<PAGE> 1
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
PENNZOIL COMPANY
(Name of Registrant as Specified in Its Charter)
PENNZOIL COMPANY
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
(4) Proposed maximum aggregate value of transaction:
* Set forth the amount on which the filing fee is calculated and state how
it was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
{LOGO}
NOTICE OF ANNUAL MEETING
MAY 19, 1994
AND PROXY STATEMENT
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to the Shareholders................................................................. 1
Notice of Annual Meeting................................................................... 2
Proxy Statement............................................................................ 3
I Election of Directors....................................................... 4
Nominees.................................................................... 4
Directors with Terms Expiring in 1995 and 1996.............................. 5
Retiring Directors.......................................................... 6
Board Organization and Meetings............................................. 6
Director Remuneration....................................................... 7
Security Ownership of Directors and Officers................................ 7
Compliance with Section 16(a) of the Exchange Act........................... 7
Executive Compensation...................................................... 8
Compensation Committee Interlocks and Insider Participation................. 11
Report of Compensation Committee on Executive Compensation.................. 11
Performance Graphs.......................................................... 15
Certain Transactions Concerning Continuing Directors........................ 16
Certain Transactions Concerning Retiring Directors.......................... 16
II Approval of Appointment of Independent Public Accountants................... 16
III Other Business.............................................................. 16
Additional Information........................................................... 17
Security Ownership of Certain Shareholders.................................. 17
Shareholder Proposals for 1995 Meeting...................................... 18
</TABLE>
<PAGE> 4
{LOGO}
PENNZOIL PLACE - P.O. BOX 2967
HOUSTON, TEXAS 77252-2967
(713) 546-4000
DEAR SHAREHOLDER: April 12, 1994
You are cordially invited to attend the annual meeting of shareholders to
be held at the Alley Theatre, 615 Texas Avenue, Houston, Texas, on May 19, 1994
at 10:00 a.m. For those of you who cannot be present at this 105th annual
meeting, we urge that you participate by indicating your choices on the enclosed
proxy and completing and returning it at your earliest convenience.
This booklet includes the notice of the meeting and the proxy statement,
which contains information about the Board and its committees and personal
information about each of the nominees for the Board. Other matters on which
action is expected to be taken during the meeting are also described.
It is important that your shares are represented at the meeting, whether or
not you are able to attend personally. Accordingly, you are requested to sign,
date and mail promptly the enclosed proxy in the envelope provided.
On behalf of the Board of Directors, thank you for your cooperation and
continued support.
/s/ JAMES L. PATE /s/ J. HUGH LIEDTKE
James L. Pate J. Hugh Liedtke
President and Chief Chairman of the Board
Executive Officer
1
<PAGE> 5
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 19, 1994
TO THE SHAREHOLDERS OF
PENNZOIL COMPANY:
The annual meeting of shareholders of Pennzoil Company will be held at the
Alley Theatre, 615 Texas Avenue, Houston, Texas, on Thursday, May 19, 1994 at
10:00 a.m., Houston time, for the following purposes:
1. To elect three directors.
2. To approve the appointment of Arthur Andersen & Co. as independent
public accountants for 1994.
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors has fixed the close of business on March 31, 1994 as
the record date for determining shareholders entitled to notice of and to vote
at the meeting.
You are cordially invited to attend the meeting in person. Even if you plan
to attend the meeting, however, you are requested to mark, sign, date and return
the accompanying proxy as soon as possible.
By Order of the Board of Directors
Linda F. Condit
Corporate Secretary
April 12, 1994
Pennzoil Place, P.O. Box 2967
Houston, Texas 77252-2967
2
<PAGE> 6
(LOGO)
PENNZOIL PLACE - P.O. BOX 2967
HOUSTON, TEXAS 77252-2967
(713) 546-4000
PROXY STATEMENT
This Proxy Statement and the accompanying proxy card are being mailed to
shareholders beginning on or about April 12, 1994. They are furnished in
connection with the solicitation by the Board of Directors of Pennzoil Company
(the "Company") of proxies from the holders of the Company's common stock
("Common Stock") for use at the annual meeting of shareholders to be held at the
time and place and for the purposes set forth in the accompanying notice. In
addition to the solicitation of proxies by mail, proxies may also be solicited
by telephone, telegram or personal interview by regular employees of the
Company. The Company has retained D. F. King & Co., Inc. to solicit proxies at a
fee estimated not to exceed $10,000 plus reasonable expenses. The Company will
pay all costs of soliciting proxies. The Company will also reimburse brokers or
other persons holding stock in their names or in the names of their nominees for
their reasonable expenses in forwarding proxy material to beneficial owners of
stock.
All duly executed proxies received prior to the meeting will be voted in
accordance with the choices specified thereon. As to any matter for which no
choice has been specified in a duly executed proxy, the shares represented
thereby will be voted FOR the election as directors of the nominees listed
herein, FOR approval of Arthur Andersen & Co. as the Company's independent
public accountants and in the discretion of the persons named in the proxy in
connection with any other business that may properly come before the meeting. A
shareholder giving a proxy may revoke it at any time before it is voted at the
meeting by filing with the Corporate Secretary an instrument revoking it, by
delivering a duly executed proxy bearing a later date or by appearing at the
meeting and voting in person.
As of March 31, 1994, the record date for determining shareholders entitled
to vote at the meeting, the Company had outstanding and entitled to vote
45,964,031 shares of Common Stock. Each share entitles the holder to one vote on
each matter submitted to a vote of shareholders and to cumulative voting in the
election of directors. The requirement for a quorum at the meeting is the
presence in person or by proxy of holders of a majority of the outstanding
shares of Common Stock. In cumulative voting for directors, each shareholder is
entitled to a number of votes equal to the number of shares held multiplied by
the number of directors to be elected; the shareholder may cast all such votes
for a single director or may cast them for any or all of the nominees in any
manner the shareholder chooses. Information regarding the vote required for
approval of particular matters is set forth in the discussion of those matters
appearing elsewhere in this Proxy Statement.
The Annual Report to Shareholders, including financial statements, for the
year ended December 31, 1993 has been mailed to all shareholders. The Annual
Report is not a part of the proxy solicitation material.
3
<PAGE> 7
I ELECTION OF DIRECTORS
Three directors are to be elected. The names of Messrs. Howard H. Baker,
Jr., Harry H. Cullen and James L. Pate will be placed in nomination, and the
persons named in the proxy will vote in favor of such nominees unless authority
to vote in the election of directors is withheld. Each nominee is currently a
director of the Company. The term of office for the directors to be elected will
be a term expiring on the date of the annual meeting in 1997 (or until their
respective successors are duly elected and qualified).
