<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 23, 1997
REGISTRATION NO. 333-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
PENNZOIL COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 1311, 2911 74-159720
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBERS) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
----------------
PENNZOIL PLACE, P.O. BOX 2967
HOUSTON, TEXAS 77252-2967
(713) 546-4000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
LINDA F. CONDIT
CORPORATE SECRETARY
PENNZOIL COMPANY
PENNZOIL PLACE, P.O. BOX 2967
HOUSTON, TEXAS 77252-2967
(713) 546-4000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
WITH A COPY TO:
MOULTON GOODRUM, JR. G. MICHAEL O'LEARY
BAKER & BOTTS, L.L.P. ANDREWS & KURTH, L.L.P.
3000 ONE SHELL PLAZA 4200 TEXAS COMMERCE TOWER
HOUSTON, TEXAS 77002 HOUSTON, TEXAS 77002
(713) 229-1234 (713) 220-4200
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the
same offering. [_]
----------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE AMOUNT TO BE PER NEW OFFERING REGISTRATION
REGISTERED REGISTERED DEBENTURES PRICE(1) FEE(2)
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<S> <C> <C> <C> <C>
Exchangeable Senior
Debentures
Due 2008.............. $889,100,000 100% $889,100,000 $269,424.24
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</TABLE>
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(1) Pursuant to Rule 457(f)(1) under the Securities Act of 1933, this amount
is the market value of the maximum amount of 6 1/2% Exchangeable Senior
Debentures due 2003 and 4 3/4% Exchangeable Senior Debentures due 2003
that may be received by the Registrant from tendering holders. Pennzoil
will not issue more than $889,100,000 of new exchangeable debentures to
tendering holders, and thus the market value of the maximum amount of 6
1/2% Exchangeable Senior Debentures and 4 3/4% Exchangeable Senior
Debentures to be received by Pennzoil will not exceed $889,100,000.
(2) The registration fee has been calculated pursuant to Rule 457(f) under
the Securities Act of 1933.
----------------
THE REGISTRANT HEREBY AMENDS THE REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED DECEMBER 23, 1997
LOGO
[Logo of Pennzoil Company appears here]
OFFER TO EXCHANGE
NEWLY ISSUED
EXCHANGEABLE SENIOR DEBENTURES DUE 2008
OF PENNZOIL COMPANY
WITH A PRINCIPAL AMOUNT AND BEARING AN INTEREST RATE
TO BE DETERMINED AS DESCRIBED HEREIN
FOR A PORTION OF ITS
OUTSTANDING 6 1/2% EXCHANGEABLE SENIOR DEBENTURES DUE 2003
AND ITS
OUTSTANDING 4 3/4% EXCHANGEABLE SENIOR DEBENTURES DUE 2003
----------
THE EXCHANGE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1998
UNLESS THE EXCHANGE OFFER IS EXTENDED (THE "EXPIRATION DATE").
----------
Pennzoil Company (the "Company" or "Pennzoil") hereby offers, upon the terms
and subject to the conditions set forth in this Prospectus and the accompanying
Letter of Transmittal (which together constitute the "Exchange Offer"), to
issue its new exchangeable senior debentures due 2008 (the "New Debentures") in
exchange for a portion of its $397.3 million of outstanding 6 1/2% exchangeable
senior debentures due 2003 (the "6 1/2% Debentures") and its $491.8 million of
outstanding 4 3/4% exchangeable senior debentures due 2003 (the "4 3/4%
Debentures" and, together with the 6 1/2% Debentures, the "Old Debentures").
The principal amount of Old Debentures to be accepted for exchange, and the
principal amount of and interest rate on the New Debentures to be issued in the
Exchange Offer, will be determined as described herein.
The Old Debentures are currently exchangeable at the option of the holders
thereof ("Existing Exchange Rights") at any time prior to maturity, unless
previously redeemed, for shares of common stock ("Chevron Stock") of Chevron
Corporation ("Chevron") beneficially owned by Pennzoil at exchange rates of
23.774 shares and 17.004 shares per $1,000 principal amount of the 6 1/2%
Debentures and the 4 3/4% Debentures, respectively (the principal amount
equivalents of $42 1/16 per share and $58 13/16 per share, respectively),
subject to adjustment in certain events. There is currently $889.1 million
aggregate principal amount of Old Debentures outstanding. The 6 1/2% Debentures
and 4 3/4% Debentures are currently listed for trading on the New York Stock
Exchange, Inc. (the "NYSE") under the symbols PZL.F and PZM.F., respectively.
See "Price Range of Old Debentures" for the recent trading prices of the Old
Debentures.
The Exchange Offer will be for a principal amount of Old Debentures (the
"Target Amount") that is exchangeable into between 7.35 million and 14.39
million shares of Chevron Stock under Existing Exchange Rights. The Target
Amount will be determined by reference to the Average Chevron Stock Price (as
defined below). See "The Exchange Offer--Target Amount." However, Pennzoil
reserves the right, in its sole discretion, to accept more than the Target
Amount of Old Debentures for exchange. The "Average Chevron Stock Price" will
be the average of the closing prices of Chevron Stock on the NYSE on the two
trading days ending on the second trading day prior to the Expiration Date. On
January , 1998, the reported closing price of Chevron Stock on the NYSE was
$ per share. See "Chevron Corporation--Dividend and Price Range of
Chevron Stock." The Company will not accept for exchange any Old Debentures if
the Exchange Offer would result in less than $100 million in principal amount
of New Debentures being issued.
The principal amount of New Debentures to be issued in exchange for Old
Debentures in the Exchange Offer will be equal to the product of (i) 103% of
the Average Chevron Stock Price and (ii) the aggregate number of shares of
Chevron Stock for which the Old Debentures tendered by a holder are
exchangeable as of the date that the Company accepts Old Debentures pursuant to
this Exchange Offer (the "Acceptance Date") (subject to the payment of cash in
lieu of the issuance of a New Debenture in a principal amount of less than
$1,000 (a "Fractional New Debenture")).
(continued on next page)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
----------
The Dealer Manager for the Exchange Offer:
PAINEWEBBER INCORPORATED
----------
The date of this Prospectus is January , 1998.
<PAGE>
The interest rate per annum for the New Debentures will be neither less than
4 3/4% nor more than 6%. Each holder of Old Debentures tendered for exchange
must specify in the Letter of Transmittal, in increments of 0.05%, the minimum
interest rate (but in no event less than 4 3/4%) that such holder is willing
to accept for the New Debentures. The Company will select the lowest interest
rate (the "Determined Rate") that will allow it to accept the Target Amount of
Old Debentures (or such lesser amount of Old Debentures as is properly
tendered and not withdrawn specifying a coupon neither less than 4 3/4% per
annum nor more than 6% per annum, or such greater amount as Pennzoil, in its
sole discretion, may determine to accept). Notwithstanding the foregoing, a
holder may elect in the Letter of Transmittal to specify that all Old
Debentures being tendered are tendered at the "Determined Rate" (as opposed to
specifying a particular rate), which should increase the likelihood that the
Company would accept for exchange such holder's Old Debentures being tendered.
See "The Exchange Offer--Terms of the Exchange Offer." All Old Debentures
properly tendered by a holder specifying an interest rate for the New
Debentures at or below the Determined Rate, and not withdrawn, will be
accepted for exchange, subject to the terms and conditions of the Exchange
Offer (including the possibility of proration), provided that not more than
$889.1 million principal amount, and not less than $100 million principal
amount, of New Debentures will be issued. All New Debentures issued pursuant
to the Exchange Offer will bear interest at the Determined Rate. The Company
will pay accrued interest on Old Debentures accepted for exchange through the
Acceptance Date. Payment of such accrued interest on the Old Debentures will
accompany delivery of the New Debentures.
If more than the Target Amount of Old Debentures is validly tendered for
exchange prior to the Expiration Date at specified interest rates at or below
the Determined Rate, and not withdrawn, Old Debentures will be accepted for
exchange on a pro rata basis from among the Old Debentures tendered at the
Determined Rate. Old Debentures tendered at an interest rate that is lower
than the Determined Rate and accepted for exchange will not be subject to
proration.
The New Debentures will be issued as of the next calendar day following the
Acceptance Date. Interest on the New Debentures will accrue from their date of
issuance and will be payable in cash semi-annually on February 1 and August 1
of each year, commencing August 1, 1998. The New Debentures may not be
redeemed prior to February 1, 2000. Thereafter, the New Debentures may be
redeemed, at the option of Pennzoil, as set forth herein, in whole or in part,
at the redemption prices set forth herein plus accrued and unpaid interest to
the date of redemption.
The New Debentures will be exchangeable at the option of the holder at any
time prior to maturity, unless previously redeemed, for shares of Chevron
Stock owned by Pennzoil at an exchange rate of 0.823 shares of Chevron Stock
for each share of Chevron Stock into which exchanged Old Debentures were
exchangeable as of the Acceptance Date under Existing Exchange Rights
(excluding shares of Chevron Stock exchangeable for that portion of Old
Debentures for which cash is paid in lieu of the issuance of a Fractional New
Debenture), subject to adjustment in certain events. See "Prospectus Summary--
Illustration." In lieu of delivering certificates representing Chevron Stock
in exchange for any New Debentures, Pennzoil may pay to the holder
surrendering such New Debentures an amount in cash equal to the market price
of the Chevron Stock for which the New Debentures are exchangeable.
The New Debentures will constitute unsecured senior debt obligations of
Pennzoil ranking pari passu with all other present and future unsecured
general obligations of Pennzoil that are not expressly subordinated to senior
indebtedness. Pennzoil currently conducts substantially all of its operations
through subsidiaries, and the holders of the New Debentures will have a junior
position to any creditors of Pennzoil's subsidiaries. As of November 30, 1997,
the aggregate outstanding debt of Pennzoil's subsidiaries was approximately
$54 million. The New Debentures will be issued only in registered form and in
denominations of $1,000 and integral multiples thereof. See "Description of
New Debentures." Holders who would otherwise be entitled to receive a
Fractional New Debenture will receive a cash payment in lieu of the issuance
of such Fractional New Debenture. See "The Exchange Offer--Terms of the
Exchange Offer." The New Debentures will be issued only in book-entry form.
See "Description of New Debentures--Book-Entry Issuance Only."
Pennzoil currently expects to call for redemption all Old Debentures that
remain outstanding after completion of the Exchange Offer, although the final
determination of whether to make, and the timing of, such
2
<PAGE>
redemption of the Old Debentures (or either series thereof) will be made by
Pennzoil's Board of Directors based upon market and other factors prevailing
at the time such determination is made. If Pennzoil calls the Old Debentures
for redemption, based upon the terms of the Old Debentures and currently
prevailing market prices for Chevron Stock, Pennzoil expects that
substantially all holders of Old Debentures will exercise their Existing
Exchange Rights to obtain the shares of Chevron Stock for which the Old
Debentures are exchangeable (although Pennzoil has the right to pay cash
instead of delivering shares of Chevron Stock). Although Pennzoil has the
right to redeem the 6 1/2% Debentures beginning January 15, 1998, Pennzoil
does not intend to call the 6 1/2% Debentures for redemption before April 15,
1998. Holders of 6 1/2% Debentures not exchanged in the Exchange Offer that
exercise their Existing Exchange Rights on or after April 15 and before July
15, 1998 will receive accrued and unpaid interest through April 15, 1998 on
the 6 1/2% Debentures exchanged for Chevron Stock. Subject to a final
determination of Pennzoil's Board of Directors, Pennzoil currently expects to
call the 4 3/4% Debentures for redemption on October 1, 1998, which is the
first date on which they can be called for redemption.
Neither the Board of Directors of Pennzoil nor Pennzoil makes any
recommendation to holders of the Old Debentures as to whether to tender or
refrain from tendering in the Exchange Offer. Holders of the Old Debentures
are urged to consult their financial and tax advisors in making their
decisions on what action to take in light of their own particular
circumstances.
The Exchange Offer is being made only to holders of Old Debentures in
registered form. Holders of Old Debentures in bearer form must first exchange
the Old Debentures in bearer form for Old Debentures in registered form if
they desire to participate in the Exchange Offer. In order to exchange Old
Debentures in bearer form for Old Debentures in registered form, a holder must
surrender the Old Debentures in bearer form at the office or agency of the
Trustee (as defined under "Description of New Debentures--General") with all
unmatured coupons and all matured coupons in default thereto appertaining.
Each holder of registered Old Debentures desiring to accept the Exchange Offer
for all or any portion of his or her Old Debentures must either (1) properly
complete, sign and date the Letter of Transmittal or a photocopy thereof (all
references in this Prospectus to the Letter of Transmittal shall be deemed to
include a photocopy thereof) in accordance with the instructions contained
herein and therein and mail or otherwise deliver such Letter of Transmittal
and any other required documents to Texas Commerce Bank National Association
(the "Exchange Agent") and either deliver the Old Debentures to the Exchange
Agent along with the Letter of Transmittal or deliver such Old Debentures
pursuant to the procedure for book-entry transfer set forth herein or (2)
request his or her broker, dealer, commercial bank, trust company or nominee
to effect the transaction for him or her. Any beneficial owner whose Old
Debentures are registered in the name of a broker, dealer, commercial bank,
trust company or other nominee and who wishes to tender for exchange should
contact such broker, dealer, commercial bank, trust company or nominee
promptly and instruct such registered holder to tender on such beneficial
owner's behalf. Each holder of Old Debentures who desires to accept the
Exchange Offer and tender Old Debentures for exchange and whose Old Debentures
are not immediately available, or who cannot comply in a timely manner with
the procedure for book-entry transfer, should tender such Old Debentures by
following the procedures for guaranteed delivery set forth under "The Exchange
Offer--Guaranteed Delivery Procedures."
The Company expressly reserves the right, in its sole discretion, subject to
applicable law, to (i) withdraw or terminate the Exchange Offer, and not
accept for exchange any Old Debentures, and promptly return all Old
Debentures, at any time for any reason, including (without limitation) if the
Exchange Offer would result in less than $100 million in principal amount of
New Debentures being issued or upon the failure of any of the conditions
specified in "The Exchange Offer--Procedures for Tendering," (ii) waive any
condition to the Exchange Offer and accept all the Old Debentures previously
tendered pursuant to the Exchange Offer, (iii) extend the Expiration Date and
retain all Old Debentures tendered pursuant to the Exchange Offer until the
Expiration Date, subject, however, to all withdrawal rights of holders (see
"The Exchange Offer--Withdrawal of Tenders") or (iv) amend or modify the terms
of the Exchange Offer in any manner, including (without limitation) the form
of the consideration or the formula for calculating the amount of the
consideration to be paid pursuant to the Exchange Offer. Any amendment
applicable to the Exchange Offer will apply to all Old
3
<PAGE>
Debentures tendered pursuant to the Exchange Offer. If the Company materially
changes the terms of the Exchange Offer or if it waives a material condition
of the Exchange Offer, the Company will extend the Exchange Offer. The minimum
period during which the Exchange Offer will be extended following a material
change in the terms of the Exchange Offer or a waiver by the Company of a
material condition of the Exchange Offer, other than a change in the principal
amount of Old Debentures being sought for exchange or in the formula for
calculating the consideration offered, will depend upon the facts and
circumstances, including the relative materiality of the change or waiver. See
"The Exchange Offer--Expiration Date; Extensions; Amendments; Termination."
For a discussion of certain federal income tax considerations to holders of
Old Debentures who exchange for New Debentures, see "Certain Federal Income
Tax Consequences."
Application will be made to list the New Debentures for trading on the NYSE.
The Company will not receive any proceeds from the Exchange Offer.
Successful completion of the Exchange Offer will allow the Company to release
a portion of the shares of Chevron Stock that have been deposited with
exchange agents for possible exchange of Old Debentures under Existing
Exchange Rights. See "Use of Proceeds." The Company will pay all of its
expenses incident to the Exchange Offer. Tenders of Old Debentures pursuant to
the Exchange Offer may be withdrawn as provided herein at any time prior to
the Expiration Date. For a discussion of the conditions under which the
Exchange Offer may be terminated, see "The Exchange Offer--Expiration Date;
Extensions; Amendments; Termination."
PaineWebber Incorporated has been retained to act as Dealer Manager to
solicit exchanges of Old Debentures for New Debentures. See "Dealer Manager."
Texas Commerce Bank National Association has been retained to act as Exchange
Agent in connection with the Exchange Offer. D.F. King & Co., Inc. has been
retained to act as Information Agent to assist in connection with the Exchange
Offer.
----------------
4
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain
Documents by Reference. 5
Prospectus Summary...... 6
Capitalization.......... 14
Recent Developments..... 15
Use of Proceeds......... 15
Chevron Corporation..... 16
Price Range of Old
Debentures............. 17
The Exchange Offer...... 18
Description of New
Debentures............. 28
Certain Federal Income
Tax Consequences....... 40
Dealer Manager.......... 45
Legal Opinions.......... 45
Experts................. 45
Available Information... 46
Special Note Regarding
Forward-Looking
Statements--Safe Harbor
Provisions............. 46
Appendix A: Selected
Information Concerning
Chevron................ A-1
Appendix B: Description
of Old 6 1/2%
Debentures............. B-1
Appendix C: Description
of Old 4 3/4%
Debentures............. C-1
</TABLE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by Pennzoil with the
Securities and Exchange Commission (the "Commission") (File No. 1-5591)
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), are incorporated in the Prospectus by reference and shall be deemed to
be a part hereof:
(a) Pennzoil's Annual Report on Form 10-K for the year ended December 31,
1996;
(b) Pennzoil's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997, June 30, 1997 and September 30, 1997; and
(c) Pennzoil's Current Reports on Form 8-K dated June 23, 1997 and July
1, 1997.
All documents filed by Pennzoil pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering made hereby shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of the filing of such documents. Any statement contained in this
Prospectus, in a supplement to this Prospectus or in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any subsequently filed supplement to this
Prospectus or in any document that also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
This Prospectus incorporates documents by reference that are not presented
herein or delivered herewith. Copies of these documents (excluding exhibits
unless such exhibits are specifically incorporated by reference into the
information incorporated herein) will be provided by first-class mail without
charge to each person to whom this Prospectus is delivered, upon written or
oral request, to Linda F. Condit, Corporate Secretary, Pennzoil Company,
Pennzoil Place, P.O. Box 2967, Houston, Texas 77252 (telephone number: (713)
546-4000).
No person is authorized in connection with any offering made hereby to give
any information or to make any representation in connection with the Exchange
Offer other than those contained in this Prospectus, and, if given or made,
such information or representation must not be relied upon as having been
authorized by Pennzoil or by the Dealer Manager. This Prospectus does not
constitute an offer to sell or a solicitation of any offer to buy any of the
securities offered hereby by any person in any jurisdiction in which it is
unlawful to make such an offer or solicitation. Neither the delivery of this
Prospectus nor any sale made hereunder shall under any circumstances create an
implication that the information contained herein is correct as of any date
subsequent to the date hereof.
5
<PAGE>
PROSPECTUS SUMMARY
This general summary is provided solely for the convenience of holders of the
Old Debentures and is qualified in its entirety by reference to the full text
of and the more specific details contained in this Exchange Offer, the related
Letter of Transmittal and any amendments hereto and thereto. Capitalized terms
used in this summary without definition shall have the respective meanings
ascribed to such terms in this Exchange Offer.
PENNZOIL COMPANY
Pennzoil is an energy company engaged primarily in oil and gas exploration
and production, in processing, refining and marketing of oil and motor oil and
refined products and in fast automotive oil change operations. Pennzoil's
operations are conducted primarily through subsidiaries. Pennzoil Exploration
and Production Company ("PEPCO") conducts the majority of Pennzoil's oil and
gas exploration and production operations. The refining of oil and the
processing and marketing of motor oil, refined products and industrial
specialities are conducted by Pennzoil Products Company ("PPC"). Jiffy Lube
International, Inc. ("Jiffy Lube") franchises, owns and operates automotive
fast lubrication and fluid maintenance service centers.
As of December 1, 1997, Pennzoil beneficially owned approximately 17.8
million shares of Chevron Stock (which have been deposited with exchange agents
for possible exchange of the Old Debentures). At the current dividend rate,
Pennzoil receives approximately $41.3 million annually in dividends on its
current investment in Chevron Stock.
THE EXCHANGE OFFER
Purpose of the Exchange The purpose of the Exchange Offer is to replace a
Offer...................... portion of Pennzoil's outstanding Old Debentures
with the New Debentures. The Company is
undertaking the Exchange Offer to take advantage
of what it believes to be favorable conditions in
the equity-linked securities markets. In
addition, the net tax loss created by the
Exchange Offer will be used to offset (at least
in part) gains recognized by Pennzoil (1) from
expected exercise of Existing Exchange Rights on
unexchanged Old Debentures and (2) on any shares
of Chevron Stock that may be released (from
deposit with exchange agents for possible
exchange of Old Debentures) as a result of the
Exchange Offer and sold by Pennzoil.
The Exchange Offer.......... Pennzoil is offering to issue the New Debentures
in exchange for the Target Amount of the Old
Debentures. The Target Amount of Old Debentures
to be accepted for exchange, and the principal
amount of and interest rate on the New Debentures
to be issued in the Exchange Offer, will be
determined as described herein.
Target Amount............... The Exchange Offer will be for the Target Amount
of Old Debentures, which is a principal amount of
Old Debentures that is exchangeable into between
7.35 million and 14.39 million shares of Chevron
Stock under Existing Exchange Rights. The Target
Amount will be determined by reference to the
Average Chevron Stock Price. See "The Exchange
Offer--Target Amount." However, Pennzoil reserves
the right, in its sole discretion, to accept more
than the Target Amount of Old Debentures for
exchange. The "Average Chevron Stock Price" will
be the average of the closing prices of Chevron
Stock on the NYSE on the two trading days ending
on the second trading day prior to the Expiration
Date. On January , 1998, the reported closing
price of Chevron Stock on the NYSE was
6
<PAGE>
$ per share. See "Chevron Corporation--
Dividend and Price Range of Chevron Stock" for
the recent trading prices of Chevron Stock.
Minimum Number of New
Debentures................. The Company will not accept for exchange any Old
Debentures if the Exchange Offer would result in
less than $100 million in principal amount of New
Debentures being issued.
Market Price of Old
Debentures................. On January , 1998, the closing prices for the 6
1/2% Debentures and the 4 3/4% Debentures on the
NYSE Composite Tape were $ and $ ,
respectively. Because the Old Debentures may
trade in small amounts and sometimes infrequently
on the NYSE, the most recently reported trading
price may or may not be indicative of the current
market value. See "Price Range of Old Debentures"
for the recent trading prices of the Old
Debentures.
Consideration Offered....... The principal amount of New Debentures to be
issued in exchange for Old Debentures in the
Exchange Offer will be equal to the product of
(i) 103% of the Average Chevron Stock Price and
(ii) the aggregate number of shares of Chevron
Stock for which the Old Debentures tendered by a
holder are exchangeable as of the Acceptance Date
(subject to the payment of cash in lieu of the
issuance of a Fractional New Debenture).
Expiration Date............. 5:00 p.m., New York City time, on
, 1998, unless the Exchange Offer is extended
as provided herein, in which case the term
"Expiration Date" means the latest date and time
to which the Exchange Offer is extended.
Determination of Interest
Rate....................... The interest rate per annum for the New
Debentures will be neither less than 4 3/4% nor
more than 6%. Each holder of Old Debentures
tendered for exchange must specify in the Letter
of Transmittal, in increments of 0.05%, the
minimum interest rate (but in no event less than
4 3/4%) that such holder is willing to accept for
the New Debentures. The Company will select the
Determined Rate, which will be the lowest rate
that will allow it to accept the Target Amount of
Old Debentures (or such lesser amount of Old
Debentures as is properly tendered and not
withdrawn specifying a coupon neither less than 4
3/4% per annum nor more than 6% per annum, or
such greater amount as Pennzoil, in its sole
discretion, may determine to accept).
Notwithstanding the foregoing, a holder may elect
in the Letter of Transmittal to specify that all
Old Debentures being tendered are tendered at the
"Determined Rate" (as opposed to specifying a
particular rate), which should increase the
likelihood that the Company would accept for
exchange such holder's Old Debentures being
tendered. Old Debentures tendered by a holder
specifying the Determined Rate (rather than a
particular rate neither less than 4 3/4% nor more
than 6%) will be considered tendered at 4 3/4%
for purposes of determining the Old Debentures
accepted for exchange and any proration, but,
subject to the other terms and conditions of the
Exchange Offer, such holders will receive New
Debentures bearing interest at the Determined
Rate. See "The Exchange Offer--Terms of the
Exchange Offer." All Old Debentures properly
tendered by a holder specifying an interest rate
7
<PAGE>
for the New Debentures at or below the Determined
Rate, and not withdrawn, will be accepted for
exchange, subject to the terms and conditions of
the Exchange Offer (including the possibility of
proration), provided that not more than $889.1
million principal amount, and not less than $100
million principal amount, of New Debentures will
be issued. All New Debentures issued pursuant to
the Exchange Offer will bear interest at the
Determined Rate.
Proration................... If more than the Target Amount of Old Debentures
is validly tendered for exchange prior to the
Expiration Date at specified interest rates at or
below the Determined Rate, and not withdrawn, Old
Debentures will be accepted for exchange on a pro
rata basis from among the Old Debentures tendered
at the Determined Rate. Old Debentures tendered
at an interest rate that is lower than the
Determined Rate and accepted for exchange will
not be subject to proration.
Conditions to the Exchange
Offer; Termination;
Waiver; Amendment.......... The Company expressly reserves the right, in its
sole discretion, subject to applicable law, to
(i) withdraw or terminate the Exchange Offer, and
not accept for exchange any Old Debentures, and
promptly return all Old Debentures, at any time
for any reason, including (without limitation) if
the Exchange Offer would result in less than $100
million in principal amount of New Debentures
being issued or upon the failure of any of the
conditions specified in "The Exchange Offer--
Procedures for Tendering," (ii) waive any
condition to the Exchange Offer and accept all
the Old Debentures previously tendered pursuant
to the Exchange Offer, (iii) extend the
Expiration Date and retain all Old Debentures
tendered pursuant to the Exchange Offer until the
Expiration Date, subject, however, to all
withdrawal rights of holders (see "The Exchange
Offer--Withdrawal of Tenders") or (iv) amend or
modify the terms of the Exchange Offer in any
manner, including (without limitation) the form
of the consideration or the formula for
calculating the amount of the consideration to be
paid pursuant to the Exchange Offer. Any
amendment applicable to the Exchange Offer will
apply to all Old Debentures tendered pursuant to
the Exchange Offer. If the Company materially
changes the terms of the Exchange Offer or if it
waives a material condition of the Exchange
Offer, the Company will extend the Exchange
Offer. The minimum period during which the
Exchange Offer will be extended following a
material change in the terms of the Exchange
Offer or a waiver by the Company of a material
condition of the Exchange Offer, other than a
change in the principal amount of Old Debentures
being sought for exchange or in the formula for
calculating the consideration offered, will
depend upon the facts and circumstances,
including the relative materiality of the change
or waiver. See "The Exchange Offer--Expiration
Date; Extensions; Amendments; Termination."
Procedures for Tendering
Old Debentures............. The Exchange Offer is being made only to holders
of Old Debentures in registered form. Holders of
Old Debentures in bearer form must first exchange
the Old Debentures in bearer form for Old
8
<PAGE>
Debentures in registered form if they desire to
participate in the Exchange Offer. In order to
exchange Old Debentures in bearer form for Old
Debentures in registered form, a holder must
surrender the Old Debentures in bearer form at
the office or agency of the Trustee with all
unmatured coupons and all matured coupons in
default thereto appertaining. Each holder of
registered Old Debentures desiring to accept the
Exchange Offer for all or any portion of his or
her Old Debentures must either (1) properly
complete, sign and date the Letter of Transmittal
or a photocopy thereof in accordance with the
instructions contained herein and therein and
mail or otherwise deliver such Letter of
Transmittal and any other required documents to
the Exchange Agent and either deliver the Old
Debentures to the Exchange Agent along with the
Letter of Transmittal or deliver such Old
Debentures pursuant to the procedure for book-
entry transfer set forth herein or (2) request
his or her broker, dealer, commercial bank, trust
company or nominee to effect the transaction for
him or her.
Special Procedures for
Beneficial Owners.......... Any beneficial owner whose Old Debentures are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender for exchange should
contact such broker, dealer, commercial bank,
trust company or nominee promptly and instruct
such registered holder to tender on such
beneficial owner's behalf.
Guaranteed Delivery
Procedures................. Each holder of Old Debentures who desires to
accept the Exchange Offer and tender Old
Debentures for exchange and whose Old Debentures
are not immediately available, or who cannot
comply in a timely manner with the procedure for
book-entry transfer, should tender such Old
Debentures by following the procedures for the
guaranteed delivery set forth under "The Exchange
Offer-- Guaranteed Delivery Procedures."
Withdrawal Rights........... Tenders of Old Debentures pursuant to the
Exchange Offer may be withdrawn at any time prior
to the Expiration Date. See "The Exchange Offer--
Withdrawal of Tenders."
Delivery of New Debentures;
Payment of Cash............ The Company expects that certificates
representing New Debentures to be issued in the
Exchange Offer, certificates representing
portions of Old Debentures not accepted for
exchange and checks in payment of the cash to be
paid in lieu of the issuance of Fractional New
Debentures and accrued and unpaid interest due on
Old Debentures accepted for exchange will be
delivered as soon as practicable after the
Expiration Date. See "The Exchange Offer--Terms
of the Exchange Offer."
Interest on the Old
Debentures................. Pennzoil will pay accrued interest on Old
Debentures accepted for exchange through the
Acceptance Date. Payment of such accrued interest
on the Old Debentures will accompany delivery of
the New Debentures. Holders of 6 1/2% Debentures
not exchanged in the Exchange Offer that exercise
their Existing Exchange Rights on or after April
15 and before July 15, 1998 will be paid accrued
and
9
<PAGE>
unpaid interest on the 6 1/2% Debentures through
April 15, 1998 at the time such Existing Exchange
Rights are exercised.
Exchange Agent; Information
Agent...................... Texas Commerce Bank National Association is
serving as Exchange Agent in connection with the
Exchange Offer. D.F. King & Co., Inc. is serving
as Information Agent in connection with the
Exchange Offer. See "The Exchange Offer--Exchange
Agent; Information Agent."
Use of Proceeds............. The Company will not receive any proceeds from
the Exchange Offer. Successful completion of the
Exchange Offer will allow the Company to release
a portion of the shares of Chevron Stock that
have been deposited with exchange agents for
possible exchange of Old Debentures under
Existing Exchange Rights. See "Use of Proceeds."
Denominations............... New Debentures will be issuable only in
registered form and only in denominations of
$1,000 and integral multiples thereof. Holders
who would otherwise be entitled to receive a
Fractional New Debenture will receive a cash
payment in lieu of such Fractional New Debenture.
See "The Exchange Offer--Terms of the Exchange
Offer."
Certain United States
Federal Income Tax
Considerations Relating to
the Exchange Offer......... Based on the position taken by Pennzoil pursuant
to proposed Treasury regulations outstanding at
the time the Old Debentures were issued, an
exchange by a holder of Old Debentures for New
Debentures will constitute two separate exchanges
for federal income tax purposes: a Deemed Debt
Exchange, in which the right of the holder to
payments of stated principal and interest is
exchanged for a portion of the New Debentures
received by the holder, and a Deemed Option
Exchange, in which the right of the holder to
exchange the Old Debentures for Chevron Stock is
exchanged for the balance of the New Debentures
received by the holder (all capitalized terms not
defined above are defined below in "Certain
Federal Income Tax Consequences"). For federal
income tax purposes, the Deemed Debt Exchange
probably will be a "recapitalization" of
Pennzoil, so a holder generally will not
recognize loss, if any, on such exchange, and
probably will recognize gain, if any, to the
extent of the "boot" received in such exchange.
The Deemed Option Exchange will not be pursuant
to a "recapitalization", so a holder will
recognize any gain or loss on such exchange. See
"Certain Federal Income Tax Consequences--
Treatment of Exchange Offer."
Appraisal Rights............ Holders of the Old Debentures do not have any
appraisal or dissenters' rights under the
Delaware General Corporation Law or the Indenture
(as defined under "Description of New
Debentures--General") in connection with the
Exchange Offer. The Company intends to conduct
the Exchange Offer in accordance with the
applicable requirements of the Exchange Act and
the rules and regulations of the Commission
promulgated thereunder.
10
<PAGE>
SUMMARY DESCRIPTION OF THE NEW DEBENTURES
Issuer...................... Pennzoil Company
Security.................... Exchangeable Senior Debentures Due 2008
Maturity Date............... February 1, 2008
Interest Payment Dates...... February 1 and August 1, commencing August 1,
1998.
Date of Issuance............ The New Debentures will be issued as of the next
calendar day following the Acceptance Date and
interest on the New Debentures will accrue from
their date of issuance.
Determination of Interest
Rate....................... The interest rate per annum for the New
Debentures will be neither less than 4 3/4% nor
more than 6%. See "The Exchange Offer--Terms of
the Exchange Offer."
Book-Entry Issuance......... The New Debentures will be issued only in book-
entry form. See "Description of New Debentures--
Book-Entry Issuance Only."
Exchange Rights............. The New Debentures will be exchangeable at the
option of the holder at any time prior to
maturity, unless previously redeemed, for shares
of Chevron Stock owned by Pennzoil at an exchange
rate of 0.823 shares of Chevron Stock for each
share of Chevron Stock into which exchanged Old
Debentures were exchangeable as of the Acceptance
Date under Existing Exchange Rights (excluding
shares of Chevron Stock exchangeable for that
portion of Old Debentures for which cash is paid
in lieu of the issuance of a Fractional New
Debenture), subject to adjustment in certain
events. See "--Illustration." In lieu of
delivering certificates representing Chevron
Stock in exchange for any New Debentures,
Pennzoil may pay to the holder surrendering such
New Debentures an amount in cash equal to the
market price of the Chevron Stock for which the
New Debentures are exchangeable.
Repurchase Rights........... Holders of New Debentures may exercise rights to
cause Pennzoil to repurchase the New Debentures
if Pennzoil takes certain action as described
under "Description of New Debentures--Repurchase
Rights."
Optional Redemption......... The New Debentures may not be redeemed prior to
February 1, 2000. Thereafter, the New Debentures
may be redeemed at the option of Pennzoil, as set
forth herein, in whole or in part, at the
redemption prices set forth herein plus accrued
and unpaid interest to the date of redemption.
