<PAGE> 1
EXHIBIT (a)(1)
OFFER TO PURCHASE OUTSTANDING OPTIONS
WITH AN EXERCISE PRICE OF $24.00 OR MORE
FOR CASH
BY
PENNZOIL-QUAKER STATE COMPANY
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THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., CENTRAL
DAYLIGHT TIME, ON OCTOBER 11, 2000, UNLESS THE OFFER IS EXTENDED.
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Pennzoil-Quaker State Company ("PQS") is offering to purchase
outstanding options previously issued to current and former employees to
purchase shares of our common stock that have an exercise price of $24.00 or
more for cash, upon the terms and subject to the conditions set forth herein and
in the related letter of transmittal. The cash amount for each tendered option
will be determined for each option as described in Section 4 and will be payable
promptly following the completion of the offer. We will only accept your tender
of either 50% or 100% of your options by grant date.
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THIS OFFER TO PURCHASE IS NOT CONDITIONED UPON A MINIMUM NUMBER OF
OPTIONS BEING TENDERED, BUT IS SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION
5.
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IMPORTANT
Any holder of options desiring to tender his or her options for
purchase should complete and sign the letter of transmittal, or a facsimile
thereof, in accordance with the instructions in the letter of transmittal, mail
or otherwise deliver it and any other required documents to PQS, at our address
set forth on the back cover of this offer to purchase.
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A COMMITTEE OF OUR BOARD OF DIRECTORS HAS APPROVED THE MAKING OF THE
OFFER. NEITHER PQS NOR OUR BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO YOU AS
TO WHETHER TO TENDER YOUR OPTIONS FOR PURCHASE. YOU MUST MAKE YOUR OWN DECISION
AS TO WHETHER TO TENDER YOUR OPTIONS. PQS IS NOT MAKING THIS OFFER TO ANY OF ITS
EXECUTIVE OFFICERS, AND THEREFORE, THEY WILL NOT TENDER THEIR OPTIONS PURSUANT
TO THIS OFFER TO PURCHASE. NONE OF OUR NON-EMPLOYEE DIRECTORS HOLD ANY OF THESE
OPTIONS.
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The common stock issuable upon exercise of the options is listed and
principally traded on the New York Stock Exchange (the "NYSE") under the symbol
"PZL." On September 8, 2000, the last trading day prior to the making of this
offer, the last reported sale price of the common stock was $12.50 per share.
You are urged to obtain current market prices for the common stock.
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Questions or requests for assistance or for additional copies of this
offer to purchase, the letter of transmittal, or other offer materials may be
directed to Darlene Cox, Director of Compensation, at (713) 546-6634, Brenda
McKee, Compensation Advisor, at (713) 546-4167, or Annette Eriksen, Compensation
Advisor, at (713) 546-6617.
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PQS HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON OUR
BEHALF AS TO WHETHER YOU SHOULD TENDER YOUR OPTIONS PURSUANT TO THIS OFFER TO
PURCHASE. PQS HAS NOT AUTHORIZED ANY PERSON TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFER TO PURCHASE OTHER THAN THOSE
CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR
MADE, SUCH RECOMMENDATION AND SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY PQS.
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This offer to purchase is not being made to, nor will any tender of
options be accepted from or on behalf of, optionholders in any jurisdiction in
which the making of this offer or the acceptance of any tender of options
therein would not be in compliance with the laws of such jurisdiction. However,
PQS may, at its discretion, take such action as we may deem necessary for us to
make the offer in any such jurisdiction and extend this offer to optionholders
in such jurisdiction.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Summary Term Sheet................................................................................................1
Introduction......................................................................................................3
The Offer.........................................................................................................4
1. Number of Options; Expiration Date..........................................................................4
2. Procedure for Tendering Options.............................................................................4
3. Withdrawal Rights...........................................................................................5
4. Acceptance for Purchase of Options and Payment of Cash......................................................5
5. Conditions of the Offer.....................................................................................6
6. Price Range of Common Stock Underlying the Options..........................................................7
7. Purpose of the Offer........................................................................................7
8. Information Concerning PQS..................................................................................8
9. Source and Amount of Funds..................................................................................8
10. Interests of Directors and Officers; Transactions and Agreements Concerning the Options.....................8
11. Federal Income Tax Considerations...........................................................................8
12. Legal Matters; Regulatory Approvals.........................................................................9
13. Extension of Tender Period; Termination; Amendments.........................................................9
14. Fees and Expenses..........................................................................................10
15. Forward-Looking Information................................................................................10
16. Additional Information.....................................................................................10
</TABLE>
<PAGE> 3
SUMMARY TERM SHEET
We are offering to purchase outstanding options to purchase shares of
our common stock that have an exercise price of $24.00 or more. The following
are some of the questions that you, as an optionholder, may have and answers to
those questions. The information in this summary is not complete and we urge you
to carefully read the remainder of this offer to purchase and the accompanying
letter of transmittal.