The persons named in the proxy may act with discretionary authority in the
event of cumulative voting or if any nominee should become unavailable for
election, although management is not presently aware of any circumstances likely
to render any nominee unavailable or likely to result in the exercise of
discretionary authority with respect to cumulative voting. There are no
conditions precedent to the exercise of cumulative voting. The proxies being
solicited by the Board of Directors do not provide a means whereby express
cumulative voting instructions can be given on the proxy. Accordingly, in order
to vote cumulatively (other than through discretionary authority given pursuant
to management's proxy), a shareholder would need to vote by ballot at the
meeting. In accordance with the Company's by-laws, the three directors will be
elected by a plurality of the votes cast.
NOMINEES -- The following summaries set forth information concerning the
three nominees for election as directors at the meeting, including each
nominee's age, position with the Company, if any, and business experience during
the past five years.
<TABLE>
<CAPTION>
Name, age and business experience
---------------------------------
<S> <C>
{PHOTO} HOWARD H. BAKER, JR. has been a partner with the law firm of Baker,
Worthington, Crossley, Stansberry & Woolf since 1988. From 1987 to
1988, he was Chief of Staff to the President of the United States. Mr.
Baker also served three terms as a member of the United States Senate
and was Senate Majority Leader from 1981 to 1985 and Minority Leader
from 1977 to 1981. He has served as a director of the Company since
1991. Mr. Baker is also a director of Federal Express Corporation,
United Technologies Corporation and WMX Technologies, Inc. He is 68
years of age and lives in Huntsville, Tennessee.
{PHOTO} HARRY H. CULLEN has been engaged for more than the past five years in
oil and gas exploration and production. He has served as a director of
the Company since 1992 and is a member of the Compensation and
Executive Committees of the Board. Mr. Cullen is also a director of
Cullen Center Bank & Trust. He is 58 years of age and lives in
Houston.
{PHOTO} JAMES L. PATE has been President and Chief Executive Officer of the
Company since March 1990. He served as Chief Operating Officer of the
Company from February 1990 to March 1990, Executive Vice President of
the Company from July 1989 to March 1990 and Senior Vice President --
Finance and Treasurer of the Company prior thereto. Mr. Pate has
served as a director of the Company since 1989, is Chairman of the
Finance Committee of the Board and is a member of the Executive
Committee of the Board. He is 58 years of age and lives in Houston.
</TABLE>
4
<PAGE> 8
DIRECTORS WITH TERMS EXPIRING IN 1995 AND 1996 -- The following summaries
set forth information concerning the seven directors of the Company whose
present terms of office will continue until 1995 or 1996, including each
director's age, position with the Company, if any, and business experience
during the past five years.
<TABLE>
<CAPTION>
Name, age and business experience
---------------------------------
<S> <C>
{PHOTO} W. J. BOVAIRD has been President and Chief Executive Officer of The
Bovaird Supply Company, a distributor of oil and gas well supplies,
for more than the past five years. Mr. Bovaird has served as a
director of the Company since 1972 and is a member of the Finance
Committee of the Board. He is 69 years of age and lives in Tulsa,
Oklahoma. Mr. Bovaird's current term as a director of the Company
expires in 1995.
{PHOTO} W. L. LYONS BROWN, JR. has served as Chairman of the Board of
Brown-Forman Corporation, a major diversified producer and marketer of
fine quality consumer products, for more than the past five years. He
was also Chief Executive Officer of Brown-Forman Corporation from 1975
until 1993. He has served as a director of the Company since 1991 and
is a member of the Audit Committee of the Board. He is 57 years of age
and lives in Prospect, Kentucky. Mr. Brown's current term as a
director of the Company expires in 1995.
{PHOTO} ERNEST H. COCKRELL has been engaged for more than the past five years
in oil and gas exploration and production. He has served as a director
of the Company since 1978 and is Chairman of the Compensation
Committee and a member of the Audit and Executive Committees of the
Board. Mr. Cockrell is also a director of Southwest Bank of Texas. He
is 48 years of age and lives in Houston. Mr. Cockrell's current term
as a director of the Company expires in 1995.
{PHOTO} ALFONSO FANJUL has been Chairman of the Board and Chief Executive
Officer of Flo-Sun Incorporated (sugar and real estate) for more than
the past five years. He is also Chairman of the Board and Chief
Executive Officer of Okeelanta Corporation (sugar) and President and
Chief Executive Officer of Central Romana Corporation, Ltd. (sugar,
real estate and cattle). Mr. Fanjul has served as a director of the
Company since 1984 and is a member of the Compensation Committee of
the Board. Mr. Fanjul is also a director and Chairman of the Executive
Committee of FAIC Securities, Inc and a director of FPL Group, Inc. He
is 56 years of age and lives in Palm Beach, Florida. Mr. Fanjul's
current term as a director of the Company expires in 1996.
</TABLE>
5
<PAGE> 9
<TABLE>
<CAPTION>
Name, age and business experience
---------------------------------
<S> <C>
{PHOTO} BERDON LAWRENCE has been President of Hollywood Marine, Inc., a Gulf
Coast operator of tank barges and tow boats handling petrochemical and
petroleum products, for more than the past five years. Mr. Lawrence
has served as a director of the Company since 1990 and is a member of
the Executive Committee of the Board. He is 51 years of age and lives
in Houston. Mr. Lawrence's current term as a director of the Company
expires in 1996.
{PHOTO} BRENT SCOWCROFT is a consultant on national and international security
affairs. From 1989 to 1993, he was Assistant to the President of the
United States for National Security Affairs. He has served as a
director of the Company since 1993. Mr. Scowcroft is also a director
of Northrup Corporation and a member of the board of trustees of the
Rand Corporation. He is 69 years of age and lives in Bethesda,
Maryland. Mr. Scowcroft's current term as a director of the Company
expires in 1996.
{PHOTO} CYRIL WAGNER, JR. has been a partner in Wagner & Brown, a firm
involved in oil and gas exploration and production, for more than the
past five years. He has served as a director of the Company since 1992
and is Chairman of the Audit Committee of the Board. Mr. Wagner is
also a director of Texas Commerce Bancshares, Inc. He is 60 years of
age and lives in Midland, Texas. Mr. Wagner's current term as a
director of the Company expires in 1996.
</TABLE>
RETIRING DIRECTORS -- Messrs. Douglas J. Bourne, Allen H. Carruth, C. W.
Flint, Jr., Baine P. Kerr and J. Hugh Liedtke will retire as directors of the
Company effective as of the annual meeting of shareholders on May 19, 1994.