Ranking..................... The New Debentures will constitute unsecured
senior debt obligations of Pennzoil ranking pari
passu with all other present and future unsecured
general obligations of Pennzoil that are not
expressly subordinated to senior indebtedness.
Pennzoil currently conducts substantially all of
its operations through subsidiaries, and the
holders of the New Debentures will have a junior
position to any creditors of Pennzoil's
subsidiaries. As of November 30, 1997, the
aggregate outstanding debt of Pennzoil's
subsidiaries was approximately $54 million.
11
<PAGE>
Listing..................... Application will be made to list the New
Debentures for trading on the NYSE.
Proposed Trading Symbol.....
Certain Federal Income Tax
Considerations Relating to
the New Debentures......... A holder will be required to include original
issue discount in gross income for federal income
tax purposes on a constant yield basis over the
term of the New Debentures. Original issue
discount will accrue at the interest rate at
which the New Debentures would have been issued
if they were not exchangeable for shares of
Chevron Stock. This rate will exceed the
Determined Rate. An exchange of the New
Debentures for shares of Chevron Stock will
constitute a taxable sale or exchange of the New
Debentures. Any gain on the sale, exchange or
redemption of the New Debentures will be ordinary
interest income (rather than capital gain); any
loss generally will be ordinary loss to the
extent of the net amount of ordinary income the
holder has previously realized on the New
Debentures and capital loss as to the balance. In
the case of New Debentures retired or exchanged
for shares of Chevron Stock on the maturity date
of the New Debentures, the amount and character
of income and loss of the holder will be the same
as described above, but will be determined in
part through certain original issue discount
"adjustments." See "Certain Federal Income Tax
Consequences--Treatment of New Debentures."
12
<PAGE>
ILLUSTRATION
The following illustrates the effect of the Exchange Offer (i) on a holder of
$1,000 principal amount of 6 1/2% Debentures, (ii) on a holder of $1,000,000
principal amount of 6 1/2% Debentures (1,000 6 1/2% Debentures, each at $1,000
principal amount), (iii) on a holder of $1,000 principal amount of 4 3/4%
Debentures, (iv) on a holder of $1,000,000 principal amount of 4 3/4%
Debentures (1,000 4 3/4% Debentures, each at $1,000 principal amount), and (v)
per share of Chevron Stock for which each series of Old Debentures are
exchangeable, assuming in each case that the Average Chevron Stock Price is
$80.00 per share and assuming the holder's tender of Old Debentures is accepted
for exchange. This chart is for illustrative purposes only. Changes in the
Average Chevron Stock Price will affect the illustration set forth below. See
"The Exchange Offer--Target Amount."
<TABLE>
<CAPTION>
EITHER SERIES
OF OLD
DEBENTURES
PER UNDERLYING
6 1/2% 6 1/2% 4 3/4% 4 3/4% SHARE OF
CURRENT HOLDINGS DEBENTURES DEBENTURES DEBENTURES DEBENTURES CHEVRON STOCK
- ---------------- ---------- ------------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Principal amount........ $1,000 $1,000,000 $1,000 $1,000,000 --
Shares of Chevron Stock
for which Old
Debentures are
exchangeable at current
exchange rate ......... 23.774 23,774 17.004 17,004 --
<CAPTION>
NEW DEBENTURES RECEIVED
IN EXCHANGE OFFER
- -----------------------
<S> <C> <C> <C> <C> <C>
(a) Average Chevron
Stock Price............ $80.00 $80.00 $80.00 $80.00 $80.00
(b) Multiple............ 103% 103% 103% 103% 103%
(c) Shares of Chevron
Stock for which Old
Debentures are
exchangeable at current
exchange rate.......... 23.774 23,774 17.004 17,004 1
Product ((a) x (b) x
(c))................... $1,958.98 $1,958,977.60 $1,401.13 $1,401,129.60 $82.40
Principal amount of New
Debentures............ $1,000.00 $1,958,000.00 $1,000.00 $1,401,000.00 N/A
Cash in Lieu of
Issuance of Fractional
New Debentures........ $958.98 $977.60 $401.13 $129.60 N/A
- --------------------------------------------------------------------------------
<CAPTION>
AMOUNTS PER $1,000
PRINCIPAL AMOUNT OF NEW
DEBENTURES(1)
- -----------------------
<S> <C> <C> <C> <C> <C>
Exchange Rate(2)........ 0.823
Principal Amount of New
Debentures per share of
underlying Chevron
Stock ($82.40/0.823)... $100.12
New exchange ratio per
$1,000 principal amount
of New Debentures
($1,000/$100.12)....... 9.988
</TABLE>
- --------
(1) Gives effect to the multiple (103%) used in determining the principal
amount of New Debentures in the Exchange Offer.
(2) The New Debentures will be exchangeable at the option of the holder at any
time prior to maturity, unless previously redeemed, for shares of Chevron
Stock owned by Pennzoil at an exchange rate of 0.823 shares of Chevron
Stock for each share of Chevron Stock into which exchanged Old Debentures
were exchangeable as of the Acceptance Date under Existing Exchange Rights
(excluding shares of Chevron Stock exchangeable for that portion of Old
Debentures for which cash is paid in lieu of the issuance of a Fractional
New Debenture), subject to adjustment in certain events. See "Description
of New Debentures--Exchange Rights."
13
<PAGE>
CAPITALIZATION
The following table sets forth information with respect to the consolidated
capitalization of Pennzoil and its subsidiaries as of September 30, 1997 and
the adjusted consolidated capitalization of Pennzoil and its subsidiaries
after giving effect to (i) the issuance of $835.4 million of New Debentures
(assuming $506.2 million principal amount of Old Debentures (an equal
percentage of the outstanding of each of the 6 1/2% Debentures and 4 3/4%
Debentures) are accepted for exchange), (ii) the redemption of the remaining
Old Debentures (assuming holders of all such remaining Old Debentures elect to
exercise their Existing Exchange Rights for Chevron Stock and Pennzoil does
not elect to pay cash in lieu of delivering Chevron Stock), and (iii) the
assumed sale of Chevron Stock that would no longer be deposited with exchange
agents for possible exchange of the Old Debentures or the New Debentures, and
the use of the net proceeds from such sale to reduce outstanding variable-rate
indebtedness, as if all those transactions occurred on September 30, 1997.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
---------------------------------------
ACTUAL ADJUSTMENTS(A) AS ADJUSTED
---------- -------------- -----------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Short-Term Debt
Current Maturities of Long-Term Debt.. $ 2,433 $ -- $ 2,433
---------- --------- ----------
Total Short-Term Debt............... 2,433 -- 2,433
========== ========= ==========
Long-Term Debt, excluding Current
Maturities
Notes and Debentures due 1999-2009.... 800,000 -- 800,000
6 1/2% and 4 3/4% Debentures due 2003. 897,229 (897,229) --
New Debentures........................ -- 835,423 (b) 835,423
Variable-Rate Credit Arrangements..... 528,424 (138,851)(c) 389,573
Other, including debenture premiums
and discounts........................ 46,156 (24,333)(d) 21,823
---------- --------- ----------
Total Long-Term Debt................ 2,271,809 (224,990) 2,046,819
Shareholders' Equity
Unrealized holding gain on marketable
securities........................... 190,337 60,936 (e) 251,273
Gain on assumed disposition of
Chevron.............................. 275,821 (f) 275,821
Extraordinary Item related to
exchange............................. (337,761)(g) (337,761)
Other Equity.......................... 898,362 898,362
---------- --------- ----------
Total Shareholders' Equity.......... 1,088,699 (1,004) 1,087,695
---------- --------- ----------
Total Capitalization.................... $3,360,508 $(225,994) $3,134,514
========== ========= ==========
</TABLE>
- --------
(a) Assumes an Average Chevron Stock Price of $80 per share.
(b) Adjustment to reflect New Debentures issued at par value. The financial
statement carrying amount of the New Debentures will be marked to market
by Pennzoil based upon changes in the price of Chevron Stock above the
effective exchange price. Such increases or decreases in carrying value
will be charged or credited, respectively, to Pennzoil net income.
(c) Adjustment to reflect the application of the $143.5 million proceeds from
the assumed sale by Pennzoil of 1.79 million Chevron shares at $80 per
share, less $4.7 million of new debt issue costs.
(d) Adjustment to reflect an assumed 2.9% discount on issuance of New
Debentures.
(e) Reflects the net increase in the unrealized holding gain on marketable
securities to reflect the adjusted fair value of the remaining 8.34
million shares of Chevron Stock held by Pennzoil at $80 per share, reduced
by liquidated holding gains (i) on the shares of Chevron Stock assumed to
be delivered in exchange for unexchanged Old Debentures under Existing
Exchange Rights and (ii) on the shares of Chevron Stock assumed to be
sold. Future changes in the fair market value of the shares of Chevron
Stock held by Pennzoil will be reflected in its financial statement
carrying amount of marketable securities. Such increases or decreases in
fair value will be recognized as an adjustment to shareholders' equity.
(f) Adjustment to reflect the realized gain on the assumed disposition of 9.60
million shares of Chevron Stock at $80 per share, net of tax. Pennzoil's
cost for the shares of Chevron Stock for accounting purposes is $33.676
per share.
(g) Reflects the extraordinary loss on retirement of the Old Debentures at a
market value of $1,435.8 million and financial statement carrying amount
of $897.2 million, plus the remaining unamortized debt issue cost of the
Old Debentures of $6.2 million, net of taxes of $207.0 million.
14
<PAGE>
RECENT DEVELOPMENTS
On November 17, 1997, Union Pacific Resources Group Inc. announced that it
terminated its unsolicited tender offer for all outstanding shares of
Pennzoil.
1998 CAPITAL EXPENDITURES
The table below summarizes Pennzoil's current 1998 capital expenditure
budget by segment compared with 1997 and 1996 capital expenditures. The
capital budget is reassessed from time to time and could, for example, be
adjusted to reflect changes in oil and gas prices and other economic factors.
<TABLE>
<CAPTION>
1998
BUDGET 1997* 1996
------ ------ ------
(EXPRESSED IN
MILLIONS)
<S> <C> <C> <C>
Oil and Gas......................................... $ $407.2 $311.9
Motor Oil & Refined Products........................ 175.3 231.7
Franchise Operations................................ 21.5 19.5
Corporate and Other................................. 5.1 2.5
------ ------ ------
$ $609.1 $565.6
====== ====== ======
</TABLE>
- --------
*Based on estimates as of December 1997.
Pennzoil currently expects to generate funds for its budgeted 1998 capital
expenditures from a combination of some, or all, of the following: cash flow
from operations, borrowings under its short-term facilities and revolving
credit facility and available cash.
USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offer.
Successful completion of the Exchange Offer will allow the Company to
release a portion of the shares of Chevron Stock that have been deposited with
exchange agents for possible exchange of Old Debentures under Existing
Exchange Rights, specifically (i) all shares underlying a Fractional New
Debenture and (ii) .177 of a share of Chevron Stock for each share of Chevron
Stock underlying an Old Debenture accepted for exchange. Pennzoil currently
intends to sell such released shares of Chevron Stock for cash prior to
December 31, 1998 and use the net proceeds from such sale to reduce
outstanding variable-rate indebtedness.
15
<PAGE>
CHEVRON CORPORATION
Chevron is a major international oil company. It provides administrative,
financial and management support for, and manages its investments in, U.S. and
foreign subsidiaries and affiliates, which engage in fully integrated
petroleum operations, chemical operations and coal mining. The company
operates in the United States and approximately 90 other countries. Pennzoil
has no affiliation with Chevron other than its stock ownership and contractual
arrangements in the ordinary course of business and therefore has no greater
access to information relating to Chevron than any other Chevron stockholder.
Appendix A to this Prospectus contains selected information concerning Chevron
taken from Chevron's Annual Report on Form 10-K for the year ended December
31, 1996 and Chevron's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997, together with Chevron's "Management's Discussion and
Analysis of Financial Condition and Results of Operations" for the year ended
December 31, 1996 and for the three- and nine-month periods ended September
30, 1997.
Based upon information published by Chevron, at September 30, 1997, Chevron
had 656,752,639 shares of Chevron Stock issued and outstanding; Chevron Stock
is listed on the NYSE (trading symbol: CHV), as well as the Midwest; Pacific;
Vancouver; London; and Zurich, Basel, and Geneva, Switzerland, stock
exchanges. Chevron Stock is also traded on the Boston, Cincinnati, Detroit and
Philadelphia stock exchanges. On January , 1998, the reported closing price
of Chevron Stock on the NYSE Composite Tape was $ .
DIVIDEND AND PRICE RANGE OF CHEVRON STOCK
The following table sets forth the high and low trading prices for Chevron
Stock on the NYSE Composite Tape and dividends declared for the calendar
periods indicated as reported in published financial sources.
<TABLE>
<CAPTION>
HIGH LOW DIVIDENDS
---- ---- ---------
<S> <C> <C> <C>
1995:
First Quarter............................... $48 1/2 $43 3/8 $0.463
Second Quarter.............................. 49 7/8 44 1/4 0.463
Third Quarter............................... 50 3/8 46 5/8 0.500
Fourth Quarter.............................. 53 5/8 46 1/8 0.500
1996:
First Quarter............................... 58 7/8 51 0.500
Second Quarter.............................. 62 1/8 54 1/2 0.500
Third Quarter............................... 63 3/8 55 7/8 0.540
Fourth Quarter.............................. 68 3/8 60 1/4 0.540
1997:
First Quarter............................... 72 3/4 63 1/2 0.540
Second Quarter.............................. 77 1/4 61 3/4 0.580
Third Quarter............................... 89 3/16 73 1/2 0.580
Fourth Quarter (through December 19, 1997).. 88 7/8 71 1/2 0.580
</TABLE>
16
<PAGE>
PRICE RANGE OF OLD DEBENTURES
On January , 1998, the closing prices for the 6 1/2% Debentures and the 4
3/4% Debentures on the NYSE Composite Tape were $ and $ ,
respectively. Because the Old Debentures may trade in small amounts and
sometimes infrequently on the NYSE, the most recently reported trading price
may or may not be indicative of the current market value.
6 1/2% DEBENTURES
The following table sets forth the high and low trading prices for the 6
1/2% Debentures on the NYSE Composite Tape for the calendar periods indicated
as reported in published financial sources.
<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C>
1995:
First Quarter......................................... $120 $111
Second Quarter........................................ 122 1/4 112
Third Quarter......................................... 121 115 1/4
Fourth Quarter........................................ 127 114
1996:
First Quarter......................................... 137 120
Second Quarter........................................ 147 1/2 130 1/2
Third Quarter......................................... 150 1/2 138
Fourth Quarter........................................ 159 147 1/2
1997:
First Quarter......................................... 167 150 1/2
Second Quarter........................................ 176 1/2 156
Third Quarter......................................... 201 181
Fourth Quarter (through December 19, 1997)............ 205 186
</TABLE>
4 3/4% DEBENTURES
The following table sets forth the high and low trading prices for the 4
3/4% Debentures on the NYSE Composite Tape for the calendar periods indicated
as reported in published financial sources.
<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C>
1995:
First Quarter......................................... $ 93 $ 85 1/2
Second Quarter........................................ 97 90 1/2
Third Quarter......................................... 97 94
Fourth Quarter........................................ 101 3/4 94 1/4
1996:
First Quarter......................................... 105 1/2 100 1/2
Second Quarter........................................ 110 1/2 101 3/4
Third Quarter......................................... 111 104
Fourth Quarter........................................ 118 110
1997:
First Quarter......................................... 123 7/8 111 1/2
Second Quarter........................................ 130 111
Third Quarter......................................... 146 1/2 126
Fourth Quarter (through December 19, 1997)............ 147 1/2 123 3/4
</TABLE>
17
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The purpose of the Exchange Offer is to replace a portion of Pennzoil's
outstanding Old Debentures with the New Debentures. The Company is undertaking
the Exchange Offer to take advantage of what it believes to be favorable
conditions in the equity-linked securities markets. In addition, to the extent
that holders of Old Debentures elect to exchange for New Debentures instead of
electing to exercise their Existing Exchange Rights to exchange the Old
Debentures for shares of Chevron Stock, the Exchange Offer will enable the
Company to defer current federal income taxes of up to approximately $100
million if the Target Amount is accepted.
The 6 1/2% Debentures are redeemable at Pennzoil's option beginning January
15, 1998, and the 4 3/4% Debentures are redeemable at Pennzoil's option
beginning October 1, 1998. Pennzoil believes that, based upon the terms of the
Old Debentures and currently prevailing market prices for Chevron Stock,
holders of Old Debentures will be inclined to exchange the Old Debentures for
the underlying shares of Chevron Stock once the Old Debentures become
redeemable by Pennzoil (although Pennzoil has the right to pay cash instead of
delivering shares of Chevron Stock). If holders of all Old Debentures
exercised their right to exchange such Old Debentures for Chevron Stock,
Pennzoil would recognize a net gain for federal income tax purposes on the
shares of Chevron Stock delivered in the exchange and incur current tax on the
gain of approximately $100 million.
By effecting the Exchange Offer, certain holders of Old Debentures will be
allowed to exchange from (1) a security that has the near-term prospect of
being called into (2) a new security with (a) higher effective interest income
and principal, and enhanced call protection, but also (b) fewer underlying
shares and an extended maturity. In addition, the net tax loss created by the
Exchange Offer will be used to offset (at least in part) gains recognized by
Pennzoil (1) from expected exercise of Existing Exchange Rights on unexchanged
Old Debentures and (2) on any shares of Chevron Stock that may be released
(from deposit with exchange agents for possible exchange of Old Debentures) as
a result of the Exchange Offer and sold by Pennzoil.
Pennzoil currently expects to call for redemption all Old Debentures that
remain outstanding after completion of the Exchange Offer, although the final
determination of whether to make, and the timing of, such redemption of the
Old Debentures (or either series thereof) will be made by Pennzoil's Board of
Directors based upon market and other factors prevailing at the time such
determination is made. If Pennzoil calls the Old Debentures for redemption,
based upon the terms of the Old Debentures and prevailing market prices for
Chevron Stock, Pennzoil expects that substantially all holders of Old
Debentures will exercise their Existing Exchange Rights to obtain the shares
of Chevron Stock for which the Old Debentures are exchangeable (although
Pennzoil has the right to pay cash instead of delivering shares of Chevron
Stock). Although Pennzoil has the right to redeem the 6 1/2% Debentures
beginning January 15, 1998, Pennzoil does not intend to call the 6 1/2%
Debentures for redemption before April 15, 1998. Holders of 6 1/2% Debentures
not exchanged in the Exchange Offer that exercise their Existing Exchange
Rights on or after April 15 and before July 15, 1998 will receive accrued and
unpaid interest through April 15, 1998 on the 6 1/2% Debentures exchanged for
Chevron Stock. Subject to a final determination of Pennzoil's Board of
Directors, Pennzoil currently expects to call the 4 3/4% Debentures for
redemption on October 1, 1998, which is the first date on which they can be
called for redemption.
RECOMMENDATION OF PENNZOIL
The Board of Directors of Pennzoil has unanimously approved the Exchange
Offer. Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to accept. Neither the Board of Directors of
Pennzoil nor Pennzoil makes any recommendation to holders of the Old
Debentures as to whether to tender or refrain from tendering in the Exchange
Offer. Holders of the Old Debentures are urged to consult their financial and
tax advisors in making their decisions on what action to take in light of
their own particular circumstances.
18
<PAGE>
TERMS OF THE EXCHANGE OFFER
Pennzoil is offering to issue its New Debentures in exchange for the Target
Amount of its outstanding Old Debentures. The Target Amount of Old Debentures
to be accepted for exchange, and the principal amount and interest rate on the
New Debentures to be issued in the Exchange Offer, will be determined as
described herein. The Target Amount of Old Debentures is the amount of Old
Debentures that are exchangeable into between 7.35 million and 14.39 million
shares of Chevron Stock under Existing Exchange Rights. The Target Amount will
be determined by reference to the Average Chevron Stock Price. See "--Target
Amount". However, the Company reserves the right, in its sole discretion, to
accept more than the Target Amount of Old Debentures for exchange. The
"Average Chevron Stock Price" will be the average of the closing prices of
Chevron Stock on the NYSE on the two trading days ending on the second trading
day prior to the Expiration Date. On January , 1998, the last reported
closing price of Chevron Stock on the NYSE Composite Tape was $ per
share. See "Chevron Corporation--Dividend and Price Range of Chevron Stock"
for recent trading prices of Chevron Stock.
The principal amount of New Debentures to be issued in exchange for Old
Debentures will be equal to the product of (i) 103% of the Average Chevron
Stock Price and (ii) the aggregate number of shares of Chevron Stock for which
the Old Debentures tendered by a holder are currently exchangeable as of the
Acceptance Date (subject to the payment of cash in lieu of the issuance of a
Fractional New Debenture).
The interest rate per annum for the New Debentures will neither be less than
4 3/4% nor more than 6%. Each holder of Old Debentures tendered for exchange
must specify in the Letter of Transmittal, in increments of 0.05%, the minimum
interest rate (but in no event less than 4 3/4%) that such holder is willing
to accept for the New Debentures. The Company will select the Determined Rate,
which will be the lowest rate that will allow it to accept the Target Amount
of Old Debentures (or such lesser amount of Old Debentures as is properly
tendered and not withdrawn specifying a coupon neither less than 4 3/4% per
annum nor more than 6% per annum, or such greater amount as Pennzoil, in its
sole discretion, may determine to accept). Notwithstanding the foregoing, a
holder may elect in the Letter of Transmittal to specify that all Old
Debentures being tendered are tendered at the "Determined Rate" (as opposed to
specifying a particular rate), which should increase the likelihood that the
Company would accept for exchange such holder's Old Debentures being tendered.
Old Debentures tendered by a holder specifying the Determined Rate (rather
than a particular rate neither less than 4 3/4% nor more than 6%) will be
considered tendered at 4 3/4% for purposes of determining the Old Debentures
accepted for exchange and any proration, but, subject to the other terms and
conditions of the Exchange Offer, such holders will receive New Debentures
bearing interest at the Determined Rate. See "The Exchange Offer--Terms of the
Exchange Offer." All Old Debentures properly tendered by a holder specifying
an interest rate for the New Debentures at or below the Determined Rate and
not withdrawn, will be accepted for exchange, subject to the terms and
conditions of the Exchange Offer (including the possibility of proration),
provided that not more than $889.1 million principal amount, and not less than
$100 million principal amount, of New Debentures will be issued. All New
Debentures issued pursuant to the Exchange Offer will bear interest at the
Determined Rate. The Company will pay accrued interest on Old Debentures
accepted for exchange through the Acceptance Date. Payment of such accrued
interest on the Old Debentures will accompany delivery of the New Debentures.
The Exchange Offer is being made only to holders of Old Debentures in
registered form. Holders of Old Debentures in bearer form must first exchange
the Old Debentures in bearer form for Old Debentures in registered form if
they desire to participate in the Exchange Offer. See "The Exchange Offers--
Procedures for Tendering."
Holders of the Old Debentures do not have any appraisal or dissenters'
rights under the Delaware General Corporation Law or the Indenture in
connection with the Exchange Offer. The Company intends to conduct the
Exchange Offer in accordance with the applicable requirements of the Exchange
Act and the rules and regulations of the Commission promulgated thereunder.
19
<PAGE>
The Company shall be deemed to have accepted validly tendered Old Debentures
when, as and if the Company has given oral notice (confirmed in writing) or
written notice thereof to the Exchange Agent on or after the Expiration Date.
The Exchange Agent will act as agent for the tendering holders for the purpose
of the exchange of Old Debentures.
The New Debentures will only be issuable only in registered form and only in
denominations of $1,000 and integral multiples thereof. Holders who would
otherwise be entitled to receive a New Debenture in a principal amount under
$1,000 will receive a cash payment in lieu of the issuance of a Fractional New
Debenture.
If more than the Target Amount of Old Debentures is validly tendered for
exchange prior to the Expiration Date at specified interest rates at or below
the Determined Rate, and not withdrawn, Old Debentures will be accepted for
exchange on a pro rata basis from among the Old Debentures tendered at the
Determined Rate. Old Debentures tendered at an interest rate that is lower
than the Determined Rate and accepted for exchange will not be subject to
proration. If any tendered Old Debentures are not accepted for exchange
because the interest rate at which the Old Debentures were tendered was
greater than the Determined Rate, because of proration, because of an invalid
tender, because of the occurrence of certain other events set forth herein or
otherwise, any such unaccepted Old Debentures will be returned, at the expense
of Pennzoil, to the tendering holder thereof as promptly as practicable after
the Expiration Date. Holders of 6 1/2% Debentures not exchanged in the
Exchange Offer that exercise the Existing Exchange Rights on or after April 15
and before July 15, 1998 will receive accrued and unpaid interest through
April 15, 1998 on the 6 1/2% Debentures exchanged for Chevron Stock.
The Company expects that certificates representing New Debentures exchanged
for Old Debentures accepted in the Exchange Offer, certificates representing
portions of Old Debentures not accepted for exchange for New Debentures in the
Exchange Offer and checks in payment of the cash to be paid in lieu of the
issuance of Fractional New Debentures and accrued and unpaid interest due on
Old Debentures accepted for exchange through the Acceptance Date will be
delivered as soon as practicable after the Expiration Date. See "--Terms of
the Exchange Offer."
Holders who tender Old Debentures in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old
Debentures pursuant to the Exchange Offer. The Company will pay all of its
charges and expenses, other than certain applicable taxes, in connection with
the Exchange Offer. See "--Fees and Expenses."
20
<PAGE>
TARGET AMOUNT
The following table identifies the Target Amount (expressed in millions of
shares of Chevron Stock into which the Old Debentures are exchangeable under
Existing Exchange Rights) given the following Average Chevron Stock Prices. If
the Average Chevron Stock Price is between two full dollar amounts set forth
in the following table, the Target Amount will be determined by interpolating
between the corresponding Target Amounts in the following table.
<TABLE>
<CAPTION>
TARGET AMOUNT
(IN MILLIONS
AVERAGE CHEVRON STOCK OF SHARES OF
PRICE CHEVRON STOCK)
- --------------------- --------------
<S> <C>
$60.00 or lower......... 14.39
61.00.................. 14.15
62.00.................. 13.92
63.00.................. 13.70
64.00.................. 13.49
65.00.................. 13.28
66.00.................. 13.08
67.00.................. 12.88
68.00.................. 12.69
69.00.................. 12.51
70.00.................. 12.33
71.00.................. 12.16
72.00.................. 11.95
73.00.................. 11.69
74.00.................. 11.44
75.00.................. 11.20
76.00.................. 10.97
77.00.................. 10.75
78.00.................. 10.54
79.00.................. 10.33
80.00.................. 10.14
</TABLE>
<TABLE>
<CAPTION>
TARGET AMOUNT
(IN MILLIONS
OF SHARES OF
AVERAGE CHEVRON STOCK PRICE CHEVRON STOCK)
- --------------------------- --------------
<S> <C>
$81.00...................................................... 9.95
82.00...................................................... 9.77
83.00...................................................... 9.59
84.00...................................................... 9.42
85.00...................................................... 9.26
86.00...................................................... 9.10
87.00...................................................... 8.95
88.00...................................................... 8.80
89.00...................................................... 8.66
90.00...................................................... 8.52
91.00...................................................... 8.39
92.00...................................................... 8.26
93.00...................................................... 8.13
94.00...................................................... 8.01
95.00...................................................... 7.89
96.00...................................................... 7.78
97.00...................................................... 7.67
98.00...................................................... 7.56
99.00...................................................... 7.45
100.00 or higher............................................ 7.35
</TABLE>
EXPIRATION DATE; EXTENSIONS; AMENDMENTS; TERMINATION
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
If the Company chooses to extend the Exchange Offer, the Company will notify
the Exchange Agent of any extension by oral notice (confirmed in writing) or
written notice and will make a public announcement thereof prior to 9:00 a.m.,
New York City time, on the next business day after each previously scheduled
expiration date.
The Company expressly reserves the right, in its sole discretion, subject to
applicable law, to (i) withdraw or terminate the Exchange Offer, and not
accept for exchange any Old Debentures, at any time for any reason, including
(without limitation) if the Exchange Offer would result in less than $100
million in principal amount of New Debentures being issued or upon the failure
of any conditions specified in "--Procedures for Tendering," (ii) waive any
condition to the Exchange Offer and accept all the Old Debentures previously
properly tendered for exchange pursuant to the Exchange Offer, (iii) extend
the Expiration Date and retain all Old Debentures tendered pursuant to the
Exchange Offer until such Expiration Date, subject, however, to all withdrawal
rights of holders (see "--Withdrawal of Tenders") or (iv) amend or modify the
terms of the Exchange Offer in any manner, including (without limitation) the
form of the consideration or the formula for calculating the amount of the
consideration to be paid pursuant to the Exchange Offer. Any amendment
applicable to the Exchange Offer will apply to all Old Debentures tendered for
exchange pursuant to the Exchange Offer. If the Company makes a material
change in the terms of the Exchange Offer or if it waives a material condition
of the Exchange Offer, the Company will extend the Exchange Offer. The minimum
period
21
<PAGE>
during which the Exchange Offer will be extended following a material change
in the terms of the Exchange Offer or a waiver by the Company of a material
condition of the Exchange Offer, other than a change in the amount of the Old
Debentures being sought for exchange or in the formula for calculating the
consideration offered, will depend upon the facts and circumstances, including
the relative materiality of the change or waiver. With respect to a change in
the amount of the Old Debentures being sought or in the formula for
calculating consideration offered, the Exchange Offer will be extended for a
minimum of 10 business days following public announcement of such change. Any
withdrawal or termination of the Exchange Offer will be followed as promptly
as practicable by public announcement thereof. In the event the Company
withdraws or terminates the Exchange Offer, it will give immediate notice to
the Exchange Agent, and all Old Debentures theretofore tendered for exchange
pursuant to the Exchange Offer will be returned promptly to the tendering
holders thereof. See "--Withdrawal of Tenders."
Without limiting the manner in which the Company may choose to make public
announcement of any delay, extension, termination or amendment of the Exchange
Offer, the Company shall have no obligation to publish, advertise or otherwise
communicate any such public announcement, other than by making a timely
release to the Dow Jones News Service.
PROCEDURES FOR TENDERING
The tender for exchange of Old Debentures by a holder thereof pursuant to
one of the procedures set forth below and the acceptance thereof by the
Company will constitute a binding agreement between such holder and the
Company in accordance with the terms and subject to the conditions set forth
herein and in the Letter of Transmittal. This Prospectus, together with the
Letter of Transmittal, will first be sent on or about , 1998 to all
holders of Old Debentures known to the Company and the Exchange Agent.
The Exchange Offer is only being made to holders of Old Debentures in
registered form. Holders of Old Debentures in bearer form must first exchange
the Old Debentures in bearer form for Old Debentures in registered form if
they desire to participate in the Exchange Offer. In order to exchange Old
Debentures in bearer form for Old Debentures in registered form, a holder must
surrender the Old Debentures in bearer form at the office or agency of the
Trustee with all unmatured coupons and all matured coupons in default thereto
appertaining. Only a holder of registered Old Debentures may tender such Old
Debentures in the Exchange Offer. Each holder of Old Debentures desiring to
accept the Exchange Offer for all or any portion of his or her Old Debentures
must transmit a properly completed and duly executed Letter of Transmittal, or
a photocopy thereof, including any other required documents, to the Exchange
Agent prior to 5:00 p.m., New York City time, on the Expiration Date. In
addition, either (i) certificates for such Old Debentures must be received by
the Exchange Agent along with the Letter of Transmittal, (ii) a timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such
Old Debentures, if such procedure is available, into the Exchange Agent's
account at The Depository Trust Company ("DTC") pursuant to the procedure for
book-entry transfer described below, must be received by the Exchange Agent
prior to the Expiration Date or (iii) the holder must comply with the
guaranteed delivery procedures described below. To be tendered effectively,
the Old Debentures, Letter of Transmittal and other required documents must be
received by the Exchange Agent at the address set forth below under "Exchange
Agent; Information Agent" prior to 5:00 p.m., New York City time, on the
Expiration Date.
LETTERS OF TRANSMITTAL, OLD DEBENTURES AND ANY OTHER REQUIRED DOCUMENTS
SHOULD BE SENT ONLY TO THE EXCHANGE AGENT, NOT TO THE COMPANY, THE DEALER
MANAGER OR DTC.
THE METHOD OF DELIVERY OF OLD DEBENTURES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, THE COMPANY RECOMMENDS THAT
HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IF SENT BY MAIL, THE
COMPANY RECOMMENDS THAT REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED AND
PROPER
22
<PAGE>
INSURANCE BE OBTAINED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE.
Any beneficial owner whose Old Debentures are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee should contact
the registered holder promptly and instruct such registered holder to tender
on such beneficial owner's behalf if such beneficial owner desires to tender
Old Debentures for exchange. If such beneficial owner wishes to tender on such
beneficial owner's own behalf, such beneficial owner must, prior to completing
and executing the Letter of Transmittal (or delivering an Agent's Message) and
delivering such beneficial owner's Old Debentures, either make appropriate
arrangements to register ownership of the Old Debentures in such beneficial
owner's name or obtain a properly completed bond power from the registered
holder. The transfer of registered ownership may take considerable time and
may not be able to be completed prior to the Expiration Date.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Old Debentures tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal
or (ii) for the account of an Eligible Institution. In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, are required to be guaranteed, such guarantee must be by a financial
institution (including most banks, savings and loan associations and brokerage
houses) that is a participant in the Security Transfer Agents Medallion
Program or The New York Stock Exchange Medallion Program or the Stock Exchange
Medallion Program (any of the foregoing hereinafter referred to as an
"Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Debentures listed therein, such Old Debentures must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Old
Debentures.
If the Letter of Transmittal or any Old Debentures or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority to so act
must be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Debentures will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and
all Old Debentures not properly tendered or any Old Debentures the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Old Debentures. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Debentures must be cured within such time as
the Company shall determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of Old Debentures, neither
the Company, the Exchange Agent nor any other person shall incur any liability
for failure to give such notification. Tenders of Old Debentures will not be
deemed to have been made until such defects or irregularities have been cured
or waived. Any Old Debentures received by the Exchange Agent that the Company
determines are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holders, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
BOOK-ENTRY TRANSFER
The Company understands that the Exchange Agent will make a request promptly
after the date of this Prospectus to establish an account with respect to the
Old Debentures at DTC for purposes of the Exchange Offer and, subject to the
establishment thereof, any financial institution that is a participant in
DTC's system may make
23
<PAGE>
book-entry delivery of Old Debentures by causing DTC to transfer such Old
Debentures into the Exchange Agent's account at DTC in accordance with DTC's
Automated Tender Offer Program ("ATOP") procedures for such book-entry
transfer.
