<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D. C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarter Ended March 31, 1995 Commission File No. 1-5591
PENNZOIL COMPANY
(Exact name of registrant as specified in its charter)
Delaware 74-1597290
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Pennzoil Place, P.O. Box 2967
Houston, Texas 77252-2967
(Address of principal executive offices)
Registrant's telephone number, including area code:
(713) 546-4000
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
Number of shares outstanding of each class of common stock,
as of latest practicable date, April 28, 1995:
Common stock, par value $0.83-1/3 per share, 46,209,249
shares.
<PAGE>
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
- ----------------------------
<TABLE>
PENNZOIL COMPANY
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31
----------------------------
1995 1994
----------- -----------
(Expressed in thousands
except per share amounts)
<S> <C> <C>
REVENUES $ 635,340 $ 622,076
COSTS AND EXPENSES
Cost of sales 368,832 371,639
Selling, general and administrative expenses 99,457 89,980
Depreciation, depletion and amortization 92,611 75,450
Exploration expenses 9,072 9,683
Taxes, other than income 14,731 17,069
Interest charges, net 48,479 41,589
----------- -----------
INCOME BEFORE INCOME TAX 2,158 16,666
Income tax provision (benefit) (585) 5,928
----------- -----------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE 2,743 10,738
Cumulative effect of change in accounting
principle (See Note 2) - (4,948)
----------- -----------
NET INCOME $ 2,743 $ 5,790
=========== ===========
EARNINGS (LOSS) PER SHARE
Income before cumulative effect of
change in accounting principle $ 0.06 $ 0.24
Cumulative effect of change in accounting principle - (0.11)
----------- -----------
TOTAL $ 0.06 $ 0.13
=========== ===========
DIVIDENDS PER COMMON SHARE $ 0.75 $ 0.75
=========== ===========
AVERAGE SHARES OUTSTANDING 46,158 45,934
=========== ===========
NUMBER OF SHARES OUTSTANDING 46,193 45,964
=========== ===========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<PAGE> 3
PART I. FINANCIAL INFORMATION - continued
<TABLE>
PENNZOIL COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<CAPTION>
March 31, December 31,
1995 1994
------------- -------------
(Expressed in thousands)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 23,513 $ 24,884
Receivables 449,455 460,248
Inventories
Crude oil, natural gas and sulphur 20,456 38,239
Motor oil and refined products 122,133 126,019
Deferred income tax 18,872 19,735
Other current assets 48,556 59,127
------------- -------------
Total current assets 682,985 728,252
Property, plant and equipment, net 2,771,631 2,828,843
Marketable securities and other investments 864,627 833,400
Other assets 386,266 325,315
------------- -------------
TOTAL ASSETS $ 4,705,509 $ 4,715,810
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 1,774 $ 1,760
Notes payable 546,303 337,212
Accounts payable and accrued liabilities 238,043 252,575
Interest accrued 48,850 33,066
Other current liabilities 46,244 52,048
------------- -------------
Total current liabilities 881,214 676,661
Long-term debt 1,970,833 2,174,921
Deferred income tax 380,049 371,644
Other liabilities 281,167 288,320
------------- -------------
TOTAL LIABILITIES 3,513,263 3,511,546
------------- -------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY 1,192,246 1,204,264
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 4,705,509 $ 4,715,810
============= =============
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<PAGE> 4
PART I. FINANCIAL INFORMATION - continued
<TABLE>
PENNZOIL COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31
---------------------------------
1995 1994
----------- -----------
(Expressed in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,743 $ 5,790
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization 92,611 75,450
Dry holes and impairments 2,484 4,977
Deferred income tax (910) (576)
Non-cash and other nonoperating items (377) 11,443
Cumulative effect of change in accounting principle - 4,948
Change in operating assets and liabilities 10,961 (90,056)
----------- -----------
Net cash provided by operating activities 107,512 11,976
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (93,700) (129,808)
Purchases of marketable securities and other investments (147,844) (203,998)
Proceeds from sales of marketable securities and other
investments 145,312 98,984
Proceeds from sales of assets 37,448 977
Other investing activities (22,413) 6,324
----------- -----------
Net cash used in investing activities (81,197) (227,521)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds (repayment) of short-term debt, net 209,091 (32,314)
Debt and capital lease obligation repayments (207,151) (55,900)
Proceeds from issuance of debt 5,000 139,963
Dividends paid (34,626) (34,456)
Other financing activities - 255
----------- -----------
Net cash provided by (used in) financing activities (27,686) 17,548
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,371) (197,997)
CASH AND CASH EQUIVALENTS, beginning of period 24,884 262,275
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 23,513 $ 64,278
=========== ===========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<PAGE> 5
PART I. FINANCIAL INFORMATION - continued
PENNZOIL COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) General -
The condensed consolidated financial statements included
herein have been prepared by Pennzoil Company ("Pennzoil")
without audit and should be read in conjunction with the
financial statements and the notes thereto included in Pennzoil's
latest annual report. The foregoing financial statements include
only normal recurring accruals and all adjustments which Pennzoil
considers necessary for a fair presentation.
(2) Employers' Accounting for Postemployment Benefits -
Effective January 1, 1994, Pennzoil changed its method of
accounting for postemployment benefit costs by adopting the
requirements of Statement of Financial Accounting Standards
("SFAS") No.112, "Employers' Accounting for Postemployment
Benefits", and recorded a charge of $4.9 million ($7.6 million
before tax), or $.11 per share, as of that date to reflect the
cumulative effect of the change in accounting principle for
periods prior to 1994.
(3) Accounting for the Impairment of Long-Lived Assets -
In March 1995 the Financial Accounting Standards Board
issued SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of," which is
intended to establish more consistent accounting standards
for measuring the recoverability of long-lived assets. In
certain instances, the statement specifies that the carrying
values of assets be written down to fair values, which,
for Pennzoil, could result in write-downs that were previously
not required under its existing impairment policy. Such
charges would result primarily from the more detailed
impairment review procedures that would be required on
Pennzoil's proved oil and gas properties. Under the new standard,
assets to be reviewed for impairment are required to be grouped
at the lowest level for which there are identifiable cash flows
that are largely independent of the cash flows of other groups.
Under current policy, oil and gas assets reviewed for impairment
are grouped at a higher level. While the potential impact of
the new standard cannot be fully assessed at this time,
Pennzoil believes that the adoption of this statement could
result in a substantial charge to operating earnings and a
corresponding write-down of Pennzoil's fixed assets, primarily
those related to oil and gas producing activities. Pennzoil must
adopt the new statement no later than for its quarter ending
March 31, 1996.
<PAGE>
<PAGE> 6
PART I. FINANCIAL INFORMATION - continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Net income for the quarter ended March 31, 1995 was $2.7
million, or $.06 per share, compared to $5.8 million, or $.13 per
share, for the same period in 1994. Effective January 1, 1994,
Pennzoil changed its method of accounting for postemployment
benefit costs by adopting the requirements of Statement
of Financial Accounting Standards No. 112, "Employers'
Accounting for Postemployment Benefits." As a result, Pennzoil
recorded a charge of $4.9 million, or $.11 per share, as of
January 1, 1994, to reflect the cumulative effect of change in
accounting principle for periods prior to 1994. Excluding this
charge, income for the quarter ended March 31, 1995 decreased $8.0
million, or $.18 per share from the comparable period in 1994.
The decrease in earnings for the first quarter of 1995, compared
to the prior year, was primarily attributable to lower results
from the oil and gas and motor oil and refined products segments.
These decreases were partially offset by higher other income,
primarily due to a franchise tax refund.
