, the Company has entered
into Tax Protection Agreements with all of its executive officers. Such Tax
Protection Agreements provide that, if there is a change in control of the
Company and if any payment or distribution to or for the benefit of an eligible
executive employee would be subject to the excise tax imposed by Section 4999 of
the Code or any interest or penalties are incurred by such employee with respect
to such excise tax, such employee will be entitled to receive an additional
payment that, taking into account all taxes imposed in the payment, would place
the employee in the same position with respect to taxes on the Company's
compensation or benefits had such excise taxes not been imposed.
11
<PAGE>
The Company also has agreements with Messrs. Pate, Beahm, Kellagher, Postl
and Shaddix that provide for the acceleration of benefits in the event of the
occurrence, as determined by the Board of Directors, of a change in control of
the Company that has a reasonable likelihood of causing the forfeiture of
benefits that such persons otherwise would have earned by depriving them of the
opportunity to fulfill applicable service and age prerequisites. The agreements
provide that the covered persons will receive, in the event of such a change in
control but without regard to any termination of employment, cash payments equal
to the appreciated value of all unvested, nonqualified stock options. The
agreements also provide, in the event of termination of employment of a covered
employee within six months following such a change in control, (a) for cash
payments generally equal to the unvested amounts under the Company's Savings and
Investment Plan (as well as the agreements providing for reimbursement of
benefits that would be payable under such Plan except for limitations imposed by
ERISA) forfeitable on the date of termination of employment, (b) for
continuation of life insurance and, in certain instances, medical expense
coverage for one year, (c) for cash payments equal to the discounted value of
benefits otherwise payable under the deferred compensation agreement referred to
above under "--Retirement Plan and Supplemental Agreements," based on an assumed
continuation of employment until age 65 and actuarially determined life
expectancies, (d) in certain instances, for cash payments in settlement of
long-term medical benefits otherwise payable and (e) for cash payments equal to
the discounted value of benefits otherwise payable under a supplemental
disability plan and a salary continuation plan. Other agreements provide for
certain executive officers that, upon any termination of employment (other than
termination for cause or voluntary termination prior to a change in control),
the executive officer will receive (i) in certain instances, continued executive
medical coverage to age 55 without any increase in cost, and thereafter retiree
medical coverage at no greater cost than currently applicable to retirees with
more than 20 years of service and (ii) supplemental retirement benefits payable
at age 55 equal to the benefit such executive officer would have earned had
current cash compensation continued to age 55. Deferred compensation agreements
and certain supplemental benefit agreements under which payments are currently
being made have been supplemented by the Company to provide, upon a change in
control of the Company, for the cash-out of retirement, spousal and medical
benefits. In addition, the Company's conditional stock award programs provide
for acceleration of benefits upon a change in control. The dollar amounts that
would be payable under the agreements and plan described in this and the
preceding paragraph and the other plans providing payments triggered by a change
in control, exclusive of amounts attributable to benefits already vested, would
be (as of December 31, 1999) $2,527,900 for Mr. Pate, $1,561,600 for Mr. Beahm,
$1,163,700 for Mr. Kellagher, $3,106,100 for Mr. Postl and $1,697,400 for
Mr. Shaddix. In addition, a change in control would result in the accelerated
payment of benefits already earned and vested over a period of years in the
amounts of $4,433,000 for Mr. Pate, $443,100 for Mr. Beahm, $25,600 for
Mr. Postl and $377,500 for Mr. Shaddix.
EMPLOYMENT AGREEMENT WITH MR. POSTL. The Company has entered into an
employment agreement with Mr. Postl that establishes his base salary and
provides for his participation in the Company's annual performance incentive
plan, tax-qualified retirement and savings plans and other executive benefit
programs and practices generally applicable to the Company's executives. The
employment agreement provides for certain benefits in the event of termination
of Mr. Postl's employment with the Company prior to the end of the employment
period.
On February 10, 2000 the Company extended a loan in the amount of $1.8
million to Mr. Postl to finance the purchase price of a new home in Houston and
related improvements and costs. The loan does not bear interest, is secured by a
mortgage lien on the new Houston residence, and is payable on the earlier of one
year or promptly after Mr. Postl completes the sale of his former principal
residence in New Jersey and his condominium residence in Houston. In addition,
if Mr. Postl terminates his employment with the Company while the loan is
outstanding, then the unpaid principal balance will bear interest from the
initial date of funding at a bank prime loan rate and the entire balance of
principal and accrued interest will become payable on 90 days' notice.