However, the exchange for Old Debentures so tendered will only be made after
timely confirmation (a "Book-Entry Confirmation") of such book-entry transfer
of Old Debentures into the Exchange Agent's account, and timely receipt by the
Exchange Agent of an Agent's Message (as such term is defined in the next
sentence) and any other documents required by the Letter of Transmittal. The
term "Agent's Message" means a message, transmitted by DTC and received by the
Exchange Agent and forming a part of a Book-Entry Confirmation, which states
that DTC has received an express acknowledgment from a participant tendering
Old Debentures that is the subject of such Book-Entry Confirmation that such
participant has received and agrees to be bound by the terms of the Letter of
Transmittal and that the Company may enforce such agreement against such
participant.
GUARANTEED DELIVERY
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Old Debentures to reach the Exchange Agent before the
Expiration Date or the procedure for book-entry transfer cannot be completed
on a timely basis, a tender may be effected if the Exchange Agent has received
at its office, prior to the Expiration Date, a letter, a telegram, or
facsimile transmission from an Eligible Institution setting forth the name and
address of the tendering holder, the name(s) in which the Old Debentures are
registered and, if the Old Debentures are held in certificated form, the
certificate number of the Old Debentures to be tendered, and stating that the
tender is being made thereby and guaranteeing that within three trading days
after the date of execution of such letter, telegram, or facsimile
transmission by the Eligible Institution, the Old Debentures, in proper form
for transfer together with a properly completed and duly executed Letter of
Transmittal (and any other required documents), or a confirmation of book-
entry transfer of such Old Debentures into the Exchange Agent's account at
DTC, will be delivered by such Eligible Institution. Unless the Old Debentures
being tendered by the above-described method are deposited with the Exchange
Agent within the time period set forth above (accompanied or preceded by a
properly completed Letter of Transmittal and any other required documents) or
a confirmation of book-entry transfer of such Old Debentures into the Exchange
Agent's account at DTC in accordance with DTC's ATOP procedures is received,
the Company may, at its option, reject the tender. Copies of a Notice of
Guaranteed Delivery which may be used by Eligible Institutions for the
purposes described in this paragraph are available from the Exchange Agent and
the Information Agent.
LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Old Debentures for exchange (the "Transferor")
exchanges, assigns, and transfers such Old Debentures to the Company and
irrevocably constitutes and appoints the Exchange Agent as the Transferor's
agent and attorney-in-fact to cause such Old Debentures to be assigned,
transferred, and exchanged. The Transferor represents and warrants that it has
full power and authority to tender, exchange, assign, and transfer the Old
Debentures and to acquire New Debentures issuable upon the exchange of such
tendered Old Debentures, and that, when the same are accepted for exchange,
the Company will acquire good and unencumbered title to the tendered Old
Debentures, free and clear of all liens, restrictions, charges, and
encumbrances and not subject to any adverse claim. The Transferor also
warrants that it will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
exchange, assignment and transfer of tendered Old Debentures or transfer
ownership of such Old Debentures on the account books maintained by DTC. All
authority conferred by the Transferor will survive the death, bankruptcy or
incapacity of the Transferor, and every obligation of the Transferor shall be
binding upon the heirs, legal representatives, successors, assigns, executors
and administrators of such Transferor.
24
<PAGE>
WITHDRAWAL OF TENDERS
Tenders of Old Debentures pursuant to the Exchange Offer may be withdrawn at
any time prior to the Expiration Date.
To be effective, a written notice of withdrawal delivered by mail, hand
delivery or facsimile transmission must be timely received by the Exchange
Agent at the address set forth in the Letter of Transmittal. The method of
notification is at the risk and election of the holder. Any such notice of
withdrawal must specify (i) the Holder named in the Letter of Transmittal as
having tendered Old Debentures to be withdrawn, (ii) if Old Debentures are
held in certificated form, the certificate numbers of such Old Debentures to
be withdrawn, (iii) that such holder is withdrawing his election to have such
Old Debentures exchanged and (iv) the name of the registered holder of such
Old Debentures, and must be signed by the holder in the same manner as the
original signature on the Letter of Transmittal (including any required
signature guarantees) or be accompanied by evidence satisfactory to the
Company that the person withdrawing the tender has succeeded to the beneficial
ownership of the Old Debentures being withdrawn. The Exchange Agent will
return the properly withdrawn Old Debentures promptly following receipt of
notice of withdrawal. If Old Debentures have been tendered pursuant to the
procedure for book-entry transfer, any notice of withdrawal must specify the
name and number of the account at DTC to be credited with the withdrawn Old
Debentures and otherwise comply with DTC's procedures. All questions as to the
validity of notice of withdrawal, including time of receipt, will be
determined by the Company, and such determination will be final and binding on
all parties. Withdrawals of tenders of Old Debentures may not be rescinded and
any Old Debentures withdrawn will thereafter be deemed not validly tendered
for purposes of the Exchange Offer. Properly withdrawn Old Debentures,
however, may be retendered by following the procedures therefor described
elsewhere herein at any time prior to the Expiration Date. See "--Procedures
for Tendering."
25
<PAGE>
EXCHANGE AGENT; INFORMATION AGENT
Texas Commerce Bank National Association has been appointed as Exchange
Agent for the Exchange Offer. D.F. King & Co., Inc. has been appointed as
Information Agent for the Exchange Offer. Questions and requests for
assistance, requests for additional copies of this Prospectus or of the Letter
of Transmittal and requests for Notices of Guaranteed Delivery may be directed
to the Exchange Agent or the Information Agent addressed as follows:
The Exchange Agent:
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By Mail By Facsimile: By Hand or Overnight Courier
(registered or certified (214) 672-5746 c/o Texas Commerce Bank
mail recommended) National Association
Texas Commerce National Confirm by Telephone to: Corporate Trust Services
Association (214) 672-5678 1201 Main, 18th Floor
Corporate Trust Services Dallas, Texas 75202
P.O. Box 2320 or
Dallas, Texas 75221-2320 Texas Commerce Trust Company
of New York
55 Water Street, North
Building
Room 234, Windows 20 & 21
New York, New York 10041
The Information Agent:
D. F. KING & CO., INC.
CALL TOLL FREE 1-800-735-3591
77 Water Street Royex House
New York, NY 10005 Aldermanbury Square
(212) 269-5550 London, England EC2V 7HR
(Call Collect) 011-44-171-600-5005
(Call Collect)
TRADING OF NEW DEBENTURES AND OLD DEBENTURES
Application will be made to list the New Debentures for trading on the NYSE.
There can be no assurance, however, that an active public market for the New
Debentures will develop and continue after the Exchange Offer.
The Old Debentures and the Chevron Stock are listed on the NYSE. For recent
trading prices of the Old Debentures and the Chevron Stock, see "Price Range
of Old Debentures" and "Chevron Corporation--Dividend and Price Range of
Chevron Stock." See Appendix A for information regarding Chevron taken from
Chevron's Annual Report on Form 10-K for the year ended December 31, 1996 and
Chevron's Quarterly Report on Form 10-Q for the quarter ended September 30,
1997, together with Chevron's "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for the year ended December 31,
1996 and for the three- and nine-month periods ended September 30, 1997 and a
press release of Chevron dated December 19, 1997.
To the extent that Old Debentures are tendered and accepted in the Exchange
Offer, the trading market for the untendered Old Debentures could be reduced
significantly, which might adversely affect the liquidity of the Old
Debentures, although the consummation of the Exchange Offer alone should not
affect the continued listing
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of the Old Debentures on the NYSE. Published guidelines of the NYSE indicate
that the NYSE would consider delisting an issue of the Old Debentures if the
aggregate principal amount or market value of such issue publicly held is less
than $1,000,000.
A debt security with a small outstanding principal amount available for
trading (a smaller "float") may command a lower price than would a comparable
debt security with greater float. Therefore, the market price for untendered
Old Debentures may be affected adversely to the extent that the principal
amount of Old Debentures tendered pursuant to the Exchange Offer reduces the
float. The reduced float may also tend to make the market price of untendered
Old Debentures more volatile.
NO TRANSACTIONS OR ARRANGEMENTS
Except as described in this Prospectus, there are no contracts,
arrangements, understandings or relationships in connection with the Exchange
Offer between the Company or any of its directors or executive officers and
any person with respect to the New Debentures or the Old Debentures.
FEES AND EXPENSES; TRANSFER TAXES
The expenses of soliciting tenders of Old Debentures will be borne by the
Company. For compensation to be paid to the Dealer Manager, see "Dealer
Manager." The total expenses to be incurred by the Company in connection with
the Exchange Offer, other than fees payable to the Dealer Manager, but
including the expenses of the Dealer Manager, printing, accounting, and legal
fees, and the fees and expenses of the Exchange Agent, the Information Agent
and the Trustee are estimated to be approximately $600,000.
The Company shall pay all transfer taxes, if any, applicable to the transfer
and exchange of Old Debentures to it or its order pursuant to the Exchange
Offer. If, however, certificates representing New Debentures or Old Debentures
are not tendered or accepted for exchange, are to be delivered to, or are to
be registered or issued in the name of, any person other than the registered
holder(s) of such Old Debentures tendered, or if a transfer tax is imposed for
any reason other than the exchange of Old Debentures to the Company or its
order pursuant to the Exchange Offer, the amount of any such transfer taxes
(whether imposed on the registered holder(s) or any other person) will be
payable by the tendering holder(s). If satisfactory evidence of payment of
such taxes or exception therefrom is not submitted, the amount of such
transfer taxes will be billed directly to such tendering holder.
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DESCRIPTION OF NEW DEBENTURES
GENERAL
The New Debentures will be a series of Pennzoil's debt securities (the "Debt
Securities") and will be issued under the Indenture dated as of December 15,
1992 (the "Indenture") between Pennzoil and Texas Commerce Bank National
Association, as trustee (the "Trustee"), and the Third Supplemental Indenture
to be dated as of January , 1998 to the Indenture ("Supplemental Indenture")
between Pennzoil and Texas Commerce Bank National Association, as trustee. The
6 1/2% Debentures and the 4 3/4% Debentures have also been issued under the
Indenture. The Indenture does not limit the aggregate principal amount of
securities which can be issued thereunder and provides that securities may be
issued from time to time thereunder in one or more series, each in an
aggregate principal amount authorized by Pennzoil prior to issuance. The
Indenture does not limit the amount of other unsecured indebtedness or Debt
Securities that may be issued by Pennzoil. The italicized references below
refer to the section numbers of the Indenture or the Supplemental Indenture.
The principal amount of New Debentures issued in exchange for Old Debentures
in the Exchange Offer will be equal to the product of (i) 103% of the Average
Chevron Stock Price and (ii) the aggregate number of shares of Chevron Stock
for which the Old Debentures tendered by a holder are exchangeable as of the
Acceptance Date (subject to the payment of cash in lieu of the issuance of a
Fractional New Debenture. The "Average Chevron Stock Price" will be determined
by the average of the closing prices of Chevron Stock on the NYSE on the two
trading days ending on the second trading day prior to the Expiration Date. On
January , 1998, the reported closing price of the Chevron Common Stock on
the NYSE was $ per share.
The New Debentures will be issued as of next calendar day following the
Acceptance Date. The New Debentures will mature on February 1, 2008 and will
bear interest from the date of issuance at the rate per annum determined as
described in the following paragraph, payable semiannually on each February 1
and August 1, commencing August 1, 1998 to the holders of the New Debentures
at the close of business on the January 15 next preceding such February 1 or
the July 15 next preceding such August 1, as the case may be. The maximum
aggregate principal amount at maturity of the New Debentures offered hereby
which may be issued will be limited to $889.1 million.
The interest rate per annum for the New Debentures will neither be less than
4 3/4% nor more than 6%. See "The Exchange Offer--Terms of the Exchange
Offer."
The New Debentures will constitute unsecured senior debt obligations of
Pennzoil ranking pari passu with all other present and future unsecured
general obligations of Pennzoil that are not expressly subordinated to senior
indebtedness. Pennzoil currently conducts substantially all of its operations
through subsidiaries, and the holders of the New Debentures will have a junior
position to any creditors of Pennzoil's subsidiaries. As of November 30, 1997,
the aggregate outstanding debt of Pennzoil's subsidiaries was approximately
$54 million.
The New Debentures will not benefit from any covenant or other provision
that would afford holders of New Debentures special protection in the event of
a highly leveraged transaction or change in control involving Pennzoil, except
for any such protection provided by the Indenture as described below under "--
Limitation of Liens."
FORM OF DEBENTURES
The New Debentures will be issued only in registered form.
BOOK-ENTRY ISSUANCE ONLY
The New Debentures will be represented by one or more fully registered
global securities (collectively, the "Global Debenture"). The Global Debenture
will be deposited upon issuance with a custodian for DTC and registered in the
name of DTC or a nominee of DTC (the "Global Debenture Registered Owner").
Except as set
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<PAGE>
forth below, the Global Debenture may be transferred, in whole and not in
part, only to another nominee of DTC or to a successor of DTC or its nominee.
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between the Participants through electronic
book-entry changes in accounts of its Participants. The Participants include
securities brokers and dealers (including the Dealer Manager), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may
beneficially own securities held by or on behalf of DTC only through the
Participants or the Indirect Participants. The ownership interest and transfer
of ownership interest of each actual purchaser of each security held by or on
behalf of DTC are recorded on the records of the Participants and Indirect
Participants.
DTC has also advised the Company that pursuant to procedures established by
it (i) upon deposit of the Global Debenture, DTC will credit the accounts of
Participants designated by the Exchange Agent with portions of the face amount
of the Global New Debentures and (ii) ownership of such interests in the
Global Debenture will be shown on, and the transfer of ownership thereof will
be effected only through, records maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect Participants (with
respect to other owners of beneficial interests in the Global Debenture). The
laws of some states require that certain persons take physical delivery in
definitive form of securities that they own. Such laws may impair the ability
to transfer beneficial interests in a Global Debenture.
Except as described below, owners of interests in the Global Debenture will
not have New Debentures registered in their names, will not receive physical
delivery of New Debentures in definitive form and will not be considered the
registered owners or holders thereof under the Indenture for any purpose. As
long as DTC, or its nominee, is the registered owner of the Global Debenture,
DTC, or its nominee, as the case may be, will be considered the sole owner and
holder of the New Debentures presented by the Global Debenture for all
purposes under the Indenture and the New Debentures.
Payment of any interest on the New Debentures registered in the name of the
Global Debenture Registered Owner will be payable by the Trustee to the Global
Debenture Registered Owner in its capacity as the registered holder under the
Indenture. Under the terms of the Indenture, the Company and the Trustee will
treat the persons in whose names the New Debentures, including the Global
Debenture, are registered as the owners thereof for the purpose of receiving
such payments and for any and all other purposes whatsoever. (Section 203 of
the Indenture). Consequently, none of the Company, the Trustee or any agent of
the Company or the Trustee has or will have any responsibility or liability
for (i) any aspect of DTC's records or any Participant's records relating to
or payments made on account of beneficial ownership interests in the Global
Debenture, or for maintaining, supervising or reviewing any of DTC's records
or any Participant's records relating to the beneficial ownership interests in
the Global Debenture or (ii) any other matter relating to the actions and
practices of DTC or any of its Participants. DTC has advised the Company that
its current practice, upon receipt of any payment in respect of securities
such as the New Debentures, is to credit the accounts of the relevant
Participants with the payment on the payment date, in amounts proportionate to
their respective holdings in face amount of beneficial interests in the
relevant security as shown on the records of DTC, unless DTC has reason to
believe it will not receive payment on such payment date. Payments by the
Participants and the Indirect Participants to the beneficial owners of New
Debentures will be governed by standing instructions and customary practices
and will be the responsibility of the Participants or the Indirect
Participants and will not be the responsibility of DTC, the Trustee or the
Company. Neither the Company nor the Trustee will be liable for any delay by
DTC or any of its Participants in identifying the beneficial owners of the New
Debentures, and the Company and the Trustee may conclusively rely on and will
be protected in relying on instructions of the Global Debenture Registered
Owner for all purposes.
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<PAGE>
The Global Debenture is exchangeable for definitive New Debentures in
registered certificated form only if (i) DTC (a) notifies the Company that it
is unwilling or unable to continue as the depositary for the Global Debenture
and the Company thereupon fails to appoint a successor depositary or (b) has
ceased to be a clearing agency registered under the Exchange Act, (ii) the
Company, at its option, notifies the Trustee in writing that it elects to
cause the issuance of the New Debentures in definitive registered certificated
form or (iii) there shall have occurred and be continuing an Event of Default
(as defined in the Indenture) or any event which after notice or lapse of time
or both would be an Event of Default with respect to the New Debentures. Upon
issuance of New Debentures in definitive registered certificated form, the
Trustee is required to register the securities in the name of, and cause the
New Debentures to be delivered to, the person or persons (or the nominee
thereof) identified as the beneficial owners as DTC shall direct.
EXCHANGE RIGHTS
The New Debentures will be exchangeable at the option of the holder at any
time prior to maturity, unless previously redeemed, for shares of Chevron
Stock owned by Pennzoil at an exchange rate of 0.823 shares of Chevron Stock
for each share of Chevron Stock into which exchanged Old Debentures were
exchangeable as of the Acceptance Date under Existing Exchange Rights
(excluding shares of Chevron Stock exchangeable for that portion of Old
Debentures for which cash is paid in lieu of the issuance of a Fractional New
Debenture), subject to adjustment in certain events as set forth in the
Supplemental Indenture. In the event the New Debentures are called for
redemption, the exchange rights will terminate at the close of business on the
date immediately prior to the date of redemption. (Section 201 of the
Supplemental Indenture).
Prior to and in connection with the issuance of the New Debentures, Pennzoil
will deposit the number of shares of Chevron Stock deliverable in exchange for
the New Debentures with Texas Commerce Bank National Association, who will act
as exchange agent for holders of New Debentures (the "New Debenture Exchange
Agent") on behalf of Pennzoil. Pennzoil will thereafter deposit with the New
Debenture Exchange Agent any cash and other property deliverable in exchange
for the New Debentures. Pennzoil will not be permitted to pledge, mortgage,
hypothecate or grant a security interest in, or permit any mortgage, pledge,
security interest or other lien upon, the Chevron Stock, cash and other
property deliverable in exchange for the New Debentures (collectively,
"Exchange Property"). The deposit arrangements with the New Debenture Exchange
Agent will terminate at such time as the right to exchange New Debentures with
the New Debenture Exchange Agent shall have expired pursuant to the
Supplemental Indenture.
In order to exercise the right of exchange, the holder of any New Debenture
must surrender such New Debenture to the New Debenture Exchange Agent at its
office maintained for such purpose in Dallas, Texas. Each New Debenture to be
surrendered must be accompanied by written notice to Pennzoil and the New
Debenture Exchange Agent that the holder elects to exchange such New
Debenture. Delivery of the certificates for Chevron Stock or any other
Exchange Property may be delayed at the request of Pennzoil in order to
effectuate the calculation of the adjustments of the Chevron Stock or other
Exchange Property to obtain any certificate representing securities to be
delivered, to complete any reapportionment of the Chevron Stock or other
Exchange Property which is required by the Indenture or to comply with any
applicable law. (Section 202 of the Supplemental Indenture). No fractional
shares will be delivered on any exchange of New Debentures, and, in lieu
thereof, a cash adjustment based on the market price of the Chevron Stock or
other Exchange Property will be paid, such market price to be determined as of
the date of receipt by Pennzoil of the notice of exchange relating to such New
Debentures (or, if such date is not a business day, on the business day next
preceding such date). (Section 203 of the Supplemental Indenture).
If Pennzoil has called the New Debentures for redemption, holders of New
Debentures exercising the right of exchange will receive accrued and unpaid
interest on the New Debentures through the date of exchange. If the New
Debentures have not been called for redemption, holders of New Debentures
exercising the right of exchange will not receive any accrued and unpaid
interest on the New Debentures. (Section 202 of the Supplemental Indenture).
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In lieu of delivering certificates representing Chevron Stock in exchange
for any New Debentures, Pennzoil may pay to the holder surrendering such New
Debentures an amount in cash equal to the market price of the Chevron Stock or
other Exchange Property for which such New Debentures are exchangeable,
determined as of the date of receipt by Pennzoil of the notice of exchange
relating to such New Debentures (or, if such date is not a business day, on
the business day next preceding such date). Prior to so directing the New
Debenture Exchange Agent to make any such cash payment, Pennzoil shall deposit
with the New Debenture Exchange Agent the cash so payable. (Section 216 of the
Supplemental Indenture).
Pennzoil will be entitled to all cash dividends with respect to the Chevron
Stock or other Exchange Property, other than dividends paid pursuant to a plan
of liquidation or partial liquidation of Chevron, recapitalization or
restructuring of Chevron or other extraordinary cash dividends. Pennzoil will
also be entitled to all interest payments on any debt securities held for
exchange by Pennzoil which are issued in exchange for Chevron Stock or other
Exchange Property pursuant to any merger or consolidation of Chevron or in
connection with any sale of all or substantially all the assets of Chevron.
(Section 205 of the Supplemental Indenture).
If Chevron should issue any Chevron Stock in subdivision or by way of stock
dividend, the exchange rate will be proportionately increased, and, if Chevron
shall effect a combination of Chevron Stock, the exchange rate will be
proportionately reduced, subject in each case to adjustments for tax
consequences, if any. (Section 204 of the Supplemental Indenture).
If Chevron should make any distribution of cash, securities or other
property with respect to the Chevron Stock or other Exchange Property (other
than cash dividends to which Pennzoil is entitled as described above, the
distributions described in the preceding paragraph or any securities or other
property received in a merger or consolidation of Chevron or in connection
with any sale of all or substantially all the assets of Chevron as described
in the next paragraph) or if Chevron grants transferable subscription rights,
options, warrants or other similar rights to Pennzoil in respect of the
Chevron Stock or other Exchange Property, Pennzoil will cause all such
securities, other property and rights to be deposited with the applicable
Exchange Agent and will direct the applicable Exchange Agent to sell all such
securities and other property and all such rights for cash, except any such
securities or property that are convertible, without payment of any
consideration, into Chevron Stock and which rights do not expire before the
retirement of such securities or other property. Such Exchange Agent will
apply the proceeds first to the payment of any taxes incurred or deemed
incurred by Pennzoil or such Exchange Agent on such distribution or such grant
of rights and incurred or deemed incurred by Pennzoil or such Exchange Agent
on the subsequent sale of the securities or other property distributed or
rights granted. The balance of the cash proceeds will be held by such Exchange
Agent for distribution pro rata with the Chevron Stock or other Exchange
Property. In the event that a distribution or grant of cash, securities or
other property on Exchange Property shall be effected as contemplated by this
paragraph, a notice stating that such distribution or grant has occurred and
setting forth the additional cash, securities or other property distributed on
the Exchange Property shall as soon as practicable be mailed by or on behalf
of Pennzoil to the holders of New Debentures at their addresses as they appear
in the Security Register. (Section 205 of the Supplemental Indenture).
In the case of any merger or consolidation of Chevron with or into any other
person that results in shares of Chevron Stock, as constituted prior to the
consummation of such transaction, being converted into other securities and/or
property, including cash, or any sale of all or substantially all the assets
of Chevron (if in connection with such sale or transfer holders of Chevron
Stock receive other securities and/or property, including cash, in exchange
for their shares of Chevron Stock), the holder of any New Debenture
surrendered for exchange thereafter will, subject to the following paragraph,
be entitled to receive the kind and amount of shares of stock and other
securities and property receivable upon or in connection with such transaction
by a holder of the number of shares of Chevron Stock or other Exchange
Property for which such New Debenture might have been exchanged immediately
prior to such transaction, as well as a pro rata share of any cash held for
exchange by Pennzoil in accordance with the preceding paragraph. (Section 211
of the Supplemental Indenture).
Upon the occurrence of any such merger, consolidation, sale of all or
substantially all the assets of Chevron described in the preceding paragraph
or any voluntary or involuntary dissolution, liquidation or winding up of
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Chevron, or any stock dividend, subdivision, combination or reclassification
of shares of Chevron Stock or other Exchange Property, which shall be taxable
to Pennzoil or the New Debenture Exchange Agent, or upon the happening of any
other event with respect to the Chevron Stock or other Exchange Property,
which is taxable or treated as being taxable to Pennzoil or the New Debenture
Exchange Agent, the New Debenture Exchange Agent will deliver cash which it
holds for exchange (including cash received in such transaction) to Pennzoil
or to itself for payment of the taxes arising from such transaction. If the
cash held for exchange is insufficient to pay the amount of such taxes, the
New Debenture Exchange Agent will sell such of the shares of Chevron Stock or
other Exchange Property as may be necessary to pay the amount of the
insufficiency and any taxes payable by Pennzoil or the New Debenture Exchange
Agent arising from such sale. The remaining shares of Chevron Stock or other
Exchange Property will be held by the New Debenture Exchange Agent for
distribution pro rata to holders requesting exchange of their New Debentures.
(Section 215 of the Supplemental Indenture).
From time to time, Pennzoil may require the New Debenture Exchange Agent to
segregate such property as Pennzoil determines may be necessary for Pennzoil
or the New Debenture Exchange Agent to pay taxes with respect to the
transactions or events described above, subject to the determination of
taxability (and any expenses incurred in determining taxability), and such
property (or any portion thereof) shall be deliverable to holders of New
Debentures only after determination that such withholding is not necessary for
the payment of such taxes and after deducting the expenses incurred in
connection with such determination. (Section 215 of the Supplemental
Indenture).
If Chevron grants nontransferable subscription rights, options, warrants or
similar rights with respect to the Exchange Property, Pennzoil will, if
otherwise lawful, deliver such rights pro rata to the New Debenture Exchange
Agent. Pennzoil and the New Debenture Exchange Agent shall cause such rights
to be distributed to the holders of the New Debentures shown in the Security
Register. (Section 205 of the Supplemental Indenture).
Pennzoil is required to give to holders of New Debentures notice of certain
dividends on the Chevron Stock deliverable upon exchange of New Debentures,
the granting of subscription rights, options, warrants or other similar rights
to holders of Chevron Stock, any reclassification of Chevron Stock (other than
a subdivision or combination of outstanding shares of Chevron Stock), certain
mergers involving Chevron, the sale of all or substantially all of the assets
of Chevron and the dissolution, liquidation or winding up of Chevron. (Section
206 of the Supplemental Indenture).
Any cash held by the New Debenture Exchange Agent that is deliverable upon
exchange of New Debentures will be invested by the New Debenture Exchange
Agent at the direction of Pennzoil in U.S. Government Obligations with
maturity dates of twelve months or less. Any interest or gain on such
investments will be for the benefit of Pennzoil, and Pennzoil will be
responsible for any losses on such investments. To the extent New Debentures
are redeemed prior to exchange, Pennzoil will be entitled to receive from the
New Debenture Exchange Agent such number of shares of Chevron Stock, other
Exchange Property and such amount of cash, if any, held by the New Debenture
Exchange Agent for exchange as exceeds the number of shares of Chevron Stock
or other Exchange Property required to be held by the New Debenture Exchange
Agent for the exchange of all New Debentures remaining then outstanding.
(Section 205 of the Supplemental Indenture).
In the event of a tender offer or exchange offer for any class of securities
included within the Exchange Property (i) if Pennzoil owns shares of such
class which are not subject to the Exchange Agreement, Pennzoil will cause the
New Debenture Exchange Agent to tender such shares of such class in the same
proportion that Pennzoil tenders its securities in such class which are not
subject to the Exchange Agreement and (ii) if Pennzoil does not own securities
of a class which are subject to the Exchange Agreement, Pennzoil may, at its
option and in its sole discretion, elect to cause the New Debenture Exchange
Agent to tender all or any portion or none of such class of security included
within the Exchange Property held by the New Debenture Exchange Agent. The
proceeds of the sale of any such Exchange Property pursuant to any such tender
or exchange offer will be held by the New Debenture Exchange Agent for the
benefit of holders as provided in the Supplemental Indenture. As a result of
the receipt by the New Debenture Exchange Agent of cash or other property upon
the tender or exchange of an Exchange Property, holders will not participate
in any subsequent appreciation or depreciation in
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the market price of such Exchange Property tendered or exchanged upon any
subsequent exchange of New Debentures. (Section 212 of the Supplemental
Indenture).
The right of a holder to exchange his New Debentures for Chevron Stock or
other Exchange Property could be adversely affected in the event of the
bankruptcy, insolvency or liquidation of Pennzoil. In such event, the Chevron
Stock or other Exchange Property could be assets of Pennzoil subject to the
claims of its general creditors.
REPURCHASE RIGHTS
The New Debenture Exchange Agent will act as agent for Pennzoil in
connection with Pennzoil's exchange obligations under the Supplemental
Indenture and will not act as escrow agents for the benefit of holders of New
Debentures. Accordingly, Pennzoil may at any time obtain from the New
Debenture Exchange Agent or otherwise authorize or direct the New Debenture
Exchange Agent to release all or a part of the Chevron Stock or other Exchange
Property. In the event that Pennzoil obtains or otherwise releases any Chevron
Stock or other Exchange Property in any manner otherwise than as contemplated
by the Supplemental Indenture, each holder of New Debentures will have the
right ("Repurchase Right"), at such holder's option, to require Pennzoil to
repurchase all of such holder's New Debentures, or a portion thereof which is
$1,000 or any integral multiple thereof, in the manner and at the price
described below. (Section 217 of the Supplemental Indenture).
Promptly (and in any event within 10 days) after Pennzoil has obtained or
released any Exchange Property in any manner otherwise than as contemplated by
the Supplemental Indenture, the New Debenture Exchange Agent will mail to all
holders of record of the New Debentures a notice thereof and the Repurchase
Right arising as a result thereof (a "Repurchase Notice"). To exercise the
Repurchase Right, a holder of New Debentures must deliver on or before the
15th day after the date of the Repurchase Notice irrevocable written notice to
the New Debenture Exchange Agent of the holder's exercise of such right,
together with the New Debentures with respect to which the right is being
exercised, duly endorsed for transfer.
On the date ("Repurchase Date") that is 30 days after the date of the
Repurchase Notice, Pennzoil will be required to repurchase all New Debentures
in respect of which the Repurchase Right has been exercised at the following
price: (i) if the date on which Pennzoil's obtaining or release of Exchange
Property in a manner not contemplated by the Supplemental Indenture first
occurs (the "Triggering Date") is before February 1, 2000, the product of (1)
120% and (2) the greater of the principal amount at maturity of such New
Debentures (plus accrued and unpaid interest, if any, to the Repurchase Date)
and the market price of the Exchange Property deliverable in exchange for such
New Debentures on the Triggering Date (or if such date is not a business day,
on the next succeeding business day); and (ii) if the Triggering Date occurs
on or after February 1, 2000, the greater of (1) the redemption price as
specified under "--Redemption Provisions" on the Triggering Date and (2) the
market price of the Exchange Property deliverable in exchange for such New
Debentures on the Triggering Date (or if such date is not a business day, on
the next succeeding business day).
The obligation of Pennzoil to deliver Exchange Property (or cash in lieu
thereof) in exchange for New Debentures shall survive and continue to apply in
full force and effect following and notwithstanding the occurrence of any
event triggering a Repurchase Right. Failure by Pennzoil to exchange New
Debentures in accordance with the Supplemental Indenture or to repurchase New
Debentures upon exercise of a Repurchase Right will constitute an Event of
Default with respect to the New Debentures, and holders of New Debentures will
have the remedies provided for in the Indenture, including acceleration of the
indebtedness evidenced by the New Debentures, in the event of any such
failure.
The exchange obligations of Pennzoil may not be assigned or otherwise
transferred by Pennzoil except in accordance with a transfer of the
indebtedness evidenced by the New Debentures in the manner permitted by the
Indenture.
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If an offer is made to repurchase New Debentures in connection with a
Repurchase Right, Pennzoil will comply with all tender offer rules, including
but not limited to Sections 13 (e) and 14 (e) under the Exchange Act and Rules
l3e-1 and l4e-1 thereunder, to the extent applicable to such offer.
REDEMPTION PROVISIONS
Subject to the redemption provisions described below, the New Debentures may
not be redeemed prior to February 1, 2000. Thereafter, the New Debentures may
be redeemed at the option of Pennzoil, in whole or from time to time in part,
on not less than 30 nor more than 60 days' notice by mail to the holders of
New Debentures at their addresses appearing on the Security Register, at the
following redemption prices (expressed as a percentage of the principal amount
at maturity) if redeemed during the 12-month period beginning February 1 of
the following years:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2000.....................................................
2001.....................................................
2002.....................................................
2003.....................................................
2004.....................................................
2005.....................................................
2006.....................................................
2007.....................................................
</TABLE>
in each case together with accrued and unpaid interest to the redemption date;
provided, however, if the interest payment date on New Debentures is on or
prior to the redemption date shall be payable to the holders of such New
Debentures, registered as such at the close of business on the relevant Record
Dates. There is no sinking fund applicable to the New Debentures.
EVENTS OF DEFAULT
Unless otherwise provided with respect to any series of Debt Securities, the
following are Events of Default under the Indenture with respect to the Debt
Securities of such series issued under such Indenture (which includes the New
Debentures): (a) failure to pay principal of (or premium, if any, on) any Debt
Security of such series when due; (b) failure to pay any interest on any Debt
Security of such series when due, continued for 60 days; (c) failure to
deposit any mandatory sinking fund payment, when due, in respect of the Debt
Securities of such series, continued for 60 days; (d) failure to perform any
other covenant of Pennzoil in the Indenture (other than a covenant included in
the applicable Indenture for the benefit of a series of Debt Securities other
than such series), continued for 90 days after written notice as provided in
the applicable Indenture; (e) certain events of bankruptcy, insolvency or
reorganization; and (f) any other Event of Default as may be specified with
respect to Debt Securities of such series. (Section 501 of the Indenture). If
an Event of Default with respect to any outstanding series of Debt Securities
occurs and is continuing, either the Trustee or the holders of at least 25% in
principal amount of the outstanding Debt Securities of such series (in the
case of an Event of Default described in clause (a), (b), (c) or (f) above) or
at least 25% in principal amount of all outstanding Debt Securities under the
Indenture (in the case of other Events of Default) may declare the principal
amount of all the Debt Securities of the applicable series (or of all
outstanding Debt Securities under the Indenture, as the case may be) to be due
and payable immediately. At any time after a declaration of acceleration has
been made, but before a judgment has been obtained, the holders of a majority
in principal amount of the outstanding Debt Securities of such series (or of
all outstanding Debt Securities under the Indenture, as the case may be) may,
under certain circumstances, rescind and annul such acceleration. (Section 502
of the Indenture).