Oil and Gas
Operating income from this segment was $12.9 million for the
quarter ended March 31, 1995, compared with $37.6 million for the
same period in 1994. The decrease in operating income was
primarily due to lower natural gas prices and higher
depreciation, depletion and amortization ("DD&A") expense. The
higher DD&A expense experienced in the first quarter of 1995 was
attributable to an increase in natural gas and liquids volumes
and higher DD&A rates. The higher DD&A rates resulted, in part,
from a settlement with the Internal Revenue Service in October
1994, which increased the carrying value of certain oil and gas
properties. Reference is made to Note 8 of Notes to Consolidated
Financial Statements in Pennzoil's Annual Report on Form 10-K for
the year ended December 31, 1994. Partially offsetting these
decreases were higher liquids and natural gas volumes, higher
liquids prices and lower operating expenses. The increases in
liquids and natural gas volumes for the three months ended March
31, 1995 were partially due to the acquisition of Co-enerco
Resources Ltd. in June 1994. Operating costs per barrel of oil
equivalent produced, excluding DD&A and exploration expense,
decreased 15% compared to the same period in 1994.
Natural gas volumes produced for sale during the three
months ending March 31, 1995 were 682.3 MMcf per day compared to
659.5 MMcf per day during the three months ending March 31, 1994.
Liquids production volumes were 73.3 Mbbls per day for the three
months ending March 31, 1995 compared to 63.4 Mbbls per day for
the three months ended March 31, 1994.
In March 1995, Pennzoil and Brooklyn Union Gas Co. announced
the formation of a new gas marketing venture by their subsidiaries,
Pennzoil Gas Marketing Company and BRING Gas Services Corp. The
50-50 gas marketing venture is known as PennUnion Energy
Services, L.L.C. ("PennUnion"). Pennzoil contributed $3.7
million to the venture in March 1995 and has committed a
substantial majority of its natural gas production from the
continental U.S. to be marketed by PennUnion.
<PAGE>
<PAGE> 7
PART I. FINANCIAL INFORMATION - continued
In March 1995 the Financial Accounting Standards Board
issued SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of," which is
intended to establish more consistent accounting standards for
measuring the recoverability of long-lived assets. In certain
instances, the statement specifies that the carrying values
of assets be written down to fair values, which, for
Pennzoil, could result in write-downs that were previously
not required under its existing impairment policy. Such
charges would result primarily from the more detailed
impairment review procedures that would be required on Pennzoil's
proved oil and gas properties. Under the new standard, assets
to be reviewed for impairment are required to be grouped at the
lowest level for which there are identifiable cash flows that are
largely independent of the cash flows of other groups.
Under current policy, oil and gas assets reviewed for
impairment are grouped at a higher level. While the potential
impact of the new standard cannot be fully assessed at this time,
Pennzoil believes that the adoption of this statement could
result in a substantial charge to operating earnings and a
corresponding write-down of Pennzoil's fixed assets, primarily
those related to oil and gas producing activities. Pennzoil must
adopt the new statement no later than for its quarter ending
March 31, 1996.
Motor Oil & Refined Products
Operating income from this segment was $14.3 million for the
quarter ended March 31, 1995, a decrease of $11.5 million from
the same period in 1994. The decrease in operating income was
primarily attributable to lower refinery, specialty and all other
product margins. Also contributing to lower earnings were higher
selling expenses and a $4.0 million litigation settlement charge.
These decreases were partially offset by higher domestic motor
oil volumes and margins and higher international, specialty and
all other product sales volumes.
Franchise Operations
The franchise operations segment recorded an operating loss
of $.2 million for the quarter ended March 31, 1995, compared
with a loss of $.7 million for the same period in 1994. In the
first quarter of 1995, the franchise operations segment recorded
lower operating expenses and higher royalty income. Results for
the first quarter of 1995 include a $6.0 million litigation
settlement charge. The 1994 first quarter results include a
charge for various self-insured claims. Excluding these
nonrecurring charges, general and administrative expenses
declined in 1995 while company center revenues increased.
Domestic systemwide sales reported by Jiffy Lube centers for
the first quarter of 1995 increased $15.0 million, or
approximately 11%, to $152.5 million, compared with the first
quarter of 1994. Average ticket prices increased to $34.30 for
the quarter ended March 31, 1995, compared with $33.65 for the
first quarter of 1994. Total vehicles serviced increased 6.3%
for the first quarter in 1995. There were 1,137 domestic lube
centers (including 426 Jiffy Lube company-operated centers) open
as of March 31, 1995.
<PAGE>
<PAGE> 8
PART I. FINANCIAL INFORMATION - continued
Jiffy Lube currently operates six fast-oil change operations
in Sears Auto Centers in Kentucky and New Jersey as part of a
test which began in mid-1994. In March 1995, Jiffy Lube and the
Sears Merchandise Group ("Sears") agreed to open as many as 456
fast-oil change units in Sears Auto Centers over the next three
years. The new agreement calls for Jiffy Lube to open
as many as 234 company-owned units and 222 franchise units.
Under the agreement, Jiffy Lube remodels, equips and operates
service areas within the Sears Auto Centers while Sears continues
to utilize the remaining bays for its operations. As a first
step, Sears and Jiffy Lube have agreed to set up 145 company-
owned units and will continue to review the market and work
toward agreement on the final plans for the remaining 311 units
by later this year.
Sulphur
In October 1994, Pennzoil entered into an agreement with
Freeport-McMoRan Resource Partners, Limited Partnership
("Freeport-McMoRan") providing for the sale of substantially all
the domestic assets of Pennzoil's sulphur segment to Freeport-
McMoRan. The transaction was completed in January 1995.
Pennzoil continues to own and operate its Antwerp, Belgium
sulphur terminal and the related international sulphur business.
Beginning in January 1995, the results of such operations are
included in other segment operating income.
Other
Other operating income for the quarter ended March 31, 1995
was $41.1 million, compared with $16.9 million for the same
period in 1994. The increase was due to a favorable resolution
of a Texas franchise tax issue, which resulted in Pennzoil
receiving a $23.2 million refund. In addition, Pennzoil will
receive approximately $1.5 million in interest associated with
the franchise tax refund.
Net interest expense for the quarter ended March 31, 1995
increased $6.9 million from the same period in 1994, primarily
due to increased borrowings at higher rates.
Capital Resources and Liquidity
As of March 31, 1995, Pennzoil had cash and cash equivalents
of $23.5 million. During the three months ended March 31, 1995,
Pennzoil's cash and cash equivalents decreased $1.4 million.
Cash flows from operating activities totaled $107.5 million
during the first quarter of 1995.
Pennzoil's other income includes dividend income of $8.4
million in each of the quarters ended March 31, 1995 and 1994,
respectively, from its investment in common stock of Chevron
Corporation.
In February 1995, Pennzoil's Board of Directors increased
the limit on the aggregate amount of commercial paper that
Pennzoil may issue under its domestic commercial paper program
and/or its Euro-commercial paper program from $250.0 million to
$500.0 million. Borrowings under Pennzoil's commercial paper
facilities totaled $428.0 million and $243.9 million at March 31,
1995 and December 31, 1994, respectively. The cash provided by
the increase in borrowings under Pennzoil's commercial paper
facilities was used primarily to pay off $205.0 million in
borrowings under an unsecured revolving credit facility with a
group of banks.
In April 1995, Pennzoil received a cash tax refund of $116.9
million from the Internal Revenue Service, which was used to
reduce borrowings under its commercial paper facilities.
<PAGE>
<PAGE> 9
PART I. FINANCIAL INFORMATION - continued
<TABLE>
(UNAUDITED)
The following tables show revenues and operating income by segment,
other components of income and operating data.