WHAT WILL I RECEIVE IF I DECIDE TO TENDER MY OPTIONS FOR PURCHASE?
We will pay you cash promptly following the completion of the offer.
For purposes of determining the cash amount payable to an optionholder, we have
treated options as separate classes based on differences in exercise price and
expiration date. The cash amount that we will pay for each class of tendered
options has been determined on the basis of six factors. The first three of
these factors will be the same for all optionholders, the fourth and fifth
factors will vary based on the number of years left before a particular option
expires and the last factor will vary among classes of options. See Section 4.
These factors are:
o an expected volatility of our common stock (28.8%);
o the dividend yield on our common stock (2.29%);
o the current share price assumed to be $12.375, the closing price on
August 18, 2000;
o a risk-free rate of return based on a U.S. Treasury rate
corresponding to the number of years left before a particular
option expires;
o the length of time to expiration of the particular option; and
o the exercise price of the particular option.
WHEN WILL I RECEIVE PAYMENT FOR MY PURCHASED OPTIONS?
PQS will pay all of the cash amount promptly following the expiration
date of this offer, whether or not the optionholder is currently employed by
PQS. All affected options are fully vested.
No interest will accrue and no interest will be paid on any portion of
the cash amount payable, regardless of when paid. See Section 4. Amounts payable
subsequent to the payment date will be general, unsecured obligations of PQS.
DO I HAVE TO TENDER ALL OF MY OPTIONS?
No. You will not be required to tender all of your options. However, we
will only accept your tender of either 50% or 100% of your options by grant
date. See Section 2.
DOES THE COMPANY HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT?
We have sufficient cash on hand to make payment on all of the options
tendered in this offer to purchase. See Section 9.
HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THE OFFER?
You will have at least until 5:00 p.m., Central daylight time, on
October 11, 2000, the "expiration date," to decide whether to tender your
options in this offer to purchase. See Section 1.
HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED?
If we extend the offer, we will make a public announcement of the
extension, not later than 9:00 a.m., Central daylight time, on the day after the
date on which the offer was previously scheduled to expire. See Section 13.
WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE OFFER?
This offer to purchase is not conditioned on a minimum number of
options being tendered. However, the offer is subject to a number of other
conditions. See Section 5.
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HOW DO I TENDER MY OPTIONS?
To tender an option for purchase, you must deliver a properly completed
and duly executed letter of transmittal and any other required documents to us
at the address set forth below, no later than the expiration date:
Darlene Cox
Director of Compensation
Pennzoil-Quaker State Company
Pennzoil Place, P.O. Box 2967
Houston, Texas 77252-2967
Facsimile: (713) 546-6589
WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES IF I TENDER MY OPTIONS?
The cash amount paid to optionholders who tender options will be taxed
as ordinary compensation income of the optionholders in the year received. To
the extent that a tendering optionholder recognizes ordinary income, we will
generally be entitled to a corresponding federal income tax deduction. See
Section 11.
HOW DO I WITHDRAW PREVIOUSLY TENDERED OPTIONS AND UNTIL WHAT TIME CAN I WITHDRAW
THEM?
You can withdraw previously tendered options at any time until the
expiration date. To withdraw tendered options you must deliver a written notice
of withdrawal, or facsimile thereof, with the required information to us while
you still have the right to withdraw the tendered options. Once withdrawn, you
may retender options only by again following one of the delivery procedures
described in Section 2. See Section 3.
WITH WHOM CAN I SPEAK IF I HAVE QUESTIONS ABOUT THE OFFER?
You can call Darlene Cox, Director of Compensation, at (713) 546-6634,
Brenda McKee, Compensation Advisor, at (713) 546-4167, or Annette Eriksen,
Compensation Advisor, at (713) 546-6617.
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TO THE HOLDERS OF OPTIONS TO PURCHASE COMMON STOCK
OF PQS WITH AN EXERCISE PRICE OF $24.00 OR MORE:
INTRODUCTION
SUMMARY TERMS OF THE OFFER
PQS hereby offers to purchase outstanding options previously issued to
current and former employees to purchase shares of our common stock that have an
exercise price of $24.00 or more for cash, upon the terms and subject to the
conditions set forth herein and in the related letter of transmittal (which
together constitute the "offer"). The cash amount will be determined for each
option as described in Section 4 and will be payable promptly following the
completion of the offer. For purposes of determining the cash amount payable to
an optionholder, we have treated options as separate classes based on
differences in exercise price and expiration date. Attachment A sets forth the
determination of the amount of the cash payment you will be entitled to receive
for each class of options, if your options are properly tendered and are
accepted for purchase. The cash amount that we will pay for each class of
tendered options has been determined on the basis of six factors. See Section 4.