The Indenture provides that the Trustee will, within 90 days after the
occurrence of a default in respect of any series of Debt Securities, give to
the holders of the Debt Securities of such series notice of all uncured and
unwaived defaults known to it; provided, however, that except in the case of a
default in the payment of the
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principal of (or premium, if any) or any interest on, or any sinking fund
installment with respect to, any Debt Securities of such series, the Trustee
will be protected in withholding such notice if it in good faith determines
that the withholding of such notice is in the interest of the holders of the
Debt Securities of such series; and provided, further, that such notice shall
not be given until at least 60 days after the occurrence of a default in the
performance, or breach, of any covenant or warranty of Pennzoil under the
Indenture other than for the payment of the principal of (or premium, if any)
or any interest on, or any sinking fund installment with respect to, any Debt
Securities of such series. For the purpose of this provision, "default" with
respect to Debt Securities of any series means any event which is, or after
notice or lapse of time, or both, would become, an Event of Default with
respect to the Debt Securities of such series. (Section 602 of the Indenture).
The holders of a majority in principal amount of the outstanding Debt
Securities of any series (or, in certain cases, all outstanding Debt
Securities under the Indenture) have the right, subject to certain
limitations, to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on the Trustee with respect to the securities of such series (or of
all outstanding securities under the Indenture). (Section 512 of the
Indenture). The Indenture provides that in case an Event of Default shall
occur and be continuing, the Trustee shall exercise such of its rights and
powers under the Indenture and use the same degree of care and skill in their
exercise as a prudent man would exercise or use under the circumstances in the
conduct of his own affairs. (Section 610 of the Indenture). Subject to such
provisions, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request of any of the holders of
the securities unless they shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which might
be incurred by it in compliance with such request. (Section 603 of the
Indenture).
The holders of a majority in principal amount of the outstanding Debt
Securities of any series (or, in certain cases, all outstanding Debt
Securities under the Indenture) may on behalf of the holders of all Debt
Securities of such series (or of all outstanding Debt Securities under the
Indenture) waive any past default under the Indenture, except a default in the
payment of the principal of (or premium, if any) or interest on any Debt
Security or in respect of a provision which under the Indenture cannot be
modified or amended without the consent of the holder of each outstanding Debt
Security affected. (Section 513 of the Indenture). The holders of a majority
in principal amount of the outstanding Debt Securities affected thereby may on
behalf of the holders of all such Debt Securities waive compliance by Pennzoil
with certain restrictive provisions of the Indentures. (Section 1009 of the
Indenture).
Pennzoil is required to furnish to the Trustee annually a statement as to
the performance by Pennzoil of certain of its obligations under the Indenture
and as to any default in such performance. (Section 1008 of the Indenture).
MODIFICATION
Modifications and amendments of the Indenture may be made by Pennzoil and
the Trustee with the consent of the holders of a majority in principal amount
of the outstanding Debt Securities under the Indenture affected thereby;
provided, however, that no such modification or amendment may, without the
consent of the holder of each outstanding Debt Security affected thereby, (a)
change the stated maturity date of the principal of, or any installment of
interest on, any Debt Security, (b) reduce the principal amount of, or the
premium (if any) or interest on, any Debt Security, (c) change the place or
currency, currencies, or currency unit or units or payment of principal of, or
premium (if any) or interest on, any Debt Security, (d) impair the right to
institute suit for the enforcement of any payment on or with respect to any
Debt Security or (e) reduce the percentage in principal amount of outstanding
securities the consent of whose holders is required for modification or
amendment of the Indenture or for waiver of compliance with certain provisions
of the Indenture or for waiver of certain defaults. (Section 902 of the
Indenture).
The Indenture provides that Pennzoil and the Trustee may, without the
consent of any holders of Debt Securities, enter into supplemental indentures
for the purposes, among other things, of adding to Pennzoil's
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covenants, adding additional Events of Default, establishing the form or terms
of Debt Securities or curing ambiguities or inconsistencies in the Indenture,
provided such action to cure ambiguities or inconsistencies shall not
adversely affect the interests of the holders of the Debt Securities in any
material respect.
CONSOLIDATION, MERGER AND SALE OF ASSETS
Pennzoil, without the consent of any holders of outstanding Debt Securities,
may consolidate with or merge into, or convey, transfer or lease its assets
substantially as an entirety to, any person, provided that the person formed
by such consolidation or into which Pennzoil is merged or which acquired or
leases the assets of Pennzoil substantially as an entirety is a corporation,
partnership or trust organized under the laws of any United States
jurisdiction and assumes by supplemental indenture Pennzoil's obligations on
the Debt Securities and under the Indenture, that after giving effect to the
transaction, no Event of Default, and no event which, after notice or lapse of
time or both, would become an Event of Default, shall have occurred and be
continuing, and that certain other conditions are met. Upon compliance with
these provisions by a successor person, Pennzoil will (except in the case of a
lease) be relieved of its obligations under the Indenture and the Debt
Securities. (Article Eight of the Indenture).
DISCHARGE AND DEFEASANCE
Pennzoil may terminate its obligations under the Indenture, other than its
obligation to pay the principal of (and premium, if any) and interest on the
Debt Securities of any series and certain other obligations, if it (i)
irrevocably deposits or causes to be irrevocably deposited with the Trustee as
trust funds money or U.S. Government Obligations maturing as to principal and
interest sufficient to pay the principal of, any interest on, and any
mandatory sinking funds in respect of, all outstanding Debt Securities of such
series on the stated maturity of such payments or on any redemption date and
(ii) complies with any additional conditions specified to be applicable with
respect to the covenant defeasance of Debt Securities of such series. (Section
401 of the Indenture). The terms of the New Debentures provide an additional
condition that Pennzoil will be permitted to terminate certain of its
obligations under the Indenture pursuant to the Indenture's covenant
defeasance provisions only if Pennzoil delivers to the Trustee an opinion of
counsel that covenant defeasance will not cause holders of the New Debentures
to recognize income, gain or loss for United States federal income tax
purposes. (Section 105 of the Supplemental Indenture).
The terms of any series of Debt Securities may also provide for legal
defeasance pursuant to the Indenture. In such case, if Pennzoil (i)
irrevocably deposits or causes to be irrevocably deposited money or U.S.
Government Obligations as described above, (ii) makes a request to the Trustee
to be discharged from its obligations on the Debt Securities of such series
and (iii) complies with any additional conditions specified to be applicable
with respect to legal defeasance of Debt Securities of such series, then
Pennzoil shall be deemed to have paid and discharged the entire indebtedness
on all the outstanding Debt Securities of such series and the obligations of
Pennzoil under the Indenture and the Debt Securities of such series to pay the
principal of (and premium, if any) and interest on the Debt Securities of such
series shall cease, terminate and be completely discharged, and the holders
thereof shall thereafter be entitled only to payment out of the money or U.S.
Government Obligations deposited with the Trustee as aforesaid, unless
Pennzoil's obligations are revived and reinstated because the Trustee is
unable to apply such trust fund by reason of any legal proceeding, order or
judgment. (Sections 403 and 404 of the Indenture). The terms of the New
Debentures provide for legal defeasance. Legal defeasance is permitted under
the terms of the New Debentures only on the additional condition that Pennzoil
shall have received from, or there shall have been published by, the United
States Internal Revenue Service a ruling to the effect that legal defeasance
will not cause holders of the New Debentures to recognize income, gain or loss
for United States federal income tax purposes. (Section 105 of the
Supplemental Indenture).
"U.S. Government Obligations" is defined in the Indenture as direct
noncallable obligations of, or noncallable obligations the payment of
principal of and interest on which is guaranteed by, the United States of
America, or to the payment of which obligations or guarantees the full faith
and credit of the United States of
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America is pledged, or beneficial interests in a trust the corpus of which
consists exclusively of money or such obligations or a combination thereof.
REGISTRATION AND TRANSFER
The New Debentures may be presented for registration of transfer (with the
form of transfer endorsed thereon duly executed), at the office of the
Security Registrar or at the office of any transfer agent designated by
Pennzoil for such purpose with respect to the New Debentures, without service
charge and upon payment of any taxes and other governmental charges as
described in the Indenture. Such transfer or exchange will be effected upon
the Security Registrar or such transfer agent, as the case may be, being
satisfied with the documents of title and identity of the Person making the
request. Pennzoil has appointed the Trustee as Security Registrar. (Section
305 of the Indenture). No service charge will be made for any registration of
transfer or exchange of the Debt Securities, but Pennzoil may require payment
of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith. (Section 305 of the Indenture). Pennzoil may at any time
designate additional transfer agents with respect to any series of securities.
(Section 1002 of the Indenture).
In the event of any redemption in part, Pennzoil shall not be required to
(i) issue, register the transfer of or exchange during a period beginning at
the opening of business 15 days prior to the selection for redemption and
ending on the close of business on the day of mailing of the relevant notice
of redemption or (ii) register the transfer of or exchange any New Debentures,
or portion thereof, called for redemption, except the unredeemed portion of
any New Debentures being redeemed in part. (Section 305 of the Indenture).
PAYMENT AND PAYING AGENTS
Payment of principal of and interest on the New Debentures will be made in
the designated currency or currency unit at the office of such paying agent or
paying agents as Pennzoil may designate from time to time (the "Paying
Agents"), except that at the option of Pennzoil payment of any interest may be
made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register. Payment of any installment of
interest on the New Debentures will be made to the person in whose name such
New Debentures are registered at the close of business on the regular record
date for such interest. (Section 307 of the Indenture).
The Corporate Trust Office of the Trustee in the Borough of Manhattan, The
City of New York will be designated as a Paying Agent for Pennzoil for
payments with respect to the New Debentures. Pennzoil may at any time
designate additional Paying Agents or rescind the designation of any Paying
Agent or approve a change in the office through which any Paying Agent acts,
except that Pennzoil will be required to maintain a Paying Agent in each Place
of Payment for such series and Pennzoil will be required to maintain a Paying
Agent in the Borough of Manhattan, The City of New York for principal payments
with respect to the New Debentures. (Section 1002 of the Indenture)
All moneys paid by Pennzoil to a Paying Agent for the payment of principal
of and any premium or interest on any security which remain unclaimed at the
end of three years after such principal, premium or interest shall have become
due and payable will (subject to applicable escheat laws) be repaid to
Pennzoil and the holder of such security or any coupon will thereafter look
only to Pennzoil for payment thereof. (Section 1003 of the Indenture).
MEETINGS
The Indenture contains provisions for convening meetings of the holders of
Debt Securities of a series. (Section 1301 of the Indenture). A meeting may be
called at any time by the Trustee, and also, upon request, by the Company or
the holders of at least 10% in principal amount of the outstanding Debt
Securities of such series, in any such case upon notice given as described
under "--Notices" below. (Section 1302 of the Indenture). Except for any
consent that must be given by the holder of each outstanding Debt Security
affected thereby, as
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described under "--Modification" above, any resolution presented at a meeting
or adjourned meeting at which a quorum is present may be adopted by the
affirmative vote of the holders of a majority in principal amount of the
outstanding Debt Securities of that series; provided, however, that, except
for any consent that must be given by the holder of each outstanding Debt
Security affected thereby, as described under "--Modification" above, any
resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that may be made, given or taken by
the holders of a specified percentage, which is less than a majority in
principal amount of the outstanding Debt Securities of a series, may be
adopted at a meeting or adjourned meeting duly reconvened at which a quorum is
present by the affirmative vote of the holders of such specified percentage in
principal amount of the outstanding Debt Securities of that series. Subject to
the proviso set forth above, any resolution passed or decision taken at any
meeting of holders of Debt Securities of any series duly held in accordance
with the Indenture will be binding on all holders of Debt Securities of that
series and any related coupons. The quorum at any meeting called to adopt a
resolution, and at any reconvened meeting, will be Persons holding or
representing a majority in principal amount of the outstanding Debt Securities
of a series. (Section 1304 of the Indenture).
NOTICES
Notices to holders of New Debentures will be given by mail to the addresses
of such holders as they appear in the Security Register. (Section 107 of the
Indenture).
THE TRUSTEE
The Indenture contains certain limitations on the right of the Trustee, as a
creditor of Pennzoil, to obtain payment of claims in certain cases and to
realize on certain property received with respect to any such claims, as
security or otherwise. (Section 613 of the Indenture). The Trustee is
permitted to engage in other transactions, except that, if it acquires any
conflicting interest (as defined), it must eliminate such conflict or resign.
(Section 608 of the Indenture).
The Trustee has made loans to Pennzoil and its subsidiaries and affiliates
from time to time in the ordinary course of business and at prevailing
interest rates under agreements with commercial bank groups. In addition, the
Trustee serves as a depositary of funds of, and performs other services for,
Pennzoil and is trustee under one other indenture pursuant to which several
outstanding series of Pennzoil's debentures have been issued.
LIMITATION ON LIENS
The Indenture provides that, so long as any Debt Securities are outstanding,
Pennzoil will not, and will not permit any Designated Subsidiary (as defined
below) to, pledge, mortgage, hypothecate or grant a security interest in, or
permit any mortgage, pledge, security interest or other lien upon, any
property or assets owned by Pennzoil or any Designated Subsidiary to secure
any Indebtedness, without making effective provision whereby outstanding
securities shall be equally and ratably secured.
Under the Indenture, Atlas Processing Company ("Atlas"), an indirect wholly
owned subsidiary of Pennzoil, is currently the only Subsidiary (as defined
below) of Pennzoil which is a Designated Subsidiary. Therefore, the above
restriction applies only to Pennzoil and Atlas and does not cover other
Pennzoil subsidiaries, including PEPCO, PPC or Jiffy Lube. The Indenture
contains no restriction on the disposition by Pennzoil of the stock of a
Designated Subsidiary or any other Subsidiary. Moreover, the Indenture does
not prohibit Pennzoil or any Designated Subsidiary from doing business through
any existing or new Subsidiary that is not a Designated Subsidiary and,
therefore, not subject to the limitation on liens in the Indenture or from
transferring assets or businesses to those Subsidiaries.
Under the terms of the Indenture, the above negative pledge restriction does
not apply to (a) any mortgage, pledge, security interest, lien or encumbrance
upon any property or assets created at the time of the acquisition of such
property or assets by Pennzoil or any Designated Subsidiary or within one year
after such time to secure
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all or a portion of the purchase price for such property or assets; (b) any
mortgage, pledge, security interest, lien or encumbrance upon any property or
assets existing thereon at the time of the acquisition thereof by Pennzoil or
any Designated Subsidiary (whether or not the obligations secured thereby are
assumed by Pennzoil or any Subsidiary); (c) any mortgage pledge, security
interest, lien or encumbrance upon any property or assets, whenever acquired,
of any corporation that becomes a Designated Subsidiary after December 15,
1992, provided that (i) the instrument creating such mortgage, pledge,
security interest, lien or encumbrance shall be in effect prior to the time
such corporation becomes a Designated Subsidiary and (ii) such mortgage,
pledge, security interest, lien or encumbrance shall only apply to properties
or assets owned by such corporation at the time it becomes a Designated
Subsidiary or thereafter acquired by it from sources other than Pennzoil or
another Designated Subsidiary; (d) any extension, renewal or refunding of any
mortgage, pledge, security interest, lien or encumbrance described in (a), (b)
or (c) above on substantially the same property or assets theretofore subject
thereto; (e) any mortgage, pledge, security interest, lien or encumbrance
arising from or in connection with a conveyance by Pennzoil or a Designated
Subsidiary of any production payment with respect to oil, gas, natural gas,
carbon dioxide, sulphur, helium, coal, metals, minerals, steam, timber or
other natural resources; (f) any mortgage, pledge, security interest, lien or
encumbrance in favor of Pennzoil or any Wholly Owned Subsidiary (as defined
below); (g) any mortgage, pledge, security interest, lien or encumbrance
created or assumed by Pennzoil or a Designated Subsidiary in connection with
the issuance of debt securities the interest on which is excludable from gross
income of the holder of such security pursuant to the Code for the purpose of
financing, in whole or in part, the acquisition or construction of property or
assets to be used by Pennzoil or a Subsidiary; or (h) any mortgage, pledge,
security interest, lien or encumbrance securing any Indebtedness (as defined
below) in an amount which, together with all other Indebtedness secured by a
mortgage, pledge, security interest, lien or encumbrance that is not otherwise
permitted by the foregoing provisions, does not at the time of the incurrence
of the Indebtedness so secured exceed 5% of Consolidated Net Tangible Assets,
as shown on a balance sheet as of the date of the balance sheet contained in
Pennzoil's most recent periodic report on Form 10-K or Form 10-Q filed with
the Commission prior to the date of such incurrence. For the purpose of this
provision, "security interest" will include the interest of the lessor under a
lease with a term of three years or more that should be, in accordance with
generally accepted accounting principles, recorded as a capital lease, and any
such lease of property or assets not acquired from Pennzoil or any Designated
Subsidiary in contemplation of such lease shall be treated as though the
lessee had purchased such property or assets from the lessor. (Section 1007 of
the Indenture).
The term "Indebtedness," as applied to any Person, is defined in the
Indenture as all indebtedness, whether or not represented by bonds,
debentures, notes or other securities, created or assumed by such Person for
the repayment of money borrowed, and obligations, computed in accordance with
generally accepted accounting principles, or as lessee under leases that
should be, in accordance with generally accepted accounting principles,
treated as capital leases. All Indebtedness secured by a lien upon property
owned by Pennzoil or any Subsidiary and upon which Indebtedness such Person
customarily pays interest, although such Person has not assumed or become
liable for the payment of such Indebtedness, shall be deemed to be
Indebtedness of such Person. All Indebtedness of others guaranteed as to
payment of principal by such Person or in effect guaranteed by such Person
through a contingent agreement to purchase such Indebtedness shall also be
deemed to be Indebtedness of such Person. Indebtedness shall not include
amounts which are payable out of all or a portion of the oil, gas, natural
gas, carbon dioxide, sulphur, helium, coal, metals, minerals, steam, timber or
other natural resources produced, derived or extracted from properties owned
or developed by such Person.
"Consolidated Net Tangible Assets" is defined in the Indenture as the total
amount of assets of Pennzoil and the Designated Subsidiaries on a consolidated
basis, including the equity in Subsidiaries that are not Designated
Subsidiaries (less applicable reserves and other properly deductible items)
after deducting therefrom (i) all current liabilities (excluding any which
are, by their terms, extendable or renewable at the option of the obligor
thereon to a time more than 12 months after the time as of which the amount
thereof is being computed) and (ii) all goodwill, trade names, trademarks,
patents, unamortized debt discount and expense and other like intangible
assets.
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The Indenture defines the term "Subsidiary" as a corporation more than 50%
of the outstanding voting stock of which is owned, directly or indirectly, by
Pennzoil or by one or more other Subsidiaries, or by Pennzoil and one or more
other Subsidiaries. For the purposes of this definition, "voting stock" means
stock which ordinarily has voting power for the election of directors, whether
at all times or only so long as no senior class of stock has such voting power
by reason of any contingency.
"Designated Subsidiary" is defined to include any Subsidiary which at the
time has been designated by Pennzoil as a Designated Subsidiary in an
Officers' Certificate delivered to the Trustee for such purpose, subject to
such provisions, if any, as may be contained in such Officers' Certificate
providing that upon the occurrence of a specified event or action or in such
other circumstances as is specified in such Officers' Certificate, such other
Subsidiary shall no longer be a Designated Subsidiary. Atlas is the only
Subsidiary of Pennzoil currently so designated.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a general summary of the material federal income
tax consequences to a holder of exchanging Old Debentures for New Debentures
in the Exchange Offer and owning and disposing of New Debentures (and Chevron
Stock received in exchange for New Debentures). This summary is based on
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
existing and proposed Treasury regulations promulgated thereunder, and
administrative and judicial interpretations thereof, all as currently in
effect and all of which are subject to change (possibly with retroactive
effect) and to differing interpretations. Furthermore, there can be no
assurance that the Internal Revenue Service ("IRS") would not take a position
contrary to those expressed herein. This summary deals only with holders that
hold the Old Debentures, and will hold the New Debentures and Chevron Stock,
as capital assets and does not address all aspects of federal income taxation
that may be applicable to investors in light of their particular
circumstances, or to investors subject to special treatment under federal
income tax law (including, but not limited to, life insurance companies,
dealers in securities, financial institutions, tax-exempt organizations,
foreign persons, persons having a functional currency other than the U.S.
dollar, and persons holding the Old Debentures, the New Debentures or the
Chevron Stock as a position in a "straddle" or conversion transaction, or as
part of a "synthetic security" or other integrated financial transaction).
This summary also does not address the state, local or foreign tax
consequences of an investment in the New Debentures or the Chevron Stock.
INVESTORS CONSIDERING THE EXCHANGE OF OLD DEBENTURES IN THE EXCHANGE OFFER ARE
URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THEIR PARTICULAR TAX
CONSEQUENCES OF THE EXCHANGE OFFER AND THE OWNERSHIP AND DISPOSITION OF THE
NEW DEBENTURES AND THE CHEVRON STOCK UNDER FEDERAL AND APPLICABLE STATE, LOCAL
AND FOREIGN TAX LAWS, INCLUDING THE EFFECTS OF RECENT OR POSSIBLE FUTURE
CHANGES IN SUCH LAWS.
TREATMENT OF EXCHANGE OFFER
Bifurcation of Old Debentures. Pursuant to proposed Treasury regulations
outstanding at the time the Old Debentures were issued, Pennzoil has taken the
position that each Old Debenture is bifurcated for federal income tax purposes
into two separate instruments: a right to receive payments of principal and
stated interest (the "Deemed Debt Instrument") and a right to exchange the Old
Debenture for Chevron Stock (the "Deemed Option"). The IRS has announced that
it will respect any reasonable method used by a taxpayer to account for debt
instruments of that type issued at that time, including a method based upon
the proposed regulations upon which Pennzoil has relied. The discussion below
assumes that the Old Debentures are treated by the holder as bifurcated into
Deemed Debt Instruments and Deemed Options. If a holder has adopted a
different reasonable method for reporting income, gain, loss and deduction on
the Old Debentures, its tax consequences may be different than those discussed
below. Holders who have not adopted the bifurcation method of reporting with
respect to the Old Debentures should contact their tax advisors regarding the
tax consequences of the Exchange Offer.
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Bifurcation of Exchange. The exchange by a holder of Old Debentures for New
Debentures will constitute two separate exchanges for federal income tax
purposes: an exchange of the Deemed Debt Instruments for a portion of the New
Debentures (the "Deemed Debt Exchange") and an exchange of the Deemed Options
for the balance of the New Debentures (the "Deemed Option Exchange"). The
amount realized by a holder upon receipt of New Debentures (which will be
equal to the "issue price" of the New Debentures, determined in the manner
discussed below at "--Treatment of New Debentures--Issue Price") will be
allocated between the Deemed Debt Exchange and the Deemed Option Exchange in
proportion to the relative fair market values of the Deemed Debt Instruments
and the Deemed Options on the Acceptance Date. The basis of the holder in the
Deemed Debt Instruments and the Deemed Options will be determined by
allocating the holder's basis in the Old Debentures between the Deemed Debt
Instruments and the Deemed Options in proportion to their relative fair market
values at the time the holder acquired the Old Debentures, with subsequent
adjustments for any amounts of original issue discount, market discount,
premium or acquisition premium included in the determination of the holder's
income with respect to the Deemed Debt Instruments. The discussion below
assumes that a holder has the same basis and holding period in each of its Old
Debentures. This may not be the case as to any holder that, for example,
acquired Old Debentures in more than one transaction. Any holders that
acquired Old Debentures in more than one transaction or otherwise do not have
the same tax basis and holding period in each of their Old Debentures should
contact their tax advisors regarding additional tax considerations applicable
to them.
Deemed Debt Exchange. The Deemed Debt Exchange probably will constitute a
"recapitalization" for federal income tax purposes. The discussion herein will
assume the Deemed Debt Exchange is a recapitalization. A holder generally will
not recognize loss, if any, on the Deemed Debt Exchange, but will recognize
gain, if any, on such exchange to the extent of the "boot" received in such
exchange. The amount of "boot" received by a holder in the Deemed Debt
Exchange will probably be equal to the excess of the portion of the issue
price of the New Debentures allocated to such exchange over the adjusted issue
price of the Deemed Debt Instruments, but a holder could reasonably adopt the
position that the amount of the boot is equal to the fair market value of the
excess of the stated principal amount of the New Debentures allocated to such
exchange over the stated principal amount of the Old Debentures. Any gain
recognized will be ordinary income to the extent of any accrued market
discount of the holder with respect to the Deemed Debt Instruments and capital
gain as to the balance. Any capital gain will be long-term capital gain if the
holder has held the Old Debentures for more than one year on the Acceptance
Date.
Deemed Option Exchange. The Deemed Option Exchange will not be pursuant to a
"recapitalization" because a Deemed Option does not constitute a "security" of
Pennzoil under current or proposed regulations, so the holder will recognize
any gain or loss on such exchange. Any gain or loss recognized will be long-
term capital gain or loss if the holder has held the Old Debentures for more
than one year on the Acceptance Date.
Basis and Holding Period of New Debentures. The basis of a holder in New
Debentures received pursuant to the Exchange Offer (including the portion of
any hypothetical Fractional New Debenture allocable to the Deemed Debt
Exchange as discussed below at "--Cash in Lieu of Fractional New Debentures")
will be equal to the sum of (i) the basis of the portion of the Old Debentures
surrendered by the holder in the Deemed Debt Exchange, increased for any gain
recognized by the holder on such exchange and (ii) the issue price (determined
as discussed below at "--Treatment of New Debentures--Issue Price") of the
portion of the New Debentures received in the Deemed Option Exchange. The
holding period of the portion of the New Debentures received in the Deemed
Option Exchange and the portion of the New Debentures received in the Deemed
Debt Exchange that are allocable to "boot" will begin the day after the
Acceptance Date. The holding period of the portion of the New Debentures
received in the Deemed Debt Exchange that are not allocable to "boot" will
include the period for which the holder held the Old Debentures, provided that
if all of a holder's gain upon the Deemed Debt Exchange is recognized, the
holding period of such New Debentures probably will begin the day after the
Acceptance Date.
Cash in Lieu of Fractional New Debentures. The portion of the cash received
in lieu of the issuance of a Fractional New Debenture that is allocable to the
Deemed Debt Exchange probably will be treated as if the
41
<PAGE>
holder had received a Fractional New Debenture (in the amount allocable to the
Deemed Debt Exchange), then the Fractional New Debenture was redeemed by
Pennzoil in exchange for the cash. Any gain on such redemption will be
interest income taxable at ordinary income rates and any loss will be capital
loss, as discussed below at "--Treatment of New Debentures--Sale, Exchange,
Redemption or Exercise of New Debentures." The portion of the cash received in
lieu of a Fractional New Debenture that is allocable to the Deemed Option
Exchange will constitute an additional amount realized by the holder in such
exchange.
Interest Paid at Exchange. The interest on the Old Debentures payable at the
time of the exchange will not be additional consideration received in the
Deemed Debt Exchange or the Deemed Option Exchange, but a payment of accrued
original issue discount on the Deemed Debt Instruments immediately before such
exchanges.
TREATMENT OF NEW DEBENTURES
Issue Price. Pennzoil anticipates that the New Debentures will be listed for
trading on the NYSE on and after the Acceptance Date, in which case the issue
price of the New Debentures will be their fair market value on the Acceptance
Date. The discussion herein assumes that the issue price of the New Debentures
will be determined in this manner.
Contingent Payment Regulations. The tax consequences to a holder of owning
or disposing of a New Debenture discussed below arise from the application of
certain Treasury regulations governing
contingent payment debt instruments (the "Contingent Payment Regulations") to
the New Debentures. The Contingent Payment Regulations require the application
of the "noncontingent bond method" to determine the amount, timing and
character of income, gain, loss and deduction with respect to the New
Debentures. As discussed below, generally, under the noncontingent bond
method, taxable interest income will accrue on the New Debentures under rules
similar to the original issue discount rules, at a rate equal to the
"comparable yield" (as defined below) of the New Debentures, and additional
adjustments will be made to the income and deduction of the holder with
respect to the New Debentures to the extent the New Debentures are satisfied
at maturity for an amount different than the amount indicated on the
"projected payment schedule" (as defined below) for the New Debentures or the
holder's basis in the New Debentures is different than the adjusted issue
price of the New Debentures. The Contingent Payment Regulations apply in lieu
of the general rules for accrual of interest; a holder will not have interest
or original issue discount income with respect to the New Debentures other
than as described below.
Determination of Comparable Yield. The "comparable yield" of the New
Debentures will be the yield at which Pennzoil would issue a fixed rate debt
instrument on the Acceptance Date with terms and conditions comparable to
those of the New Debentures, including the level of subordination, term,
timing of payments, and general market conditions (but without the right to
exchange the New Debentures for Chevron Stock). The "comparable yield" will be
determined on the Acceptance Date and will exceed the Determined Rate.
Accrual of Interest at Comparable Yield. Under the noncontingent bond
method, a holder, whether such holder uses the cash or the accrual method of
tax accounting, will be required to include as ordinary interest income the
sum of the "daily portions" of interest on the New Debentures for all days
during the taxable year that the holder owns the New Debentures. As a result,
a holder of New Debentures that employs the cash method of accounting will be
required to include amounts in respect of interest accruing on the New
Debentures in taxable income each year, whether or not the current receipt of
cash from the New Debentures is sufficient to pay any resulting tax.
The daily portions of interest on a New Debenture are determined by
allocating to each day in any accrual period a ratable portion of the interest
allocable to that accrual period. The amount of interest on a New Debenture
allocable to each accrual period is determined by multiplying the "adjusted
issue price" (as defined below) of the New Debentures at the beginning of the
accrual period by the comparable yield of the New Debentures (appropriately
adjusted to reflect the length of the accrual period). The "adjusted issue
price" of a New Debenture at the beginning of any accrual period generally
will be the sum of its issue price (determined as
42
<PAGE>
discussed above at "--Issue Price") and the amount of interest allocable to
all prior accrual periods, less the amount of any stated interest payments
made in all prior accrual periods. Since the comparable yield will exceed the
Determined Rate, interest income with respect to the New Debentures will
exceed the amount of stated interest payable on the New Debentures.
Projected Payment Schedule. The "projected payment schedule" is a schedule
that will be created on the Acceptance Date and will include all stated
payments of interest and an amount for the value of the exchangeability
feature on the Maturity Date that produces a yield on the New Debentures equal
to the comparable yield. If, on the Maturity Date, a New Debenture is retired
or is exchanged for Chevron Stock pursuant to the exercise of the holder's
option, any excess of the amount actually paid on the Maturity Date over the
amount listed on the projected payment schedule for payment on the Maturity
Date will be a "positive adjustment" and any excess of the amount listed on
the projected payment schedule over the amount paid will be a "negative
adjustment." See "--Effect of Positive and Negative Adjustments."
Differences Between Basis and Adjusted Issue Price. A holder whose initial
basis in the New Debentures (determined as discussed above at "--Treatment of
Exchange Offer--Basis and Holding Period of New Debentures") is different from
the adjusted issue price of the New Debentures must make appropriate
"positive" and "negative" adjustments to its income and deductions with
respect to the New Debentures. At the time the holder acquires a New
Debenture, the holder must allocate any difference between its basis in the
New Debenture and the adjusted issue price of the New Debenture among either
the remaining payments due on the projected payment schedule or the remaining
accruals of interest at the comparable yield in a reasonable manner. It will
be reasonable for a holder to allocate any such difference pro rata to all
remaining accruals of interest on a New Debenture at the comparable yield,
provided that, after taking into account this allocation, the yield on the New
Debenture would not be less than the applicable Federal rate applicable to the
New Debenture (determined as if it were a new debt instrument issued on the
purchase date and due on the Maturity Date). Adjustments allocated to either
an interest accrual or the projected payments are taken into account at the
time the corresponding interest is accrued or payment is made. If the holder's
basis is greater than the adjusted issue price of the New Debentures, the
excess is treated as a "negative adjustment", and if the holder's basis is
less than the adjusted issue price, the difference is treated as a "positive
adjustment". See "--Effect of Positive and Negative Adjustments."
Effect of Positive and Negative Adjustments. Positive and negative
adjustments with respect to a New Debenture for a taxable year are netted. A
net positive adjustment is treated as additional interest income to the
holder. A net negative adjustment first reduces the amount of interest accrued
by the holder on the New Debenture for the taxable year, as described above at
"--Accrual of Interest at Comparable Yield," then the remainder is ordinary
loss to the extent the holder's total interest inclusions with respect to the
New Debenture exceed the total amount of net negative adjustments treated as
ordinary losses for prior years. Any excess net negative adjustment is carried
forward as a negative adjustment to the following year, except that any excess
net negative adjustment on the Maturity Date or in the year in which the
holder disposes of the New Debenture reduces the holder's amount realized on
the redemption, sale or exchange. Any negative and positive adjustments of the
kind described above at "--Differences Between Basis and Adjusted Issue Price"
made by a holder of New Debentures in respect of any difference between its
basis and the adjusted issue price of the New Debentures on the date of
acquisition decrease or increase, respectively, the holder's basis in the New
Debentures.