<CAPTION>
Three Months Ended
March 31
----------------------------
1995 1994
----------- -----------
(Dollar amounts expressed
in thousands)
<S> <C> <C>
REVENUES
Oil and Gas $ 189,176 $ 203,964
Motor Oil & Refined Products 378,283 357,405
Franchise Operations 67,120 62,218
Sulphur - 15,931
Other 42,032 21,535
Intersegment sales (41,271) (38,977)
----------- -----------
Total revenues $ 635,340 $ 622,076
----------- -----------
OPERATING INCOME (LOSS)
Oil and Gas $ 12,908 $ 37,586
Motor Oil & Refined Products 14,265 25,758
Franchise Operations (148) (737)
Sulphur - (3,730)
Other 41,058 16,942
----------- -----------
Total operating income 68,083 75,819
Corporate administrative expenses 17,446 17,564
Interest charges, net 48,479 41,589
----------- -----------
Income before income taxes 2,158 16,666
Income tax provision (benefit) (585) 5,928
----------- -----------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE 2,743 10,738
Cumulative effect of change in accounting principle - (4,948)
----------- -----------
NET INCOME $ 2,743 $ 5,790
=========== ===========
RATIO OF EARNINGS TO FIXED CHARGES 1.02 1.29
=========== ===========
</TABLE>
<PAGE>
<PAGE> 10
PART I. FINANCIAL INFORMATION - continued
<TABLE>
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31
------------------------------
1995 1994
------------ ------------
<S> <C> <C>
OPERATING DATA
- --------------
OIL AND GAS
Net production
Crude oil, condensate and natural
gas liquids (barrels per day) 73,326 63,404
Natural gas produced for sale (Mcf per day) 682,273 659,523
Weighted average prices
Crude oil, condensate and natural
gas liquids (per barrel) $ 14.34 $ 11.92
Natural gas (per Mcf) $ 1.40 $ 2.24
MOTOR OIL & REFINED PRODUCTS
Sales (barrels per day)
Gasoline and naphtha 21,492 24,837
Distillates and gas oils 28,487 29,296
Lubricating oil and other specialty products 23,756 22,870
Residual fuel oils 4,098 3,230
----------- -----------
Total sales (barrels per day) 77,833 80,233
=========== ===========
Raw materials processed (barrels per day) 55,548 56,662
Refining capacity (barrels per day) <F1> 62,700 70,700
FRANCHISE OPERATIONS
Domestic systemwide sales (in thousands) $ 152,534 $ 137,492
Same center sales (in thousands) $ 144,159 $ 135,812
Centers open (U.S.) 1,137 1,079
<FN>
<F1> As of September 1994, Pennzoil stopped processing crude oil at its
refinery in Roosevelt, Utah. The Roosevelt Refinery had a refining
capacity of 8,000 barrels per day.
</FN>
</TABLE>
<PAGE>
<PAGE> 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -
3 Restated Certificate of Incorporation of Pennzoil Company
dated May 3, 1995.
12 Computation of Ratio of Earnings to Fixed Charges for the
three months ended March 31, 1995 and 1994.
27 Financial Data Schedule
(b) Reports -
No reports on Form 8-K were filed during the quarter for which
this report was filed.
<PAGE>
<PAGE> 12
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
PENNZOIL COMPANY
Registrant
S/N Mark A. Malinski
Mark A. Malinski
Group Vice President -
Accounting
May 10, 1995
EXHIBIT 3
RESTATED CERTIFICATE OF INCORPORATION
OF
PENNZOIL COMPANY
Under Sections 242 and 245 of the
Delaware General Corporation Law
PENNZOIL COMPANY, a corporation organized and existing
under and by virtue of the Delaware General Corporation Law,
hereby certifies that:
(1) The name of the corporation is Pennzoil Company.
The corporation was, by a Certificate of Agreement of
Consolidation between United Gas Corporation, a corporation
organized and existing under the laws of the State of
Delaware, and Pennzoil Company, a corporation organized and
existing under the laws of the Commonwealth of Pennsylvania,
formed under the name "Pennzoil United, Inc." Such
Certificate of Agreement of Consolidation was filed by the
Secretary of State of the State of Delaware on the 22nd day
of March, 1968.
(2) This Restated Certificate of Incorporation
restates and further amends the Restated Certificate of
Incorporation of the corporation. The amendments effected
by this Restated Certificate of Incorporation include, but
are not limited to, amendments (i) to increase the number of
authorized shares of the corporation's common stock, par
value $0.83-1/3 per share, to 100,000,000 and (ii) to
eliminate obsolete and unnecessary provisions.
(3) The restatement of and further amendments to the
Restated Certificate of Incorporation of the Corporation
have been duly adopted by vote of the stockholders in
accordance with Sections 242 and 245 of the General
Corporation Law of the State of Delaware.
(4) The text of the Restated Certificate of
Incorporation of the Pennzoil Company, as heretofore amended
and supplemented, is hereby restated and further amended
hereby to read in its entirety as follows:
RESTATED CERTIFICATE OF INCORPORATION
of
PENNZOIL COMPANY
First: The name of the corporation is Pennzoil Company.
Second: The address of its registered office in the State of
Delaware is 1209 Orange Street in the City of Wilmington, County
of New Castle. The name of its registered agent at such address
is The Corporation Trust Company.
Third: The purpose of the corporation is to engage in any
lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware.
Fourth: The total number of shares of all classes of stock
which the corporation shall have authority to issue is
137,610,644, divided into classes as follows:
9,747,720 shares shall be Preferred Stock, par value
$1.00 per share ("Preferred Stock");
27,862,924 shares shall be Preference Common Stock, par
value $0.83-1/3 per share ("Preference Common Stock"); and
100,000,000 shares shall be Common Stock, par value
$0.83-1/3 per share ("Common Stock").
Shares of any class of stock of the corporation may be
issued for such consideration and for such corporate purposes as
the Board of Directors may from time to time determine.
The following is a statement of the powers, preferences and
rights, and the qualifications, limitations or restrictions, of
the Preferred Stock, Preference Common Stock and Common Stock.
Section I. Preferred Stock
Shares of Preferred Stock shall be issuable in one or more
series with such voting powers, full or limited, or no voting
powers, and such designations, powers, preferences and relative,
participating, optional, redemption, conversion, exchange and
other rights, and qualifications, limitations or restrictions
thereof, as are stated and expressed herein, and, to the extent
not stated and expressed herein, as shall be fixed by the Board
of Directors pursuant to the authority to do so, which is hereby
expressly vested in it, and stated and expressed in a resolution
or resolutions adopted by the Board of Directors providing for
the issuance of the Preferred Stock of such series.
In accordance with this Section I of Article Fourth, the
Board of Directors has designated shares of Preferred Stock with
the voting powers, preferences, rights, qualifications,
limitations and restrictions as set forth on Exhibit A hereto.
Section II. Preference Common Stock
Shares of Preference Common Stock shall be issuable in one
or more series with such designations, powers, preferences and
relative, participating, optional, redemption, conversion,
exchange and other rights, and qualifications, limitations or
restrictions thereof, as are stated and expressed herein, and, to
the extent not stated and expressed herein, as shall be fixed by
the Board of Directors pursuant to the authority to do so, which
is hereby expressly vested in it, and stated and expressed in a
resolution or resolutions adopted by the Board of Directors
providing for the issuance of the Preference Common Stock of such
series.
Subject to the prior rights of the holders of Preferred
Stock as may be set forth in a resolution or resolutions of the
Board of Directors providing for the issuance of any series of
Preferred Stock, the holders of Preference Common Stock, in
preference to the holders of Common Stock, shall be entitled to
receive if, as and when declared by the Board of Directors, out
of the assets of the corporation which are by law available for
the payment of dividends, dividends at but not exceeding the rate
set forth in a resolution or resolutions of the Board of
Directors providing for the issuance of any series of Preference
Common Stock.