We will accept for purchase all options validly tendered and not
properly withdrawn on or prior to the expiration date. We will only accept your
tender of 50% or 100% of your options by grant date.
THIS OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF OPTIONS BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO A NUMBER OF OTHER CONDITIONS. SEE
SECTION 5. We reserve the right (but are not obligated) to waive any or all such
conditions, other than those that are legally mandated.
NEITHER WE NOR OUR BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO YOU
AS TO WHETHER TO TENDER YOUR OPTIONS FOR PURCHASE. YOU MUST MAKE YOUR OWN
DECISION AS TO WHETHER TO TENDER OPTIONS FOR PURCHASE.
GENERAL INFORMATION
As of the date of this offer to purchase, we had issued and outstanding
options to purchase 11,470,266 shares of our common stock issued under our
various plans, of which options to purchase 1,739,493 shares of our common stock
are held by persons other than our executive officers and have an exercise price
of $24.00 or more. The options that we are offering to purchase represent 15.2%
of the options issued and outstanding.
The common stock issuable upon exercise of the options is listed and
principally traded on the NYSE under the symbol "PZL." On September 8, 2000, the
last reported sale price of the common stock was $12.50 per share. Optionholders
are urged to obtain current market prices for the common stock. See Section 6.
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THE OFFER
1. NUMBER OF OPTIONS; EXPIRATION DATE.
Upon the terms and subject to the conditions described herein and in
the accompanying letter of transmittal, we will accept for purchase, and will
purchase, options to purchase shares of our common stock that have an exercise
price of $24.00 or more and that are validly tendered on or prior to the
expiration date and which are not properly withdrawn in accordance with Section
3. We will only accept your tender of 50% or 100% of your options by grant date.
The later of 5:00 P.M., Central daylight time, on October 11, 2000 or the latest
time and date to which the offer is extended, is referred to herein as the
"expiration date." This offer is not conditioned on any minimum number of
options being tendered. If your options are properly tendered and accepted for
purchase, you will be entitled to receive a cash payment for each class of
options in the amount as determined by Attachment A to this offer to purchase.
The cash amount will be payable promptly following the completion of the offer.
See Section 4.
Subject to the applicable rules and regulations of the SEC, we
expressly reserve the right, in our sole discretion, to change the terms of this
offer to purchase. This offer to purchase will be extended until the expiration
of ten business days from the date of publication of notice if:
o we increase or decrease the amount of cash to be paid for options
tendered for purchase; and
o the offer is scheduled to expire at any time earlier than the
expiration of a period ending on the tenth business day from, and
including, the date that notice of such increase or decrease is
first published, sent or given in the manner described in Section
13.
For purposes of this offer, a "business day" means any day other than a
Saturday, Sunday or federal holiday and consists of the time period from 12:01
a.m. through Midnight, Central daylight time. There can be no assurance,
however, that we will exercise our right to extend this offer to purchase.
2. PROCEDURE FOR TENDERING OPTIONS.
Proper tender of options. To validly tender options for purchase
pursuant to this offer, a properly completed and duly executed letter of
transmittal, or facsimile thereof, together with any other documents required by
the letter of transmittal, must be received by us at our address set forth on
the back cover of this offer to purchase prior to the expiration date.
THE METHOD OF DELIVERY OF OPTIONS, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING
OPTIONHOLDER. OPTIONS WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY
US. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE TIMELY DELIVERY.
No interest will accrue and no interest will be paid on the cash amount
payable to you, regardless of:
o any extension of the offer; or
o any delay in making any payment.
Determination of validity; rejection of options; waiver of defects; no
obligation to give notice of defects. All questions as to the form of documents
and the validity, eligibility (including time of receipt) and acceptance for
purchase and payment will be determined by us in our sole discretion, and our
determination will be final and binding on all parties. We reserve the absolute
right to reject any or all tenders of options that we determine are not in
proper form or the acceptance for purchase and payment of or purchase and
payment for which may be unlawful. We also reserve the absolute right to waive
any condition of the offer or any defect or irregularity in any tender of
options. A tender of options will not be deemed to have been properly made until
all defects or irregularities have been cured by the tendering optionholder or
waived by us. Neither we nor any other person will be under any duty to give
notice of any defect or irregularity in tenders, nor shall we nor any other
person incur any liability for failure to give any such notice.
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3. WITHDRAWAL RIGHTS.