Sale, Exchange or Redemption of New Debentures. When a holder sells,
exchanges or otherwise disposes of a New Debenture, including the redemption
or retirement of the New Debenture by Pennzoil or the exercise by the holder
of its option to exchange the New Debenture for Chevron Stock, (a
"disposition"), the holder's gain (or loss) on such disposition will equal the
difference between the amount realized by the holder for the New Debenture and
the holder's tax basis in the New Debenture. Upon an exercise by the holder
prior to the Maturity Date of its right to exchange the New Debenture for
Chevron Stock, the amount realized by the holder will be equal to the fair
market value of any Chevron Stock (or the amount of cash received in lieu of
Chevron Stock) received by such holder, plus any cash received in lieu of
fractional shares, adjusted for any
43
<PAGE>
"adjustments" required under the principles described above at "--Effect of
Positive and Negative Adjustments." In the case of a retirement on the
Maturity Date or an exercise by the holder on the Maturity Date of its right
to exchange the New Debenture for Chevron Stock, the amount realized will be
the amount listed in the Projected Payment Schedule for payment on the
Maturity Date, as discussed about at "--Projected Payment Schedule," adjusted
for any "adjustments" required under the principles described above at "--
Projected Payment Schedule" and "--Effect of Positive and Negative
Adjustments." A holder's tax basis in a New Debenture will be its initial
basis, determined as described above at "--Treatment of Exchange Offer--Basis
and Holding Period of New Debentures," increased for interest accrued in prior
accrual periods as described above at "--Accrual of Interest at Comparable
Yield," decreased by the amount of the payments of stated interest made on the
New Debentures in prior accrual periods and further adjusted as described
above at "--Effect of Positive and Negative Adjustments." Any gain realized by
a holder on a disposition will be treated as ordinary interest income. Any
loss realized by a holder on a disposition will be treated as ordinary loss to
the extent the holder's interest inclusions with respect to the New Debenture
up to the date of disposition exceed the total net negative adjustments
previously treated by the holder as ordinary loss. Any loss recognized in
excess of such amount generally will be treated as a capital loss. Any capital
loss recognized by a holder will be a long-term capital loss if such holder's
holding period for the New Debentures is more than one year, and a short-term
capital loss in other cases. If a holder receives Chevron Stock in a
disposition, such holder will have a basis in that stock equal to the stock's
fair market value on the date of the disposition. Additionally, the holder's
holding period in the Chevron Stock will begin the day after the disposition.
Pennzoil's Determination Binding. Pennzoil's determination of the comparable
yield and projected payment schedule will be binding on holders. Information
regarding the comparable yield and the projected payment schedule can be
obtained from any time after the day after the Acceptance Date.
The "comparable yield" and the "projected payment schedule" are used to
determine accruals of interest for tax purposes only and are not assurances by
Pennzoil with respect to the actual yield of, or payments to be made in
respect of, the New Debentures. The "comparable yield" and the "projected
payment schedule" do not necessarily represent Pennzoil's expectations
regarding such yield or the amounts of such payments.
TREATMENT OF CHEVRON STOCK
Distributions on Chevron Stock. The gross amount of any distribution made by
Chevron to a holder with respect to the Chevron Stock generally will be
includible in the income of a holder as a dividend taxable as ordinary income
to the extent that such distribution is paid out of Chevron's current or
accumulated earnings and profits as determined under federal income tax
principles. Subject to certain limitations, corporations holding Chevron Stock
that receive dividends thereon generally will be eligible for a dividends-
received deduction equal to 70% of the dividends received. If the amount of
any distribution exceeds Chevron's current and accumulated earnings and
profits as so computed, such excess first will be treated as a tax-free return
of capital to the extent of the holder's tax basis in its Chevron Stock, and
thereafter as gain from the sale or exchange of property.
Dispositions of Chevron Stock. A holder generally will recognize capital
gain or loss for federal income tax purposes on the sale or disposition of
Chevron Stock in an amount equal to the difference between the amount realized
on the sale or other disposition and the holder's tax basis in the Chevron
Stock. Any such gain or loss will be long-term capital gain or loss if the
holder held the Chevron Stock for more than one year.
BACKUP WITHHOLDING AND INFORMATION REPORTING
A holder may be subject to information reporting and to backup withholding
at a rate of 31 percent with respect to payments made on a New Debenture or
Chevron Stock, or the proceeds of the sale of a New Debenture before maturity
or Chevron Stock, unless such holder provides proof of an applicable exemption
or a correct taxpayer identification number, and otherwise complies with
applicable requirements of the information reporting and backup withholding
rules.
44
<PAGE>
Certain holders may receive Forms 1099-OID reporting interest accruals on a
New Debenture. Those forms may not, however, reflect the effects of any
positive or negative adjustments resulting from differences between the
holder's basis in a New Debenture and the adjusted issue price of the New
Debenture. Holders are urged to consult their tax advisors as to whether, and
how, such adjustments should be made to the amounts reported on any Form 1099-
OID.
DEALER MANAGER
PaineWebber Incorporated, as Dealer Manager, has agreed to solicit exchanges
of Old Debentures. The Company will pay the Dealer Manager a fee of $500,000
payable as of the commencement of the Exchange Offer, plus $0.39 per share of
Chevron Stock into which exchanged Old Debentures were exchangeable as of the
Acceptance Date under Existing Exchange Rights. Additional solicitation may be
made by telecopier, by telephone, or in person by officers and regular
employees of the Company and its affiliates. No additional compensation will
be paid to any such officers and employees who engage in soliciting tenders.
Pennzoil has agreed to indemnify the Dealer Manager against certain
liabilities, including civil liabilities under the Securities Act of 1933, as
amended (the "Securities Act"), and the Exchange Act, and contribute to
payment that the Dealer Manager may be required to make in respect thereof.
The Dealer Manager engages in transactions with, and from time to time has
performed services for, the Company.
LEGAL OPINIONS
Certain legal matters in connection with the New Debentures offered hereby
will be passed upon for Pennzoil by Baker & Botts, L.L.P., Houston, Texas.
EXPERTS
The consolidated financial statements of Pennzoil and its subsidiaries
incorporated by reference in this Registration Statement to the extent and for
the periods indicated in their report have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are incorporated by reference herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
report.
The summary report of Ryder Scott Company Petroleum Engineers included as
Exhibit 99(a) to Pennzoil's Annual Report on Form 10-K for the year ended
December 31, 1996 and the estimates from the reports of that firm appearing
under the caption "Oil and Gas--Oil and Gas Reserves" in Item 1 of such Annual
Report and under "Oil and Gas Information" included in the Supplemental
Financial and Statistical Information contained in such Annual Report are
incorporated by reference herein on the authority of said firm as experts in
giving such reports.
45
<PAGE>
AVAILABLE INFORMATION
Pennzoil is subject to the informational requirements of the Exchange Act,
and in accordance therewith files reports, proxy statements and other
information with the Commission, which can be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Judiciary Plaza, Room 1024, Washington, D.C. 20549; and at regional
offices of the Commission at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511 and at Suite 1300, Seven World Trade
Center, New York, New York 10048. Copies of such material can be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549 at prescribed rates. The Commission
maintains a web site (http://www.sec.gov.) that contains reports, proxy and
information statements and other information filed electronically by Pennzoil
with the Commission through its Electronic Data Gathering, Analysis and
Retrieval (EDGAR) System. In addition, Pennzoil's common stock and the Old
Debentures are listed on the NYSE, and application will be made to list the
New Debentures for trading on the NYSE. Material filed by Pennzoil can be
inspected at the offices of the NYSE, 20 Broad Street, New York, New York
10005 and the Pacific Stock Exchange, 301 Pine Street, San Francisco,
California 94104.
Pennzoil has filed with the Commission a Registration Statement (the
"Registration Statement") under the Securities Act with respect to the
securities offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission.
For further information with respect to Pennzoil and such securities,
reference is made to such Registration Statement and to the exhibits thereto.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS--SAFE HARBOR PROVISIONS
This Prospectus contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act, which are intended to be covered by the safe harbors created thereby. To
the extent that such statements are not recitations of historical fact, such
statements constitute forward-looking statements which, by definition, involve
risks and uncertainties. In particular, statements containing forward-looking
statements are incorporated by reference from Pennzoil Company's Form 10-K for
the year ended December 31, 1996 and Forms 10-Q for the quarters ended March
31, June 30 and September 30, 1997. Where, in any forward-looking statement,
Pennzoil expresses an expectation or belief as to future results or events,
such expectation or belief is expressed in good faith and believed to have a
reasonable basis, but there can be no assurance that the statement of
expectation or belief will result or be achieved or accomplished.
The following are factors that could cause actual results or events to
differ materially from those anticipated, and include but are not limited to:
general economic, financial and business conditions; commodity prices for
natural gas and crude oil; the effect of weather on natural gas demand and
consumption; competition for foreign drilling rights; the costs of exploration
and development of petroleum reserves; exploration risks; political risks
impacting exploration and development; competition in the motor oil marketing
business; base oil margins and supply and demand in the base oil business; the
success and costs of advertising and promotional efforts; mechanical failure
in refining operations; unanticipated environmental liabilities; changes in
and compliance with governmental regulations; changes in tax laws; and the
costs and effects of legal proceedings.
46
<PAGE>
APPENDIX A
SELECTED INFORMATION CONCERNING CHEVRON
Appendix A contains selected information concerning Chevron Corporation
("Chevron") taken from Chevron's Annual Report on Form 10-K for the year ended
December 31, 1996 and Chevron's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997, together with Chevron's "Management's Discussion and
Analysis of Financial Condition and Results of Operations" for the year ended
December 31, 1996 and for the three- and nine-month periods ended September
30, 1997 and a press release of Chevron dated December 19, 1997.
Chevron is subject to the information requirements in the Exchange Act, and
in accordance therewith files reports, proxy statements and other information
with the Commission, to which reference is made for detailed financial and
other information regarding Chevron. Such reports, proxy statements and other
information can be inspected and copied at the Commission's offices referred
to on page 46 of the Prospectus or can be inspected and copied at the NYSE, 20
Broad Street, New York, New York 10005, on which Chevron Stock is listed. The
Commission does not approve or disapprove or pass upon the accuracy or the
adequacy of reports, proxy statements or other information filed with it.
Although Pennzoil has no reason to believe the information concerning Chevron
included therein is not reliable, Pennzoil has not verified either its
accuracy or its completeness. Neither Pennzoil nor the Dealer Manager warrants
that there have not occurred events not yet publicly disclosed by Chevron
which would affect either the accuracy or the completeness of the information
concerning Chevron included therein. Pennzoil has no affiliation with Chevron
other than its stock ownership and contractual arrangements in the ordinary
course of business and therefore has no greater access to information relating
to Chevron than any other Chevron stockholder. Pennzoil does not intend to
furnish to holders of New Debentures subsequent information with respect to
Chevron.
A-1
<PAGE>
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
NINE MONTHS THREE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, YEARS ENDED DECEMBER 31,
--------------- --------------- ---------------------------------------
1997 1996 1997 1996 1996 1995 1994 1993 1992
------- ------- ------- ------- ------- ------- ------- ------- -------
(EXPRESSED IN MILLIONS EXCEPT PER SHARE AMOUNT)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales and other
operating revenues..... $30,871 $31,517 $10,130 $10,846 $42,782 $36,310 $35,130 $36,191 $38,212
Equity in net income of
affiliated companies... 535 686 164 104 767 553 440 440 406
Other income............ 289 179 34 99 344 219 284 451 1,059
------- ------- ------- ------- ------- ------- ------- ------- -------
Total Revenues.......... 31,695 32,382 10,328 11,049 43,893 37,082 35,854 37,082 39,677
Costs, Other Deductions
and Income Taxes....... 29,314 30,239 9,601 10,394 41,286 36,152 34,161 35,817 37,467
------- ------- ------- ------- ------- ------- ------- ------- -------
Net Income (Loss)....... $ 2,381 $ 2,143 $ 727 $ 655 $ 2,607 $ 930 $ 1,693 $ 1,265 $ 1,569
======= ======= ======= ======= ======= ======= ======= ======= =======
Net Income (Loss) Per
Share of Common Stock.. $ 3.64 $ 3.28 $ 1.11 $ 1.00 $ 3.99 $ 1.43 $ 2.60 $ 1.94 $ 2.31
======= ======= ======= ======= ======= ======= ======= ======= =======
Cash Dividends Per Share
of Common Stock........ $ 1.70 $ 1.54 $ 0.58 $ 0.54 $ 2.08 $ 1.93 $ 1.85 $ 1.75 $ 1.65
</TABLE>
- --------------------------------------------------------------------------------
REPRODUCED FROM CHEVRON CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 1996 AND QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED
SEPTEMBER 30, 1997.
A-2
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THIRD QUARTER 1997 COMPARED WITH THIRD QUARTER 1996
AND FIRST NINE MONTHS 1997 COMPARED WITH FIRST NINE MONTHS 1996
OVERVIEW AND OUTLOOK
Net income for the third quarter of 1997 was $727 million ($1.11 per share),
an increase of 11 percent from the $655 million ($1.00 per share) reported for
the third quarter of 1996. Net income in the 1997 third quarter was reduced by
$5 million of net special items, including an additional charge of $72 million
for the disposition of the company's refining and marketing assets in the
United Kingdom, charges of $9 million for environmental remediation provisions
and a write-off of $8 million of certain telecommunications equipment. These
charges were nearly offset by $84 million of favorable prior-year income tax
adjustments. For the third quarter 1996, net income included a net benefit of
$5 million from special items. Excluding special items, earnings in the third
quarter were $732 million, an increase of 13 percent from the $650 million
earned in the 1996 third quarter.
Net income for the first nine months of 1997 was $2.381 billion ($3.64 per
share), up 11 percent from $2.143 billion ($3.28 per share) reported for the
first nine months of 1996. The 1997 results included net gains of $8 million
from special items while 1996 results benefited $177 million from special
items. Special items in the 1997 nine months included gains from asset sales
and prior-year income tax adjustments amounting to $125 million, mostly offset
by charges for environmental remediation provisions, asset write-offs,
litigation provisions and employee performance stock option costs. The 1996
benefit from special gains was mostly related to the company's share of its
Caltex affiliate's gain from the sale of refinery interests in Japan.
Excluding special items, earnings for the 1997 nine months were $2.373
billion, 21 percent higher than the $1.966 billion earned in the corresponding
1996 period.
The company's improvement from last year's third quarter was led by
worldwide refining, marketing and transportation operations. Although down
from this year's second quarter, third quarter 1997 worldwide downstream
operating results were more than double those of last year's comparable period
as the refining and marketing business continues to benefit from favorable
market conditions, lower operating expenses and higher sales volumes. Year to
date 1997 operating results were 58 percent ahead of the prior year period.
Worldwide exploration and production operating earnings, although strong,
declined from the 1996 third quarter as higher natural gas realizations could
not fully offset the more than $2.00 per barrel decline in crude oil
realizations. On a year-to-date basis, however, exploration and production
operating earnings increased 9 percent from the prior-year results with higher
production volumes and higher natural gas prices more than offsetting
marginally lower average crude oil prices.
Chemicals operating earnings declined in the third quarter 1997 as a result
of higher expenses and downtime associated with maintenance and expansion
activities at certain manufacturing plants. For nine months 1997, operating
earnings were slightly lower than the comparable 1996 period. The results for
1997 have benefited from stronger prices and higher volumes for some of the
company's products, particularly ethylene and polyethylene; however, this has
been more than offset by the absence of a $17 million after-tax insurance
recovery included in the 1996 results.
For the 12 months ended September 30, 1997, Chevron's return on capital
employed, excluding special items, was 14.1 percent, compared with 12.5
percent for the year 1996.
Total revenues for the third quarter were $10.3 billion, down 6 percent from
$11.0 billion in the 1996 third quarter, as realizations for refined products
and crude oil declined from last year. For the nine months, total revenues
were $31.7 billion, compared with $32.4 billion for the first nine months of
1996.
- -------------------------------------------------------------------------------
REPRODUCED FROM CHEVRON CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 1996 AND QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER
ENDED SEPTEMBER 30, 1997.
A-3
<PAGE>
Operating, general and administrative expenses, adjusted for special items,
declined $161 million in the 1997 third quarter and $402 million in the first
nine months to $1.579 billion and $4.781 billion, respectively, compared with
$1.740 billion and $5.183 billion in the comparable periods of 1996. The
decline primarily reflects lower transportation costs in 1997 and the absence
of expenses from operations that were disposed of in 1996.
Taxes on income for the third quarter and first nine months of 1997 were
$522 million and $1.723 billion, respectively, compared with $596 million and
$1.617 billion for the comparable 1996 periods. The effective income tax rate
for both the third quarter and first nine months of 1997 declined to 42
percent from 47.6 percent in the 1996 third quarter and 43 percent in the 1996
nine months.
During the third quarter of 1997, the effective tax rate fell more than 5
percentage points from the 1996 third quarter. The primary reasons for the
decline were a 2 percent decrease in the United Kingdom statutory corporate
tax rate and its effect on current and deferred tax liabilities, an increase
in third quarter 1997 earnings from equity affiliates that are recorded on an
after-tax basis, higher U.S. income tax credits for enhanced production and
other credits and a shift in international earnings from countries with high
effective tax rates to countries with lower effective tax rates.
The effective tax rates for the 1996 and 1997 nine months were impacted by a
number of non-recurring items including prior-year tax adjustments, asset
dispositions, and statutory tax rate changes. These factors were largely
offsetting between the periods and the one percent decrease in the effective
tax rate for the first nine months of 1997 is primarily attributable to a
shift in international earnings from countries with high effective tax rates
to countries with lower effective tax rates.
Foreign exchange gains of $36 million were included in third quarter 1997
net income, compared with gains of $6 million in the prior year third quarter.
For the first nine months of 1997, foreign exchange gains were $41 million,
while in 1996 foreign exchange losses totaled $14 million. Year to date, the
1997 gains primarily reflect the U.S. dollar's fluctuation against the
Australian dollar and the currencies of Thailand, Malaysia and the
Philippines. The 1996 losses reflect primarily the U.S. dollar's fluctuation
against the Australian dollar.
CURRENT DEVELOPMENTS
In early October, Chevron agreed to sell its marketing interests in the
United Kingdom, including its retail network of 450 stations, and its
lubricants and commercial fuels businesses, to Shell UK Ltd. In September, the
company signed an agreement to sell to Texaco Ltd. its 50 percent equity
interest in the Pembroke Cracking Co., which operates a 90,000 barrel-per-day
catalytic cracking facility at Texaco's refinery in Pembroke, Wales. The
company expects to complete these transactions during the 1997 fourth quarter,
subject to regulatory approvals. The company will also close its 115,000
barrel-per-day refinery located near Milford Haven, Wales and will close and
sell its headquarters building in Cheltenham. Chevron also plans to sell the
Gulf trademark in the United Kingdom and Ireland to Gulf Canada Resources
Limited. The company has recorded a provision of $272 million for estimated
losses and future costs associated with this transaction; $200 million was
recorded in the fourth quarter 1996 and an additional $72 million in the third
quarter 1997. These transactions will substantially complete the company's
withdrawal from the refining and marketing business in the United Kingdom.
In September, Chevron agreed to sell its interest in two offshore Louisiana
properties, West Cameron 180 and 198. The sale closed in early October and is
expected to result in a gain.
The company was the successful bidder for 64 deep-water blocks offshore
Texas in the Gulf of Mexico. Chevron now has more than 360 leases in the
Gulf's deep water, making it one of the largest leaseholders in that promising
area.
- -------------------------------------------------------------------------------
REPRODUCED FROM CHEVRON CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 1996 AND QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER
ENDED SEPTEMBER 30, 1997.
A-4
<PAGE>
The company continues to review and analyze its operations and may sell,
restructure or purchase assets to achieve operational or strategic benefits.
These activities may result in gains or losses to income in future periods.
Tengizchevroil (TCO), in which Chevron has a 45 percent interest, has
awarded a $250 million contract to increase production capacity at the Tengiz
field in Kazakhstan by about 30 percent to 240,000 barrels per day by year-end
1999. The project represents the third major expansion of the field since TCO
was formed in 1993. The second-phase expansion, which is nearing completion,
is expected to lift production from its current capacity of 160,000 barrels
per day to about 174,000 barrels per day by year-end 1997 and 187,000 barrels
per day upon completion in mid-1998. Separately, TCO has signed an agreement
with Sinochem, a Chinese state oil trader, to make a test shipment of crude
oil from the Tengiz field to China by rail later this year. This test shipment
will help evaluate the feasibility of transporting crude oil via rail while
awaiting the development of alternate means of transportation to China. TCO
continues to move oil by pipeline, barge and rail car to destinations in the
former Soviet Union and Europe and looks forward to the completion of a direct
pipeline to the Black Sea by the Caspian Pipeline Consortium.
An agreement was signed with the Republic of Azerbaijan to explore the deep-
water Absheron Offshore Block in the southern Caspian Sea. Chevron will have a
30 percent interest and will be the operator of the exploration phase, which
is expected to begin drilling in late 1999, following 3-D seismic surveying in
1998.
The first liquefied petroleum gas (LPG) exports from the company's Escravos,
Nigeria, joint venture gas project occurred in September. This project
provides a commercial outlet for LPG and natural gas produced in conjunction
with the company's crude oil operations.
The CACT Operators Group, in which Chevron has a 16 percent interest,
discovered crude oil in the Pearl River Mouth Basin of the South China Sea.
CACT, one of China's largest offshore producers, currently produces 100,000
barrels per day. The new discovery is expected to be produced using the
existing infrastructure.
The Hibernia Development project, 200 miles offshore Newfoundland, Canada,
in which Chevron has a 26.9 percent interest, recently drilled its first
production well into the oil reservoir. Hibernia is expected to begin
production before the end of 1997. Chevron discovered the Hibernia oil field
in 1979.
Recent Far Eastern currency devaluations, notably in Thailand, Malaysia and
the Philippines, have caused erosion in marketing margins for Chevron's Caltex
affiliate. Crude oil and refined products purchased for refining or sale in
these areas are typically purchased in U.S. dollars; however, when products
are sold in the local markets, they are denominated in local currency. Because
of the devaluations, prices have to rise in local currency terms to maintain
product sales margins. The imposition of temporary price controls in several
markets and the lag in the timing of local price increases has resulted in
deteriorating sales margins. Offsetting the lower margins in the third quarter
were favorable balance sheet currency translation effects caused by the
devaluations.
In a lawsuit in Los Angeles, California, brought in 1995, the company and
five other oil companies are contesting the validity of a patent granted to
Unocal Corporation (Unocal) for reformulated gasoline, which the company sells
in California in certain months of the year. The first two phases of the trial
were concluded in October and November 1997 with the jury upholding the
validity of the patent and assessing damages at the rate of 5.75 cents per
gallon of gasoline sold in infringement of the patent between March 1, 1996
and July 31, 1996. In the third phase of the trial, to begin in December 1997,
the trial court judge will decide whether the company and the five other oil
companies have equitable defenses to the enforcement of the patent by Unocal.
While the ultimate outcome of this matter cannot be determined presently with
certainty, the company believes Unocal's patent is invalid and that any
unfavorable rulings should be reversed upon appeal. Should the jury's findings
and Unocal's position ultimately be upheld, the company's exposure with
respect to future reformulated gasoline sales would depend on the availability
of alternate formulations and the industry's ability to recover additional
costs of production through the prices charged to their customers.
- -------------------------------------------------------------------------------
REPRODUCED FROM CHEVRON CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 1996 AND QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER
ENDED SEPTEMBER 30, 1997.
A-5
<PAGE>
Chevron's partner in Nigeria, the government-owned Nigerian National
Petroleum Corporation (NNPC) funded only 60 percent of its share of the
previously approved 1997 work programs for Chevron and the other oil companies
operating in Nigeria. Consequently, Chevron reduced its 1997 joint venture
expenditures to accommodate the budget shortfall and prioritized expenditures
to minimize the impact on overall production. Despite this year's shortfall,
Chevron has increased its proposed 1998 budget to $1.3 billion, up from $1.2
billion originally budgeted for 1997, and is awaiting Nigerian government
approval.
Chevron has significant production and development projects underway in
Africa. Its share of combined production from Nigeria, Angola, Republic of
Congo and Democratic Republic of Congo is about 300,000 barrels per day. While
the company's producing operations in Nigeria and other African countries have
been generally unaffected by the civil unrest, political uncertainty and
economic conditions in this area, the company continues to closely monitor
developments.
REVIEW OF OPERATIONS
The following tables detail the Company's after-tax earnings by major
operating area and selected operating data.
EARNINGS BY MAJOR OPERATING AREA
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED NINE MONTHS
SEPTEMBER ENDED
30, SEPTEMBER 30,
--------- --------------
1997 1996 1997 1996
---- ---- ------ ------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C>
Exploration and Production
United States...................................... $193 $237 $ 736 $ 699
International...................................... 287 291 991 802
---- ---- ------ ------
Total Exploration and Production................. 480 528 1,727 1,501
Refining, Marketing and Transportation...............
United States...................................... 193 80 445 281
International...................................... 11 21 159 398
---- ---- ------ ------
Total Refining, Marketing and Transportation..... 204 101 604 679
Total Petroleum Operations....................... 684 629 2,331 2,180
Chemicals............................................ 25 49 165 164
Coal and Other Minerals.............................. 16 12 37 35
Corporate and Other*................................. 2 (35) (152) (236)
---- ---- ------ ------
Net Income........................................... $727 $655 $2,381 $2,143
==== ==== ====== ======
</TABLE>
- --------
* "Corporate and Other" includes interest expense, interest income on cash and
marketable securities, corporate center costs, and real estate and insurance
activities.
- -------------------------------------------------------------------------------
REPRODUCED FROM CHEVRON CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 1996 AND QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER
ENDED SEPTEMBER 30, 1997.
A-6
<PAGE>
SELECTED OPERATING DATA(1)
<TABLE>
<CAPTION>
THREE
MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER SEPTEMBER
30, 30,
----------- -----------
1997 1996 1997 1996
----- ----- ----- -----
<S> <C> <C> <C> <C>
U.S. Exploration and Production
Net Crude Oil and Natural Gas Liquids Production
(MBPD).............................................. 343 340 343 341
Net Natural Gas Production (MMCFPD).................. 1,796 1,857 1,872 1,853
Sales of Natural Gas Liquids (MBPD).................. 121 194 126 208
Revenue from Net Production Crude Oil ($/Bbl.)....... 16.74 18.88 17.82 17.95
Natural Gas ($/MCF).................................. 2.20 2.06 2.31 2.13
International Exploration and Production
Net Crude Oil and Natural Gas Liquids Production
(MBPD).............................................. 719 712 727 691
Net Natural Gas Production (MMCFPD).................. 580 587 580 571
Revenue from Liftings
Liquids ($/Bbl.)..................................... 17.43 19.44 18.09 18.62
Natural Gas ($/MCF).................................. 1.88 1.78 2.08 1.80
U.S. Refining and Marketing
Sales of Gasoline (MBPD)............................. 628 572 596 560
Sales of Other Refined Products (MBPD)............... 616 586 606 561
Refinery Input (MBPD)................................ 972 971 933 954
Average Refined Product Sales Price ($/Bbl.)......... 28.50 30.34 29.09 29.69
International Refining and Marketing
Sales of Refined Products (MBPD)..................... 863 901 886 950
Refinery Input (MBPD)................................ 544 506 568 542
Chemical Sales and Other Operating Revenues(2)
United States........................................ 753 647 2,303 2,218
International........................................ 148 130 433 458
----- ----- ----- -----
Worldwide.......................................... 901 777 2,736 2,676
</TABLE>
- --------
(1) Includes equity in affiliates.
(2) Millions of dollars. Includes sales to other Chevron companies.
- --------
MBPD = thousand barrels per day; MMCFPD = million cubic feet per day;
Bbl. = barrel; MCF = thousand cubic feet
- --------------------------------------------------------------------------------
REPRODUCED FROM CHEVRON CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 1996 AND QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED
SEPTEMBER 30, 1997.
A-7
<PAGE>
Worldwide exploration and production earned $480 million in the third
quarter of 1997 compared with $528 million in the corresponding 1996 period.
Earnings of $1.727 billion in the first nine months of 1997 were 15 percent
higher than the $1.501 billion earned in the 1996 nine months. U.S.
exploration and production net earnings of $193 million declined 19 percent
from $237 million earned in last year's third quarter. There were no special
items in the 1997 quarter; however, the 1996 quarter included a net gain of
$17 million from the merger of Chevron's natural gas marketing and natural gas
liquids businesses with NGC Corporation and the unrelated sale of a producing
property. Excluding these special items, earnings of $193 million for the
third quarter 1997 declined 12 percent compared with $220 million in last
year's third quarter, reflecting a decline in crude oil realizations.
Partially offsetting the lower crude oil realizations were higher average
natural gas realizations and lower operating expenses.
Crude oil realizations averaged $16.74 per barrel for the third quarter of
1997, 11 percent lower than the $18.88 per barrel averaged in last year's
third quarter. Average natural gas prices increased 14 cents to $2.20 per
thousand cubic feet.
U.S. net liquids production increased in the third quarter to 343,000
barrels per day compared with the prior year quarter's 340,000 barrels per
day; net natural gas production decreased to 1.80 billion cubic feet per day
from 1.86 billion in the 1996 quarter.
Earnings for the first nine months of 1997 were $736 million compared with
$699 million last year. Special items benefited earnings $32 million and $8
million in the 1997 and 1996 nine months, respectively. Excluding special
items in both periods, 1997 year-to-date earnings of $704 million were up from
year-ago earnings of $691 million. Year to date, average crude oil prices were
down 13 cents per barrel at $17.82 and natural gas prices rose 18 cents to
$2.31 per thousand cubic feet. Crude oil production volumes in the 1997 nine
months were 343,000 barrels per day and natural gas production was 1.87
billion cubic feet per day compared with 341,000 barrels and 1.85 billion
cubic feet in 1996.
International exploration and production net earnings for the third quarter
were $287 million, down slightly from $291 million earned in the third quarter
of 1996. Despite lower crude oil prices, earnings were comparable to the
prior-year quarter due to lower operating and exploration expenses and a lower
effective income tax rate. Net liquids production increased to 719,000 barrels
per day in the third quarter of 1997 from 712,000 barrels per day in last
year's quarter, but was down from the 1997 second quarter, in part reflecting
lower production from Kazakhstan due to scheduled third quarter maintenance at
the Tengiz facilities. In the third quarter of 1997, net natural gas
production declined to 580 million from 587 million cubic feet per day in the
comparable quarter last year.
Nine months net earnings were $991 million compared with $802 million in the
1996 nine months. Year-to-date earnings in 1997 benefited $50 million from
asset sale gains and $14 million from prior-year tax adjustments, which were
partially offset by a charge of $5 million for employee performance stock
option costs. Earnings in the 1996 period were reduced $7 million by asset
write-offs. Excluding special charges in both periods, earnings increased 15
percent to $932 million. Crude oil production increased 5 percent to 727,000
barrels per day and natural gas production was up slightly to 580 million
cubic feet per day. Higher prices for natural gas also contributed to the
earnings increase; natural gas prices were up 16 percent to $2.08 per thousand
cubic feet while crude oil prices were down 53 cents per barrel to $18.09.
Foreign currency effects increased earnings $17 million in the 1997 quarter,
compared with an increase of $5 million in the 1996 third quarter. Foreign
exchange gains were $34 million for the 1997 nine months compared with a loss
of $5 million in the 1996 period.
Worldwide refining and marketing operations reported net earnings of $204
million in the 1997 third quarter, more than double the $101 million earned in
the 1996 third quarter. The 1997 nine-month net income
- -------------------------------------------------------------------------------
REPRODUCED FROM CHEVRON CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 1996 AND QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER
ENDED SEPTEMBER 30, 1997.
A-8
<PAGE>
was $604 million, down 11 percent from the $679 million earned in the
corresponding 1996 period. U.S. refining and marketing net earnings were $193
million compared with $80 million reported in the third quarter of last year.
Earnings for the 1997 third quarter included no special items, while the 1996
quarter included net charges of $26 million, mainly for environmental
remediation provisions. Excluding special items, earnings for the 1997 quarter
increased 82 percent from $106 million in the third quarter 1996.
Earnings for the 1997 nine months were $445 million, an increase of 58
percent from $281 million for the same period last year. Included in the 1997
earnings were special charges of $43 million for environmental remediation,
litigation and employee performance stock option costs. Special charges of $37
million in the 1996 first nine months were for environmental remediation,
litigation and employee severance programs. Despite a decline in sales
realizations, operating earnings of $488 million increased 53 percent on
higher refined product sales volumes and lower crude oil feedstock costs and
operating expenses.
Average refined product prices for nine months 1997 were down 2 percent from
the 1996 nine months, at $29.09 per barrel. 1997 third quarter prices averaged
$28.50, down from $30.34 in the 1996 third quarter. Total refined product
sales volumes increased steadily in 1997; 1.170 million barrels per day in the
first quarter, 1.192 million barrels per day in the second quarter, and 1.244
million barrels per day in the third quarter. Year-to-date volumes averaged
1.202 million barrels per day in 1997 compared with 1.121 million barrels per
day in 1996.
International refining and marketing net earnings were $11 million compared
with $21 million reported in last year's third quarter. The 1997 third quarter
results were reduced $72 million by an additional charge associated with the
expected fourth quarter 1997 disposition of certain U.K. marketing and
refining assets and the subsequent planned closure of the company's refinery
in Milford Haven, Wales. Excluding special items, 1997 operating earnings of
$83 million were nearly four times the 1996 third quarter earnings of $21
million.
Nine month 1997 earnings declined $239 million to $159 million because of
special items in both periods. The 1997 third quarter charges for the U.K.
asset sales and refinery closure and an additional $3 million for employee
performance stock option costs reduced 1997 nine months earnings $75 million.
The 1996 period included a $275 million gain for the company's share of its
Caltex affiliate's sale of refinery interests in Japan and a special charge of
$15 million for environmental remediation. Excluding net special items in both
nine-month periods, operating earnings rose 70 percent to $234 million due to
favorable foreign currency swings, lower operating costs and improved marine
transportation operations.
Caltex third quarter operations benefited from improved market conditions,
particularly in Korea. Currency devaluations in Thailand, Malaysia and the
Philippines eroded sales margins in those countries. However, favorable
balance sheet currency translation effects caused by the devaluations offset
the related product margin declines. While Caltex refined product sales
volumes were flat in the 1997 third quarter compared to last year, total sales
volumes for international refining and marketing operations declined by 4
percent to 863,000 barrels per day, primarily due to lower sales volumes from
the company's trading activities. Refined product sales volumes for nine
months of 886,000 barrels per day were 7 percent lower than in 1996 because of
the sale of the Japanese refinery interests and lower trading volumes.
Foreign currency gains totaled $19 million in the 1997 third quarter and $3
million year to date compared with losses of $1 million in the 1996 quarter
and $22 million for the nine months.
Chemicals third quarter net earnings of $25 million declined from $49
million in the prior-year third quarter and were about flat at $165 million in
the current-year nine months compared with $164 million in 1996. The 1997
third quarter results were reduced $9 million by a special charge for
environmental remediation provisions; 1996 results were reduced by $12 million
for asset write-offs. In addition to the quarter charges, year-to-date results
were reduced $9 million for employee performance stock option costs in 1997
and $16 million for litigation provisions in 1996. Excluding the special
charges, 1997 third quarter earnings of $34 million decreased
- -------------------------------------------------------------------------------
REPRODUCED FROM CHEVRON CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 1996 AND QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER
ENDED SEPTEMBER 30, 1997.