In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the corporation,
then, before any distribution may be made to the holders of
Common Stock, the holders of Preference Common Stock (subject to
the prior rights of holders of Preferred Stock as may be set
forth in a resolution or resolutions of the Board of Directors
providing for the issuance of any series of Preferred Stock)
shall be entitled to be paid an amount equal to the accrued and
unpaid dividends thereon to the date of payment thereof. After
payment or provision for payment of the debts and other
liabilities of the corporation and any accrued and unpaid
dividends due the holders of Preference Common Stock (subject to
the prior rights of holders of Preferred Stock as may be set
forth in a resolution or resolutions of the Board of Directors
providing for the issuance of any series of Preferred Stock), the
holders of Preference Common Stock and Common Stock shall be
entitled to share ratably in the remaining assets of the
corporation. Neither the merger or consolidation of the
corporation into or with another corporation nor the merger or
consolidation of any other corporation into or with the
corporation shall be deemed to be a liquidation, dissolution or
winding up of the corporation within the meaning of this
paragraph, but the sale, lease or conveyance of all or
substantially all of the assets of the corporation shall be
deemed to be a liquidation, dissolution or winding up of the
corporation within the meaning of this paragraph.
In addition to any other voting powers of the holders of
Preference Common Stock as may be provided by law, (i) without
the affirmative vote of the holders of at least a majority of the
total number of shares of Preference Common Stock at the time
outstanding, the corporation shall not merge or consolidate with
or into any other corporation or sell or otherwise dispose of all
or substantially all of its assets (provided, however, that no
such vote shall be required in connection with a merger into the
corporation of a subsidiary at least 90% of the outstanding
shares of each class of stock of which is owned by the
corporation), (ii) without the affirmative vote of the holders of
at least two-thirds of the total number of shares of Preference
Common Stock at the time outstanding, the corporation shall not
voluntarily liquidate, dissolve or wind up the affairs of the
corporation, (iii) without the affirmative vote of the holders of
at least two-thirds of the total number of shares of Preference
Common Stock at the time outstanding, the corporation shall not
amend, alter or repeal any of the rights, preferences or powers
of the holders of Preference Common Stock so as to affect
adversely any such rights, preferences or powers (provided,
however, that if such amendment, alteration or repeal affects
adversely the rights, preferences or powers of one or more, but
not all, series of Preference Common Stock at the time
outstanding, only the affirmative vote of the holders of at least
two-thirds of the total number of outstanding shares of all
series so affected shall be required; and provided, further, that
an amendment to increase or decrease the authorized number of
shares of Preference Common Stock or to create or authorize, or
increase or decrease the amount of, any class of stock ranking
prior to or on a parity with the outstanding shares of Preference
Common Stock as to dividends shall not be deemed to affect
adversely the rights, preferences or powers of the holders of
Preference Common Stock or any series thereof) and (iv) without
the affirmative vote of the holders of at least two-thirds of the
total number of shares of Preference Common Stock at the time
outstanding, the corporation shall not create or authorize any
shares of any class of stock ranking prior to the Preference
Common Stock as to dividends or assets (other than Preferred
Stock) or issue any shares of any such prior ranking stock (other
than Preferred Stock) more than 12 months after the date as of
which the corporation was empowered to create or authorize such
prior ranking stock.
Section III. Common Stock
After the requirements with respect to any preferential
dividends upon the Preferred Stock and Preference Common Stock
have been met, the holders of the Common Stock shall be entitled
to receive such dividends as may be declared from time to time by
the Board of Directors.
Section IV. Provisions Applicable to Capital Stock
1. Voting Rights. Each share of Common Stock and each share
of Preference Common Stock shall entitle the holder thereof to
one vote for each share held and, except as otherwise provided
herein or by law, the Common Stock and the Preference Common
Stock (and any other stock of the corporation at the time
entitled to vote) shall vote together as one class. At all
elections of directors, each holder of record of shares of Common
Stock and/or Preference Common Stock shall be entitled to as many
votes as shall equal the number of such shares of Common Stock
and/or Preference Common Stock so held multiplied by the number
of directors to be elected, and such holder may cast all of such
votes for a single director, or may distribute them among the
number to be voted for, or for any two or more of them, as such
holder may see fit.
2. Regarding Pre-emptive Rights. No stockholder of the
corporation shall by reason of his holding shares of any class of
stock have any pre-emptive or preferential right to subscribe
for, purchase or otherwise acquire or receive any shares of any
class of stock issued by the corporation, whether now or
hereafter authorized, or any shares of any class of stock of the
corporation now or hereafter acquired by the corporation as
treasury stock and subsequently reissued or sold or otherwise
disposed of, or any notes, debentures, bonds or other securities
convertible into or carrying options or warrants to purchase
shares of any class of stock, whether now or hereafter
authorized, whether or not the issuance of any such shares, or
such notes, debentures, bonds or other securities, would
adversely affect the dividend or voting rights of such
stockholder; and the Board of Directors may issue shares of any
class of stock of the corporation, or any notes, debentures,
bonds or other securities convertible into or carrying options or
warrants to purchase shares of any class of stock, without
offering any such shares of any class, either in whole or in
part, to the existing stockholders of any class.
Fifth: 1. All corporate powers shall be exercised by the
Board of Directors except as otherwise provided by law or by the
Certificate of Incorporation.
In furtherance and not in limitation of the powers conferred
by statute, the Board of Directors is expressly authorized:
(a) Except as may be otherwise provided in the By-laws,
to make, alter, amend and repeal the By-laws of the
corporation, subject always to the power of the stockholders
to change such action.
(b) To fix in or pursuant to the By-laws from time to
time the number of Directors of the corporation, none of
whom need be stockholders.
(c) To fix, determine and vary from time to time the
amount to be maintained as surplus of the corporation and
the amount or amounts to be set apart as working capital of
the corporation.
(d) To authorize and cause to be executed mortgages and
liens upon the real and personal property of the
corporation.
(e) To set apart out of any of the funds of the
corporation available for dividends a reserve or reserves
for any proper purposes and/or to abolish any such reserve
in the manner in which it was created.
(f) To designate, by resolution or resolutions passed
by a majority of the whole Board, one or more committees,
each committee to consist of two or more of the Directors of
the corporation, which, to the extent provided in said
resolution or resolutions or in the By-laws of the
corporation, shall have and may exercise the power of the
Board of Directors in the management of the business and
affairs of the corporation, and may authorize the seal of
the corporation to be affixed to all papers which may
require it. Such committee or committees shall have such
name or names as may be stated in the By-laws of the
corporation or as may be determined from time to time by
resolutions adopted by the Board of Directors.
2. The number of Directors which shall constitute the whole
Board of Directors of the corporation shall be not less than 3
nor more than 18 as specified from time to time in the By-laws of
the corporation, except in the case of an increase in the number
of directors by reason of any default provisions adopted pursuant
to Article Fourth. The Board of Directors shall be divided into
three classes, Class I, Class II and Class III. Such classes
shall be as nearly equal in number of directors as possible.
Each Director shall serve for a term ending on the third annual
meeting following the annual meeting at which such Director was
elected. The foregoing notwithstanding, each Director shall
serve until his successor shall have been duly elected and
qualified, unless he shall resign, become disqualified, disabled
or shall otherwise be removed.
At each annual election, the Directors chosen to succeed
those whose terms then expire shall be of the same class as the
Directors they succeed, unless, by reason of any intervening
changes in the authorized number of Directors, the Board shall
designate one or more directorships whose term then expires as
directorships of another class in order more nearly to achieve
equality of number of Directors among the classes.
Notwithstanding the provision that the three classes shall
be as nearly equal in number of Directors as possible, in the
event of any change in the authorized number of Directors, each
Director then continuing to serve as such shall nevertheless
continue as a Director of the class of which he is a member until
the expiration of his current term, or his prior death,
resignation or removal. If any newly created directorship may,
consistent with the provision that the three classes shall be as
nearly equal in number of Directors as possible, be allocated to
one or two or more classes, the Board shall allocate it to that
of the available classes whose terms of office are due to expire
at the earliest date following such allocation.