BOARD ORGANIZATION AND MEETINGS -- The members of the Audit Committee and
the Compensation Committee of the Board of Directors indicated in the above
summaries are not employees of the Company. The Audit Committee of the Board
recommends the appointment of independent public accountants to conduct audits
of the Company's financial statements, reviews with the independent accountants
the plan and results of the auditing engagement, approves other professional
services provided by the independent accountants and evaluates the independence
of the accountants. The Audit Committee also reviews the scope and results of
the Company's procedures for internal auditing and the adequacy of the Company's
system of internal accounting controls. The Compensation Committee approves, or
in some cases recommends to the Board, remuneration arrangements and
compensation plans involving the Company's directors, executive officers and
certain other employees whose compensation exceeds specified levels. The
Compensation Committee also acts on the granting of stock options and the
granting of conditional stock units under the Company's stock option plans and
conditional stock award programs. The Board does not have a standing nominating
committee or other committee performing a similar function.
6
<PAGE> 10
During 1993, the Board of Directors held 7 meetings. During 1993, the Audit
Committee met 2 times and the Compensation Committee met 4 times. During 1993,
all members of the Board attended at least 75% of the total of all Board
meetings and applicable committee meetings.
DIRECTOR REMUNERATION -- Each director, other than a regularly employed
officer of the Company, receives a director's fee of $20,000 per annum and a
committee fee of $2,000 per committee per annum for service on the Audit,
Executive, Finance and Compensation Committees. Each such director also receives
an additional fee of $1,000 for each Board, Executive Committee or other
committee meeting attended. All directors are reimbursed for their travel and
other expenses involved in attendance at Board and committee meetings. In
addition, Mr. Scowcroft received $100,000 in remuneration for services as a
director consulting on special international projects.
SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS -- The following tabulation
sets forth the shares of Common Stock of the Company beneficially owned directly
or indirectly as of March 1, 1994 (i) by the Company's nominees for director,
continuing directors, retiring directors, chief executive officer and four other
most highly compensated executive officers and (ii) by all the foregoing and
other current executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP(1)
---------------------- PERCENTAGE
NAME DIRECT OTHER OF CLASS
---- ------- ------ ----------
<S> <C> <C> <C>
David P. Alderson, II...................... 22,401 -- *
Howard H. Baker, Jr........................ 1,000 -- *
Douglas J. Bourne.......................... 7,342 -- *
W. J. Bovaird.............................. 6,535 -- *
W. L. Lyons Brown, Jr...................... 2,500 1,821 *
Allen H. Carruth........................... 2,500 1,500 *
Ernest H. Cockrell......................... 151,515 10,000 *
Harry H. Cullen............................ 14,115 3,500 *
Alfonso Fanjul............................. 200 30,300 *
C. W. Flint, Jr............................ 1,748 15,000 *
Thomas M. Hamilton......................... 13,822 -- *
Baine P. Kerr.............................. 130,508 -- *
Berdon Lawrence............................ 5,000 -- *
J. Hugh Liedtke............................ 151,316 -- *
Mark A. Malinski........................... 20,725 -- *
James L. Pate.............................. 84,812 -- *
Brent Scowcroft............................ 500 -- *
James W. Shaddix........................... 28,634 -- *
Cyril Wagner, Jr........................... 13,900 -- *
All the above and other current executive
officers as a group (25 persons)......... 759,078 62,121 1.8%
</TABLE>
- ------------
(1) Pursuant to regulations of the Securities and Exchange Commission (the
"SEC"), securities must be listed as beneficially owned by a person who
directly or indirectly holds or shares the power to vote or dispose of the
securities, whether or not the person has any economic interest in the
securities. In addition, a person is deemed a beneficial owner if he has the
right to acquire beneficial ownership within 60 days, including upon
exercise of a stock option or conversion of a convertible security. Shares
of Common Stock listed under the "Direct" column include those owned by the
individuals and members of their immediate families (or held by any of them
in family trusts). Securities owned by certain family members are included
in the foregoing table even in certain instances where the possession or
sharing of voting or dispositive power is not acknowledged. The "Direct"
column also includes shares subject to stock options exercisable within 60
days (19,973 for Mr. Alderson, 11,333 for Dr. Hamilton, 18,223 for Mr.
Malinski, 66,550 for Mr. Pate, 21,996 for Mr. Shaddix and 218,407 for all
the above and other current executive officers as a group). Shares shown
under the "Other" column include ownership through corporations or
subsidiaries of corporations in which the named individuals are officers or
directors, partnerships in which the named individuals are partners or
charitable foundations in which the named individuals are officers,
directors or trustees.
* Less than 1%.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT -- Section 16(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires the
Company's directors and executive officers to file with the SEC and the New York
Stock Exchange initial reports of ownership and reports of changes in ownership
of Common Stock. Based solely on a review of the copies of such reports
7
<PAGE> 11
furnished to the Company and written representations that no other reports were
required, the Company believes that all its directors and officers during 1993
complied on a timely basis with all applicable filing requirements under Section
16(a) of the Exchange Act, except that Mr. Fanjul, a director of the Company,
did not timely file a Form 4 (which was subsequently filed) for an acquisition
of 300 shares of Common Stock by a corporation of which he is a controlling
shareholder.
EXECUTIVE COMPENSATION -- Set forth below is information regarding the
compensation of the Company's Chief Executive Officer (the "CEO") and the other
four most highly compensated executive officers of the Company (together with
the CEO, the "named officers").
Summary Compensation Table. The summary compensation table set forth below
contains information regarding the compensation of each of the named officers
for services rendered in all capacities during 1991, 1992 and 1993.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
---------------------
ANNUAL COMPENSATION AWARDS
-------------------------------- ---------------------
SECURITIES
OTHER UNDERLYING ALL
ANNUAL RESTRICTED OPTIONS/ OTHER
NAME AND COMPEN- STOCK SARS COMPENSA-
PRINCIPAL POSITION YEAR SALARY BONUS SATION(1)(2) AWARDS(3) (SHARES)(4) TION(1)(5)
------------------ ---- -------- -------- ------------ --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
James L. Pate 1993 $592,500 $385,000 $ -- $200,000 55,000 $69,700
President and Chief 1992 552,900 267,500 -- 218,700 36,000 72,000
Executive Officer 1991 500,000 150,000 -- 221,100 44,000 --
David P. Alderson, II 1993 $217,300 $125,000 $ -- $ 55,000 9,630 $24,500
Group Vice President -- 1992 203,300 95,000 -- 56,400 10,120 22,300
Finance and Treasurer 1991 183,500 37,100 -- 59,400 11,500 --
Thomas M. Hamilton 1993 $332,700 $125,000 $ -- $ 75,000 14,670 $28,900
Group Vice President -- 1992 327,100 110,000 -- 101,500 15,000 1,700
Oil and Gas(6) 1991 4,800 -- -- -- 9,500 --
Mark A. Malinski 1993 $217,500 $115,000 $ -- $ 55,000 9,630 $23,700
Group Vice President -- 1992 204,600 98,000 -- 56,400 10,120 22,100
Accounting and Controller 1991 181,200 37,000 -- 59,400 11,500 --
James W. Shaddix 1993 $223,500 $115,000 $ -- $ 55,000 9,850 $25,200
General Counsel 1992 219,200 100,000 -- 56,400 10,790 24,600
1991 197,100 40,000 -- 59,400 11,500 --
</TABLE>
- ---------------
(1) In accordance with transitional provisions under the SEC's compensation
disclosure regulations, amounts of Other Annual Compensation and All Other
Compensation are not presented for 1991.