Tenders of options made pursuant to this offer to purchase may be
withdrawn:
o at any time prior to the expiration date; or
o after November 6, 2000 unless they have been previously accepted for
purchase as provided in this offer to purchase.
If we extend the period of time during which the offer is open, we are delayed
in accepting for payment or paying for options or we are unable to accept for
purchase and payment or pay for options pursuant to the offer for any reason,
then, without prejudice to our rights under the offer, we may retain all options
tendered, and tendered options may not be withdrawn, except as otherwise
provided in this Section 3, subject to Rule 13e-4(f)(5) under the Securities
Exchange Act of 1934 (the "Exchange Act"), which provides that the issuer making
the tender offer shall either pay the consideration offered, or return the
tendered securities promptly after the termination or withdrawal of this offer
to purchase. To be effective, a written or facsimile transmission notice of
withdrawal must be timely received by us at our address set forth on the back
cover of this offer to purchase and must specify the name of the person who
tendered the options to be withdrawn and the number of options to be withdrawn.
Withdrawals may not be rescinded, and options withdrawn will thereafter be
deemed not validly tendered for purposes of this offer. However, withdrawn
options may be retendered by again following one of the procedures described in
Section 2 at any time prior to the expiration date.
All questions as to the form and validity (including time of receipt)
of any notice of withdrawal will be determined by us, in our sole discretion,
which determination shall be final and binding on all parties. Neither PQS nor
any other person will be under any duty to give notification of any defect or
irregularity in any notice of withdrawal or incur any liability for failure to
give any such notification.
4. ACCEPTANCE FOR PURCHASE OF OPTIONS AND PAYMENT OF CASH.
Upon the terms and subject to the conditions of this offer to purchase
and as promptly as practicable after the expiration date, we will accept for
purchase all options validly tendered.
You will receive the full cash amount for your options that are
properly tendered and are accepted for purchase as determined by Attachment A
promptly after the expiration of this offer to purchase.
For purposes of determining the cash amount payable to an optionholder,
we have treated options as separate classes based on differences in exercise
price and expiration date. The cash amount that we will pay for each class of
tendered options has been determined on the Black-Scholes option pricing model
adapted for use in valuing executive stock options. The estimated values under
the model are based on the following six factors, the values for the first three
of which are the same for all optionholders regardless of class, the value for
the fourth and fifth factors varies based on the number of years left before a
particular option expires and the value for the last factor is the same for all
optionholders within a class of options:
o an expected volatility of our common stock (28.8%);
o the dividend yield on our common stock (2.29%);
o the current share price assumed to be $12.375, the closing price on
August 18, 2000;
o a risk-free rate of return based on a U.S. Treasury rate
corresponding to the number of years left before a particular
option expires;
o the length of time to expiration of the particular option; and
o the exercise price of the particular option.
All affected options are fully vested.
For purposes of the offer, we will be deemed to have accepted for
purchase and payment options that are validly tendered and not properly
withdrawn as, if and when we give oral or written notice to the optionholders of
our acceptance for payment of such options, which may be by press release.
Under no circumstances will interest accrue or be paid on amounts to be
paid to tendering optionholders, regardless of when payment of any portion of
the cash amount is made or if there is any delay in making any cash payment.
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5. CONDITIONS OF THE OFFER.
Notwithstanding any other provision of this offer to purchase, we will
not be required to accept for purchase, or make any payment with respect to, any
options tendered, and may terminate or amend and may postpone (subject to the
requirements of the Exchange Act for prompt payment for or return of options)
the acceptance for purchase of options tendered, if at any time on or after
September 11, 2000 and on or before the expiration date any of the following
shall have occurred:
(a) there shall have been threatened, instituted or pending
any action or proceeding by any government or governmental, regulatory
or administrative agency or authority or tribunal or any other person,
domestic or foreign, or before any court, authority, agency or tribunal
that (i) challenges the purchase of options by us pursuant to this
offer or otherwise in any manner relates to or affects the offer or
(ii) in our reasonable judgment, could materially and adversely affect
our business, condition (financial or other), income, operations or
prospects, or otherwise materially impair in any way the contemplated
future conduct of our or any of our subsidiaries' business or
materially impair the offer's contemplated benefits to us;
(b) there shall have been any action threatened, pending or
taken, or approval withheld, or any statute, rule, regulation,
judgment, order or injunction threatened, proposed, sought,
promulgated, enacted, entered, amended, enforced or deemed to be
applicable to this offer or to us or any of our subsidiaries, by any
legislative body, court, authority, agency or tribunal which, in our