3. No Director of the corporation shall be removed from his
office as a Director by vote or other action of stockholders or
otherwise except for cause.
4. Except as provided in or pursuant to Article Fourth
hereof, newly created directorships resulting from any increase
in the number of Directors and any vacancies on the Board of
Directors resulting from death, resignation, disqualification,
removal or other cause shall be filled by the affirmative vote of
a majority of the remaining Directors then in office, even though
less than a quorum of the Board of Directors. Any Director
elected in accordance with the preceding sentence shall hold
office for the remainder of the full term of the class of
Directors in which the new directorship was created or the
vacancy occurred and until such Director's successor shall have
been elected and qualified. No decrease in the number of
Directors constituting the Board of Directors shall shorten the
term of any incumbent Director.
5. No contract or other transaction between the corporation
and any other corporation shall be affected or invalidated by the
fact that one or more of the Directors of the corporation are
interested in, or is a director or directors or officer or
officers of such other corporation, and no contract or other
transaction between the corporation and any other person or firm
shall be affected or invalidated by the fact that one or more of
the Directors of the corporation is a party to, or are parties
to, or interested in, such contract or transaction; provided that
in each such case the nature and extent of the interest of such
Director or Directors in such contract or other transaction
and/or the fact that such Director or Directors is or are a
director or directors or officer or officers of such other
corporation is known to the Board of Directors or is disclosed at
the meeting of the Board of Directors at which such contract or
other transaction is authorized.
Sixth: 1. Except as set forth in Paragraph 4 of this Article
Sixth, the affirmative vote or consent of the holders of 80% of
all stock of this corporation entitled to vote in elections of
directors (excluding stock entitled so to be exercised only upon
the happening of some contingency unless such contingency shall
have occurred and is continuing), considered for the purposes of
this Article Sixth as one class and hereinafter in this Article
Sixth embraced in the term "voting stock", shall be required:
(i) for a merger or consolidation of the corporation
with or into any other corporation, or
(ii) for any sale or lease of all or any substantial
part of the assets of the corporation to any other
corporation, person or other entity, or
(iii) any sale or lease to the corporation or any
subsidiary thereof of any assets (except assets having an
aggregate fair market value of less than $5,000,000) in
exchange for voting stock (or securities convertible into or
exchangeable for voting stock or options, warrants or rights
to purchase voting stock or securities convertible into
voting stock) of the corporation or any subsidiary of the
corporation by any other corporation, person or entity,
if as of the record date for the determination of stockholders
entitled to notice thereof and to vote thereon or consent
thereto, or as of the time the Board of Directors shall have
approved a memorandum of understanding, or the corporation shall
have entered into any agreement, with respect to any such
transaction for which the vote or consent of the holders of no
class or series of stock of the corporation is otherwise required
by law, the Certificate of Incorporation or any other contract or
agreement, such other corporation, person or entity which is
party to such a transaction is the beneficial owner, directly or
indirectly, of 5% or more of the outstanding shares of any class
or series of voting stock of the corporation. There shall also
be required for any such transaction for which such affirmative
vote or consent shall be required by this Paragraph 1 the
affirmative vote or consent of the holders of a majority of all
voting stock of this corporation, exclusive of all voting stock
of this corporation of which such other corporation, person or
entity which is party to such transaction is, directly or
indirectly, the beneficial owner. Each such affirmative vote or
consent shall be in addition to the vote or consent of the
holders of any class or series of stock of the corporation
otherwise required by law or the Certificate of Incorporation or
the resolution or resolutions providing for the issuance of such
class or series which have been adopted by the Board of Directors
or any agreement between the corporation and any national
securities exchange.
2. For purposes of this Article Sixth any corporation,
person or other entity shall be deemed to be the beneficial owner
of any shares of stock of the corporation:
(i) which it owns directly, whether or not of record,
or
(ii) which it has the right to acquire pursuant to any
agreement or understanding or upon exercise of conversion
rights, exchange rights, warrants or options or otherwise,
or
(iii) which are beneficially owned, directly or
indirectly (including shares deemed to be owned through
application of clause (ii) above), by any "affiliate" or
"associate" as those terms are defined in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange
Act of 1934 as in effect on March 1, 1975, or
(iv) which are beneficially owned, directly or
indirectly (including shares deemed owned through
application of clause (ii) above), by any other corporation,
person or entity with which it or its "affiliate" or
"associate" has any agreement or arrangement or
understanding for the purpose of acquiring, holding, voting
or disposing of stock of the corporation.
For the purposes of this Article Sixth, the outstanding
shares of any class or series of stock of the corporation
shall include shares deemed owned through the application of
clauses (2)(ii), (iii) and (iv) above, but shall not include
any other shares which may be issuable pursuant to any
agreement or upon exercise of conversion rights, warrants,
options or otherwise. As used in this Article Sixth, the
term "subsidiary" shall mean a corporation a majority of the
voting power of the capital stock (that is, voting power
entitled to be exercised in the election of directors, but
excluding voting power entitled so to be exercised only upon
the happening of some contingency unless such contingency
shall have occurred and is continuing) of which shall be
owned by the corporation or by one or more subsidiaries or
by the corporation and one or more subsidiaries.
3. The Board of Directors shall have the power and duty to
determine for the purposes of this Article Sixth on the basis of
information known to this corporation whether
(i) such other corporation, person or other entity
beneficially owns 5% or more of the outstanding shares of
any class or series of voting stock of the corporation,
(ii) a corporation, person or entity is an "affiliate"
or "associate" (as defined in Paragraph 2 above) of another,
(iii) the assets being acquired by the corporation, or
any subsidiary thereof, have an aggregate fair market value
of less than $5,000,000, and
(iv) the memorandum of understanding referred to in
Paragraph 4 below is substantially consistent with the
transaction covered thereby.
Any such determination shall be conclusive and binding for
all purposes of this Article Sixth.
4. The provisions of Paragraph 1 of this Article Sixth shall
not apply to:
(i) any merger or consolidation of this corporation
with any corporation, or any sale or lease to this
corporation or any subsidiary thereof of any assets of, or
any sale or lease by this corporation or any subsidiary
thereof of any of its assets to, any corporation, person or
entity, if the Board of Directors of this corporation has
approved a memorandum of understanding with such other
corporation, person or entity with respect to such
transaction prior to the time that such other corporation,
person or entity shall have become a beneficial owner of 5%
or more of the outstanding shares of any class or series of
voting stock of the corporation; or
(ii) any merger or consolidation of this corporation
with, or any sale or lease to this corporation or any
subsidiary thereof of any assets of, or any sale or lease by
this corporation or any subsidiary thereof of any of its
assets to, any corporation 40% or more of the outstanding
voting stock of which is beneficially owned, directly or
indirectly, by this corporation.
5. The corporation shall have the right, subject to any
express provisions or restrictions contained in the Certificate
of Incorporation or the By-laws, from time to time to amend the
Certificate of Incorporation or any provision thereof in any
manner now or hereafter provided by law, and all rights and
powers at any time conferred upon the Directors or stockholders
of the corporation by the Certificate of Incorporation or any
amendment thereof are subject to such right of the corporation.
6. Notwithstanding any other provision of this Certificate
of Incorporation or the By-laws (and in addition to any other
vote that may be required by law, this Certificate of
Incorporation or the By-laws), there shall be required to amend,
alter, change or repeal, directly or indirectly, this Article
Sixth the affirmative vote or consent of (i) the holders of 80%
of all voting stock of the corporation (considered for this
purpose as one class) and (ii) the holders of a majority of all
voting stock of the corporation (considered for this purpose as
one class), exclusive of all voting stock of the corporation
beneficially owned, directly or indirectly, by any corporation,
person or entity which is, as of the record date for the
determination of stockholders entitled to notice of such
amendment, alteration, change or repeal and to vote thereon or
consent thereto, the beneficial owner of 5% or more of the
outstanding shares of any class or series of voting stock of the
corporation.