(2) Excludes perquisites and other benefits because the aggregate amounts
thereof do not exceed the lesser of $50,000 or 10% of the total of annual
salary and bonus reported for any named officer.
(3) Amounts shown under Restricted Stock Awards are the aggregate market value
on January 1 of the year indicated of shares of Common Stock underlying
common stock units awarded on such date under the Company's Conditional
Stock Award Programs. Each common stock unit awarded is to be distributed in
the form of a share of Common Stock at the end of a five-year period,
provided certain conditions as to continued employment are met. In the
interim, participants receive dividend equivalents on their common stock
units as though they were shares of Common Stock. The aggregate common stock
units held at the end of 1993 and their values were 14,230 units, $759,500
for Mr. Pate; 4,000 units, $213,500 for Mr. Alderson; 3,300 units, $176,100
for Dr. Hamilton; 4,000 units, $213,500 for Mr. Malinski; and 4,000 units,
$213,500 for Mr. Shaddix. Such values are calculated by multiplying the
closing market price of the Common Stock on December 31, 1993 ($53.375) by
the number of common stock units held at such date.
(4) All options were granted in tandem with stock appreciation rights, but there
is currently in effect a moratorium on the exercise of any such stock
appreciation rights.
(5) Amounts shown under All Other Compensation include (i) amounts contributed
or accrued for 1993 under the Company's Savings and Investment Plan and
related supplemental agreements ($64,200 for Mr. Pate, $24,100 for Mr.
Alderson, $27,600 for Dr. Hamilton, $23,400 for Mr. Malinski and $24,500 for
Mr. Shaddix) and (ii) amounts paid by the Company in 1993 for certain
premiums on term life insurance ($5,500 for Mr. Pate, $400 for Mr. Alderson,
$1,300 for Dr. Hamilton, $300 for Mr. Malinski and $700 for Mr. Shaddix).
(6) Dr. Hamilton became Group Vice President -- Oil and Gas of the Company in
December 1991.
8
<PAGE> 12
Option/SAR Grants. Shown below is further information on grants of stock
options during 1993 to the named officers, which are reflected in the Summary
Compensation Table on page 8.
OPTION/SAR GRANTS IN 1993
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------
NUMBER OF
SECURITIES PERCENT
UNDERLYING OF TOTAL
OPTIONS/SARS OPTIONS/SARS
GRANTED GRANTED TO EXERCISE
IN EMPLOYEES PRICE GRANT
1993 IN (PER EXPIRATION DATE
NAME (SHARES)(1) 1993 SHARE)(2) DATE VALUE(3)
---- ----------- ------------ --------- ---------- --------
<S> <C> <C> <C> <C> <C>
James L. Pate..................... 55,000 12.6% $55.25 12/9/2003 $520,800
David P. Alderson, II............. 9,630 2.2% $55.25 12/9/2003 $ 91,200
Thomas M. Hamilton................ 14,670 3.4% $55.25 12/9/2003 $138,900
Mark A. Malinski.................. 9,630 2.2% $55.25 12/9/2003 $ 91,200
James W. Shaddix.................. 9,850 2.3% $55.25 12/9/2003 $ 93,300
</TABLE>
- --------------
(1) All the above options were granted on December 9, 1993 and become
exercisable in 33 1/3% increments on each of the first, second and third
anniversaries of the date of grant. Such options were granted in tandem with
stock appreciation rights, but there is currently in effect a moratorium on
the exercise of any such stock appreciation rights. All the above options
were granted pursuant to the Company's 1992 Stock Option Plan.
(2) The option exercise price is 100% of the average of the high and low trading
prices of the Common Stock on the New York Stock Exchange on the date of
grant (December 9, 1993) and may be paid in cash or previously owned shares
of Common Stock.
(3) Based on the Black-Scholes option pricing model adapted for use in valuing
executive stock options. The actual value, if any, that may be realized will
depend on the excess of the underlying stock price over the exercise price
on the date the option is exercised, so that there is no assurance the value
realized will be at or near the value estimated by the Black-Scholes model.
The estimated values under the model are based on the following assumptions:
expected volatility based on a 3-year historical volatility of month-end
Common Stock prices (22.7%), a risk-free rate of return based on a 10-year
zero-coupon U.S. Treasury rate at the time of grant (6.1%), an average of
dividend yields on Common Stock for prior 3 years (5.1%), an option exercise
period of 10 years (with the exercise occurring at the end of such period)
and an adjustment for the risk of forfeiture equal to 3% per year over the
3-year vesting period.
Option Exercises and 1993 Year-End Option/SAR Holdings. Shown below is
information with respect to unexercised options to purchase Common Stock granted
in 1993 and prior years to the named officers and held by them at December 31,
1993. None of the named officers exercised options or tandem stock appreciation
rights in 1993.
YEAR-END 1993 OPTION/SAR HOLDINGS
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1993 DECEMBER 31, 1993(1)
--------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
James L. Pate.......................... 59,883 93,667 $30,000 $60,000
David P. Alderson, II.................. 18,139 20,211 $ 8,400 $16,900
Thomas M. Hamilton..................... 11,333 27,837 $12,500 $25,000
Mark A. Malinski....................... 16,389 20,211 $ 8,400 $16,900
James W. Shaddix....................... 20,162 20,878 $ 9,000 $18,000
</TABLE>
- ---------------
(1) The excess, if any, of the market value of Common Stock at December 31, 1993
($53.375) over the option exercise price.