reasonable judgment, would or might directly or indirectly (i) make the
acceptance for payment of, or payment for, some or all of the options
illegal or otherwise restrict or prohibit consummation of this offer,
(ii) delay or restrict our ability, or render us unable, to accept for
payment or pay for some or all of the options, (iii) materially impair
the contemplated benefits of this offer to us or (iv) materially and
adversely affect our business, condition (financial or other), income,
operations or prospects, or otherwise materially impair in any way the
contemplated future conduct of the business of PQS or any of our
subsidiaries;
(c) it shall have been publicly disclosed or we shall have
learned that (i) any person or "group" (within the meaning of Section
13(d)(3) of the Exchange Act) has acquired or proposes to acquire
beneficial ownership of more than 5% of the outstanding shares of
common stock underlying the options whether through the acquisition,
directly or indirectly, of our capital stock, the formation of a group,
the grant of any option or right, or otherwise (other than as disclosed
in a Schedule 13D or 13G on file with the SEC on or prior to September
11, 2000) or (ii) any such person or group that on or prior to
September 11, 2000 had filed a Schedule 13D or 13G with the SEC
thereafter shall have acquired or shall propose to acquire, whether
through the acquisition shares, the formation of a group, the grant of
any option or right, or otherwise, beneficial ownership of additional
shares of common stock underlying the options representing 2% or more
of the outstanding shares of common stock underlying the options;
(d) there shall have occurred (i) any general suspension of
trading in, or limitation on prices for, securities on any national
securities exchange or in the over-the-counter market, (ii) any
significant decline or increase in the market price of the shares of
our common stock, (iii) any change in the general political, market,
economic or financial condition in the United States or abroad that
could have a material adverse effect on our business, condition
(financial or other), income, operations, prospects, or ability to
obtain financing generally, (iv) the declaration of a banking
moratorium or any suspension of payments in respect of banks in the
United States or any limitation on, or any event which, in our
reasonable judgment, might affect, the extension of credit by lending
institutions in the United States, (v) the commencement of a war, armed
hostilities or other international or national calamity directly or
indirectly involving the United States or (vi) in the case of any of
the foregoing existing at the time of the commencement of the offer, in
our reasonable judgment, a material acceleration or worsening thereof;
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(e) a tender or exchange offer with respect to some or all of
the options or our common stock (other than this offer), or a merger,
acquisition or other business combination proposal for PQS, shall have
been proposed, announced or made by any person;
(f) there shall have occurred any event or events that have
resulted, or may in our reasonable judgment result, in an actual or
threatened change in the business, condition (financial or other),
income, operations, option ownership or prospects of PQS and our
subsidiaries, taken as a whole; or
(g) there shall have occurred any decline in the Dow Jones
Industrial Average or the Standard & Poor's Composite 500 Stock Index
by an amount in excess of 10% measured from the close of business on
September 11, 2000;
and, in our reasonable judgment, such event or events make it undesirable or
inadvisable to proceed with the offer or with such acceptance for purchase and
payment.
The foregoing conditions are for our reasonable benefit and may be
asserted by us regardless of the circumstances (including any action or inaction
by us) giving rise to any such condition, and any such condition may be waived
by us, in whole or in part, at any time and from time to time, in our reasonable
discretion, whether or not any other condition of the offer is also waived. The
failure by us at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right and each such right shall be deemed an ongoing
right which may be asserted at any time and from time to time. Any determination
by us concerning the events described above will be final and binding on all
parties.
6. PRICE RANGE OF COMMON STOCK UNDERLYING THE OPTIONS.
The common stock issuable upon exercise of the options is listed and
principally traded on the NYSE under the symbol "PZL." The following table sets
forth the high and low prices of the common stock for the fiscal quarters
indicated:
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High* Low*
<S> <C> <C>
Fiscal Year Ended December 31, 1999
Quarter ended March 31, 1999................................................. 16.50 11.88
Quarter ended June 30, 1999 ................................................. 15.44 11.06
Quarter ended September 30, 1999 ............................................ 15.38 12.31
Quarter ended December 31, 1999.............................................. 12.94 8.50
Fiscal Year Ended December 31, 2000:
Quarter ended March 31, 2000 ................................................ 11.88 8.38
Quarter ended June 30, 2000 ................................................. 12.50 9.44
Quarter ended September 30, 2000 (through September 8, 2000) ................ 13.25 11.00
</TABLE>
On September 8, 2000, the last full NYSE trading day prior to the
making of this offer to purchase, the last reported sale price of the common
stock underlying the options was $12.50 per share. YOU ARE URGED TO OBTAIN
CURRENT MARKET PRICES FOR THE COMMON STOCK.