Seventh: No action required to be taken or which may be
taken at any annual or special meeting of stockholders of the
corporation may be taken without a meeting, and the power of
stockholders to consent in writing to the taking of any action is
specifically denied.
Eighth: No director of the corporation shall be personally
liable to the corporation or any of its stockholders for monetary
damages for breach of fiduciary duty as a director involving any
act or omission of any such director occurring on or after
April 30, 1987; provided, however, that the foregoing provision
shall not eliminate or limit the liability of a director (a) for
any breach of such director's duty of loyalty to the corporation
or its stockholders, (b) for acts or omissions not in good faith
or which involve intentional misconduct or knowing violation of
law, (c) under Title 8, Section 174 of the General Corporation
Law of the State of Delaware or (d) for any transaction from
which such director derived an improper personal benefit. Any
repeal or modification of this Article Eighth by the
stockholders of the corporation shall be prospective only, and
shall not adversely affect any limitation on the personal
liability of a director of the corporation existing at the time
of such repeal or modification.
________________________________
(5) This Certificate shall become effective upon the
filing hereof in the office of the Secretary of State of the
State of Delaware.
IN WITNESS WHEREOF, Pennzoil Company has caused this
Restated Certificate of Incorporation to be signed by its
authorized officer this 3rd day of May, 1995.
PENNZOIL COMPANY
By:
S/N David P. Alderson, II
David P. Alderson, II
Group Vice President - Finance
CERTIFICATE OF DESIGNATION
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
PENNZOIL COMPANY
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
PENNZOIL COMPANY, a corporation organized and existing under
the General Corporation Law of the State of Delaware, in
accordance with the provisions of Section 103 thereof, DOES
HEREBY CERTIFY:
That pursuant to the authority vested in the Board of
Directors in accordance with the provisions of the Restated
Certificate of Incorporation of the said Corporation, the said
Board of Directors on October 28, 1994 adopted the following
resolution creating a series of 750,000 shares of Preferred Stock
designated as "Series A Junior Participating Preferred Stock":
RESOLVED, that pursuant to the authority vested in the
Board of Directors of this Corporation in accordance with the
provisions of the Restated Certificate of Incorporation, a series
of Preferred Stock, par value $1.00 per share, of the
Corporation be and hereby is created, and that the
designation and number of shares thereof and the voting and other
powers, preferences and relative, participating, optional or
other rights of the shares of such series and the qualifications,
limitations and restrictions thereof are as follows:
Series A Junior Participating Preferred Stock
1. Designation and Amount. There shall be a series of
Preferred Stock that shall be designated as "Series A Junior
Participating Preferred Stock," and the number of shares
constituting such series shall be 750,000. Such number of shares
may be increased or decreased by resolution of the Board of
Directors; provided, however, that no decrease shall reduce the
number of shares of Series A Junior Participating Preferred Stock
to less than the number of shares then issued and outstanding
plus the number of shares issuable upon exercise of outstanding
rights, options or warrants or upon conversion of outstanding
securities issued by the Corporation.
2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders
of any shares of any series of Preferred Stock ranking prior and
superior to the shares of Series A Junior Participating Preferred
Stock with respect to dividends, the holders of shares of Series
A Junior Participating Preferred Stock, in preference to the
holders of shares of any class or series of stock of the
Corporation ranking junior to the Series A Junior Participating
Preferred Stock, shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available
for the purpose, quarterly dividends payable in cash on the 15th
day of March, June, September and December in each year (each
such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a
share of Series A Junior Participating Preferred Stock, in an
amount per share (rounded to the nearest cent) equal to the
greater of (a) $2.00 or (b) the Adjustment Number (as defined
below) times the aggregate per share amount of all cash
dividends, and the Adjustment Number times the aggregate per
share amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in shares of Common
Stock or a subdivision of the outstanding shares of Common Stock
(by reclassification or otherwise), declared on the Common Stock,
par value $0.83-1/3 per share, of the Corporation (the
"Common Stock") since the immediately preceding Quarterly
Dividend Payment Date, or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Junior Participating Preferred
Stock. The "Adjustment Number" shall initially be 100. In the
event the Corporation shall at any time after October 28, 1994
(the "Rights Declaration Date") (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock or (iii) combine the outstanding
Common Stock into a smaller number of shares, then in each such
case the Adjustment Number in effect immediately prior to
such event shall be adjusted by multiplying such Adjustment
Number by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such
event.
(B) The Corporation shall declare a dividend or distribution
on the Series A Junior Participating Preferred Stock as provided
in paragraph (A) above immediately after it declares a dividend
or distribution on the Common Stock (other than a dividend
payable in shares of Common Stock); provided that, in the event
no dividend or distribution shall have been declared on the
Common Stock during the period between any Quarterly Dividend
Payment Date and the next subsequent Quarterly Dividend Payment
Date, a dividend of $2.00 per share on the Series A Junior
Participating Preferred Stock shall nevertheless be payable on
such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Junior Participating Preferred
Stock from the Quarterly Dividend Payment Date next preceding the
date of issue of such shares of Series A Junior Participating
Preferred Stock, unless the date of issue of such shares is prior
to the record date for the first Quarterly Dividend Payment Date,
in which case dividends on such shares shall begin to accrue from
the date of issue of such shares, or unless the date of issue is
a Quarterly Dividend Payment Date or is a date after the record
date for the determination of holders of shares of Series A
Junior Participating Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment
Date, in either of which events such dividends shall begin to
accrue and be cumulative from such Quarterly Dividend Payment
Date. Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Series A Junior Participating
Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series
A Junior Participating Preferred Stock entitled to receive
payment of a dividend or distribution declared thereon, which
record date shall be no more than 30 days prior to the date fixed
for the payment thereof.
3. Voting Rights. The holders of shares of Series A Junior
Participating Preferred Stock shall have the following voting
rights:
(A) Each share of Series A Junior Participating Preferred
Stock shall entitle the holder thereof to a number of votes equal
to the Adjustment Number on all matters submitted to a vote of
the stockholders of the Corporation. At all elections of
directors at which the Series A Junior Participating Preferred
Stock shall vote together with the Common Stock (and any other
capital stock of the Corporation at the time entitled thereto),
each share of Series A Participating Preferred Stock shall
entitle the holder thereof to as many votes as shall equal the
Adjustment Number multiplied by the number of directors to be
elected, and such holder may cast all of such votes for a single
director, or may distribute them among the number to be voted
for, or for any two or more of them, as such holder may see fit.
(B) Except as otherwise provided herein, in the Restated
Certificate of Incorporation or by law, the holders of shares of
Series A Junior Participating Preferred Stock, the holders of
shares of Preference Common Stock, par value $0.83-1/3 per share,
of the Corporation ("Preference Common Stock") and the holders
of shares of Common Stock shall vote together as one class on
all matters submitted to a vote of stockholders of the
Corporation.
(C)(i) If at any time dividends on any Series A Junior
Participating Preferred Stock shall be in arrears in an amount
equal to six quarterly dividends thereon, the occurrence of such
contingency shall mark the beginning of a period (herein called a
"default period") that shall extend until such time when all
accrued and unpaid dividends for all previous quarterly dividend
periods and for the current quarterly dividend period on all
shares of Series A Junior Participating Preferred Stock then
outstanding shall have been declared and paid or set apart for
payment. During each default period, (1) the number of Directors
shall be increased by two, effective as of the time of election
of such Directors as herein provided, and (2) the holders of
Preferred Stock (including holders of the Series A Junior
Participating Preferred Stock) upon which these or like voting
rights have been conferred and are exercisable (the "Voting
Preferred Stock") with dividends in arrears in an amount equal to
six quarterly dividends thereon, voting as a class, irrespective
of series, shall have the right to elect such two Directors.