Retirement Plan and Supplemental Agreements. The Company has a
tax-qualified retirement plan applicable to salaried employees generally. The
retirement plan generally provides for annual retirement benefits approximating
between 1.1% and 1.6% of a calculated career average compensation multiplied by
the number of years of service. The annual benefits under the retirement plan
are net of
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<PAGE> 13
certain offsets based on social security benefits and reflect limitations
mandated by the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), on the maximum amounts payable. The Company has agreements with
Messrs. Pate, Alderson, Hamilton, Malinski and Shaddix to supplement their
benefits under the tax-qualified retirement plan in the event and to the extent
the aforesaid limitations on annual benefits mandated by ERISA reduce the
retirement benefits that otherwise would be payable under such plan. The Company
also has a deferred compensation agreement with Mr. Pate designed to bring his
total annual retirement benefits from all sources (including social security and
benefits from prior employers) to 57% of his annual salary rate at retirement.
This percentage is comparable to the proportion that retirement benefits
provided by the Company's regular retirement plan (and social security) for the
majority of the Company's employees bear to remuneration at the time of
retirement. In addition, the deferred compensation agreement provides for
continuation of medical expense reimbursement plan coverage for the participant,
his spouse and dependents. Based on salaries as of December 31, 1993, estimated
annual benefits payable upon retirement at normal retirement age (65) from all
sources would be $342,000 for Mr. Pate, $117,200 for Mr. Alderson, $84,700 for
Dr. Hamilton, $134,600 for Mr. Malinski and $112,700 for Mr. Shaddix.
Employment Contracts and Termination of Employment and
Change-in-Control Arrangements. Dr. Hamilton became Group Vice President -- Oil
and Gas of the Company in December 1991. In order to secure the services of Dr.
Hamilton as an executive officer of the Company, the Company and Dr. Hamilton
entered into as of December 11, 1991 an employment agreement having a term of
five years. Under the terms of the agreement, Dr. Hamilton is entitled to
salary compensation of not less than $315,000 per annum and participation in
the Company's stock option plans and conditional stock award program and
participation or eligibility for participation in all other benefit plans,
programs or practices generally applicable to salaried employees and to those
special benefit programs, plans and practices applicable to executive officers,
in each case at benefit levels consistent with those of similarly situated
employees. In addition, Dr. Hamilton's employment agreement provides for his
participation in a performance incentive plan for executives in the Company's
oil and gas subsidiaries.
The Company maintains an Executive Severance Plan for selected employees
providing for severance benefits upon a termination of employment for reasons
other than cause within two years after a change in control of the Company. The
Board of Directors and the Compensation Committee must act to designate
participants in the Plan and benefits are payable only in the event there occurs
each of (i) a change in control of the Company, (ii) a designation by the Board
of Directors and the Compensation Committee that the employee is likely to be
adversely affected by the change in control and (iii) a subsequent termination
of employment within two years for reasons other than cause. Benefits are
prorated if the employee is within three years of normal retirement age (65) at
termination of employment. Participants in the plan include Mr. Alderson, Dr.
Hamilton, Mr. Malinski and Mr. Shaddix. Such severance benefits generally
include a payment of up to the present value of three times a participant's
annual salary.
The Company also has agreements with Messrs. Pate, Alderson, Hamilton,
Malinski and Shaddix that provide for the acceleration of benefits in the event
of the occurrence, as determined by the Board of Directors, of a change in
control of the Company that has a reasonable likelihood of causing the
forfeiture of benefits that such persons otherwise would have earned by
depriving them of the opportunity to fulfill applicable service and age
prerequisites. The agreements provide that the covered persons will receive, in
the event of such a change in control but without regard to any termination of
employment, cash payments equal to the appreciated value of all unvested,
nonqualified stock options. The agreements also provide, in the event of
termination of employment of a covered employee within six months following such
a change in control, (a) for cash payments generally equal to the unvested
amounts under the Company's Savings and Investment Plan (as well as the
agreements providing for reimbursement of benefits that would be payable under
such Plan but for limitations imposed by ERISA) forfeitable on the date of
termination of employment, (b) for continuation of life insurance and, in
certain instances, medical expense coverage for one year, (c) for cash payments
equal to the discounted value of benefits otherwise payable under the deferred
compensation
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<PAGE> 14
agreements referred to above under "-- Retirement Plan and Supplemental
Agreements," based on an assumed continuation of employment until age 65 and
actuarially determined life expectancies, (d) in certain instances, for cash
payments in settlement of long-term medical benefits otherwise payable and (e)
for cash payments equal to the discounted value of benefits otherwise payable
under a supplemental disability plan and a salary continuation plan. Deferred
compensation agreements and certain supplemental benefit agreements under which
payments are currently being made have been supplemented by the Company to
provide, upon a change in control of the Company, for the cash-out of
retirement, spouse and medical benefits. In addition, the Company's conditional
stock award programs provide for acceleration of benefits upon a change in
control. The dollar amounts that would be payable under the agreements and plan
described in this and the preceding paragraph and the other plans providing for
payments triggered by a change in control, exclusive of amounts attributable to
benefits already vested, would be (as of December 31, 1993) $3,230,800 for Mr.
Pate, $813,000 for Mr. Alderson, $1,095,200 for Dr. Hamilton, $813,000 for Mr.
Malinski and $827,000 for Mr. Shaddix. In addition, a change in control would
result in the accelerated payment of benefits already earned and vested over a
period of years in the amounts of $1,323,500 for Mr. Pate, $37,400 for Mr.
Alderson, $31,100 for Dr. Hamilton, $31,200 for Mr. Malinski and $51,100 for Mr.
Shaddix.
Other Matters. In 1977, the Board of Directors formally adopted and
confirmed a policy relating to the use of Company facilities. In certain
circumstances, the policy requires use by officers of Company facilities in
order to increase the time available for performance of Company business and for
reasons of security and other corporate purposes. Under applicable federal
income tax regulations, the Company imputes income to employees of the Company
for federal income tax purposes with respect to their use of Company facilities
when and to the extent required by the regulations. When the policies and
procedures adopted by the Board have been duly observed, it is contemplated that
the Company will hold employees harmless from any tax (including penalty and
interest) sought to be imposed on a basis in excess of the amount of income
imputed by the Company as described above. To date, no amounts have been paid or
requested to reimburse employees for such a tax.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION -- The members
of the Compensation Committee of the Board are Messrs. Cockrell, Cullen and
Fanjul. Messrs. Cockrell, Cullen and Fanjul are nonemployee directors.