7. PURPOSE OF THE OFFER.
We believe that many of our outstanding options, though currently
exercisable, are not achieving the purpose for which they were intended since
they have exercise prices that are significantly higher than the current market
price, effectively making them unlikely to be exercised. By making this offer to
purchase and instituting other forms of incentive and option plans for which our
current employees will be able to realize the intended benefits, we expect to be
able to provide better performance incentives to these employees and thereby
maximize shareholder value.
Except as disclosed in this offer to purchase, we have no plans or
proposals which relate to or would result in:
o the acquisition by any person of any of our securities or the
disposition of any of our securities;
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o an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving PQS or any of our
subsidiaries;
o a sale or transfer of a material amount of our or our subsidiaries'
assets;
o any change in our present board of directors or management;
o any material change in our present dividend rate or policy, or our
indebtedness or capitalization;
o any other material change in our corporate structure or business;
o any change in our Restated Certificate of Incorporation or By-laws,
as amended, or any actions which may impede the acquisition of
control of PQS by any person;
o a class of equity securities being delisted from a national
securities exchange;
o a class of our equity securities becoming eligible for termination
of registration pursuant to Section 12(g)(4) of the Exchange Act; or
o the suspension of our obligation to file reports pursuant to Section
15(d) of the Exchange Act.
Neither we nor our board of directors makes any recommendation to you
as to whether to tender your options, nor have we authorized any person to make
any such recommendation. You are urged to evaluate carefully all information in
the offer to purchase and to consult your own investment and tax advisors. You
must make your own decision whether to tender your options for purchase.
8. INFORMATION CONCERNING PQS.
General. PQS is a leading worldwide automotive consumer products
company, marketing over 1,300 products with 20 leading brands in more than 50
countries. The company markets Pennzoil(R) and Quaker State(R) brand motor oils,
the number one and number two selling motor oils in the United States. Jiffy
Lube, a wholly owned subsidiary of PQS, is the world's largest fast lube
operator and franchiser.
Our principal executive offices are located at Pennzoil Place, 700
Milam, Houston, Texas, and our telephone number is (713) 546-4000.
9. SOURCE AND AMOUNT OF FUNDS.
Assuming we purchase all outstanding options that have an exercise
price of $24.00 or more pursuant to the offer, excluding those options held by
our executive officers, the aggregate cash consideration to be paid will be
approximately $1.95 million (excluding estimated fees and expenses). We
anticipate financing the cash consideration payable to tendering optionholders
for the purchase of options pursuant to this offer to purchase and the payment
of related fees and expenses from available cash.
10. INTERESTS OF DIRECTORS AND OFFICERS; TRANSACTIONS AND AGREEMENTS CONCERNING
THE OPTIONS.
Neither PQS, nor to the best of our knowledge, any of our directors or
executive officers, nor any affiliates of any of the foregoing, had any
transactions involving the options or the common stock issuable upon the
exercise of such options during the 60 days prior to the date of this offer to
purchase.
Except for outstanding options to purchase common stock granted from
time to time to certain of our employees (including executive officers) and
non-employee directors pursuant to our option plans, and restricted share awards
granted from time to time to certain of our employees (including executive
officers) pursuant to our incentive compensation programs and except as
otherwise described herein, neither PQS nor, to the best of our knowledge, any
of our affiliates, directors or executive officers, is a party to any contract,
arrangement, understanding or relationship with any other person relating,
directly or indirectly, to the offer with respect to any of our securities,
including, but not limited to, any contract, arrangement, understanding or
relationship concerning the transfer or the voting of any such securities, joint
ventures, loan or option arrangements, puts or calls, guaranties of loans,
guaranties against loss or the giving or withholding or proxies, consents or
authorizations.
11. FEDERAL INCOME TAX CONSIDERATIONS.
General. The following summary of certain federal income tax
consequences of the purchase of options pursuant to this offer to purchase is
based on the Internal Revenue Code of 1986, as amended to date, applicable
proposed and final Treasury Regulations, judicial authority and current
administrative rulings and practice, all of which are subject to change. This
summary does not attempt to describe all of the possible tax
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<PAGE> 11
consequences that could result from this offer to purchase or the purchase of
options pursuant to this offer to purchase.
The cash amount paid to optionholders who tender options for purchase
will be taxed as ordinary compensation income of the optionholders in the year
received. Such income will be subject to withholding of income, FICA and
Medicare taxes and other applicable employment taxes. To the extent that a
tendering optionholder recognizes ordinary income, we will generally be entitled
to a corresponding federal income tax deduction.
The tax discussion set forth above is included for general information
only. The tax consequences of this offer to purchase or a purchase pursuant to
the offer may vary depending upon, among other things, the particular
circumstances of the tendering optionholder. No information is provided herein
as to the state, local or foreign tax consequences of the transaction
contemplated by the offer. Optionholders are urged to consult their own tax
advisors to determine the particular federal, state, local and foreign tax
consequences of purchase made by them pursuant to the offer.