A-9
<PAGE>
44 percent from $61 million in 1996. Nine month 1997 results, excluding
special items, were $183 million compared with $192 million. The decline in
operating earnings resulted from higher expenses and downtime associated with
maintenance and expansion activities at certain manufacturing facilities in
the third quarter. The 1997 results have benefited from stronger prices and
higher volumes for some of the company's products, particularly ethylene and
polyethylene together with reduced depreciation expense as a result of a
reassessment of the useful lives of certain assets. The 1996 periods benefited
from the non-recurring receipt of $17 million of after-tax insurance proceeds.
Coal and other minerals net earnings increased to $16 million in the 1997
third quarter and to $37 million year to date from $12 million and $35 million
for the corresponding periods last year. A special charge for employee
performance stock option costs reduced year to date 1997 earnings by $2
million, while a third quarter 1996 special charge of $3 million for an
employee severance program affected both 1996 period comparisons.
Corporate and other includes interest expense, interest income on cash and
marketable securities, corporate center costs, and real estate and insurance
operations. These activities earned a net $2 million in the third quarter 1997
compared with a net charge of $35 million in the 1996 third quarter. Year-to-
date charges were $152 million in 1997 and $236 million in 1996. The 1997
third quarter results included a special net gain of $76 million for prior-
year income tax adjustments offset partially by a charge for the write-off of
certain telecommunications equipment. The 1996 quarter included a net gain of
$29 million from a favorable prior-year income tax adjustment, partially
offset by special charges for employee severance and a litigation matter. In
addition to the third quarter special items, the 1997 nine months included
charges of $13 million for employee performance stock option costs and $8
million for environmental remediation provisions. Nine month 1996 net special
charges of $16 million included losses of $29 million on disposal of the
company's real estate development portfolio and provisions of $16 million for
litigation, partially offset by the third quarter $29 million net benefit.
Excluding special items, net charges from corporate activities increased by
$10 million to $74 million in the third quarter 1997, primarily due to lower
pension settlement gains than in last year's quarter. On a year-to-date basis,
net charges decreased by $13 million to $207 million due to a number of
factors, including lower interest expense, higher interest income and lower
insurance expense.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $991 million at September 30, 1997, a $99
million increase from year-end 1996. Cash flows from operations and asset
sales were adequate to fund the company's capital expenditures and dividend
payments to stockholders, and to reduce debt by a net $420 million.
In April 1997, the company increased the quarterly dividend on its common
stock by 4 cents a share, or 7 percent, to 58 cents a share. This was the
company's tenth consecutive annual dividend increase and brings Chevron's
annualized dividend rate to $2.32 a share.
Year to date 1997, the company generated approximately $150 million in net
cash proceeds from the sale of treasury stock associated with employees
exercising options under the company's broad-based performance stock option
program.
The company's debt and capital lease obligations totaled $6.217 billion at
September 30, 1997, down $477 million from $6.694 billion at year-end 1996.
Strong cash flows have enabled the company to reduce the amount of its
outstanding debt. Long-term debt was reduced by the scheduled first quarter
1997 retirement of $138 million of Swiss Franc denominated 4.625 percent debt
and the third quarter 1997 early redemption of $142 million of 9.75 percent
debentures originally due in 2017. The company also retired via a non-cash
transaction, in January 1997, as scheduled, $50 million of 7.28 percent debt
related to the Employee Stock Ownership Plan.
- -------------------------------------------------------------------------------
REPRODUCED FROM CHEVRON CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 1996 AND QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER
ENDED SEPTEMBER 30, 1997.
A-10
<PAGE>
Although the company benefits from lower interest rates on its short-term
debt, the proportionately large amount relative to long-term debt has kept
Chevron's ratio of current assets to current liabilities at relatively low
levels. The company's current ratio was .99 at September 30, 1997 compared
with .89 at year end 1996. The company's short-term debt, consisting primarily
of commercial paper and the current portion of long-term debt, totaled $4.478
billion at September 30, 1997. This amount includes $2.725 billion of
commercial paper that was reclassified as long-term debt on Chevron's balance
sheet since the company has both the intent and ability, as evidenced by
committed credit agreements, to refinance it on a long-term basis. In the
third quarter of 1997, the company decreased the amount of committed credit
facilities from $4.425 billion to $4.05 billion, but increased the portion
with termination dates beyond one year from $1.8 billion to $2.725 billion.
The improvement in the company's current ratio is primarily the result of the
additional $925 million of short-term debt reclassified as long-term. The
company's practice has been to continually refinance its commercial paper,
maintaining levels it believes to be appropriate.
The company's debt ratio (total debt to total debt plus equity) was 26.7
percent at September 30, 1997, down from 30.0 percent at year-end 1996. The
company continually monitors its spending levels, market conditions and
related interest rates to maintain what it perceives to be a reasonable level
and composition of debt.
Worldwide capital and exploratory expenditures for the first nine months of
1997, including the company's share of affiliates' expenditures, totaled
$3.801 billion, an increase of 17 percent from $3.249 billion spent in the
1996 nine months. The increased spending was primarily for U.S. exploration
and production projects and U.S. and international chemicals facilities. About
67 percent of the company's capital and exploratory expenditures were for
total exploration and production activities in 1997, about the same as in
1996. Of these amounts, about half of the expenditures for exploration and
production were for projects in the United States, compared with 39 percent in
1996, reflecting the company's spending on development projects to stabilize
U.S. oil and gas production.
- -------------------------------------------------------------------------------
REPRODUCED FROM CHEVRON CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 1996 AND QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER
ENDED SEPTEMBER 30, 1997.
A-11
<PAGE>
TEXT OF PRESS RELEASE OF CHEVRON DATED DECEMBER 19, 1997
San Francisco, Dec. 19--Chevron Corp. today announced that its Board
approved a new program to repurchase up to $2 billion of common stock and a
$6.3 billion capital and exploratory spending program for 1998, the largest in
company history.
The company also said operational earnings for 1997 are expected to set a
new record, exceeding the previous high of $2.65 billion set last year.
Earnings for 1997 will be announced in late January.
And the company announced four developments from its worldwide oil
operations:
* Discovery of a second giant oil field in Angola's offshore Block 14,
adjacent to another giant field discovered earlier this year;
* First production of oil from the offshore Kitina Field in the Republic
of Congo;
* An agreement to extend a services contract with Kuwait to assist in
development of the Burgan Field, the world's second largest;
* A new production rate of 90,000 barrels per day (bpd) from the giant
Boscan Field, operated by Chevron in Venezuela, exceeding the target by
about 10 percent.
"The repurchase program and capital budget reflect our optimism about
creating greater value for Chevron shareholders," said Chairman Ken Derr. "The
stock repurchase plan will reduce the number of outstanding shares, increasing
share value for remaining shareholders, while our large capital budget
reflects the wealth of attractive investments we have around the world."
The stock repurchase will assist in maintaining a desired capital structure
by providing shares for the company's employee stock option programs.
"In addition," said Derr, "the program reinforces our belief that purchase
of our stock is an attractive investment for the company and for
shareholders."
The stock repurchases may be made from time to time in the open market or
otherwise at prevailing prices as permitted by securities laws.
The new Angola discovery was made in Block 14, where the first giant
discovery was made last April.
"We are delighted with these findings," said Dick Matzke, president of
Chevron Overseas Petroleum Inc. and a Chevron director. "And we have drilled
several other wells in Block 14 which give promise of even more discoveries."
Last week, Chevron began production from the Kitina Field, located west of
the Congolese city of Point Noire in the Marine VII permit. The field is
expected to reach peak production of 50,000 bpd by the end of 1998. Chevron
has a 29 percent interest.
"The Kitina facilities will handle additional production from several new
satellite fields, most notably Kitina South, which will begin producing as
early as mid '98," said Matzke.
In Kuwait, Chevron has been providing technical assistance in the
development and transportation of oil from the supergiant Burgan Field for
more than three years. Chevron and Kuwait have now agreed to extend the
services agreement for another three and a half years. Chevron has about 30
engineers and geoscientists in Kuwait providing training, technology and
managerial assistance.
A-12
<PAGE>
Chevron's $6.3 billion capital and exploratory budget for 1998 represents
the fourth consecutive year of an increase in the program.
The company plans to invest nearly $4 billion, or 63 percent of the total,
in worldwide exploration and production. Consistent with the company's
strategy to grow its international upstream business, about $2.5 billion of
these expenditures will be made outside the United States.
Strong opportunities also exist in the United States and the company plans
to invest about $1.5 billion in U.S. exploration and production.
The worldwide exploration and production program includes major projects in:
* Kazakhstan, where expanded capacity at the Tengiz Field will come on
stream in mid-1998, bringing production from the current 160,000 bpd to
about 187,000 bpd. An additional expansion is underway to bring capacity to
240,000 bpd at the turn of the century.
*West Africa, where Chevron-operated production has been increasing
steadily in Angola and Nigeria, and is now about 440,000 bpd in each
country.
*The deep-water U.S. Gulf of Mexico, where the Genesis platform, in water
2,600 feet deep, is expected to start production in December 1998. Chevron
has a 57 percent working interest.
*The U.K. North Sea, where the Britannia field is scheduled to come on
stream in mid-1998. Production is expected to peak in 1999 at 740 million
cubic feet of gas and 70,000 bpd of condensate. Chevron's equity interest
is about 30 percent.
*Canada, where the large Hibernia project offshore Newfoundland produced
its first oil in November, ahead of schedule. Production is scheduled to
exceed 100,000 bpd by year-end '98. Chevron's equity interest is 26.9
percent.
In worldwide refining, marketing and transportation, Chevron plans to invest
about $1.1 billion, of which more than $600 million will be spent in the
United States, including continuous upgrading of the company's service station
network. The remainder will be invested outside the U.S. by Chevron's 50
percent-owned affiliate, Caltex.
Chevron plans to invest about $800 million in the worldwide chemicals
business in 1998, reflecting the company's belief that the chemicals business
is a very attractive investment over the long term.
A-13
<PAGE>
APPENDIX B
DESCRIPTION OF OLD 6 1/2% DEBENTURES
Capitalized terms defined in this Appendix B are used as defined only in this
Appendix B.
GENERAL
The 6 1/2% exchangeable senior debentures due 2003 (the "6 1/2% Debentures")
are an issue of Pennzoil's Debt Securities (the "Securities") issued under the
Indenture dated as of December 15, 1992 (the "Indenture") between Pennzoil
Company (the "Company" or "Pennzoil") and Texas Commerce Bank National
Association, as trustee (the "Trustee"). The italicized references below refer
to the section numbers of the First Supplemental Indenture dated as of January
13, 1993 to the Indenture ("First Supplemental Indenture") between Pennzoil
and Texas Commerce Bank National Association, as trustee.
The 6 1/2% Debentures will mature on January 15, 2003 and will each bear
interest from January 13, 1993 at 6 1/2% per annum, payable semiannually on
each January 15 and July 15, commencing July 15, 1993 (i) to the holders of
the Registered 6 1/2% Debentures at the close of business on the December 31
next preceding such January 15 or the June 30 next preceding such July 15, as
the case may be, and (ii) to the holders of the Bearer 6 1/2% Debentures upon
presentation of the appropriate coupon appertaining thereto on each January 15
and July 15, commencing July 15, 1993. The aggregate principal amount of the 6
1/2% Debentures outstanding is $397.4 million.
The 6 1/2% Debentures constitute unsecured senior debt obligations of
Pennzoil ranking pari passu with all other present and future unsecured
general obligations of Pennzoil that are not expressly subordinated to senior
indebtedness.
FORM OF 6 1/2% DEBENTURES
The 6 1/2% Debentures are issued as both Registered 6 1/2% Debentures and
Bearer 6 1/2% Debentures. The Registered 6 1/2% Debentures are in definitive
form without coupons. The Bearer 6 1/2% Debentures are in denominations of
$5,000, with coupons attached.
The Paying Agent for the Bearer 6 1/2% Debentures is Chemical Bank London.
EXCHANGE RIGHTS
The 6 1/2% Debentures (or portions thereof in integral multiples of $1,000)
are exchangeable for shares of common stock ("Chevron Stock") of Chevron
Corporation ("Chevron") Chevron Stock at any time and from time to time prior
to maturity at an exchange rate of $42 1/16 share (equivalent to an exchange
rate of 23.774 shares of Chevron Stock per $1,000 principal amount of 6 1/2%
Debentures), subject to adjustment under the circumstances described below. In
the event the 6 1/2% Debentures are called for redemption, the exchange rights
will terminate at the close of business on the date immediately prior to the
date of redemption. (Section 201)
Pennzoil has deposited the number of shares of Chevron Stock deliverable in
exchange for (i) the Registered 6 1/2% Debentures with Texas Commerce Bank
National Association, who is the exchange agent for holders of Registered 6
1/2% Debentures (the "Domestic Exchange Agent") on behalf of Pennzoil and (ii)
the Bearer 6 1/2% Debentures with Chemical Bank London, who is the exchange
agent for holders of Bearer 6 1/2% Debentures (the "Foreign Exchange Agent")
on behalf of Pennzoil. Each of the Domestic Exchange Agent and the Foreign
Exchange Agent are referred to individually herein as an "Exchange Agent" and
collectively as the "Exchange Agents." Pennzoil will deposit with the Domestic
Exchange Agent and the Foreign Exchange Agent any cash and other property
deliverable in exchange for the Registered 6 1/2% Debentures and the Bearer 6
1/2% Debentures, respectively. Pennzoil will not be permitted to pledge,
mortgage, hypothecate or grant a security interest in, or
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permit any mortgage, pledge, security interest or other lien upon, the Chevron
Stock, cash and other property deliverable in exchange for the 6 1/2%
Debentures (collectively, "Exchange Property"). The deposit arrangements with
each Exchange Agent will terminate at such time as the right to exchange 6
1/2% Debentures with such Exchange Agent shall have expired pursuant to the
First Supplemental Indenture.
In order to exercise the right of exchange, the holder of any Registered 6
1/2% Debenture must surrender such 6 1/2% Debenture to the Domestic Exchange
Agent at its office maintained for such purpose in Houston, Texas and the
holder of a Bearer 6 1/2% Debenture must surrender such 6 1/2% Debenture to
the Foreign Exchange Agent at its office maintained for such purpose in
London, England. Each 6 1/2% Debenture to be surrendered must be accompanied
by written notice to Pennzoil and the applicable Exchange Agent that the
holder elects to exchange such Debenture. Delivery of the certificates for
Chevron Stock or any other Exchange Property may be delayed at the request of
Pennzoil in order to effectuate the calculation of the adjustments of the
Chevron Stock or other Exchange Property to obtain any certificate
representing securities to be delivered, to complete any reapportionment of
the Chevron Stock or other Exchange Property which is required by the
Indenture or to comply with any applicable law. (Section 202). No fractional
shares will be delivered on any exchange of 6 1/2% Debentures and in lieu
thereof a cash adjustment based on the market price of the Chevron Stock or
other Exchange Property will be paid. (Section 203)
In lieu of delivering certificates representing Chevron Stock in exchange
for any 6 1/2% Debentures, Pennzoil may pay to the holder surrendering such 6
1/2% Debentures an amount in cash equal to the market price of the Chevron
Stock or other Exchange Property for which such 6 1/2% Debentures are
exchangeable, determined as of the date of receipt by Pennzoil of the notice
of exchange relating to such 6 1/2% Debentures (or, if such date is not a
business day, on the business day next preceding such date). Prior to so
directing an Exchange Agent to make any such cash payment, Pennzoil shall
deposit with such Exchange Agent the cash so payable. (Section 216)
Upon an exchange of Exchange Property (or cash in lieu thereof) for a
Debenture, a holder will not receive any cash payment representing accrued
original issue discount for United States federal income tax purposes ("Tax
OID"). The delivery of the Exchange Property (or cash in lieu thereof) to a
holder in exchange for a holder's 6 1/2% Debenture will be deemed to satisfy
Pennzoil's obligation to pay the principal amount of the 6 1/2% Debenture
including the Tax OID attributable to the period from the date of issue to the
date of such exchange with respect to such Debenture. Thus, the accrued Tax
OID is deemed to be paid rather than canceled, extinguished or forfeited. As a
result, the exchange rate is not adjusted for accrued Tax OID. (Section 202)
Pennzoil is entitled to all cash dividends with respect to the Chevron Stock
or other Exchange Property, other than dividends paid pursuant to a plan of
liquidation or partial liquidation of Chevron, recapitalization or
restructuring of Chevron or other extraordinary cash dividends. Pennzoil will
also be entitled to all interest payments on any debt securities held for
exchange by Pennzoil which are issued in exchange for Chevron Stock or other
Exchange Property pursuant to any merger or consolidation of Chevron or in
connection with any sale of all or substantially all the assets of Chevron.
(Section 205)
If Chevron should issue any Chevron Stock in subdivision or by way of stock
dividend, the exchange rate will be proportionately increased, and if Chevron
shall effect a combination of Chevron Stock, the exchange rate will be
proportionately reduced, subject in each case to adjustments for tax
consequences, if any. (Section 204)
If Chevron should make any distribution of cash, securities or other
property with respect to the Chevron Stock or other Exchange Property (other
than cash dividends to which Pennzoil is entitled as described above, the
distributions described in the preceding paragraph or any securities or other
property received in a merger or consolidation of Chevron or in connection
with any sale of all or substantially all the assets of Chevron as described
in the next paragraph) or if Chevron grants transferable subscription rights,
options, warrants or other similar rights to Pennzoil in respect of the
Chevron Stock or other Exchange Property, Pennzoil will cause all such
securities, other property and rights to be deposited with the applicable
Exchange Agent and will direct the applicable Exchange Agent to sell all such
securities and other property and all such rights for cash, except any
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such securities or property that are convertible, without payment of any
consideration, into Chevron Stock and which rights do not expire before the
retirement of such securities or other property. Such Exchange Agent will
apply the proceeds first to the payment of any taxes incurred or deemed
incurred by Pennzoil or such Exchange Agent on such distribution or such grant
of rights and incurred or deemed incurred by Pennzoil or such Exchange Agent
on the subsequent sale of the securities or other property distributed or
rights granted. The balance of the cash proceeds will be held by such Exchange
Agent for distribution pro rata with the Chevron Stock or other Exchange
Property. In the event that a distribution or grant of cash, securities or
other property on Exchange Property shall be effected as contemplated by this
paragraph, a notice stating that such distribution or grant has occurred and
setting forth the additional cash, securities or other property distributed on
the Exchange Property shall as soon as practicable be mailed by or on behalf
of Pennzoil to the holders of Registered 6 1/2% Debentures at their addresses
as they appear in the Security Register and shall be published at least twice
in a daily newspaper in the cities of New York and London or other capital
city in Western Europe. (Section 205)
In the case of any merger or consolidation of Chevron with or into any other
person which results in shares of Chevron Stock, as constituted prior to the
consummation of such transaction, being converted into other securities and/or
property, including cash, or any sale of all or substantially all the assets
of Chevron (if in connection with such sale or transfer holders of Chevron
Stock receive other securities and/or property, including cash, in exchange
for their shares of Chevron Stock), the holder of any 6 1/2% Debenture
surrendered for exchange thereafter will, subject to the following paragraph,
be entitled to receive the kind and amount of shares of stock and other
securities and property receivable upon or in connection with such transaction
by a holder of the number of shares of Chevron Stock or other Exchange
Property for which such 6 1/2% Debenture might have been exchanged immediately
prior to such transaction, as well as a pro rata share of any cash held for
exchange by Pennzoil in accordance with the preceding paragraph. (Section 211)
Upon the occurrence of any such merger, consolidation, sale of all or
substantially all the assets of Chevron described in the preceding paragraph
or any voluntary or involuntary dissolution, liquidation or winding up of
Chevron, or any stock dividend, subdivision, combination or reclassification
of shares of Chevron Stock or other Exchange Property, which shall be taxable
to Pennzoil or either Exchange Agent, or upon the happening of any other event
with respect to the Chevron Stock or other Exchange Property, which is taxable
or treated as being taxable to Pennzoil or either Exchange Agent, the
applicable Exchange Agent will deliver cash which it holds for exchange
(including cash received in such transaction) to Pennzoil or to itself for
payment of the taxes arising from such transaction. If the cash held for
exchange is insufficient to pay the amount of such taxes, such Exchange Agent
will sell such of the shares of Chevron Stock or other Exchange Property as
may be necessary to pay the amount of the insufficiency and any taxes payable
by Pennzoil or such Exchange Agent arising from such sale. The remaining
shares of Chevron Stock or other Exchange Property will be held by such
Exchange Agent for distributions pro rata to holders requesting exchange of
their 6 1/2% Debentures. (Section 215)
From time to time, Pennzoil may require the Exchange Agents to segregate
such property as Pennzoil determines may be necessary for Pennzoil or the
Exchange Agents to pay taxes with respect to the transactions or events
described above, subject to the determination of taxability (and any expenses
incurred in determining taxability), and such property (or any portion
thereof) shall be deliverable to holders of 6 1/2% Debentures only after
determination that such withholding is not necessary for the payment of such
taxes and after deducting the expenses incurred in connection with such
determination. (Section 215)
If Chevron grants nontransferable subscription rights, options, warrants or
similar rights with respect to the Exchange Property, Pennzoil will, if
otherwise lawful, deliver such rights pro rata to the Exchange Agents.
Pennzoil and the Domestic Exchange Agent shall cause such rights to be
distributed to the holders of the Registered 6 1/2% Debentures shown in the
Security Register and Pennzoil shall make available to holders of Bearer 6
1/2% Debentures a notice published at least twice in a daily newspaper in the
cities of New York and London or other capital city in Western Europe, which
notice shall state that such rights will be delivered to such holder upon such
holder's furnishing satisfactory proof to Pennzoil of such holder's status as
a holder of Bearer Securities. (Section 205)
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Pennzoil is required to give to holders of 6 1/2% Debentures notice of
certain dividends on the Chevron Stock deliverable upon exchange of 6 1/2%
Debentures, the granting of subscription rights, options, warrants or other
similar rights to holders of Chevron Stock, any reclassification of Chevron
Stock (other than a subdivision or combination of outstanding shares of
Chevron Stock), certain mergers involving Chevron, the sale of all or
substantially all of the assets of Chevron and the dissolution, liquidation or
winding up of Chevron. (Section 206)
Any cash held by an Exchange Agent that is deliverable upon exchange of 6
1/2% Debentures will be invested by such Exchange Agent at the direction of
Pennzoil in U.S. Government Obligations with maturity dates of twelve months
or less. Any interest or gain on such investments will be for the benefit of
Pennzoil and Pennzoil will be responsible for any losses on such investments.
To the extent 6 1/2% Debentures are redeemed prior to exchange, Pennzoil will
be entitled to receive from the applicable Exchange Agent such number of
shares of Chevron Stock, other Exchange Property and such amount of cash, if
any, held by such Exchange Agent for exchange as exceeds the number of shares
of Chevron Stock or other Exchange Property required to be held by such
Exchange Agent for the exchange of all 6 1/2% Debentures remaining then
outstanding. (Section 205)
"U.S. Government Obligations" is defined in each Indenture as direct non-
callable obligations of, or non-callable obligations the payment of principal
of and interest on which is guaranteed by, the United States of America, or
the payment of which obligations or guarantees the full faith and credit of
the United States of America is pledged, or beneficial interests in a trust
the corpus of which consists exclusively of money or such obligations or a
combination thereof.
In the event of a tender offer or exchange offer for any class of securities
included within the Exchange Property (i) if Pennzoil owns shares of such
class which are not subject to the Exchange Agreement, Pennzoil will cause
each Exchange Agent to tender such shares of such class in the same proportion
that Pennzoil tenders its securities in such class which are not subject to
the Exchange Agreement, and (ii) if Pennzoil does not own securities of a
class which are subject to the Exchange Agreement, Pennzoil may, at its option
and in its sole discretion, elect to cause either or both Exchange Agents to
tender all or any portion or none of such class of security included within
the Exchange Property held by such Exchange Agent or Exchange Agents. The
proceeds of the sale of any such Exchange Property pursuant to any such tender
or exchange offer will be held by each Exchange Agent for the benefit of
holders as provided in the First Supplemental Indenture. As a result of the
receipt by an Exchange Agent of cash or other property upon the tender or
exchange of an Exchange Property, holders will not participate in any
subsequent appreciation or depreciation in the market price of such Exchange
Property tendered or exchanged upon any subsequent exchange of 6 1/2%
Debentures. (Section 212)
The right of a holder to exchange his 6 1/2% Debentures for Chevron Stock or
other Exchange Property could be adversely affected in the event of the
bankruptcy, insolvency or liquidation of Pennzoil. In such event, the Chevron
Stock or other Exchange Property could be assets of Pennzoil subject to the
claims of its general creditors.
REPURCHASE RIGHTS
The Exchange Agents will act as agents for Pennzoil in connection with
Pennzoil's exchange obligations under the First Supplemental Indenture and
will not act as escrow agents for the benefit of holders of 6 1/2% Debentures.
Accordingly, Pennzoil may at any time obtain from either or both of the
Exchange Agents or otherwise authorize or direct either or both of the
Exchange Agents to release all or a part of the Chevron Stock or other
Exchange Property. In the event that Pennzoil obtains or otherwise releases
any Chevron Stock or other Exchange Property in any manner otherwise than as
contemplated by the First Supplemental Indenture, each holder of 6 1/2%
Debentures will have the right ("Repurchase Right"), at such holder's option,
to require Pennzoil to repurchase all of such holder's 6 1/2% Debentures, or a
portion thereof which is $1,000 or any integral multiple thereof, in the
manner and at the price described below. (Section 217)
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Promptly (and in any event within 10 days) after Pennzoil has obtained or
released any Exchange Property in any manner otherwise than as contemplated by
the First Supplemental Indenture, the Domestic Exchange Agent will mail to all
holders of record of the 6 1/2% Debentures a notice thereof and the Repurchase
Right arising as a result thereof (a "Repurchase Notice") and the Foreign
Exchange Agent will cause a copy of the Repurchase Notice to be published at
least twice in a daily newspaper in the cities of New York and London or other
capital city in Western Europe. To exercise the Repurchase Right, a holder of
6 1/2% Debentures must deliver on or before the 15th day after the date of the
Repurchase Notice irrevocable written notice to the applicable Exchange Agent
of the holder's exercise of such right, together with the 6 1/2% Debentures
with respect to which the right is being exercised, duly endorsed for
transfer.
On the date ("Repurchase Date") that is 30 days after the date of the
Repurchase Notice, Pennzoil will be required to repurchase all 6 1/2%
Debentures in respect of which the Repurchase Right has been exercised at the
following price: (i) if the date on which Pennzoil's obtaining or release of
Exchange Property in a manner not contemplated by the First Supplemental
Indenture first occurs (the "Triggering Date") is before January 15, 1998, the
product of (1) 120% and (2) the greater of the principal amount at maturity of
such 6 1/2% Debentures (plus accrued and unpaid interest, if any, to the
Repurchase Date) and the market price of the Exchange Property deliverable in
exchange for such 6 1/2% Debentures on the Triggering Date (or if such date is
not a business day, on the next succeeding business day); and (ii) if the
Triggering Date occurs on or after January 15, 1998, the greater of (1) the
redemption price as specified under "Redemption Provisions" on the Triggering
Date and (2) the market price of the Exchange Property deliverable in exchange
for such 6 1/2% Debentures on the Triggering Date (or if such date is not a
business day, on the next succeeding business day).
The obligation of Pennzoil to deliver Exchange Property (or cash in lieu
thereof) in exchange for 6 1/2% Debentures shall survive and continue to apply
in full force and effect following and notwithstanding the occurrence of any
event triggering a Repurchase Right. Failure by Pennzoil to exchange 6 1/2%
Debentures in accordance with the First Supplemental Indenture or to
repurchase either Registered 6 1/2% Debentures or Bearer 6 1/2% Debentures
upon exercise of a Repurchase Right will constitute an Event of Default with
respect to the 6 1/2% Debentures, and holders of 6 1/2% Debentures will have
the remedies provided for in the Indenture, including acceleration of the
indebtedness evidenced by the 6 1/2% Debentures, in the event of any such
failure.
The exchange obligations of Pennzoil may not be assigned or otherwise
transferred by Pennzoil except to the extent Pennzoil may, without the consent
of any holders of outstanding Securities, consolidate with or merge into, or
convey, transfer or lease its assets substantially as an entirety to, any
person, provided that the person formed by such consolidation or into which
Pennzoil is merged or which acquires or leases the assets of Pennzoil
substantially as an entirety is a corporation, partnership or trust organized
under the laws of any United States jurisdiction and assumes by supplemental
indenture Pennzoil's obligation on the Securities and under the Indentures,
that after giving effect to the transaction, no Event of Default, and no event
which, after notice or lapse of time or both, would become an Event of
Default, shall have happened and be continuing, and that certain other
conditions are met. Upon compliance with these provisions by a successor
person, Pennzoil will (except in the case of a lease) be relieved of its
obligations under the Indenture and the Securities (Article Eight).
If an offer is made to repurchase 6 1/2% Debentures in connection with a
Repurchase Right, Pennzoil will comply with all tender offer rules, including
but not limited to Sections 13(e) and 14(e) under the Exchange Act and Rules
l3e-1 and 14e-1 thereunder, to the extent applicable to such offer.
REDEMPTION PROVISIONS
Subject to the redemption provisions described below, the 6 1/2% Debentures
will not be redeemable prior to January 15, 1998. Thereafter, the 6 1/2%
Debentures may be redeemed at the option of Pennzoil, in whole or from time to
time in part, (i) on not less than 30 nor more than 60 days' notice by mail to
the holders of Registered 6 1/2% Debentures at their addresses appearing on
the Security Register and (ii) by publication for the holders of Bearer 6 1/2%
Debentures at least twice in a daily newspaper in the cities of New York and
London or other capital city of Western Europe, one of which publications is
not later than 30 days prior to the redemption date
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and one of which publications is not earlier than 60 days prior to the
redemption date, at the following redemption prices (expressed as a percentage
of the principal amount at maturity) if redeemed during the 12-month period
beginning January 15 of the following years:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
1998................................... 103.25%
1999................................... 102.60%
2000................................... 101.90%
2001................................... 101.30%
2002................................... 100.65%
</TABLE>
in each case together with accrued interest to the redemption date; provided,
however, that installments of interest on Bearer 6 1/2% Debentures whose
stated maturity is on or prior to the redemption date shall be payable only at
an office or agency located outside the United States (except as otherwise
provided in Section 1002 of the Indenture) and, only upon presentation and
surrender of coupons for such interest; and provided, further, that
installments of interest on Registered 6 1/2% Debentures whose stated maturity
is on or prior to the redemption date shall be payable to the holders of such
6 1/2% Debentures, registered as such at the close of business on the relevant
Record Dates. There is no sinking fund applicable to the 6 1/2% Debentures.
The 6 1/2% Debentures may also be redeemed at the option of Pennzoil, in
whole but not in part at any time, upon notice as described below, at a
redemption price equal to the principal amount thereof, together with accrued
and unpaid interest to the date fixed for redemption, if (i) Pennzoil shall
determine that, as a result of any change in, or amendment to, the laws (or
any regulations or rulings promulgated thereunder) of the United States or any
political subdivision or taxing authority thereof or therein affecting
taxation, or any change in official position regarding the application,
enforcement or interpretation of such laws, regulations or rulings (including
a holding by a court of competent jurisdiction), which change, amendment,
application, enforcement or interpretation becomes effective on or after the
date of this Prospectus Supplement, Pennzoil must pay or would become
obligated to pay any additional amounts ("Additional Amounts") with respect to
the 6 1/2% Debentures as described below under "Certain United States Federal
Income Tax Consequences--Payment of Additional Amounts" or (ii) any action
shall have been taken by a taxing authority (including but not limited to a
ruling or announcement of the Internal Revenue Service ("IRS") or other taxing
authority, whether or not officially published) or a court of competent
jurisdiction in the United States or any political subdivision or taxing
authority thereof or therein, including any of those actions specified in (i)
above (whether or not, in the case of an action taken by a taxing authority,
such action was taken or brought with respect to Pennzoil) or any change,
amendment, application, enforcement or interpretation shall be officially
proposed, in any case on or after the date of the prospectus supplement for
these 6 1/2% Debentures, as a result of which there is a substantial
possibility that Pennzoil will be obligated to pay Additional Amounts and, in
either case described in clause (i) or (ii), such obligation to pay Additional
Amounts cannot be avoided by the use of reasonable measures available to
Pennzoil; provided, however, that (i) no notice of redemption may be given
earlier than 90 days prior to the earliest date on which Pennzoil would be
obligated to pay such Additional Amounts were a payment in respect of the 6
1/2% Debentures then due, and (ii) at the time such notice of redemption is
given, such obligation to pay such Additional Amounts remains in effect. Prior
to the publication of any notice of redemption of the 6 1/2% Debentures
pursuant to the foregoing, Pennzoil shall deliver to the Trustee an opinion of
independent legal counsel to Pennzoil stating that Pennzoil is entitled to
effect such redemption, together with a certificate setting forth facts
showing that the conditions precedent to the right of Pennzoil so to redeem
have occurred.