(ii) During any default period, such voting right of the
holders of Series A Junior Participating Preferred Stock may be
exercised initially at a special meeting called pursuant to
subparagraph (iii) of this Section 3(C) or at any annual meeting
of stockholders, and thereafter at annual meetings of
stockholders, provided that such voting right shall not be
exercised unless the holders of at least one-third in number of
the shares of Voting Preferred Stock outstanding shall be present
in person or by proxy. The absence of a quorum of the holders of
Common Stock shall not affect the exercise by the holders of
Voting Preferred Stock of such voting right.
(iii) Unless the holders of Voting Preferred Stock shall,
during an existing default period, have previously exercised
their right to elect Directors, the Board of Directors may order,
or any stockholder or stockholders owning in the aggregate not
less than ten percent of the total number of shares of Voting
Preferred Stock outstanding, irrespective of series, may request,
the calling of a special meeting of the holders of Voting
Preferred Stock, which meeting shall thereupon be called by the
Chairman of the Board, the President, a Vice President or the
Secretary of the Corporation. Notice of such meeting and of any
annual meeting at which holders of Voting Preferred Stock are
entitled to vote pursuant to this paragraph (C)(iii) shall be
given to each holder of record of Voting Preferred Stock by
mailing a copy of such notice to him at his last address as the
same appears on the books of the Corporation. Such meeting shall
be called for a time not earlier than 20 days and not later than
60 days after such order or request or, in default of the calling
of such meeting within 60 days after such order or request, such
meeting may be called on similar notice by any stockholder or
stockholders owning in the aggregate not less than ten percent of
the total number of shares of Voting Preferred Stock outstanding.
Notwithstanding the provisions of this paragraph (C)(iii), no
such special meeting shall be called during the period within 60
days immediately preceding the date fixed for the next annual
meeting of the stockholders.
(iv) In any default period and after the holders of Voting
Preferred Stock shall have exercised their right to elect
Directors voting as a class, (x) the Directors so elected by the
holders of Voting Preferred Stock shall continue in office until
their successors shall have been elected by such holders or until
the expiration of the default period, and (y) any vacancy in the
Board of Directors may be filled by vote of a majority of the
remaining Directors theretofore elected by the holders of the
class or classes of stock which elected the Director whose office
shall have become vacant. References in this paragraph (C) to
Directors elected by the holders of a particular class or classes
of stock shall include Directors elected by such Directors to
fill vacancies as provided in clause (y) of the foregoing
sentence.
(v) Immediately upon the expiration of a default period,
(x) the right of the holders of Voting Preferred Stock as a class
to elect Directors shall cease, (y) the term of any Directors
elected by the holders of Voting Preferred Stock as a class shall
terminate and (z) the number of Directors shall be such number as
may be provided for in the Restated Certificate of Incorporation
or By-Laws irrespective of any increase made pursuant to the
provisions of paragraph (C) of this Section 3 (such number being
subject, however, to change thereafter in any manner provided by
law or in the Restated Certificate of Incorporation or By-Laws).
Any vacancies in the Board of Directors effected by the
provisions of clauses (y) and (z) in the preceding sentence may
be filled by a majority of the remaining Directors.
(D) Except as set forth herein, holders of Series A Junior
Participating Preferred Stock shall have no special voting rights
and their consent shall not be required (except to the extent
they are entitled to vote with holders of Common Stock as set
forth herein) for taking any corporate action.
4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Junior Participating
Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A
Junior Participating Preferred Stock outstanding shall have been
paid in full, the Corporation shall not
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for
consideration any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Junior Participating Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding up)
with the Series A Junior Participating Preferred Stock, except
dividends paid ratably on the Series A Junior Participating
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled; or
(iii) redeem or purchase or otherwise acquire for
consideration any shares of Series A Junior Participating
Preferred Stock, or any shares of stock ranking on a parity with
the Series A Junior Participating Preferred Stock, except in
accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all
holders of Series A Junior Participating Preferred Stock, or to
such holders and holders of any such shares ranking on a parity
therewith, upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and
classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration
any shares of stock of the Corporation unless the Corporation
could, under paragraph (A) of this Section 4, purchase or
otherwise acquire such shares at such time and in such manner.
5. Reacquired Shares. Any shares of Series A Junior
Participating Preferred Stock purchased or otherwise acquired by
the Corporation in any manner whatsoever shall be retired and
cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of
a new series of Preferred Stock to be created by resolution or
resolutions of the Board of Directors, subject to any conditions
and restrictions on issuance set forth herein.
6. Liquidation, Dissolution or Winding Up. (A) Upon any
liquidation (voluntary or otherwise), dissolution or winding up
of the Corporation, no distribution shall be made to the holders
of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Junior
Participating Preferred Stock unless, prior thereto, the holders
of shares of Series A Junior Participating Preferred Stock shall
have received $100 per share, plus an amount equal to accrued and
unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment (the "Series A Liquidation
Preference"). Following the payment of the full amount of the
Series A Liquidation Preference, no additional distributions
shall be made to the holders of shares of Series A Junior
Participating Preferred Stock unless, prior thereto, the holders
of shares of Common Stock and Preference Common Stock shall have
received an amount per share (the "Common Adjustment") equal to
the quotient obtained by dividing (i) the Series A Liquidation
Preference by (ii) the Adjustment Number. Following the payment
of the full amount of the Series A Liquidation Preference and the
Common Adjustment in respect of all outstanding shares of
(1) Series A Junior Participating Preferred Stock and (2) Common
Stock and Preference Common Stock, respectively, (a) holders of
Series A Junior Participating Preferred Stock and (b) holders of
shares of Common Stock and Preference Common Stock shall, subject
to the prior rights of all other series of Preferred Stock, if
any, ranking prior thereto, receive their ratable and
proportionate share of the remaining assets to be distributed in
the ratio of the Adjustment Number to 1 with respect to (x) the
Series A Junior Participating Preferred Stock and (y) the Common
Stock and Preference Common Stock, on a per share basis,
respectively.
(B) In the event, however, that there are not sufficient
assets available to permit payment in full of the Series A
Liquidation Preference and the liquidation preferences of all
other series of Preferred Stock, if any, that rank on a parity
with the Series A Junior Participating Preferred Stock, then such
remaining assets shall be distributed ratably to the holders of
such parity shares in proportion to their respective liquidation
preferences. In the event, however, that there are not
sufficient assets available to permit payment in full of the
Common Adjustment, then such remaining assets shall be
distributed ratably to the holders of Common Stock and Preference
Common Stock.
(C) Neither the merger or consolidation of the Corporation
into or with another corporation nor the merger or consolidation
of any other corporation into or with the Corporation shall be
deemed to be a liquidation, dissolution or winding up of the
Corporation within the meaning of this Section 6, but the sale,
lease or conveyance of all or substantially all the Corporation's
assets shall be deemed to be a liquidation, dissolution or
winding up of the Corporation within the meaning of this
Section 6.
7. Consolidation, Merger, etc. In case the Corporation
shall enter into any consolidation, merger, combination or other
transaction in which the shares of Common Stock are exchanged for
or changed into other stock or securities, cash and/or any other
property, then in any such case each share of Series A Junior
Participating Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share equal to the
Adjustment Number times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as
the case may be, into which or for which each share of Common
Stock is changed or exchanged.