12
<PAGE>
OTHER MATTERS. In 1998, the Board of Directors formally adopted and
confirmed a policy relating to the use of Company facilities. In certain
circumstances, the policy requires use by officers of Company facilities in
order to increase the time available for performance of Company business and for
reasons of security and other corporate purposes. Under applicable federal
income tax regulations, the Company imputes income to employees of the Company
for federal income tax purposes with respect to their use of Company facilities
when and to the extent required by the regulations. When the policies and
procedures adopted by the Board have been duly observed, it is contemplated that
the Company will protect employees against liability for any tax, including
penalties and interest, asserted by the Internal Revenue Service in an amount
exceeding the tax on the amount of income imputed by the Company as described
above. To date, no amounts have been paid or requested to reimburse employees
for such a tax.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION -- The members
of the Compensation Committee of the Board are Messrs. Cockrell, Fanjul and
Haselton, all of whom are non-employee directors.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION --
1999 COMPENSATION PHILOSOPHY. The Company's executive compensation program
is designed to help the Company attract, motivate and retain the executive
talent that the Company needs in order to maximize its return to shareholders.
To this end, the Company's executive compensation program provides appropriate
compensation levels and incentive pay that varies based on corporate, business
unit and individual performance.
Base salary, annual incentives, long-term incentives and executive benefits
are the elements of compensation provided to the Company's executives. The
Compensation Committee's philosophy is to place more emphasis on variable
performance-based incentive pay and less emphasis on base salary because the
primary compensation program objective is to reward executives for maximizing
long-term returns to shareholders.
BASE SALARY PROGRAM. The Company's base salary program is based on a
philosophy of providing salaries that are equivalent with the market median for
companies of comparable size (as measured by revenues). In aggregate, the
Company's executive salaries are consistent with this philosophy. Base salary
levels are also based on each individual employee's performance over time and
each individual's role. Consequently, employees with higher levels of sustained
performance over time and/or employees assuming greater responsibilities are
paid correspondingly higher salaries. Executive salaries are reviewed annually
based on a variety of factors, including individual performance, company
performance, general levels of market salary increases and the Company's overall
financial results. Individual performance assessment is subjective; the
Compensation Committee considers earnings levels, progress in implementing
strategic initiatives and effectiveness in business development efforts in
establishing base salary increases for executives. No specific performance
formula or weighting of these or other factors is used in determining base
salary levels. In 1999, Mr. Pate's salary as CEO of the Company was increased
from $821,500 to $857,700 based on median to 75th percentile market salaries for
comparable companies and on the performance indicators described above as
determined by the Compensation Committee. Mr. Pate's base salary has been
established slightly above the market median due in part to his long service
with the Company.
ANNUAL INCENTIVE PLAN. The Company's annual incentive plan is intended to
(1) reward key employees based on company, business unit and individual
performance, (2) motivate key employees and (3) provide appropriate cash
compensation opportunities to plan participants. Under the plan, target award
opportunities, which are based at the market 55th percentile, vary by individual
position and are expressed as a percent of base salary. The amount that a
particular executive may earn is directly dependent on the individual's
position, responsibility and ability to impact the Company's financial success.
13
<PAGE>
The Company's annual incentive plan measures for 1999 were economic profit
and synergies to be achieved as a result of the business combination with Quaker
State Corporation. These same measures were also used at the business unit
level, although additional measurements such as sales, cost management,
environmental/safety, and operating cash flow were also used.
The 1999 bonuses paid to corporate officers were slightly above target since
the Company's performance on these goals was slightly above target. Mr. Pate
received an award of $720,050, one-third of which was in cash and two-thirds in
shares of Company stock. For the other executive officers, half of the award was
paid in cash and half in shares of Company stock.
LONG-TERM INCENTIVE PLANS. The Company has several types of long-term
incentive awards intended to achieve various objectives. Stock options are the
primary long-term incentive award to be used by the Company and are granted at
100% of fair market value at the date of grant. Stock options are intended to
award executives for appreciation in the market value of the Company's Common
Stock. Conditional stock grants are also used and are made to increase executive
share ownership levels and reward executives for maintaining and enhancing the
Company's total shareholder return. The Company also has in place a long-term
performance plan that rewards executives for the Company's total shareholder
return performance relative to a peer group of consumer products companies. The
total long-term incentive program (including the three devices cited above) is
targeted at the market 55th percentile.