If Pennzoil shall determine, based upon an opinion of an independent legal
counsel to Pennzoil, that any payment made outside the United States by
Pennzoil or any of its paying agents of the full amount of the next scheduled
payment of principal of or interest due in respect of any Bearer 6 1/2%
Debenture or coupon appertaining thereto would, under any present or future
laws or regulations of the United States affecting taxation
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or otherwise, be subject to any certification, information, documentation or
other reporting requirement of any kind the effect of which requirement is the
disclosure to Pennzoil, any paying agent or any governmental authority of the
nationality, residence or identity (as distinguished from status as a United
States Alien (as defined below)) of a beneficial owner of such Bearer 6 1/2%
Debenture or coupon who is a United States Alien (other than such a
requirement which (a) would not be applicable to a payment if made (i)
directly to the beneficial owner or (ii) to a custodian, nominee or other
agent of the beneficial owner, (b) can be satisfied by such a custodian,
nominee or other agent certifying to the effect that such beneficial owner is
a United States Alien, provided, however, that in each case referred to in
clause (a) (ii) and (b) payment by such custodian, nominee or agent to such
beneficial owner is not otherwise subject to any such requirement (other than
a requirement which is imposed on a custodian, nominee or other agent
described in clause (e) of this sentence), (c) is applicable only to a
collection or payment by a custodian, nominee or other agent of the beneficial
owner to or for such beneficial owner, (d) would not be applicable to such a
payment made by any other paying agent of Pennzoil outside the United States
or (e) is applicable to a payment to or by a custodian, nominee or other agent
of the beneficial owner because such custodian, nominee or agent is a United
States person (within the meaning of the United States Internal Revenue Code
of 1986, as amended (the "Code")), a controlled foreign corporation for United
States tax purposes, a foreign person 50% or more of whose gross income for
certain periods is effectively connected with a United States trade or
business, or otherwise related to the United States), Pennzoil shall redeem
the Bearer 6 1/2% Debentures (but not the Registered 6 1/2% Debentures), in
whole but not in part at any time, at a redemption price equal to the
principal amount thereof, together with accrued and unpaid interest and any
Additional Amounts with respect thereto, on the date fixed for redemption,
less applicable withholding taxes, such redemption to take place on such date,
not later than one year after the publication of notice of such determination,
as Pennzoil shall determine by notice to the Trustee at least 60 days before
the redemption date unless shorter notice is acceptable to the Trustee.
Pennzoil shall make such determination as soon as practicable and give prompt
notice thereof in accordance with Section 1104 of the Indenture, stating in
that notice the effective date of such certification, information,
documentation or reporting requirements and the date on which the redemption
shall occur. Notwithstanding the foregoing, Pennzoil shall not so redeem the 6
1/2% Debentures if, on the basis of any subsequent event, it is determined, in
the manner set forth above, 30 days or more prior to the date fixed for
redemption, that no such payment would be subject to any such requirement, in
which case Pennzoil shall give prompt notice of such determination. Except as
otherwise provided in the Indenture, notices to holders of Bearer Securities
will be given by publication at least twice in a daily newspaper in The City
of New York and London or other capital city in Western Europe and in such
other city or cities as may be specified in the Securities. Notices to holders
of Registered Securities will be given by mail to the addresses of such
holders as they appear in the Security Register. (Section 107) Any earlier
redemption notice shall then be deemed revoked and of no further effect.
Notwithstanding the provisions of the immediately preceding paragraph, if
and so long as each certification, information, documentation or other
reporting requirement referred to therein would be fully satisfied by payment
of withholding tax, backup withholding tax or similar charge, Pennzoil may
elect, prior to publication of the notice of determination referred to in the
second sentence of the immediately preceding paragraph, to have the provisions
of this paragraph apply in lieu of the provisions of that paragraph. In such
event, Pennzoil will pay as Additional Amounts such amounts as may be
necessary so that every net payment made following the effective date of such
requirement outside the United States by Pennzoil or any of its paying agents
of principal of, premium, if any, and interest on any Bearer 6 1/2% Debenture
or any coupon to a holder who is a United States Alien (but without any
requirement with regard to disclosure of the nationality, residence or
identity of such holder), after deduction or withholding for or on account of
such withholding tax, backup withholding tax or similar charge (other than a
withholding tax, backup withholding tax or similar charge which would not be
applicable in the circumstances referred to in the second parenthetical clause
of the first sentence of the immediately preceding paragraph), will not be
less than the amount provided for in such Bearer 6 1/2% Debenture or such
coupon to be then due and payable. If Pennzoil elects to pay such Additional
Amounts and so long as it is obligated to pay the same, Pennzoil may
subsequently redeem the Bearer 6 1/2% Debentures (but not the Registered 6
1/2% Debentures), in whole but not in part at any time, at a redemption price
equal, to the principal amount thereof, together with accrued and unpaid
interest to the date fixed for redemption. If Pennzoil elects to
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pay Additional Amounts pursuant to this paragraph and the condition specified
in the first sentence of this paragraph should no longer be satisfied, then
Pennzoil shall promptly redeem the Bearer 6 1/2% Debentures (but not the
Registered 6 1/2% Debentures) in whole but not in part.
DISCHARGE AND DEFEASANCE
The terms of the 6 1/2% Debentures provide that Pennzoil will be permitted
to terminate certain of its obligations under the Indenture pursuant to the
Indenture's covenant defeasance provisions only if Pennzoil delivers to the
Trustee an opinion of counsel that covenant defeasance will not cause holders
of the 6 1/2% Debentures to recognize income, gain or loss for United States
federal income tax purposes.
Pennzoil may terminate its obligations under the Indenture, other than its
obligation to pay the principal of (and premium, if any) and interest on the
Securities of any series and certain other obligations, if it (i) irrevocably
deposits or causes to be irrevocably deposited with the Trustee as trust funds
money or U.S. Government Obligations maturing as to principal and interest
sufficient to pay the principal of, any interest on, and any mandatory sinking
funds in respect of, all outstanding Securities of such series on the stated
maturity of such payments or on any redemption date and (ii) complies with any
additional conditions specified to be applicable with respect to the covenant
defeasance of Securities of such series. (Section 401)
The terms of the 6 1/2% Debentures also provide to legal defeasance. Legal
defeasance is permitted only if Pennzoil shall have received from, or there
shall have been published by, the United States Internal Revenue Service a
ruling to the effect that legal defeasance will not cause holders of the 6
1/2% Debentures to recognize income, gain or loss for United States federal
income tax purposes. In such case, if Pennzoil (i) irrevocably deposits or
causes to be irrevocably deposited money or U.S. Government Obligations as
described above, (ii) makes a request to the Trustee to be discharged from its
obligations on the Securities of such series and (iii) complies with any
additional conditions specified to be applicable with respect to legal
defeasance of Securities of such series, then Pennzoil shall be deemed to have
paid and discharged the entire indebtedness on all the outstanding Securities
of such series and the obligations of Pennzoil under the applicable Indenture
and the Securities of such series to pay the principal of (and premium, if
any) and interest on the Securities of such series shall cease, terminate and
be completely discharged, and the holders thereof shall thereafter be entitled
only to payment out of the money or U.S. Government Obligations deposited with
the Trustee as aforesaid, unless Pennzoil's obligations are revived and
reinstated because the Trustee is unable to apply such trust fund by reason of
any legal proceeding, order or judgment. (Sections 403 and 404)
PAYMENT OF ADDITIONAL AMOUNTS
Pennzoil will, subject to certain exceptions and limitations set forth
below, pay as additional interest such Additional Amounts to the holder of any
6 1/2% Debenture who is a United States Alien (as defined below) as may be
necessary in order that every net payment by Pennzoil or any of its paying
agents of principal of, premium, if any, and interest on each 6 1/2% Debenture
and any other amounts payable with respect to each Debenture, after deduction
or withholding for or on account of any present or future tax, assessment or
governmental charge imposed by the United States (or any political subdivision
or taxing authority thereof or therein) upon or as a result of such payment,
will not be less than the amount provided for in such 6 1/2% Debenture to be
then due and payable. However, Pennzoil will not be required to make any
payment of Additional Amounts for or on account of any one or more of the
following:
(a) any tax, assessment or other governmental charge which would not have
been so imposed but for (i) the existence of any present or former
connection between such holder (or a fiduciary, settlor, beneficiary,
member or shareholder of, or possessor of a power over, such holder, if
such holder is an estate, a trust, a partnership or a corporation) and the
United States, including, without limitation, such holder (or such
fiduciary, settlor, beneficiary, member, shareholder or possessor) being or
having been a citizen or resident thereof or treated as a resident thereof,
or being or having been present therein, or being or having been engaged in
a trade or business therein, or having or having had a permanent
establishment therein or (ii) the
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presentation of a 4 3/4% Debenture or any coupon appertaining thereto for
payment on a date more than 10 days after the date on which such payment
becomes due and payable or the date on which payment thereof is duly
provided for, whichever occurs later;
(b) any estate, inheritance, gift, sales, transfer, wealth, personal
property or any similar tax, assessment or other governmental charge;
(c) any tax, assessment or other governmental charge which is payable
otherwise than by deduction or withholding from payments of principal of or
interest on the 6 1/2% Debentures;
(d) any tax, assessment or other governmental charge imposed by reason of
such holder's past or present status (i) as a personal holding company or a
foreign personal holding company with respect to United States federal
income taxation, (ii) as a corporation which accumulates earnings to avoid
United States federal income tax, (iii) as a controlled foreign corporation
for United States tax purposes that is related to Pennzoil through stock
ownership, (iv) as the owner, actually or constructively, of 10 percent or
more of the total combined voting power of all classes of stock of Pennzoil
entitled to vote or (v) as a private foundation or other tax-exempt
organization;
(e) any tax, assessment or other governmental charge imposed by reason of
such holder's failure to comply with any certification, identification or
other reporting requirements concerning its nationality, residence,
identity or connection with the United States if such compliance is
required to establish entitlement to exemption from such tax, assessment or
other governmental charge; or
(f) any tax, assessment or other governmental charge which would not have
been imposed but for the fact that a 6 1/2% Debenture constitutes a "United
States real property interest," as defined in Section 897(c) (1) of the
Code with respect to the beneficial owner of such a 4 3/4% Debenture;
nor shall Additional Amounts be paid with respect to any payment of principal
of, premium, if any, or interest on a 6 1/2% Debenture or any other amount
payable with respect to a Debenture to any United States Alien holder who is a
fiduciary or partnership or other than the sole beneficial owner of any such
payment to the extent a beneficiary or settlor with respect to such fiduciary
or a member of such partnership or a beneficial owner would not have been
entitled to the Additional Amounts had such beneficiary, settlor, member or
beneficial owner been the holder of the Debenture. (Section 106)
The term "United States Alien" means any person who, for United States
federal income tax purposes, is as to the United States (i) a foreign
corporation, (ii) a foreign partnership one or more of the members of which
is, as to the United States, a foreign corporation, a nonresident alien
individual or a nonresident alien fiduciary of a foreign estate or trust,
(iii) a nonresident alien individual or (iv) a nonresident alien fiduciary of
a foreign estate or trust.
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APPENDIX C
DESCRIPTION OF OLD 4 3/4% DEBENTURES
Capitalized terms defined in this Appendix C are used as defined only in this
Appendix C.
GENERAL
The 4 3/4% exchangeable senior debentures due 2003 (the "4 3/4% Debentures")
are an issue of Pennzoil's Debt Securities (the "Securities") issued under the
Indenture dated as of December 15, 1992 (the "Indenture") between Pennzoil and
Texas Commerce Bank National Association, as trustee (the "Trustee"). The
italicized references below refer to the section numbers of the Second
Supplemental Indenture to be dated as of October 12, 1993 to the Indenture
("Second Supplemental Indenture") between Pennzoil and Texas Commerce Bank
National Association, as trustee.
The 4 3/4% Debentures will mature on October 1, 2003 and will each bear
interest from October 12, 1993 at 4 3/4% per annum, payable semiannually on
each April 1 and October 1, commencing April 1, 1994 (i) to the holders of the
Registered 4 3/4% Debentures at the close of business on the March 15 next
preceding such April 1 or the September 15 next preceding such October 1, as
the case may be, and (ii) to the holders of the Bearer 4 3/4% Debentures upon
presentation of the appropriate coupon appertaining thereto on each April 1
and October 1, commencing April 1, 1994. The aggregate principal amount of the
4 3/4% Debentures is $492.1 million.
The 4 3/4% Debentures constitute unsecured senior debt obligations of
Pennzoil ranking pari passu with all other present and future unsecured
general obligations of Pennzoil that are not expressly subordinated to senior
indebtedness.
FORM OF 4 3/4% DEBENTURES
The 4 3/4% Debentures are issued as both Registered 4 3/4% Debentures and
Bearer 4 3/4% Debentures. The Registered 4 3/4% Debentures are in definitive
form without coupons. The Bearer 4 3/4% Debentures are in denominations of
$5,000, with coupons attached.
The Paying Agent for the Bearer 4 3/4% Debentures is Chemical Bank London.
EXCHANGE RIGHTS
The 4 3/4% Debentures (or portions thereof in integral multiples of $1,000)
are exchangeable for Chevron Stock at any time and from time to time prior to
maturity at an exchange rate of $58 13/16 per share (equivalent to an exchange
rate of 17.004 shares of Chevron Stock per $1,000 principal amount of 4 3/4%
Debentures), subject to adjustment under the circumstances described below. In
the event the 4 3/4% Debentures are called for redemption, the exchange rights
will terminate at the close of business on the date immediately prior to the
date of redemption. (Section 201)
Pennzoil has deposited the number of shares of Chevron Stock deliverable in
exchange for (i) the Registered 4 3/4% Debentures with Texas Commerce Bank
National Association, who will act as exchange agent for holders of Registered
4 3/4% Debentures (the "Domestic Exchange Agent") on behalf of Pennzoil and
(h) the Bearer 4 3/4% Debentures with Chemical Bank London, who will act as
exchange agent for holders of Bearer 4 3/4% Debentures (the "Foreign Exchange
Agent") on behalf of Pennzoil. Each of the Domestic Exchange Agent and the
Foreign Exchange Agent are referred to individually herein as an "Exchange
Agent" and collectively as the "Exchange Agents." Pennzoil will deposit with
the Domestic Exchange Agent and the Foreign Exchange Agent any cash and other
property deliverable in exchange for the Registered 4 3/4% Debentures and the
Bearer 4 3/4% Debentures, respectively. Pennzoil will not be permitted to
pledge, mortgage, hypothecate or grant a security interest in, or permit any
mortgage, pledge, security interest or other lien upon, the Chevron Stock,
cash and
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other property deliverable in exchange for the 4 3/4% Debentures
(collectively, "Exchange Property"). The deposit arrangements with each
Exchange Agent will terminate at such time as the right to exchange 4 3/4%
Debentures with such Exchange Agent shall have expired pursuant to the Second
Supplemental Indenture.
In order to exercise the right of exchange, the holder of any Registered 4
3/4% Debenture must surrender such 4 3/4% Debenture to the Domestic Exchange
Agent at its office maintained for such purpose in Houston, Texas and the
holder of a Bearer 4 3/4% Debenture must surrender such 4 3/4% Debenture to
the Foreign Exchange Agent at its office maintained for such purpose in
London, England. Each 4 3/4% Debenture to be surrendered must be accompanied
by written notice to Pennzoil and the applicable Exchange Agent that the
holder elects to exchange such Debenture. Delivery of the certificates for
Chevron Stock or any other Exchange Property may be delayed at the request of
Pennzoil in order to effectuate the calculation of the adjustments of the
Chevron Stock or other Exchange Property to obtain any certificate
representing securities to be delivered, to complete any reapportionment of
the Chevron Stock or other Exchange Property which is required by the
Indenture or to comply with any applicable law. (Section 202) No fractional
shares will be delivered on any exchange of 4 3/4% Debentures, and in lieu
thereof a cash adjustment based on the market price of the Chevron Stock or
other Exchange Property will be paid. (Section 203)
In lieu of delivering certificates representing Chevron Stock in exchange
for any 4 3/4% Debentures, Pennzoil may pay to the holder surrendering such 4
3/4% Debentures an amount in cash equal to the market price of the Chevron
Stock or other Exchange Property for which such 4 3/4% Debentures are
exchangeable, determined as of the date of receipt by Pennzoil of the notice
of exchange relating to such 4 3/4% Debentures (or, if such date is not a
business day, on the business day next preceding such date). Prior to so
directing an Exchange Agent to make any such cash payment, Pennzoil shall
deposit with such Exchange Agent the cash so payable. (Section 216)
Upon an exchange of Exchange Property (or cash in lieu thereof) for a
Debenture, a holder will not receive any cash payment representing accrued
original issue discount for United States federal income tax purposes ("Tax
OID"). The delivery of the Exchange Property (or cash in lieu thereof) to a
holder in exchange for a holder's 4 3/4% Debenture will be deemed to satisfy
Pennzoil's obligation to pay the principal amount of the 4 3/4% Debenture
including the Tax OID attributable to the period from the date of issue to the
date of such exchange with respect to such Debenture. Thus, the accrued Tax
OID is deemed to be paid rather than canceled, extinguished or forfeited. As a
result, the exchange rate is not adjusted for accrued Tax OID. (Section 202)
Pennzoil is entitled to all cash dividends with respect to the Chevron Stock
or other Exchange Property, other than dividends paid pursuant to a plan of
liquidation or partial liquidation of Chevron, recapitalization or
restructuring of Chevron or other extraordinary cash dividends. Pennzoil will
also be entitled to all interest payments on any debt securities held for
exchange by Pennzoil which are issued in exchange for Chevron Stock or other
Exchange Property pursuant to any merger or consolidation of Chevron or in
connection with any sale of all or substantially all the assets of Chevron.
(Section 205)
If Chevron should issue any Chevron Stock in subdivision or by way of stock
dividend, the exchange rate will be proportionately increased, and if Chevron
shall effect a combination of Chevron Stock, the exchange rate will be
proportionately reduced, subject in each case to adjustments for tax
consequences, if any. (Section 204)
If Chevron should make any distribution of cash, securities or other
property with respect to the Chevron Stock or other Exchange Property (other
than cash dividends to which Pennzoil is entitled as described above, the
distributions described in the preceding paragraph or any securities or other
property received in a merger or consolidation of Chevron or in connection
with any sale of all or substantially all the assets of Chevron as described
in the next paragraph) or if Chevron grants transferable subscription rights,
options, warrants or other similar rights to Pennzoil in respect of the
Chevron Stock or other Exchange Property, Pennzoil will cause all such
securities, other property and rights to be deposited with the applicable
Exchange Agent and will direct the applicable Exchange Agent to sell all such
securities and other property and all such rights for cash, except any such
securities or property that are convertible, without payment of any
consideration, into Chevron Stock and
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which rights do not expire before the retirement of such securities or other
property. Such Exchange Agent will apply the proceeds first to the payment of
any taxes incurred or deemed incurred by Pennzoil or such Exchange Agent on
such distribution or such grant of rights and incurred or deemed incurred by
Pennzoil or such Exchange Agent on the subsequent sale of the securities or
other property distributed or rights granted. The balance of the cash proceeds
will be held by such Exchange Agent for distribution pro rata with the Chevron
Stock or other Exchange Property. In the event that a distribution or grant of
cash, securities or other property on Exchange Property shall be effected as
contemplated by this paragraph, a notice stating that such distribution or
grant has occurred and setting forth the additional cash, securities or other
property distributed on the Exchange Property shall as soon as practicable be
mailed by or on behalf of Pennzoil to the holders of Registered 4 3/4%
Debentures at their addresses as they appear in the Security Register and
shall be published at least twice in a daily newspaper in the cities of New
York and London or other capital city in Western Europe. (Section 205)
In the case of any merger or consolidation of Chevron with or into any other
person which results in shares of Chevron Stock, as constituted prior to the
consummation of such transaction, being converted into other securities and/or
property, including cash, or any sale of all or substantially all the assets
of Chevron (if in connection with such sale or transfer holders of Chevron
Stock receive other securities and/or property, including cash, in exchange
for their shares of Chevron Stock), the holder of any 4 3/4% Debenture
surrendered for exchange thereafter will, subject to the following paragraph,
be entitled to receive the kind and amount of shares of stock and other
securities and property receivable upon or in connection with such transaction
by a holder of the number of shares of Chevron Stock or other Exchange
Property for which such 4 3/4% Debenture might have been exchanged immediately
prior to such transaction, as well as a pro rata share of any cash held for
exchange by Pennzoil in accordance with the preceding paragraph. (Section 211)
Upon the occurrence of any such merger, consolidation, sale of all or
substantially all the assets of Chevron described in the preceding paragraph
or any voluntary or involuntary dissolution, liquidation or winding up of
Chevron, or any stock dividend, subdivision, combination or reclassification
of shares of Chevron Stock or other Exchange Property, which shall be taxable
to Pennzoil or either Exchange Agent, or upon the happening of any other event
with respect to the Chevron Stock or other Exchange Property, which is taxable
or treated as being taxable to Pennzoil or either Exchange Agent, the
applicable Exchange Agent will deliver cash which it holds for exchange
(including cash received in such transaction) to Pennzoil or to itself for
payment of the taxes arising from such transaction. If the cash held for
exchange is insufficient to pay the amount of such taxes, such Exchange Agent
will sell such of the shares of Chevron Stock or other Exchange Property as
may be necessary to pay the amount of the insufficiency and any taxes payable
by Pennzoil or such Exchange Agent arising from such sale. The remaining
shares of Chevron Stock or other Exchange Property will be held by such
Exchange Agent for distribution pro rata to holders requesting exchange of
their 4 3/4% Debentures. (Section 215)
From time to time, Pennzoil may require the Exchange Agents to segregate
such property as Pennzoil determines may be necessary for Pennzoil or the
Exchange Agents to pay taxes with respect to the transactions or events
described above, subject to the determination of taxability (and any expenses
incurred in determining taxability), and such property (or any portion
thereof) shall be deliverable to holders of 4 3/4% Debentures only after
determination that such withholding is not necessary for the payment of such
taxes and after deducting the expenses incurred in connection with such
determination. (Section 215)
If Chevron grants nontransferable subscription rights, options, warrants or
similar rights with respect to the Exchange Property, Pennzoil will, if
otherwise lawful, deliver such rights pro rata to the Exchange Agents.
Pennzoil and the Domestic Exchange Agent shall cause such rights to be
distributed to the holders of the Registered 4 3/4% Debentures shown in the
Security Register and Pennzoil shall make available to holders of Bearer 4
3/4% Debentures a notice published at least twice in a daily newspaper in the
cities of New York and London or other capital city in Western Europe, which
notice shall state that such rights will be delivered to such holder upon such
holder's furnishing satisfactory proof to Pennzoil of such holder's status as
a holder of Bearer Securities. (Section 205)
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Pennzoil is required to give to holders of 4 3/4% Debentures notice of
certain dividends on the Chevron Stock deliverable upon exchange of 4 3/4%
Debentures, the granting of subscription rights, options, warrants or other
similar rights to holders of Chevron Stock, any reclassification of Chevron
Stock (other than a subdivision or combination of outstanding shares of
Chevron Stock), certain mergers involving Chevron, the sale of all or
substantially all of the assets of Chevron and the dissolution, liquidation or
winding up of Chevron. (Section 206)
Any cash held by an Exchange Agent that is deliverable upon exchange of 4
3/4% Debentures will be invested by such Exchange Agent at the direction of
Pennzoil in U.S. Government Obligations with maturity dates of twelve months
or less. Any interest or gain on such investments will be for the benefit of
Pennzoil, and Pennzoil will be responsible for any losses on such investments.
To the extent 4 3/4% Debentures are redeemed prior to exchange, Pennzoil will
be entitled to receive from the applicable Exchange Agent such number of
shares of Chevron Stock, other Exchange Property and such amount of cash, if
any, held by such Exchange Agent for exchange as exceeds the number of shares
of Chevron Stock or other Exchange Property required to be held by such
Exchange Agent for the exchange of all 4 3/4% Debentures remaining then
outstanding. (Section 205)
"U.S. Government Obligations" is defined in each Indenture as direct non-
callable obligations of, or non-callable obligations the payment of principal
of and interest on which is guaranteed by, the United States of America, or
the payment of which obligations or guarantees the full faith and credit of
the United States of America is pledged, or beneficial interests in a trust
the corpus of which consists exclusively of money or such obligations or a
combination thereof.
In the event of a tender offer or exchange offer for any class of securities
included within the Exchange Property (i) if Pennzoil owns shares of such
class which are not subject to the Exchange Agreement, Pennzoil will cause
each Exchange Agent to tender such shares of such class in the same proportion
that Pennzoil tenders its securities in such class which are not subject to
the Exchange Agreement and (ii) if Pennzoil does not own securities of a class
which are subject to the Exchange Agreement, Pennzoil may, at its option and
in its sole discretion, elect to cause either or both Exchange Agents to
tender all or any portion or none of such class of security included within
the Exchange Property held by such Exchange Agent or Exchange Agents. The
proceeds of the sale of any such Exchange Property pursuant to any such tender
or exchange offer will be held by each Exchange Agent for the benefit of
holders as provided in the Second Supplemental Indenture. As a result of the
receipt by an Exchange Agent of cash or other property upon the tender or
exchange of an Exchange Property, holders will not participate in any
subsequent appreciation or depreciation in the market price of such Exchange
Property tendered or exchanged upon any subsequent exchange of 4 3/4%
Debentures. (Section 212)
The right of a holder to exchange his 4 3/4% Debentures for Chevron Stock or
other Exchange Property could be adversely affected in the event of the
bankruptcy, insolvency or liquidation of Pennzoil. In such event, the Chevron
Stock or other Exchange Property could be assets of Pennzoil subject to the
claims of its general creditors.
REPURCHASE RIGHTS
The Exchange Agents will act as agents for Pennzoil in connection with
Pennzoil's exchange obligations under the Second Supplemental Indenture and
will not act as escrow agents for the benefit of holders of 4 3/4% Debentures.
Accordingly, Pennzoil may at any time obtain from either or both of the
Exchange Agents or otherwise authorize or direct either or both of the
Exchange Agents to release all or a part of the Chevron Stock or other
Exchange Property. In the event that Pennzoil obtains or otherwise releases
any Chevron Stock or other Exchange Property in any manner otherwise than as
contemplated by the Second Supplemental Indenture, each holder of 4 3/4%
Debentures will have the right ("Repurchase Right"), at such holder's option,
to require Pennzoil to repurchase all of such holder's 4 3/4% Debentures, or a
portion thereof which is $1,000 or any integral multiple thereof, in the
manner and at the price described below. (Section 217)
Promptly (and in any event within 10 days) after Pennzoil has obtained or
released any Exchange Property in any manner otherwise than as contemplated by
the Second Supplemental Indenture, the Domestic Exchange
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Agent will mail to all holders of record of the 4 3/4% Debentures a notice
thereof and the Repurchase Right arising as a result thereof (a "Repurchase
Notice") and the Foreign Exchange Agent will cause a copy of the Repurchase
Notice to be published at least twice in a daily newspaper in the cities of
New York and London or other capital city in Western Europe. To exercise the
Repurchase Right, a holder of 4 3/4% Debentures must deliver on or before the
15th day after the date of the Repurchase Notice irrevocable written notice to
the applicable Exchange Agent of the holder's exercise of such right, together
with the 4 3/4% Debentures with respect to which the right is being exercised,
duly endorsed for transfer.
On the date ("Repurchase Date") that is 30 days after the date of the
Repurchase Notice, Pennzoil will be required to repurchase all 4 3/4%
Debentures in respect of which the Repurchase Right has been exercised at the
following price: (i) if the date on which Pennzoil's obtaining or release of
Exchange Property in a manner not contemplated by the Second Supplemental
Indenture first occurs (the "Triggering Date") is before October 1, 1998, the
product of (1) 120% and (2) the greater of the principal amount at maturity of
such 4 3/4% Debentures (plus accrued and unpaid interest, if any, to the
Repurchase Date) and the market price of the Exchange Property deliverable in
exchange for such 4 3/4% Debentures on the Triggering Date (or if such date is
not a business day, on the next succeeding business day); and (ii) if the
Triggering Date occurs on or after October 1, 1998, the greater of (1) the
redemption price as specified under "Redemption Provisions" on the Triggering
Date and (2) the market price of the Exchange Property deliverable in exchange
for such 4 3/4% Debentures on the Triggering Date (or if such date is not a
business day, on the next succeeding business day).
The obligation of Pennzoil to deliver Exchange Property (or cash in lieu
thereof) in exchange for 4 3/4% Debentures shall survive and continue to apply
in full force and effect following and notwithstanding the occurrence of any
event triggering a Repurchase Right. Failure by Pennzoil to exchange 4 3/4%
Debentures in accordance with the Second Supplemental Indenture or to
repurchase either Registered 4 3/4% Debentures or Bearer 4 3/4% Debentures
upon exercise of a Repurchase Right will constitute an Event of Default with
respect to the 4 3/4% Debentures, and holders of 4 3/4% Debentures will have
the remedies provided for in the Indenture, including acceleration of the
indebtedness evidenced by the 4 3/4% Debentures, in the event of any such
failure.
The exchange obligations of Pennzoil may not be assigned or otherwise
transferred by Pennzoil except to the extent Pennzoil may, without the consent
of any holders of outstanding Securities, consolidate with or merge into, or
convey, transfer or lease its assets substantially as an entirety to, any
person, provided that the person formed by such consolidation or into which
Pennzoil is merged or which acquires or leases the assets of Pennzoil
substantially as an entirety is a corporation, partnership or trust organized
under the laws of any United States jurisdiction and assumes by supplemental
indenture Pennzoil's obligation on the Securities and under the Indentures,
that after giving effect to the transaction, no Event of Default, and no event
which, after notice or lapse of time or both, would become an Event of
Default, shall have happened and be continuing, and that certain other
conditions are met. Upon compliance with these provisions by a successor
person, Pennzoil will (except in the case of a lease) be relieved of its
obligations under the Indenture and the Securities (Article Eight)
If an offer is made to repurchase 4 3/4% Debentures in connection with a
Repurchase Right, Pennzoil will comply with all tender offer rules, including,
but not limited to, Sections 13 (e) and 14 (e) under the Exchange Act and
Rules l3e-1 and l4e-1 thereunder, to the extent applicable to such offer.
REDEMPTION PROVISIONS
Subject to the redemption Provisions described below, the 4 3/4% Debentures
will not be redeemable prior to October 1, 1998. Thereafter, the 4 3/4%
Debentures may be redeemed at the option of Pennzoil, in whole or from time to
time in part, (i) on not less than 30 nor more than 60 days' notice by mail to
the holders of Registered 4 3/4% Debentures at their addresses appearing on
the Security Register and (ii) by publication for the holders of Bearer 4 3/4%
Debentures at least twice in a daily newspaper in the cities of New York and
London or other capital city of Western Europe, one of which publications is
not later than 30 days prior to the redemption date
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and one of which publications is not earlier than 60 days prior to the
redemption date, at the following redemption prices (expressed as a percentage
of the principal amount at maturity) if redeemed during the 12-month period
beginning October 1 of the following years:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
1998................................... 102.375%
1999................................... 101.900%
2000................................... 101.420%
2001................................... 100.475%
2002................................... 100.475%
</TABLE>
in each case together with accrued interest to the redemption date; provided,
however, that installments of interest on Bearer 4 3/4% Debentures whose
stated maturity is on or prior to the redemption date shall be payable only at
an office or agency located outside the United States (except as otherwise
provided in Section 1002 of the Indenture) and, only upon presentation and
surrender of coupons for such interest; and provided, further, that
installments of interest on Registered 4 3/4% Debentures whose stated maturity
is on or prior to the redemption date shall be payable to the holders of such
4 3/4% Debentures, registered as such at the close of business on the relevant
Record Dates. There is no sinking fund applicable to the 4 3/4% Debentures.
The 4 3/4% Debentures may also be redeemed at the option of Pennzoil, in
whole but not in part at any time, upon notice as described below, at a
redemption price equal to the principal amount thereof, together with accrued
and unpaid interest to the date fixed for redemption, if (i) Pennzoil shall
determine that, as a result of any change in, or amendment to, the laws (or
any regulations or rulings promulgated thereunder) of the United States or any
political subdivision or taxing authority thereof or therein affecting
taxation, or any change in official position regarding the application,
enforcement or interpretation of such laws, regulations or rulings (including
a holding by a court of competent jurisdiction), which change, amendment,
application, enforcement or interpretation becomes effective on or after the
date of this Prospectus Supplement, Pennzoil must pay or would become
obligated to pay any additional amounts ("Additional Amounts") with respect to
the 4 3/4% Debentures as described below under "--Payment of Additional
Amounts" or (ii) any action shall have been taken by a taxing authority
(including, but not limited to, a ruling or announcement of the IRS or other
taxing authority, whether or not officially published) or a court of competent
jurisdiction in the United States or any political subdivision or taxing
authority thereof or therein, including any of those actions specified in (i)
above (whether or not, in the case of an action taken by a taxing authority,
such action was taken or brought with respect to Pennzoil) or any change,
amendment, application, enforcement or interpretation shall be officially
proposed, in any case on or after the date of the prospectus supplement for
these 4 3/4% Debentures, as a result of which there is a substantial
possibility that Pennzoil will be obligated to pay Additional Amounts and, in
either case described in clause (i) or (ii), such obligation to pay Additional
Amounts cannot be avoided by the use of reasonable measures available to
Pennzoil; provided, however, that (i) no notice of redemption may be given
earlier than 90 days prior to the earliest date on which Pennzoil would be
obligated to pay such Additional Amounts, were a payment in respect of the 4
3/4% Debentures then due, and (ii) at the time such notice of redemption is
given, such obligation to pay such Additional Amounts remains in effect. Prior
to the publication of any notice of redemption of the 4 3/4% Debentures
pursuant to the foregoing, Pennzoil shall deliver to the Trustee an opinion of
independent legal counsel to Pennzoil stating that Pennzoil is entitled to
effect such redemption, together with a certificate setting forth facts
showing that the conditions precedent to the right of Pennzoil so to redeem
have occurred.
If Pennzoil shall determine, based upon an opinion of an independent legal
counsel to Pennzoil, that any payment made outside the United States by
Pennzoil or any of its paying agents of the full amount of the next scheduled
payment of principal of or interest due in respect of any Bearer 4 3/4%
Debenture or coupon appertaining thereto would, under any present or future
laws or regulations of the United States affecting taxation
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<PAGE>
or otherwise, be subject to any certification, information, documentation or
other reporting requirement of any kind the effect of which requirement is the
disclosure to Pennzoil, any paying agent or any governmental authority of the
nationality, residence or identity (as distinguished from status as a United
States Alien (as defined below)) of a beneficial owner of such Bearer 4 3/4%
Debenture or coupon who is a United States Alien (other than such a
requirement which (a) would not be applicable to a payment if made (i)
directly to the beneficial owner or (ii) to a custodian, nominee or other
agent of the beneficial owner, (b) can be satisfied by such a custodian,
nominee or other agent certifying to the effect that such beneficial owner is
a United States Alien; provided, however, that in each case referred to in
clause (a) (ii) and (b), payment by such custodian, nominee or agent to such
beneficial owner is not otherwise subject to any such requirement (other than
a requirement which is imposed on a custodian, nominee or other agent
described in clause (e) of this sentence), (c) is applicable only to a
collection or payment by a custodian, nominee or other agent of the beneficial
owner to or for such beneficial owner, (d) would not be applicable to such a
payment made by any other paying agent of Pennzoil outside the United States
or (e) is applicable to a payment to or by a custodian, nominee or other agent
of the beneficial owner because such custodian, nominee or agent is a United
States person (within the meaning of the United States Internal Revenue Code
of 1986, as amended (the "Code")), a controlled foreign corporation for United
States tax purposes, a foreign person 50% or more of whose gross income for
certain periods is effectively connected with a United States trade or
business, or otherwise related to the United States), Pennzoil shall redeem
the Bearer 4 3/4% Debentures (but not the Registered 4 3/4% Debentures), in
whole but not in part at any time, at a redemption price equal to the
principal amount thereof, together with accrued and unpaid interest and any
Additional Amounts with respect thereto, on the date fixed for redemption,
less applicable withholding taxes, such redemption to take place on such date,
not later than one year after the publication of notice of such determination,
as Pennzoil shall determine by notice to the Trustee at least 60 days before
the redemption date unless shorter notice is acceptable to the Trustee.