Mr. Kerr served on the Compensation Committee until December 1993. Mr. Kerr
is currently Chairman of the Executive Committee of the Board and served as
President of the Company from 1977 until 1985. In December 1993, a subsidiary of
the Company purchased 82% of the outstanding 32% interest in Siberian American
Limited-Liability Company ("Sallco") not owned by the Company, pursuant to a
cash tender offer made to all minority shareholders. Sallco, now 94% owned by
the Company, and another Company subsidiary own an aggregate 50% interest in a
Russian joint venture engaged in the development of the West Mogotlorsk oil
field in western Siberia. The selling shareholders included adult family members
of Mr. Kerr and Mr. Liedtke, accounting for ownership of approximately 5% and
2%, respectively, of Sallco, and the aggregate consideration received amounted
to $531,900 and $221,800, respectively.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION --
Compensation Policy. The Company's executive compensation program is
designed to help the Company attract, motivate and retain the executive talent
the Company believes is necessary in order to maximize its return to
shareholders. Toward that end, the Compensation Committee attempts to provide
the Company's executives with a total compensation package that, at expected
levels of performance, is competitive with those provided to executives who hold
comparable positions or have similar qualifications in comparable companies. The
Compensation Committee determines competitive levels of compensation for
executive positions in comparable companies based on information drawn from
proxy statements for other companies included in the Standard & Poor's
Oil-Integrated Domestic Index (which is the index used for purposes of
comparison of cumulative total shareholder return under "Performance Graphs"
below) and from compensation surveys and compensation consultants. The Company's
total executive compensation program includes base salary, annual incentives,
long-
11
<PAGE> 15
term incentives and other benefits described below under "-- Other Plans and
Benefits." The Compensation Committee's philosophy is to place more emphasis on
performance-based incentive pay and less emphasis on base salary, in order to
tie executive compensation more closely to long-term returns to shareholders.
Accordingly, the Compensation Committee targets base salary rates at the market
median of comparable companies, while annual incentive opportunities as well as
standards of performance targets are established above the market median. For
1993, long-term incentive grant levels were targeted at the market median of
comparable companies.
The Company's incentive plans are designed to ensure that incentive
compensation varies based on the financial performance of the Company. However,
some of the Company's incentive payouts are based on annual performance while
other incentive values are based on long-term (i.e., multi-year) performance.
Also, business unit and individual performance are considered by the
Compensation Committee in administering the Company's incentive plans. As a
result, the total compensation levels for an executive in any given year may not
reflect the Company's overall bottom-line financial performance in that year.
The Compensation Committee evaluates from time to time (at least annually)
both the aggregate compensation levels and the relative weighting of component
compensation, including base salary, annual incentives and long-term incentives.
During 1994, the Compensation Committee will review the Company's executive
compensation program with respect to qualifying compensation for deductibility
under Section 162(m) of the Internal Revenue Code.
Base Salary Program. The Company's base salary program is based on a
philosophy of providing salaries that are competitive with the market for
comparable companies. Base salary levels are also based on each individual
employee's performance over time and each individual's role in the Company.
Consequently, employees with higher levels of sustained performance over time
and/or employees assuming greater responsibilities will be paid correspondingly
higher salaries. Executive salaries are reviewed annually based on a variety of
factors, including individual performance, general levels of market salary
increases and the Company's overall financial results. All salary increases are
granted within a pay-for-performance framework. In 1993, the base salary of the
Company's CEO, James L. Pate, was increased from $535,000 to $600,000. This
increase was based on the above factors as well as on a survey of median
salaries for chief executive officers of comparable companies.
Annual Incentive Plan. The Company's annual incentive plan is intended to
reward and motivate key employees, to focus on company, business unit and
individual performance and to provide competitive cash opportunities to plan
participants. As a pay-for-performance plan, incentive awards are paid annually
based on the achievement of performance objectives for the year.
At the beginning of 1993, the Compensation Committee adopted a new annual
incentive plan for executives. Under the plan, a range of potential annual
incentive awards is developed for each plan participant. These annual incentive
award ranges are targeted above the market median (i.e., the market 55th
percentile) of comparable companies. The standards of performance used in the
annual incentive plan are also targeted above the market median of comparable
companies.
For 1993, the corporate annual incentive plan objectives included (i) a
ratio of earnings before interest, taxes, depreciation and amortization
("EBITDA") to revenue compared to a predetermined performance measure for the
1993 calendar year and (ii) a return on average beginning and ending equity
relative to the Company's industry peer group included in the Standard & Poor's
Oil-Integrated Domestic Index from September 30, 1992 to September 30, 1993.
Each of these objectives was weighted 50% in 1993. A funding pool for paying
annual incentives was created based on corporate performance measured against
these objectives. Individual awards paid from the funding pool were based on
qualitative and quantitative assessment of business unit and individual
performance and included such factors as cash flow, market share, and
contributions to operating income. However, these assessments were not linked to
any specific formula. The specific objectives and standards used in the plan are
reviewed annually by the Compensation Committee in order to ensure consistency
with
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<PAGE> 16
the Company's business strategy and prevailing market conditions. Amounts
awarded under the 1993 Annual Incentive Plan are reported in the "Bonus" column
of the Summary Compensation Table on page 8.
Mr. Pate's annual incentive award for 1993 was $385,000. This award was
slightly below the targeted level, since the Company performed below target on
the EBITDA to revenue objective and slightly above target on the return on
average shareholders equity objective relative to the Company's industry peer
group included in the Standard & Poor's Oil-Integrated Domestic Index.
Long-Term Incentive Plans. The Company's long-term incentive plans are
stock-based in nature (with the exception of the oil and gas performance
incentive plan discussed below). Stock-based long-term compensation is designed
to provide benefits that are correlated with the Company's stock price, thereby
directly aligning compensation incentives with shareholder value. The
stock-based plans consist of stock option plans and a conditional stock award
program.
Under the Company's stock option plans, options are granted, generally on
an annual basis, at an option price equal to 100% of the average of the high and
low trading prices of the Common Stock on the New York Stock Exchange on the
date of grant. Options granted in 1993 have terms of ten years and become
exercisable in one-third annual increments beginning one year after the date of
grant. In 1993, options were generally granted to the Company's executive
officers in amounts having imputed grant-date values proportionate to their base
salaries (the applicable percentage being higher for Mr. Pate than for the other
executive officers), but also taking into account individual performance in a
qualitative fashion. (The imputed grant-date values were determined using an
option pricing model and various assumptions and do not represent amounts the
recipients could then realize.)
