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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
any and all outstanding options 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.
For purposes of this offer, we are classifying your options based on the date on
which they were granted to you. For the class of options granted on any grant
date, we will accept your tender of either 50% or 100% of your options granted
on that date. See "Summary Term Sheet."
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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.
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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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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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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...........................................................................9
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>
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SUMMARY TERM SHEET
We are offering to purchase any and all 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 their grant 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 are the same for all classes of options, regardless of grant date.
The fourth and fifth factors vary among classes of options based on the number
of years left before a particular option expires. The last factor will vary
among classes of options based on the exercise price set at the grant date, but
is the same for all options within a class 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.
DO I HAVE TO TENDER ALL OF MY OPTIONS?
No. You will not be required to tender all of your options. We
have treated options as separate classes based on their grant date. You may
tender none, 50% or 100% of your options granted on any particular grant date.
For example, if you have options issued on multiple grant dates, you may tender
100% of one class of options issued on a grant date, 50% of another class of
options issued on another grant date and none of another class of options issued
on yet another 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 several conditions
such as the absence of:
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o court and governmental actions prohibiting the offer;
o a substantial acquisition of our common stock by a
third party or a proposal or offer by a third party
to acquire our common stock;
o a material change in the condition of PQS's business;
and
o a material change in public markets.
See Section 5.
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 any and all outstanding options
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 their grant date. You may tender none, 50% or 100%
of your options granted on any particular grant 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.
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. PQS HAS BEEN ADVISED THAT
ITS EXECUTIVE OFFICERS DO NOT INTEND TO TENDER THEIR OPTIONS PURSUANT TO THIS
OFFER TO PURCHASE. NONE OF OUR NON-EMPLOYEE DIRECTORS HOLD ANY OF THESE OPTIONS.
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 1,997,630 have an exercise
price of $24.00 or more.
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. For purposes of this offer, we are classifying your options based on
the date on which they were granted to you. For the class of options granted on
any grant date, we will accept your tender of 50% or 100% of your options
granted on that 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.
You may tender none, 50% or 100% of your options granted on
any particular grant date. For example, if you have options issued on multiple
grant dates, you may tender 100% of one class of options issued on a grant date,
50% of another class of options issued on another grant date and none of another
class of options issued on yet another grant 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
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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.
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 their grant
date.
The cash amount that we will pay for each class of tendered
options has been determined using the Black-Scholes option pricing model adapted
for use in valuing executive stock options. The estimated values under the model
are based on six factors. The first three of these factors are the same for all
classes of options, regardless of grant date. The fourth and fifth factors vary
among classes of options based on the number of years left before a particular
option expires. The last factor will vary among classes of options based on the
exercise price set at the grant date, but is the same for all options within a
class of options. The six 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.
All affected options are fully vested.
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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.
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
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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;
(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:
<TABLE>
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
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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;
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, the aggregate cash
consideration to be paid will be approximately $2.1 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
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<PAGE> 11
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 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.,
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<PAGE> 12
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 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
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<PAGE> 13
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.
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 Stock Option Stock Option Black-Scholes Number of for 100% of
Grant 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
----------
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.
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September 11, 2000
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