12. LEGAL MATTERS; REGULATORY APPROVALS.
We are not aware of any license or regulatory permit that we believe is
material to our business that might be adversely affected by our purchase of
options as contemplated herein or of any approval or other action by any
government or governmental, administrative or regulatory authority or agency,
domestic or foreign, that would be required for the purchase by us of options as
contemplated herein. Should any such approval or other action be required, we
presently contemplate that such approval or other action will be sought. We are
unable to predict whether we will be required to delay the acceptance for
payment of, or payment for, options tendered pursuant to the offer pending the
outcome of any such matter. There can be no assurance that any such approval or
other action, if needed, would be obtained or would be obtained without
substantial conditions or that the failure to obtain any such approval or other
action might not result in adverse consequences to our business. Our obligations
under the offer to accept for purchase, and make any payment in respect of, any
options are subject to a number of conditions. See Section 5.
13. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS.
We expressly reserve the right, in our sole discretion and at any time
or from time to time, to extend the period of time during which this offer to
purchase is open by giving oral or written notice of such extension to the
optionholders. There can be no assurance, however, that we will exercise our
right to extend this offer. During any such extension, all options previously
tendered will remain subject to the offer, except to the extent that such
options may be withdrawn as set forth in Section 3. We also expressly reserve
the right, in our reasonable discretion, (a) to terminate the offer and not
accept for payment any options not theretofore accepted for payment or, subject
to Rule 13-4(f)(5) under the Exchange Act, which requires us either to pay the
consideration offered or to return the options tendered promptly after the
termination or withdrawal of the offer, to postpone payment for options upon the
occurrence of any of the conditions specified in Section 5 hereof by giving oral
or written notice of such termination to the optionholders by making a public
announcement thereof and (b) at any time or from time to time amend the offer in
any respect. Amendments to the offer may be effected by public announcement.
Without limiting the manner in which we may choose to make public announcement
of any termination or amendment, we will have no obligation (except as otherwise
required by applicable law) to publish, advertise or otherwise communicate any
such public announcement, other than by making a release to the Dow Jones News
Service, except in the case of an announcement of an extension of the offer, in
which case we will have no obligation to publish, advertise or otherwise
communicate such announcement other than by issuing a notice of such extension
by press release or other public announcement, which notice will be issued no
later than 9:00 a.m., Central daylight time, on the next business day after the
previously scheduled expiration date. Material changes to information previously
provided to holders of the options in this offer or in documents furnished
subsequent thereto will be disseminated to holders of options in compliance with
Rule 13e-4(e)(3) promulgated by the SEC under the Exchange Act.
If we materially change the terms of this offer to purchase or the
information concerning the offer, or if we waive a material condition of the
offer, we will extend the offer to the extent required by Rules 13e-4(d)(2) and
13e-4(e)(2) under the Exchange Act. Those rules require that the minimum period
during which an offer must remain open following material changes in the terms
of the offer or information concerning the offer (other than a
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<PAGE> 12
change in the amount paid or a change in percentage of securities sought) will
depend on the facts and circumstances, including the relative materiality of
such terms or information. In a published release, the SEC has stated that in
its view, an offer should remain open for a minimum of five business days from
the date that notice of such a material change is first published, sent or
given. The offer will continue or be extended for at least ten business days
from the time we publish, send or give to holders of options a notice that we
will (a) increase or decrease the amount of the consideration payable or (b)
increase (except for an increase not exceeding 2% of the outstanding subject
options) or decrease the percentage of subject options sought.
14. FEES AND EXPENSES.
We will not pay any fees or commissions to any broker, dealer or other
person for soliciting tenders of options pursuant to this offer to purchase.
15. FORWARD-LOOKING INFORMATION
This document contains and incorporates by reference forward-looking
statements with respect to our business, financial condition and results of
operations, including, without limitation, statements herein and in our annual
and quarterly reports under the captions "Business" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations." You can
generally identify forward-looking statements by looking for words such as
"may," "will," "expect," "intend," "estimate," "anticipate," "believe" or
"continue." Variations on those or similar words, or the negatives of such
words, also may indicate forward-looking statements.
These forward-looking statements are based on certain assumptions and
are subject to a number of risks and uncertainties. Such uncertainties include,
but are not limited to:
o general economic, financial and business conditions;
o competition in the motor oil marketing business;
o commodity prices for crude oil;
o base oil margins and supply and demand in the base oil business;
o the success and costs of advertising and promotional efforts;
o mechanical failure in refining operations;
o unanticipated environmental liabilities;
o changes in and compliance with governmental regulations;
o changes in tax laws;
o the costs and effects of legal proceedings, and
o others of which may be detailed from time to time in our press
releases, reports to shareholders and our filings with the SEC.