Value ultimately realized by the participant is, of course, proportionate
to appreciation in the market price of the Common Stock over the grant date
price, assuming the vesting requirements are satisfied. Mr. Pate was granted an
option to purchase 55,000 shares at $55.25 per share in December 1993. The
December 1993 option grants for the executive officers generally had a higher
imputed grant-date value in relation to base salaries than in prior years, with
a corresponding decrease in the percentage of incentive compensation in the form
of conditional stock awards. In addition to reviewing market median data of
comparable companies in establishing long-term incentive awards, the
Compensation Committee also considers the size of past grants.
The Company's conditional stock award program provides for grants of common
stock units which result in the distribution to participants of one share of
Common Stock per unit at the end of a five-year vesting period. Dividend
equivalents are paid on a current basis during the five-year period. Conditional
stock units were granted in January 1993 to the Company's executive officers
generally in proportion to their base salaries. Mr. Pate's January 1993
conditional stock grant was 4,000 units. The conditional stock unit awards
effective in January 1994 (reportable in next year's proxy statement) will
comprise lower percentages of aggregate compensation, in keeping with the shift
in weighting of stock-based incentive compensation toward stock options.
Oil and Gas Performance Incentive Plan. In connection with the recruitment
in 1991 of a new senior management team for the Company's international oil and
gas exploration and development efforts, the Company established a performance
incentive plan intended to provide incentives and corresponding rewards to the
members of the oil and gas senior management team (which includes Dr. Hamilton)
for improvements beginning in December 1991 in cash flow and asset values of the
Company's oil and gas subsidiaries over the five-year term of the plan. Upon the
expiration of the plan (or an earlier sale or spin-off of oil and gas assets or
a change in control of the Company), interests in the performance incentive plan
will be cashed out by reference to a formula applicable to oil and gas
operations that equally weights improvements in cash flow and improvements in a
measured oil and gas reserve value, adjusted for increases in
receivables/payables balances and debt. Payouts will be based on a multiplier,
resulting in an aggregate payout of $5 million for each 100% improvement in cash
flow and/or for each 100% improvement in reserve value, with the aggregate
payout limited to $20 million. Benefits are to be payable in cash, although the
parties may agree to substitute Common Stock
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<PAGE> 17
for cash. No compensation under this plan was accrued or paid in 1993, and
accordingly no compensation under this plan for 1993 is reported in the
accompanying tables.
Other Plans and Benefits. The Company's executive officers participate in
several other compensation plans and benefit programs. These programs provide
benefits generally related to salary levels and length of service (as in the
case of retirement plan benefits, savings plan benefits, disability benefits and
death benefit coverages) or are independent of salary levels (such as medical
coverages). There is no specific performance-based relationship between benefits
under these plans and corporate performance (except that savings plan
contributions are invested in Common Stock).
This report is furnished by the members of the Compensation Committee of
the Board of Directors of Pennzoil Company.
Ernest H. Cockrell, Chairman
Harry H. Cullen
Alfonso Fanjul
March 17, 1994
14
<PAGE> 18
PERFORMANCE GRAPHS --
Five Years Ended December 31, 1993. The following performance graph
compares the cumulative total shareholder return on the Common Stock to the
cumulative total return of the Standard & Poor's 500 Stock Index and the
Standard & Poor's Oil-Integrated Domestic Index for the last five years. The
graph assumes that the value of the investment in the Common Stock and each
index was $100 at December 31, 1988 and that all dividends were reinvested on a
quarterly basis.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
[CHART]
Supplemental Information for Year Ended December 31, 1993. The following
supplemental performance graph shows the cumulative total shareholder return on
the Common Stock for the most recent twelve-month period ended December 31,
1993. As with the graph above, such return is compared to and calculated on the
same basis as the return on the Standard & Poor's 500 Stock Index and the
Standard & Poor's Oil-Integrated Domestic Index for the relevant period. The
graph assumes that the value of the investment in the Common Stock and each
index was $100 at December 31, 1992 and that all dividends were reinvested on a
quarterly basis.
COMPARISON OF TWELVE-MONTH CUMULATIVE TOTAL RETURN
[CHART]
15
<PAGE> 19
CERTAIN TRANSACTIONS CONCERNING CONTINUING DIRECTORS -- Mr. Baker is a
partner in the law firm of Baker, Worthington, Crossley, Stansberry & Woolf,
which represents the Company from time to time in connection with certain
matters pursuant to a retainer arrangement. Mr. Bovaird is the chief executive
officer and a stockholder of The Bovaird Supply Company, which sold oil field
equipment and supplies during 1993 in the ordinary course of business at
generally prevailing prices to the Company and its subsidiaries amounting to
$6,070,200.
CERTAIN TRANSACTIONS CONCERNING RETIRING DIRECTORS -- During 1993, the
Company paid $492,200 in customary fees and commissions at generally prevailing
rates to John L. Wortham & Son, a Houston insurance partnership in which Mr.
Carruth is a partner, for placement of the Company's insurance coverage with
various insurers. During 1993, the Company paid $261,400 for oil field
construction services provided in the ordinary course of business at generally
prevailing prices by a subsidiary of Flint Industries, Inc., of which Mr. Flint
is a director.
The Company, through subsidiaries, is an equal limited partner with an
affiliate of a large commercial bank holding company in several real estate
limited partnerships managed by VeriQuest Real Estate Services, Inc. and its
affiliate ("VeriQuest"). The partnerships own four office buildings and four
apartment complexes in the Houston metropolitan area. During 1993, the Company
contributed $168,000 to such partnerships as the Company's proportionate share
of funds for capital improvements and amortization of debt net of cash flow from
operations. During such period, the Company, directly and indirectly, also paid
$369,000 to VeriQuest (excluding amounts paid over to third party vendors and
net of reimbursements) representing the Company's share of costs of asset and
property management services, commissions and expenses (including the Company's
proportionate share of a salary of $250,000 to Larry A. Strickland, who is an
owner of VeriQuest). Mr. Strickland is married to a daughter of Mr. Liedtke.
Under the partnership agreements, after the limited partners fully recover their
entire investment (including a rate of return ranging from 10% to 13%), the
limited partners will be entitled to 50% to 75% of the net proceeds of such
partnerships, and VeriQuest will be entitled to the remainder.
For additional information, see "Compensation Committee Interlocks and
Insider Participation" above.
II APPROVAL OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon recommendation of its Audit Committee, has
approved and recommends the appointment of Arthur Andersen & Co. as independent
public accountants to conduct an audit of the Company's financial statements for
the year 1994. This firm has acted as independent public accountants for the
Company for many years.
Members of Arthur Andersen & Co. will attend the annual meeting and will be
available to respond to questions which may be asked by shareholders. Such
members will also have an opportunity to make a statement at the meeting if they
desire to do so.