Mr. Pate received stock options for 147,660 shares of Common Stock in
January 1999 and 28,780 shares of conditional stock in March 1999. Mr. Pate did
not earn a payment under the Company's long-term performance plan because
threshold performance was not achieved. The total value of the stock option and
conditional stock awards provided to Mr. Pate placed his total long-term
incentives below the market 50th percentile.
OTHER PLANS AND BENEFITS. The Company's executive officers participate in
several other compensation plans and benefit programs. These programs provide
benefits generally related to salary levels and length of service (as in the
case of retirement plan benefits, savings plan benefits, disability benefits and
death benefit coverage) or are independent of salary levels (such as the
perquisite allowances and medical coverage). There is no specific
performance-based relationship between benefits under these plans and corporate
performance (except that savings plan contributions are invested in Common
Stock).
SECTION 162(M). The Company's incentive plans provide for stock option
grants, annual incentive plan awards and long-term performance plan awards, each
of which can be qualified as performance-based compensation under
Section 162(m) of the Code. Whether one or more awards made under these
incentive plans are qualified as performance-based components is in the
discretion of the Company and the Compensation Committee. Currently, some of the
awards under the incentive plans are not qualified under Section 162(m), and the
Compensation Committee may determine to grant awards in the future that are not
so qualified.
This report is furnished by the Compensation Committee of the Board of
Directors.
<TABLE>
<S> <C> <C>
Ernest H. Cockrell, Chair
Alfonso Fanjul
March 9, 2000 Forrest R. Haselton
</TABLE>
14
<PAGE>
PERFORMANCE GRAPH -- The following performance graph compares the cumulative
total shareholder return on the Common Stock to the cumulative total return of
the Standard & Poor's Midcap 400 Stock Index and the Standard & Poor's Consumer
Staples Index for the last twelve months. The graph assumes that the value of
the investment in the Common Stock or in each index was $100 at December 31,
1998 and that all dividends were reinvested. The Common Stock of the Company
began trading "regular way" on the New York Stock Exchange on December 31, 1998.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PENNZOIL-QUAKER STATE COMPANY S&P MIDCAP 400 S&P CONSUMER STAPLES
<S> <C> <C> <C>
Dec-98 100 100 100
Jan-99 104.2373 96.0933 100.2663
Feb-99 85.556 91.04225 97.9688
Mar-99 85.12608 93.58606 97.32975
Apr-99 88.99548 100.9562 98.46257
May-99 96.70027 101.3524 97.0451
Jun-99 104.5408 106.7585 97.79963
Jul-99 103.2341 104.4686 96.44491
Aug-99 98.00113 100.8832 93.62765
Sep-99 89.1722 97.73475 86.82888
Oct-99 83.43344 102.7115 92.00041
Nov-99 74.59659 108.1169 93.72054
Dec-99 73.24848 114.5417 93.68821
Jan-00
Feb-00
</TABLE>
15
<PAGE>
II. APPROVAL OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon recommendation of its Audit Committee, has
approved and recommends the appointment of Arthur Andersen LLP as independent
public accountants to conduct an audit of the Company's financial statements for
the year 2000. This firm acted as independent public accountants to the Company
last year. Representatives of Arthur Andersen LLP will attend the annual
meeting, will be available to respond to questions by shareholders and will have
an opportunity to make a statement regarding the Company's financial statements
if they desire to do so.
The Board of Directors recommends that shareholders approve the appointment
of Arthur Andersen LLP as the Company's independent public accountants. In
accordance with the Company's By-laws, approval of the appointment of
independent public accountants will require the affirmative vote of a majority
of the shares of Common Stock voted at the meeting. Accordingly, abstentions and
broker non-votes applicable to shares present at the meeting will not be
included in the tabulation of votes cast on this matter.
III. OTHER BUSINESS
Management does not intend to bring any business before the meeting other
than the matters referred to in the accompanying notice. If, however, any other
matters properly come before the meeting, the persons named in the accompanying
proxy will vote pursuant to the discretionary authority granted in the proxy in
accordance with their best judgment on such matters. The discretionary authority
includes matters that the Board of Directors does not know are to be presented
at the meeting by others.
ADDITIONAL INFORMATION
SECURITY OWNERSHIP OF CERTAIN SHAREHOLDERS -- The following table sets forth
information as to persons known to possess voting or dispositive power over more
than 5% of the Company's outstanding Common Stock.