These forward-looking statements are based on management's expectations
as of the date of this document, or if incorporated by reference from a document
as of an earlier date, the earlier date. Actual future performance and results
could differ materially from that contained in or suggested by these
forward-looking statements as a result of the factors described above and
elsewhere in this offer to purchase.
16. ADDITIONAL INFORMATION.
We are subject to the informational filing requirements of the Exchange
Act and, in accordance therewith, file with the SEC periodic reports, proxy
statements and other information relating to our business, financial condition
and other matters. We are required to disclose in such reports certain
information, as of particular dates, concerning our operating results and
financial condition, officers and directors, principal holders of securities,
any material interests of such persons in transactions with us and other
matters. These reports and other informational filings required by the Exchange
Act are available for inspection at the public reference facilities maintained
by the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W. Washington,
D.C. 20549 and also are available for inspection and copying at the regional
offices of the commission located at Citicorp Center, 500 West Madison Street,
Chicago, Illinois 60661 and 7 World Trade Center, 13th Floor, New York, New York
10048. Copies of such material may be obtained by mail, upon payment of the
SEC's customary fees, from the SEC's principal office at Judiciary Plaza, 450
Fifth Street, N.W., Washington D.C. 20549. The SEC maintains a Web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC, such as us. The
SEC's Web site address is http://www.sec.gov. Information regarding PQS may also
be obtained at the offices of The New York Stock Exchange, 20 Broad Street, New
York, NY 10005.
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<PAGE> 13
The SEC allows us to "incorporate by reference" other documents filed
with the SEC, which means that we can disclose important information to you by
referring you to other documents. The documents that are incorporated by
reference are legally considered to be a part of this offer to purchase. The
documents incorporated by reference are:
o our Annual Report on Form 10-K for the year ended December 31, 1999;
o our Quarterly Reports on Form 10-Q for the quarters ended March 31
and June 30, 2000; and
o our current report on Form 8-K filed with the SEC on April 19, 2000.
As you read the above documents, you may find some inconsistencies in
information from one document to another. If you find inconsistencies between
the documents, or between a document and this offer to purchase, you should rely
on the statements made in the most recent document.
You should rely only on the information in this offer to purchase or
incorporated by reference. We have not authorized anyone to provide you with any
different information.
The information contained in this offer to purchase about PQS should be
read in conjunction with the information contained in the documents incorporated
by reference.
We will provide without charge to each person to whom a copy of this
offer to purchase is delivered, upon the written or oral request of any such
person, a copy of any or all of the documents incorporated herein by reference,
other than exhibits to such documents (unless such exhibits are specifically
incorporated by reference into such documents). Requests should be directed to
Pennzoil-Quaker State Company, Pennzoil Place, P.O. Box 2967, Houston, Texas
77252-2967, Attention: Darlene Cox, (713) 546-6634. In order to ensure timely
delivery of the documents prior to the expiration date, any such requests should
be made by September 22, 2000.
This offer to purchase constitutes part of an Issuer Tender Offer
Statement on Schedule TO filed with the SEC by us pursuant to Section 13 of the
Exchange Act and the rules and regulations promulgated thereunder. The Schedule
TO and all exhibits thereto are incorporated by reference into this offer to
purchase.
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<PAGE> 14
September 11, 2000
ATTACHMENT A
PENNZOIL-QUAKER STATE COMPANY
STOCK OPTION BUY-BACK
NAME OF OPTIONHOLDER
S.S.N. 000-00-0000
<TABLE>
<CAPTION>
Buy-Back Cost
Stock Option Grant Stock Option Stock Option Black-Scholes Number of for 100% of
Date Expiration Date Grant Price Value/Share Shares Shares
--------------------- ------------------ ------------------- ------------------ ---------------- ------------------
<S> <C> <C> <C> <C> <C>
Total
================ ==================
</TABLE>
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<PAGE> 15
================================================================================
OFFER TO PURCHASE
OUTSTANDING OPTIONS
WITH AN EXERCISE PRICE OF $24.00 OR MORE
OF
PENNZOIL-QUAKER STATE COMPANY
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Any questions or requests for assistance or additional copies of any documents
incorporated by reference into this offer to purchase may be directed to Darlene
Cox, Director of Compensation, at (713) 546-6634, Brenda McKee, Compensation
Advisor, at (713) 546-4167, or Annette Eriksen, Compensation Advisor, at (713)
546-6617, at Pennzoil-Quaker State Company, Pennzoil Place, P.O. Box 2967,
Houston, Texas 77252-2967.
----------
September 11, 2000
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