The Board of Directors recommends that shareholders approve the appointment
of Arthur Andersen & Co. as independent public accountants. In accordance with
the Company's by-laws, approval of the appointment of independent public
accountants will require the affirmative vote of a majority of the shares of
Common Stock voted at the meeting. Accordingly, abstentions and broker non-votes
applicable to shares present at the meeting will not be included in the
tabulation of votes cast on this issue.
III OTHER BUSINESS
Management does not intend to bring any business before the meeting other
than the matters referred to in the accompanying notice. If, however, any other
matters properly come before the meeting, it is intended that the persons named
in the accompanying proxy will vote pursuant to discretionary authority granted
in the proxy in accordance with their best judgment on such matters.
16
<PAGE> 20
The discretionary authority includes matters that the Board of Directors does
not know are to be presented at the meeting by others.
ADDITIONAL INFORMATION
SECURITY OWNERSHIP OF CERTAIN SHAREHOLDERS -- The following table sets
forth information as to persons known to possess voting or dispositive power
over more than 5% of the Company's outstanding Common Stock.
<TABLE>
<CAPTION>
TITLE OF NAME AND ADDRESS OF NUMBER OF PERCENTAGE
CLASS BENEFICIAL OWNER SHARES OF CLASS
-------- ------------------- -------- ----------
<S> <C> <C> <C>
Common Stock Fayez Sarofim & Co.
and Fayez S. Sarofim 2,709,426 5.9%
Suite 2907
Two Houston Center
Houston, Texas 77010
Common Stock State Farm Mutual
Automobile Insurance Company 4,171,692 9.1%
One State Farm Plaza
Bloomington, Illinois 61710
Common Stock Wellington Management Company 3,992,800 8.7%
75 State Street
Boston, Massachusetts 02109
</TABLE>
The information in the foregoing table regarding Fayez Sarofim & Co. and
Fayez S. Sarofim is based on a filing made with the SEC reflecting ownership of
Common Stock as of December 31, 1993. Mr. Sarofim is the Chairman of the Board,
President and principal shareholder of Fayez Sarofim & Co., a registered
investment advisory firm. The filing states that the shares were acquired in the
ordinary course of business and not for the purpose of influencing control of
the Company. The filing indicates shared voting power for 2,066,734 shares of
Common Stock and shared dispositive power for 2,351,901 shares of Common Stock
in the case of Fayez Sarofim & Co., and shared voting power for 2,073,749 shares
of Common Stock and shared dispositive power for 2,358,916 shares of Common
Stock and sole voting and dispositive power for 350,510 shares of Common Stock
in the case of Mr. Sarofim.
Fayez Sarofim & Co. also acts as investment manager for a number of
employee retirement plans for the Company and its subsidiaries. The Company and
its subsidiaries paid Fayez Sarofim & Co. fees of approximately $348,600 during
1993 in the ordinary course of business for services as investment manager.
The information in the foregoing table regarding State Farm Mutual
Automobile Insurance Company ("State Farm") is based on a filing made with the
SEC reflecting ownership of Common Stock as of December 31, 1993. The filing
states that the shares of Common Stock were acquired in the ordinary course of
business and not for the purpose of influencing control of the Company. The
filing indicates sole voting and dispositive power for 4,171,692 shares of
Common Stock by State Farm and related entities.
The information in the foregoing table regarding Wellington Management
Company ("WMC") is based on a filing made with the SEC reflecting ownership of
Common Stock as of December 31, 1993. The filing states that the shares of
Common Stock were acquired in the ordinary course of business and not for the
purpose of influencing control of the Company. The filing indicates shared
voting power for 75,600 shares of Common Stock and shared dispositive power for
3,992,800 shares of Common Stock. The filing by WMC, an investment advisor,
indicates that shares of Common Stock reported as beneficially owned by WMC are
owned by investment advisory clients of WMC. One of such clients of WMC,
Vanguard/Windsor Funds, Inc., Vanguard Financial Center, Valley Forge,
Pennsylvania 19482, has also made a filing with the SEC reflecting ownership of
Common Stock as of December 31, 1993
17
<PAGE> 21
and reporting sole voting and shared dispositive power for 3,082,000 shares of
Common Stock that are included in the total amount reported in the foregoing
table for WMC.
SHAREHOLDER PROPOSALS FOR 1995 MEETING -- Proposals of shareholders
intended to be presented at the Company's 1995 annual meeting, and otherwise
eligible, must be received by the Company (directed to the Corporate Secretary
of the Company at the address indicated on the first page of this proxy
statement) no later than December 15, 1994 to be considered for inclusion in the
Company's proxy material and form of proxy relating to that meeting.
By Order of the Board of Directors
J. Hugh Liedtke
Chairman
April 12, 1994
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<PAGE> 22
{LOGO}
PENNZOIL PLACE - P.O. BOX 2967
HOUSTON, TEXAS 77252-2967
(713) 546-4000
<PAGE> 23
FORM 34-102 (1)
UNLESS A CONTRARY DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
FOR ALL THE DIRECTORS LISTED BELOW AND FOR ALL OTHER ITEMS.
SIGN BELOW.
P
R
O
X
Y
Signature_________________________________ Date _______________________, 1994
(If signing as Attorney, Administrator, Executor, Guardian, Trustee or
Corporate Officer, please add your title as such.)
(Do Not Separate)
PENNZOIL COMPANY
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS, ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD THURSDAY, MAY 19, 1994.
The undersigned hereby appoints David P. Alderson, II, Linda F. Condit
P and Mark A. Malinski, jointly and severally, proxies with full power of
substitution and resubstitution and with discretionary authority, to
R represent and to vote, in accordance with the instructions set forth below,
all shares of Common Stock which the undersigned is entitled to vote at the
O 1994 annual meeting of shareholders of Pennzoil Company, and any
adjournments thereof. In their discretion, the proxies may vote
X cumulatively for the election of directors (other than any for whom
authority to vote is withheld below) and upon such other business as may
Y properly come before the meeting.
1. ELECTION OF DIRECTORS: Nominees are Howard H. Baker, Jr., Harry H.
Cullen and James L. Pate. All nominees will serve for a term of 3
years.
(INSTRUCTION: To withhold authority to vote for an individual
nominee, strike a line through the nominee's name above.)
/ / FOR all nominees listed above, except as marked to the contrary
above
/ / WITHHOLD AUTHORITY to vote for all nominees listed above
2. TO APPROVE THE APPONTMENT OF ARTHUR ANDERSEN & CO. as the
independent public accountants of the Company.
/ / FOR / / AGAINST / / ABSTAIN