<TABLE>
<CAPTION>
TITLE OF NAME AND ADDRESS OF NUMBER OF PERCENTAGE
CLASS BENEFICIAL OWNER SHARES OF CLASS
-------- ------------------- --------- ----------
<S> <C> <C> <C>
Common Stock Capital Research and 10,062,200 12.9%
Management Company
333 South Hope Street
Los Angeles, California 90071
Common Stock Wellington Management Company, LLP 7,123,100 9.1%
75 State Street
Boston, Massachusetts 02109
Common Stock Lazard Freres & Co. LLC 3,971,815 5.1%
30 Rockefeller Plaza
New York, New York 10020
</TABLE>
The information in the foregoing table regarding Capital Research and
Management Company ("Capital Research") is based on a filing made with the SEC
reflecting ownership of Common Stock as of December 31, 1999. The filing states
that the shares of Common Stock were acquired in the ordinary course of business
and not for the purpose of influencing control of the Company. The filing
indicates sole dispositive power for 10,062,200 shares of Common Stock by
Capital Research.
The information in the foregoing table regarding Wellington Management
Company, LLP ("Wellington") is based on a filing made with the SEC reflecting
ownership of Common Stock as of December 31, 1999. The filing states that the
shares of Common Stock were acquired in the ordinary course of business and not
for the purpose of influence control of the Company. The filing indicates shared
voting power for
16
<PAGE>
4,345,200 shares of Common Stock and shared dispositive power for 7,123,100
shares of Common Stock for Wellington.
The information in the foregoing table regarding Lazard Freres & Co. LLC
("Lazard") is based on a filing made with the SEC reflecting ownership of Common
Stock as of December 31, 1999. The filing states the shares of Common Stock were
acquired in the ordinary course of business and not for the purpose of influence
control of the Company. The filing indicates sole voting power for 3,272,835
shares of Common Stock and sole dispositive power for 3,971,815 shares of Common
Stock for Lazard.
SHAREHOLDER PROPOSALS FOR 2001 MEETING -- In order to be included in the
Company's proxy materials for its 2001 annual meeting of shareholders, eligible
shareholder proposals must be received by the Company on or before December 1,
2000 (directed to the Corporate Secretary of the Company at the address
indicated on the first page of this Proxy Statement).
ADVANCE WRITTEN NOTICE REQUIRED FOR SHAREHOLDER NOMINATIONS AND
PROPOSALS -- The By-laws of the Company require timely advance written notice of
shareholder nominations of director candidates and of any other proposals to be
presented at an annual meeting of shareholders. In the case of director
nominations by shareholders, the By-laws require that not less than 90 days' nor
more than 120 days' advance written notice be delivered to the Company's
Corporate Secretary (at the address indicated on the first page of this Proxy
Statement). The advance written notice must set forth for each person whom the
shareholder proposes to nominate for election or re-election as a director
(a) the name, age, business address and residence address of such person,
(b) the principal occupation or employment of such person, (c) the number of
shares of each class of capital stock of the Company beneficially owned by such
person, (d) any other information relating to such person that would be required
to be disclosed in connection with the solicitation of proxies under the
Exchange Act and (e) the written consent of such person to having his or her
name placed in nomination at the meeting and to serve as a director if elected.
The shareholder giving the notice must also include the name and address, as
they appear on the Company's books, of such shareholder and the number of shares
of each class of voting stock of the Company that are then beneficially owned by
such shareholder.
In the case of other proposals by shareholders at an annual meeting, the
By-laws require that not less than 90 days' nor more than 120 days' advance
written notice be delivered to the Company's Corporate Secretary (at the address
indicated on the first page of this Proxy Statement) and set forth (a) a
description of each proposal intended to be brought before the annual meeting
and the reasons for conducting such business at the annual meeting, (b) the name
and address, as they appear on the Company's books, of the shareholder proposing
such business (c) the number of shares of each class of capital stock of the
Company that are beneficially owned by the shareholder on the date of such
notice and (d) any arrangement, understanding or material interest of the
shareholder in connection with such proposal.
In order for shareholder nominations of director candidates or other
shareholder proposals for the Company's 2001 annual meeting of shareholders to
be timely submitted, they must be received by the Company on or after
January 4, 2001 and on or before February 3, 2001. A copy of the By-laws of the
Company setting forth the requirements for the nomination by shareholders of
candidates for the Board of Directors and the requirements for proposals by
shareholders may be obtained from the Company's Corporate Secretary at the
address indicated on the first page of this Proxy Statement.