8. Redemption. (A) The Corporation, at its option, may
redeem shares of the Series A Junior Participating Preferred
Stock in whole at any time and in part from time to time, at a
redemption price equal to the Adjustment Number times the current
per share market price (as such term is hereinafter defined) of
the Common Stock on the date of the mailing of the notice of
redemption, together with unpaid accumulated dividends to the
date of such redemption. The "current per share market price" on
any date shall be deemed to be the average of the closing price
per share of such Common Stock for the ten consecutive Trading
Days (as such term is hereinafter defined) immediately prior to
such date; provided, however, that in the event that the current
per share market price of the Common Stock is determined during a
period following the announcement of (i) a dividend or
distribution on the Common Stock other than a regular quarterly
cash dividend or (ii) any subdivision, combination or
reclassification of such Common Stock and the ex-dividend date
for such dividend or distribution, or the record date for such
subdivision, combination or reclassification, shall not have
occurred prior to the commencement of such ten Trading Day
period, then, and in each such case, the current per share market
price shall be properly adjusted to take into account ex-dividend
trading. The closing price for each day shall be the last sales
price, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal transaction
reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange, or, if the Common Stock
is not listed or admitted to trading on the New York Stock
Exchange, on the principal national securities exchange on which
the Common Stock is listed or admitted to trading, or, if the
Common Stock is not listed or admitted to trading on any national
securities exchange but sales price information is reported for
such security, as reported by the National Association of
Securities Dealers, Inc. Automated Quotations System ("NASDAQ")
or such other self-regulatory organization or registered
securities information processor (as such terms are used under
the Securities Exchange Act of 1934, as amended) that then
reports information concerning the Common Stock, or, if sales
price information is not so reported, the average of the high bid
and low asked prices in the over-the-counter market on such day,
as reported by NASDAQ or such other entity, or, if on any such
date the Common Stock is not quoted by any such entity, the
average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Common Stock
selected by the Board of Directors of the Corporation. If on any
such date no such market maker is making a market in the Common
Stock, the fair value of the Common Stock on such date as
determined in good faith by the Board of Directors of the
Corporation shall be used. The term "Trading Day" shall mean a
day on which the principal national securities exchange on which
the Common Stock is listed or admitted to trading is open for the
transaction of business, or, if the Common Stock is not listed or
admitted to trading on any national securities exchange but is
quoted by NASDAQ, a day on which NASDAQ reports trades, or, if
the Common Stock is not so quoted, a Monday, Tuesday, Wednesday,
Thursday or Friday on which banking institutions in the State of
New York are not authorized or obligated by law or executive
order to close.
(B) In the event that fewer than all the outstanding shares
of the Series A Junior Participating Preferred Stock are to be
redeemed, the number of shares to be redeemed shall be determined
by the Board of Directors and the shares to be redeemed shall be
determined by lot or pro rata as may be determined by the Board
of Directors or by any other method that may be determined by the
Board of Directors in its sole discretion to be equitable.
(C) Notice of any such redemption shall be given by mailing
to the holders of the shares of Series A Junior Participating
Preferred Stock to be redeemed a notice of such redemption, first
class postage prepaid, not later than the fifteenth day and not
earlier than the sixtieth day before the date fixed for
redemption, at their last address as the same shall appear upon
the books of the Corporation. Each such notice shall state:
(i) the redemption date; (ii) the number of shares to be redeemed
and, if fewer than all the shares held by such holder are to be
redeemed, the number of such shares to be redeemed from such
holder; (iii) the redemption price; (iv) the place or places
where certificates for such shares are to be surrendered for
payment of the redemption price; and (v) that dividends on the
shares to be redeemed will cease to accrue on the close of
business on such redemption date. Any notice that is mailed in
the manner herein provided shall be conclusively presumed to have
been duly given, whether or not the stockholder received such
notice, and failure duly to give such notice by mail, or any
defect in such notice, to any holder of Series A Junior
Participating Preferred Stock shall not affect the validity of
the proceedings for the redemption of any other shares of
Series A Junior Participating Preferred Stock that are to be
redeemed. On or after the date fixed for redemption as stated in
such notice, each holder of the shares called for redemption
shall surrender the certificate evidencing such shares to the
Corporation at the place designated in such notice and shall
thereupon be entitled to receive payment of the redemption price.
If fewer than all the shares represented by any such surrendered
certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.
(D) The shares of Series A Junior Participating Preferred
Stock shall not be subject to the operation of any purchase,
retirement or sinking fund.
9. Ranking. The Series A Junior Participating Preferred
Stock shall rank junior to all other series of the Corporation's
Preferred Stock as to the payment of dividends and the
distribution of assets, unless the terms of any such series shall
provide otherwise, and shall rank senior to the Common Stock and
Preference Common Stock as to such matters.
10. Amendment. At any time that any shares of Series A
Junior Participating Preferred Stock are outstanding, the
Restated Certificate of Incorporation of the Corporation shall
not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A
Junior Participating Preferred Stock so as to affect them
adversely without the affirmative vote of the holders of a
majority or more of the outstanding shares of Series A Junior
Participating Preferred Stock, voting separately as a class.
11. Fractional Shares. Series A Junior Participating
Preferred Stock may be issued in fractions of a share that shall
entitle the holder, in proportion to such holder's fractional
shares, to exercise voting rights, receive dividends, participate
in distributions and to have the benefit of all other rights of
holders of Series A Junior Participating Preferred Stock.
<TABLE>
EXHIBIT 12
PENNZOIL COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<CAPTION>
For the three months ended
March 31,
----------------------------------
1995 1994
------------- -------------
(Dollar amounts expressed in thousands)
<S> <C> <C>
Income before cumulative effect of change
in accounting principle $ 2,743 $ 10,738
Income tax provision (benefit)
Federal and foreign (1,325) 4,422
State 740 1,506
------------- -------------
Total income tax provision (benefit) (585) 5,928
Interest charges 54,494 47,318
------------- -------------
Income before income tax provision (benefit) and interest charges $ 56,652 $ 63,984
============= =============
Fixed charges $ 55,557 $ 49,493
============= =============
Ratio of earnings to fixed charges 1.02 1.29
============= =============
<CAPTION>
DETAIL OF INTEREST AND FIXED CHARGES
For the three months ended
March 31,
----------------------------------
1995 1994
------------- -------------
(Expressed in thousands)
<S> <C> <C>
Interest charges per Consolidated Statement of Income
which includes amortization of debt discount, expense and premium $ 49,542 $ 43,764
Add: portion of rental expense representative of interest factor <F1> 6,015 5,729
------------- -------------
Total fixed charges $ 55,557 $ 49,493
Less: interest capitalized per Consolidated Statement of Income 1,063 2,175
------------- -------------
Total interest charges $ 54,494 $ 47,318
============= =============
<FN>
<F1> Interest factor based on management's estimates and approximates one-third of rental expense.
</FN>
</TABLE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D. C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarter Ended March 31, 1995 Commission File No. 1-5591
PENNZOIL COMPANY
(Exact name of registrant as specified in its charter)
Delaware 74-1597290
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Pennzoil Place, P.O. Box 2967
Houston, Texas 77252-2967
(Address of principal executive offices)
EXHIBIT
<PAGE>
PENNZOIL COMPANY AND SUBSIDIARIES
INDEX TO EXHIBITS
Exhibit No.
- -----------
3 Restated Certificate of Incorporation of Pennzoil Company dated
May 3, 1995.
12 Computation of Ratio of Earnings to Fixed Charges for the three
months ended March 31, 1995 and 1994.
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 23,513
<SECURITIES> 0
<RECEIVABLES> 458,237
<ALLOWANCES> 8,782
<INVENTORY> 142,589
<CURRENT-ASSETS> 682,985
<PP&E> 6,001,787
<DEPRECIATION> 3,230,156
<TOTAL-ASSETS> 4,705,509
<CURRENT-LIABILITIES> 881,214
<BONDS> 1,970,833
<COMMON> 43,507
0
0
<OTHER-SE> 1,148,739
<TOTAL-LIABILITY-AND-EQUITY> 4,705,509
<SALES> 588,760
<TOTAL-REVENUES> 635,340
<CGS> 368,832
<TOTAL-COSTS> 377,904
<OTHER-EXPENSES> 107,342
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 48,479
<INCOME-PRETAX> 2,158
<INCOME-TAX> (585)
<INCOME-CONTINUING> 2,743
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,743
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