By Order of the Board of Directors
James L. Pate
CHAIRMAN OF THE BOARD
March 29, 2000
17
<PAGE>
PENNZOIL-QUAKER STATE
C O M P A N Y PROXY
Proxy Solicited on Behalf of the Board of Directors
Annual Meeting of Shareholders to be held Thursday, May 4, 2000
The undersigned hereby appoints Linda F. Condit, Thomas P. Kellagher and
Michael J. Maratea, jointly and severally, proxies with full power of
substitution and resubstitution and with discretionary authority, to
represent and to vote, in accordance with the instructions set forth herein,
all shares of Common Stock which the undersigned is entitled to vote at the
2000 annual meeting of shareholders of Pennzoil-Quaker State Company, and any
adjournment or postponement thereof.
THIS PROXY WILL BE VOTED AS SPECIFIED BY THE UNDERSIGNED. IF NO CHOICE IS
SPECIFIED, THIS PROXY WILL BE VOTED FOR THE DIRECTOR NOMINEES LISTED ON THE
REVERSE (ITEM 1), FOR APPROVAL OF AUDITORS (ITEM 2), AND ACCORDING TO THE
DISCRETION OF THE PROXY HOLDERS ON ANY OTHER MATTERS THAT MAY PROPERLY COME
BEFORE THE MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
Please mark this proxy as indicated on the reverse side to vote on any item.
If you wish to vote in accordance with the Board of Directors'
recommendations, please sign the reverse side; no boxes need to be checked.
Continued and to be voted and signed on reverse
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
PENNZOIL-QUAKER STATE
C O M P A N Y
2000 Annual Meeting of Shareholders
May 4, 2000
The Alley Theatre
615 Texas Avenue
Houston, Texas 77002
Registration and seating of shareholders begins at 9:40 a.m.
Meeting begins at 10:00 a.m.
Cameras and recording devices will not be allowed in the meeting.
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2 Please mark X
your votes as
indicated in
this example
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/ / To vote for all items AS RECOMMENDED BY THE BOARD OF DIRECTORS, mark
this box, sign, date and return this Proxy. (No additional vote necessary.)
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1. ELECTION OF DIRECTORS: Nominees are 01 Howard H. Baker, 02 James L. Pate,
03 Gerald B. Smith and 04 Lorne R. Waxlax
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE
THROUGH THE NOMINEE'S NAME ABOVE.
/ / FOR all nominees (except as / / WITHHOLD authority to vote
marked to the contrary above) for all nominees
ELECTRONIC ACCESS: In the future if you consent to access your Annual Report
and Proxy Statement electronically via the Internet, instead of by mail,
check this box. / /
2. APPROVAL OF AUDITORS: To approve Arthur Andersen LLP as independent public
accountants. / / FOR / / AGAINST / / ABSTAIN
Date , 2000
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SIGNATURE
- --------------------------------------------------------
SIGNATURE, IF JOINTLY HELD
If acting as Attorney, Executor, Trustee or in any other
representative capacity, please sign name and title.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
INSTRUCTIONS IF VOTING BY TELEPHONE OR INTERNET
QUICK *** EASY *** IMMEDIATE***
Your telephone or Internet vote authorizes the named proxies to vote your
shares in the same manner as if you marked, signed and returned your proxy card.
* You will be asked to enter a CONTROL NUMBER which is located in the lower
right hand corner of this form.
VOTE BY PHONE:
OPTION 1: To vote as the Board of Directors recommends on ALL proposals:
Press 1.
When asked, please confirm your vote by Pressing 1.
OPTION 2: If you you choose to vote on each proposal separately, press 0. You
will hear these instructions:
Item 1: To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL nominees,
press 9. To WITHHOLD FOR AN INDIVIDUAL nominee, press 0 and listen
to the instructions.
Item 2: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
When asked, please confirm your vote by pressing 1.
VOTE BY INTERNET: THE WEB ADDRESS IS www.proxyvoting.com/pzl
IF YOU VOTE BY PHONE OR INTERNET -- DO NOT MAIL THE PROXY CARD
THANK YOU FOR VOTING.
CALL ** TOLL FREE ** ON A TOUCH-TONE TELEPHONE -----------------------------
1-888-215-8323 - ANYTIME
There is NO CHARGE to you for this call. CONTROL NUMBER
FOR TELEPHONE/INTERNET VOTING
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