Pennzoil shall make such determination as soon as practicable and give prompt
notice thereof in accordance with Section 1104 of the Indenture, stating in
that notice the effective date of such certification, information,
documentation or reporting requirements and the date on which the redemption
shall occur. Notwithstanding the foregoing, Pennzoil shall not so redeem the 4
3/4% Debentures if, on the basis of any subsequent event, it is determined, in
the manner set forth above, 30 days or more prior to the date fixed for
redemption, that no such payment would be subject to any such requirement, in
which case Pennzoil shall give prompt notice of such determination. Except as
otherwise provided in the Indenture, notices to holders of Bearer Securities
will be given by publication at least twice in a daily newspaper in The City
of New York and London or other capital city in Western Europe and in such
other city or cities as may be specified in the Securities. Notices to holders
of Registered Securities will be given by mail to the addresses of such
holders as they appear in the Security Register. (Section 107) Any earlier
redemption notice shall then be deemed revoked and of no further effect.
Notwithstanding the provisions of the immediately preceding paragraph, if
and so long as each certification, information, documentation or other
reporting requirement referred to therein would be fully satisfied by payment
of withholding tax, backup withholding tax or similar charge, Pennzoil may
elect, prior to publication of the notice of determination referred to in the
second sentence of the immediately preceding paragraph, to have the provisions
of this paragraph apply in lieu of the provisions of that paragraph. In such
event, Pennzoil will pay as Additional Amounts such amounts as may be
necessary so that every net payment made following the effective date of such
requirement outside the United States by Pennzoil or any of its paying agents
of principal of, premium, if any, and interest on any Bearer 4 3/4% Debenture
or any coupon to a holder who is a United States Alien (but without any
requirement with regard to disclosure of the nationality, residence or
identity of such holder), after deduction or withholding for or on account of
such withholding tax, backup withholding tax or similar charge (other than a
withholding tax, backup withholding tax or similar charge which would not be
applicable in the circumstances referred to in the second parenthetical clause
of the first sentence of the immediately preceding paragraph), will not be
less than the amount provided for in such Bearer 4 3/4% Debenture or such
coupon to be then due and payable. If Pennzoil elects to pay such Additional
Amounts and so long as it is obligated to pay the same, Pennzoil may
subsequently redeem the Bearer 4 3/4% Debentures (but not the Registered 4
3/4% Debentures), in whole but not in part at any time, at a redemption price
equal to the principal amount thereof, together with accrued and unpaid
interest to the date fixed for redemption. If Pennzoil elects to
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pay Additional Amounts pursuant to this paragraph and the condition specified
in the first sentence of this paragraph should no longer be satisfied, then
Pennzoil shall promptly redeem the Bearer 4 3/4% Debentures (but not the
Registered 4 3/4% Debentures) in whole but not in part.
DISCHARGE AND DEFEASANCE
The terms of the 4 3/4% Debentures provide that Pennzoil will be permitted
to terminate certain of its obligations under the Indenture pursuant to the
Indenture's covenant defeasance provisions only if Pennzoil delivers to the
Trustee an opinion of counsel that covenant defeasance will not cause holders
of the 4 3/4% Debentures to recognize income, gain or loss for United States
federal income tax purposes.
Pennzoil may terminate its obligations under the Indenture, other than its
obligation to pay the principal of (and premium, if any) and interest on the
Securities of any series and certain other obligations, if it (i) irrevocably
deposits or causes to be irrevocably deposited with the Trustee as trust funds
money or U.S. Government Obligations maturing as to principal and interest
sufficient to pay the principal of, any interest on, and any mandatory sinking
funds in respect of, all outstanding Securities of such series on the stated
maturity of such payments or on any redemption date and (ii) complies with any
additional conditions specified to be applicable with respect to the covenant
defeasance of Securities of such series. (Section 401)
The terms of the 4 3/4% Debentures also provide for legal defeasance. Legal
defeasance is permitted only if Pennzoil shall have received from, or there
shall have been published by, the IRS a ruling to the effect that legal
defeasance will not cause holders of the 4 3/4% Debentures to recognize
income, gain or loss for United States federal income tax purposes. In such
case, if Pennzoil (i) irrevocably deposits or causes to be irrevocably
deposited money or U.S. Government Obligations as described above, (ii) makes
a request to the Trustee to be discharged from its obligations on the
Securities of such series and (iii) complies with any additional conditions
specified to be applicable with respect to legal defeasance of Securities of
such series, then Pennzoil shall be deemed to have paid and discharged the
entire indebtedness on all the outstanding Securities of such series and the
obligations of Pennzoil under the applicable Indenture and the Securities of
such series to pay the principal of (and premium, if any) and interest on the
Securities of such series shall cease, terminate and be completely discharged,
and the holders thereof shall thereafter be entitled only to payment out of
the money or U.S. Government Obligations deposited with the Trustee as
aforesaid, unless Pennzoil's obligations are revived and reinstated because
the Trustee is unable to apply such trust fund by reason of any legal
proceeding, order or judgment. (Sections 403 and 404)
PAYMENT OF ADDITIONAL AMOUNTS
Pennzoil will, subject to certain exceptions and limitations set forth
below, pay as additional interest such Additional Amounts to the holder of any
4 3/4% Debenture who is a United States Alien (as defined below) as may be
necessary in order that every net payment by Pennzoil or any of its paying
agents of principal of, premium, if any, and interest on each 4 3/4% Debenture
and any other amounts payable with respect to each Debenture, after deduction
or withholding for or on account of any present or future tax, assessment or
governmental charge imposed by the United States (or any political subdivision
or taxing authority thereof or therein) upon or as a result of such payment,
will not be less than the amount provided for in such 4 3/4% Debenture to be
then due and payable. However, Pennzoil will not be required to make any
payment of Additional Amounts for or on account of any one or more of the
following:
(a) any tax, assessment or other governmental charge which would not have
been so imposed but for (i) the existence of any present or former
connection between such holder (or a fiduciary, settlor, beneficiary,
member or shareholder of, or possessor of a power over, such holder, if
such holder is an estate, a trust, a partnership or a corporation) and the
United States, including, without limitation, such holder (or such
fiduciary, settlor, beneficiary, member, shareholder or possessor) being or
having been a citizen or resident thereof or treated as a resident thereof,
or being or having been present therein, or being or having been engaged in
a trade or business therein, or having or having had a permanent
establishment therein or (ii) the
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presentation of a 4 3/4% Debenture or any coupon appertaining thereto for
payment on a date more than 10 days after the date on which such payment
becomes due and payable or the date on which payment thereof is duly
provided for, whichever occurs later;
(b) any estate, inheritance, gift, sales, transfer, wealth, personal
property or any similar tax, assessment or other governmental charge;
(c) any tax, assessment or other governmental charge which is payable
otherwise than by deduction or withholding from payments of principal of or
interest on the 4 3/4% Debentures;
(d) any tax, assessment or other governmental charge imposed by reason of
such holder's past or present status (i) as a personal holding company or a
foreign personal holding company with respect to United States federal
income taxation, (ii) as a corporation which accumulates earnings to avoid
United States federal income tax, (iii) as a controlled foreign corporation
for United States tax purposes that is related to Pennzoil through stock
ownership, (iv) as the owner, actually or constructively, of 10 percent or
more of the total combined voting power of all classes of stock of Pennzoil
entitled to vote or (v) as a private foundation or other tax-exempt
organization;
(e) any tax, assessment or other governmental charge imposed by reason of
such holder's failure to comply with any certification, identification or
other reporting requirements concerning its nationality, residence,
identity or connection with the United States if such compliance is
required to establish entitlement to exemption from such tax, assessment or
other governmental charge; or
(f) any tax, assessment or other governmental charge which would not have
been imposed but for the fact that a 4 3/4% Debenture constitutes a "United
States real property interest," as defined in Section 897(c) (1) of the
Code with respect to the beneficial owner of such a 4 3/4% Debenture;
nor shall Additional Amounts be paid with respect to any payment of principal
of, premium, if any, or interest on a 4 3/4% Debenture or any other amount
payable with respect to a Debenture to any United States Alien holder who is a
fiduciary or partnership or other than the sole beneficial owner of any such
payment to the extent a beneficiary or settlor with respect to such fiduciary
or a member of such partnership or a beneficial owner would not have been
entitled to the Additional Amounts had such beneficiary, settlor, member or
beneficial owner been the holder of the Debenture. (Section 106)
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<PAGE>
LOGO
The Exchange Agent:
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By Mail By Facsimile: By Hand or Overnight
(registered or certified (214) 672-5746 Courier
mail recommended) c/o Texas Commerce Bank
Texas Commerce National Confirm by Telephone to: National Association
Association Corporate (214) 672-5678 Corporate Trust Services
Trust Services 1201 Main, 18th Floor
P.O. Box 2320 Dallas, Texas 75202
Dallas, Texas 75221-2320 or
Texas Commerce Trust
Company of New York
55 Water Street, North
Building
Room 234, Windows 20 & 21
New York, New York 10041
Any questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at the telephone numbers and addresses listed
below. Requests for additional copies of the Exchange Offer, the Letter of
Transmittal or other Exchange Offer materials may be directed to the
Information Agent, and such copies will be furnished promptly at the Company's
expense. Holders of Old Debentures may also contact their local broker, dealer,
commercial bank or trust company for assistance concerning the Exchange Offer.
The Information Agent:
D. F. KING & CO., INC.
TOLL FREE 1-800-735-3591
77 Water Street Royex House
New York, NY 10005 Aldermanbury Square
(212) 269-5550 London, England EC2V 7HR
(Call Collect) 011-44-171-600-5005
(Call Collect)
The Dealer Manager:
PAINEWEBBER INCORPORATED
1285 Avenue of the Americas
New York, New York 10019
Telephone: (800) 595-8360 (toll-free)
<PAGE>
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Article VII of the By-Laws of Pennzoil, as amended, provides for
indemnification of officers, directors, agents and employees of Pennzoil to
the extent authorized by applicable law, including, but not limited to, the
Delaware General Corporation Law ("DGCL"). Pursuant to Section 145 of the
DGCL, a corporation generally has the power to indemnify its present and
former directors, officers, employees and agents against expenses and
liabilities incurred by them in connection with any suit to which they are, or
are threatened to be made, a party by reason of their serving in such
positions so long as they acted in good faith and in a manner they reasonably
believed to be in, or not opposed to, the best interests of the corporation,
and with respect to any criminal action, they had no reasonable cause to
believe their conduct was unlawful. With respect to suits by or in the right
of a corporation, however, indemnification is generally limited to attorneys'
fees and other expenses and is not available if such person is adjudged to be
liable to the corporation unless the court determines that indemnification is
appropriate. In addition, a corporation has the power to purchase and maintain
insurance for such persons. The statute also expressly provides that the power
to indemnify authorized thereby is not exclusive of any rights granted under
any bylaw, agreement, vote of stockholders or disinterested directors, or
otherwise.
Article EIGHTH of Pennzoil's Restated Certificate of Incorporation
eliminates in certain circumstances the monetary liability of directors of
Pennzoil for a breach of their fiduciary duty as directors. These provisions
do not eliminate the liability of a director (i) for a breach of the
director's duty of loyalty to the corporation or its stockholders; (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
knowing violation of law; (iii) under Section 174 of the DGCL (relating to the
declaration of dividends and purchase or redemption of shares in violation of
the DGCL); or (iv) for transactions from which the director derived an
improper personal benefit.
The above discussion of Pennzoil's Restated Certificate of Incorporation and
By-Laws and of Section 145 of the DGCL is not intended to be exhaustive and is
respectively qualified in its entirety by such Restated Certificate of
Incorporation, By-Laws and statute.
Directors and executive officers of Pennzoil have entered into
indemnification agreements with Pennzoil that provide indemnification similar
to that provided by Pennzoil's By-Laws.
ITEM 22. UNDERTAKINGS
(a) Pennzoil hereby undertakes to respond to requests for information that
is incorporated by reference into the prospectus pursuant to Items 4, 10(b),
11 or 13 of this Form, within one business day of receipt of such request, and
to send the incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed subsequent to
the effective date of the Registration Statement through the date of
responding to the request.
(b) Pennzoil hereby undertakes to supply by means of a post-effective
amendment all information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and included in the
Registration Statement when it became effective.
(c) Pennzoil hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is
incorporated by reference in the Registration Statement shall be deemed to be
a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrants pursuant to the provisions described under Item 20 above, or
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<PAGE>
otherwise, the registrants have each been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrants of expenses incurred or paid by a director, officer or controlling
person of the registrants in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrants will, unless
in the opinion of their counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by them is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(e) Pennzoil hereby undertakes to file, during any period in which offers or
sales are being made, a post-effective amendment to this Registration
Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate price
set forth in the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the registration statement.
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<PAGE>
ITEM 21--EXHIBITS
<TABLE>
<C> <S>
1 Form of Dealer Manager Agreement
*3.1 Restated Certificate of Incorporation of Pennzoil Company, as amended
through May 10, 1996 (Pennzoil 10-Q (March 31, 1997) SEC File No. 1-
05591 Exhibit 3)
*3.2 By-laws of Pennzoil Company, as amended through July 1, 1997 (Pennzoil
8-K (July 1, 1997) SEC File No. 1-05591 Exhibit 1)
*4.1 Indenture dated as of December 15, 1992 between Pennzoil Company and
Texas Commerce Bank National Association, Trustee (Pennzoil Company 10-
K (1992), SEC File No.1-5591, Exhibit 4(o))
4.2 Form of Third Supplemental Indenture between Pennzoil and Texas
Commerce Bank National Association, Trustee
4.3 Form of Exchange Agent Agreement Between Pennzoil Company and Texas
Commerce Bank National Association
+5 Opinion of Baker & Botts, L.L.P.
*12.1 Computation of Ratio of Earnings to Fixed Charges for the years ended
December 31, 1996, 1995, 1994, 1993 and 1992 (Pennzoil Company 10-K
(1996), SEC File No. 1-5591, Exhibit 11)
*12.2 Computation of Ratio of Earnings to Fixed Changes for the nine months
ended September 30, 1997 and 1996 (Pennzoil Company 10-Q (September 30,
1997), SEC File No. 1-5591, Exhibit 12)
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Ryder Scott Company Petroleum Engineers
24 Powers of attorney
25 Form T-1 Statement of Eligibility of Trustee under the Trust Indenture
Act of 1939, as amended, of Texas Commerce Bank National Association
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Letter to Registered Holders and Depository Trust Company
Participants
99.4 Form of Letter to Clients
+99.5 Form of Newspaper Announcement
</TABLE>
- --------
* Incorporated by reference
+ To be filed by amendment.
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<PAGE>
SIGNATURES
The Registrant. Pursuant to the requirements of the Securities Act, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
the State of Texas, on December 22, 1997.
PENNZOIL COMPANY
/s/ James L. Pate
By:__________________________________
(James L. Pate,
Chairman of the Board and
Chief Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ James L. Pate Principal Executive Officer December 22, 1997
____________________________________ and Director
(James L. Pate,
Chairman of the Board and Chief
Executive Officer)
/s/ David P. Alderson, II Principal Financial and December 22, 1997
____________________________________ Accounting Officer
(David P. Alderson, II,
Group Vice President--Finance
and Accounting)
Howard H. Baker, Jr.*
W. J. Bovaird*
W. L. Lyons Brown, Jr.*
Ernest H. Cockrell*
Harry H. Cullen* Directors of Pennzoil
Alfonso Fanjul*
Berdon Lawrence*
Brent Scowcroft*
Gerald B. Smith*
Cyril Wagner, Jr.*
*By: /s/ David P. Alderson, II December 22, 1997
____________________________________
(David P. Alderson, II,
Attorney-in-Fact)
</TABLE>
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<PAGE>
EXHIBIT 1
Dealer-Manager Agreement
January __, 1998
PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 100 19
Ladies and Gentlemen:
This agreement (the "Agreement") will confirm the understanding between
Pennzoil Company, a Delaware corporation, and its subsidiaries (collectively,
the "Company") and PaineWebber Incorporated ("PaineWebber") pursuant to which
the Company has retained PaineWebber to act as its exclusive dealer manager, on
the terms and subject to the conditions set forth herein, in connection with the
proposed offer by the Company to acquire, a portion of the Company's 4 3/4%
Exchangeable Senior Debentures due 2003 and 6 1/2% Exchangeable Senior
Debentures due 2003 (together being the "Securities") and the issuance by the
Company of newly issued exchangeable senior debentures due 2008 (the "New
Debentures"), with a principal amount and bearing an interest rate to be
determined as set forth in the Prospectus referred to below. The New Debentures
will be a series of the Company's debt securities and will be issued under the
Indenture dated as of December 15, 1992 and the Third Supplemental Indenture
dated as of _________,1998 (the "Supplemental Indenture"), both between the
Company and Texas Commerce Bank, N.A (the "Trustee"). The transaction, which is
intended to result in the partial acquisition of the Securities by or on behalf
of the Company as proposed to be accomplished through an exchange of securities
by the Company, is referred to herein as the "Exchange Offer." The making of the
Exchange Offer, the exchange of Securities pursuant thereto, and all related
incidental acts and transactions are hereinafter referred to collectively as the
"Exchange Offer Transactions." The following sets forth the agreement between
the Company and PaineWebber:
<PAGE>
PaineWebber Incorporated
January _______, 1998
Page 2
SECTION 1. Appointment as Dealer Manager.
The Company hereby appoints PaineWebber on an exclusive basis to act as
financial advisor with respect to the Exchange Offer Transactions and as sole
dealer manager for the Exchange Offer, and hereby authorizes PaineWebber to act
as such in connection therewith. PaineWebber agrees to perform those services as
dealer manager with respect to the Exchange Offer as are customarily performed
by PaineWebber in connection with tender offers of a like nature, including (but
not limited to) using its best efforts to solicit tenders of Securities pursuant
to the Exchange Offer and in communicating with other brokers, dealers,
commercial banks and trust companies (collectively, "Dealers"). In soliciting or
obtaining tenders, (i) PaineWebber, as dealer manager, shall not be deemed to be
acting as the agent of the Company other than pursuant to this Agreement or as
the agent of any Dealer, (ii) the Company will not pay any person any commission
or other remuneration, directly or indirectly, for the solicitation of the
Exchange Offer (other than PaineWebber) and (iii) no Dealer shall be deemed to
be acting as the agent of PaineWebber. It is understood that PaineWebber is
being engaged hereunder solely to provide the services described above on behalf
of the Company, and that PaineWebber is not acting as an agent or fiduciary of,
and shall have no duties or liability to, the equity holders of the Company or
any other third party in connection with its engagement hereunder, all of which
are hereby expressly waived.
SECTION 2. Exchange Offer Materials.
Prior to the commencement of the Exchange Offer, the Company agrees to
furnish you, at the Company's expense, with as many copies as you may reasonably
request of (i) each of the documents that is filed with the Securities and
Exchange Commission (the "Commission"), including each registration statement,
preliminary and final prospectus filed with the Commission (such final
prospectus included in such registration statement as amended at the time it
becomes effective is herein called the "Prospectus," except that, if the
prospectus first filed by the Company pursuant to Rule 424(b) of the rules and
regulations of the Commission shall differ from the Prospectus, the term
"Prospectus" shall also include the prospectus first filed pursuant to Rule
424(b)), in connection with the Exchange Offer, (ii) each offering circular,
sales memorandum, term sheet, proposed agreement, invitation to negotiate,
private placement memorandum, solicitation statement, disclosure document, or
other explanatory statement, or other report, filing, document, release or
communication mailed, delivered, published, or filed by or on behalf of the
Company in connection with the Exchange Offer, (iii) each document required to
be filed with the Commission pursuant to the provisions of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), pertaining to the Company
during the term of this Agreement and (iv) each appendix, attachment,
modification, amendment or supplement to any of the foregoing and all related
documents, including but not limited to each related letter of transmittal (each
of (i), (ii), (iii) and (iv), an "Exchange Offer Document" and, collectively,
the "Exchange Offer Documents"). At the commencement of the Exchange Offer, the
<PAGE>
PaineWebber Incorporated
January _______, 1998
Page 3
Company shall cause timely to be delivered to each registered holder of any
Securities legally or contractually entitled thereto, each Exchange Offer
Document and any other offering materials prepared expressly for use by holders
of Securities tendering, voting, or otherwise participating in the Exchange
Offer, together with a return envelope. Thereafter, to the extent practicable,
until the expiration of the Exchange Offer, the Company shall use its best
efforts to cause copies of such materials and a return envelope to be mailed to
each person who becomes a holder of any Securities.
The Company agrees that, at a reasonable time prior to using any material
in connection with the Exchange Offer or filing any such material with the
Commission or any other federal or state agency, commission or instrumentality,
the Company will submit copies of such material to PaineWebber and will consult
with PaineWebber and give reasonable consideration to its comments, if any, with
respect thereto. In connection with the Exchange Offer, if the Company (a) uses
or permits the use of, or files with the Commission or any other governmental or
regulatory agency, authority or instrumentality, any Exchange Offer Document
that (i) has not been submitted to PaineWebber on a timely basis for
PaineWebber's comments or (ii) has been so submitted and with respect to which
PaineWebber reasonably objects or (b) shall have breached any of its
representations, warranties, agreements, or covenants herein, then PaineWebber
shall be entitled to withdraw as a dealer manager in connection with the
Exchange Offer, without any liability or penalty to PaineWebber or any other
Indemnified Person (as defined in paragraph 6 hereof) for such withdrawal and
without loss of any right to indemnification or contribution provided in this
Agreement or to the payment of all fees and expenses payable hereunder that have
accrued to the date of such withdrawal. In the event of any such withdrawal, for
the purpose of determining the fees payable to PaineWebber pursuant to this
Agreement, PaineWebber shall remain entitled to receive the payment of all fees
and expenses payable under this Agreement that have accrued to the date of any
such withdrawal. The Company recognizes and confirms that, in connection with
the Exchange Offer, PaineWebber will be using and relying upon (i) information
(both written and oral), documents (including the Exchange Offer Documents) and
data furnished by the Company to PaineWebber, and (ii) information available
from filings made by the Company pursuant to the Exchange Act which have been
approved for such use by the Company (collectively the "Information"). The
Company further recognizes that PaineWebber does not assume responsibility for
the accuracy or completeness of the Information and will not undertake to
independently verify its accuracy or completeness.
The Company agrees that any reference to PaineWebber or any affiliate of
PaineWebber in any Exchange Offer Document or any release or written
communication, is subject to PaineWebber's prior approval. If PaineWebber
resigns prior to the dissemination of any Exchange Offer Document or any release
or communication, no reference shall be made therein to PaineWebber.
<PAGE>
PaineWebber Incorporated
January _______, 1998
Page 4
SECTION 3. Compensation.
The Company will pay PaineWebber for services to be rendered by PaineWebber
hereunder as set forth in the compensation provisions of the agreement dated
August 1, 1997, between Pennzoil Company and PaineWebber (the "Prior
Agreement"), and the amendment thereto dated December 19, 1997 (the
"Amendment") which compensation provisions are incorporated as if restated
herein in full and shall remain as a part of this Agreement notwithstanding any
termination, amendment or purported invalidity of the Prior Agreement or
Amendment. A form of the Prior Agreement and Amendment is attached hereto as
Exhibit A.
SECTION 4. Expenses; Reimbursement Thereof.
The Company will pay or cause to be paid (i) all fees and expenses relating
to the preparation, printing, filing, mailing and publishing of all documents
pertaining to the Exchange Offer; (ii) all fees and expenses of any depositary,
information agent or other agents, attorneys and other persons retained by the
Company in connection with the Exchange Offer; (iii) all fees, if any, payable
to Dealers (including PaineWebber) as reimbursement for their customary mailing
and handling expenses in forwarding materials related to the Exchange Offer to
their customers; (iv) all advertising charges; and (v) all other fees and
expenses incurred in connection with or relating to the Exchange Offer. In
addition, the Company agrees to reimburse PaineWebber and its affiliates,
promptly upon request, for all out-of-pocket expenses, including (without
limiting the foregoing) the fees, costs and expenses of PaineWebber's legal
counsel, incurred in connection with the Exchange Offer Transactions.
SECTION 5. Limitation on Liability.
Neither PaineWebber nor any affiliate thereof shall have any liability to
the Company or any affiliate thereof for any losses, claims, damages,
liabilities or expenses ("Liabilities") arising from any act or omission on the
part of any Dealer, or from PaineWebber's acts or omissions in performing its
obligations hereunder or otherwise in connection with the Exchange Offer
Transactions, except to the extent that such Liabilities are finally judicially
determined by a court of competent jurisdiction to have resulted primarily from
PaineWebber's willful misconduct or gross negligence.
SECTION 6. Indemnification and Contribution.
The Company hereby agrees (i) to indemnify and hold harmless PaineWebber,
its affiliated companies, and each of PaineWebber's and such affiliated
companies' respective officers, directors, agents, employees and controlling
persons (within the meaning of Section 20 of the Exchange Act and Section 15 of
the Securities Act of 1933, as amended (the "Securities Act")) (each of the
foregoing, including PaineWebber, being hereafter sometimes called an
"Indemnified Person"), to the
<PAGE>
PaineWebber Incorporated
January _______, 1998
Page 5
fullest extent permitted by law from and against any and all Liabilities,
actions (including shareholder derivative actions), proceedings, investigations
(whether formal or informal) or inquiries, or threats thereof, based on or
arising out of (1) any untrue statement or alleged untrue statement of any
material fact in any Exchange Offer Document, (2) any omission or alleged
omission of any material fact required to be stated in any Exchange Offer
Document or necessary to make the statement made in any Exchange Offer Document,
in light of the circumstances under which it was made, not misleading, (3) any
withdrawal, termination or cancellation of any one or more of the Exchange Offer
Transactions for any reason whatsoever, (4) any tender, purchase, exchange or
other acquisition by the Company or any affiliate thereof of Securities
(including, without limiting the foregoing, any purchase prior to the date
hereof as to which PaineWebber acted as broker or dealer), (5) any violation by
or conflict of the Exchange Offer or any of the Exchange Offer Transactions of
or with any law, rule, regulation, order, award, judgment, determination, writ,
injunction or decree of any United States federal, state, local or foreign court
or governmental authority, (6) any breach by the Company of any representation
or warranty or any failure to comply with any of the agreements contained herein
or any agreement relating to the Exchange Offer or the Exchange Offer
Transactions, or (7) the Exchange Offer, the Exchange Offer Transactions or
PaineWebber's engagement hereunder, and (ii) in connection with the foregoing
obligations, to reimburse each Indemnified Person for all expenses (including
fees, disbursements and other charges of counsel) as they are incurred by such
Indemnified Person in connection with investigating, preparing to defend or
defending any such action (including actions brought by the Company or the
Company's equity holders or derivative actions brought by any person claiming
through the Company or in the Company's name), proceeding, investigation or
inquiry, or threat thereof, whether or not any such action, proceeding,
investigation or inquiry is actually or formally commenced or any such
Indemnified Person is a party thereto or subject thereof. Notwithstanding the
foregoing, the Company shall not be obligated to indemnify any such Indemnified
Person under this Section 6 with respect to any Liability, and amounts paid in
reimbursement of expenses under this Section 6 shall be refunded, to the extent,
but only to the extent, that it is finally judicially determined (i) that such
Liability resulted primarily from an untrue statement of any material fact in
any Exchange Offer Document or any omission to state any material fact required
to be stated in any Exchange Offer Documents, or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading, if, in any such case, such statement or omission was made
in such Exchange Offer Documents in reliance upon and in conformity with written
information prepared by and relating to PaineWebber and furnished to the Company
in writing by PaineWebber or (ii) in the case of Liabilities against which
Indemnified Persons are indemnified solely under clause (i)(7) of the preceding
sentence, that such Liability resulted primarily from the willful misconduct or
gross negligence of such Indemnified Person. If multiple claims are brought
against any Indemnified Person in an arbitration or other proceeding and at
least one such claim is based upon, relates to or arises out of PaineWebber's
services hereunder or any Indemnified Person's role thereunder, the Company
agrees that any award, judgment and other liabilities resulting therefrom shall
be deemed conclusively to be based on, relate to or arise out of PaineWebber's
services hereunder or any
<PAGE>
PaineWebber Incorporated
January _______, 1998
Page 6
Indemnified Person's role thereunder, except to the extent that such award or
judgment expressly states that the award or judgment, or any portion thereof is
based solely upon, relates to or arises out of other matters for which
indemnification is not available hereunder.
If any litigation, proceeding or investigation is instituted or threatened
against any Indemnified Person in respect of which indemnity may be sought
against the Company pursuant to this Section 6, such indemnified person shall
promptly notify the Company thereof, but the omission so to notify the Company
shall not relieve the Company from any obligation or liability under this
Section 6, unless, and only to the extent that, such omission so to notify
results in the loss of substantive rights or defenses. If any such litigation or
proceeding shall be brought against any Indemnified Person, the Company shall be
entitled to participate in such litigation or proceeding and, after written
notice from the Company to such Indemnified Person, to assume the defense of
such litigation or proceeding with counsel of the Company's choice at its
expense; provided, however, that such counsel shall be satisfactory to the
Indemnified Person. Notwithstanding the election of the Company to assume the
defense of such litigation or proceeding, such Indemnified Person shall have the
right to employ separate counsel and to control its own defense of such
litigation or proceeding, and the Company shall bear the fees and disbursements
of such separate counsel, if, in the reasonable opinion of counsel to such
Indemnified Person, (i) there may be legal defenses available to such
Indemnified Person or to other Indemnified Persons that are different from or
additional to those available to the Company or (ii) a conflict or potential
conflict otherwise exists between such Indemnified Person and the Company that
would make such separate representation advisable; provided, however, that the
Company shall not under any circumstances be liable hereunder for the expenses
of more than one firm of attorneys in any jurisdiction in any one legal action
or group of related legal actions. The Company agrees that it will not, without
the prior written consent of PaineWebber, settle or compromise or consent to the
entry of any judgment in any pending or threatened claim, action or proceeding
relating to the Exchange Offer Transactions or PaineWebber's engagement
hereunder (whether or not any Indemnified Person is a party thereto) unless such
settlement, compromise or consent includes an unconditional release of
PaineWebber and each other Indemnified Person from all liability. arising or
that may arise out of such claim, action or proceeding.
If the indemnification provided for in this Section 6 is held by a court of
competent jurisdiction to be unavailable to any Indemnified Person in respect of
any Liabilities referred to herein (other than as a consequence of a final
judicial determination as set forth in the second sentence of the first
paragraph of this Section 6), then the Company in lieu of indemnifying such
Indemnified Person, shall contribute to the amount paid or payable by such
Indemnified Person as a result of such Liabilities in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and by such Indemnified Person on the other from the Exchange Offer
Transactions. If the allocation provided in the preceding sentence is not
permitted by applicable law, or as a consequence of a final judicial
determination as set forth in the second sentence of the first paragraph
<PAGE>
PaineWebber Incorporated
January _______, 1998
Page 7
of this Section 6, then the Company agrees to contribute to the amount paid or
payable by such Indemnified Person as a result of such Liabilities in such
proportion as is appropriate to reflect not only the relative benefits referred
to in the preceding sentence, but also the relative fault of the Company on the
one hand and of such Indemnified Person on the other in connection with the
statements or omissions or other actions relating to or in connection with the
Exchange Offer Transactions or PaineWebber's engagement hereunder that resulted
in such Liabilities. Notwithstanding the foregoing, in no event shall the
aggregate amount contributed by the Indemnified Persons taking into account the
contribution of Company as described above exceed the amount of fees actually
paid to PaineWebber by Company pursuant to this Agreement in connection with the
Exchange Offer Transactions. The relative benefits received by the Company on
the one hand and PaineWebber on the other shall be deemed to be in the same
proportion as (i) the aggregate value of the maximum number of Securities
offered to be exchanged pursuant to the Exchange Offer bears to (ii) the fees
paid to PaineWebber pursuant to this Agreement. The relative fault of the
Company on the one hand and of PaineWebber on the other shall be determined by
reference to, among other things, whether any untrue or alleged untrue statement
of, or any omission or alleged omission to state, a material fact relates to
information supplied by the Company or by PaineWebber and by reference to the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The foregoing indemnification and
contribution agreement shall be in addition to any rights that any Indemnified
Person may have at common law, by separate agreement or otherwise.
SECTION 7. Representations, Warranties and Covenants.
The Company represents and warrants to, and covenants with, PaineWebber that:
(i) The Company is a corporation duly organized and validly
existing in good standing under the laws of the jurisdiction of its
incorporation.
(ii) The Company has taken all necessary corporate action to
authorize the Exchange Offer.
(iii) This Agreement has been duly authorized, executed and
delivered by, and is a legal, valid and binding agreement of, the Company
and is enforceable against Company in accordance with its terms.
(iv) The Exchange Offer Transactions comply and will comply in
all material respects with all applicable requirements of law, the
corporate laws of the state in which the Company is incorporated and any
applicable state "blue sky" laws.
<PAGE>
PaineWebber Incorporated
January _______, 1998
Page 8
(v) When the registration statement filed in connection with the
Exchange Offer (the "Registration Statement") becomes effective and at all times
subsequent thereto up to and including the date on which the Company commences
the Exchange Offer (the "Commencement Date"), the initial termination date of
the Exchange Offer (the "Effective Date of Exchange"), which shall be
______________, 1998 and, if the Exchange Offer is extended in accordance with
its terms, such subsequent expiration date of the Exchange Offer (the "Further
Effective Date of Exchange"), (a) the Registration Statement and Prospectus, and
any amendments or supplements thereto, and the other Exchange Offer Documents,
and any supplements thereto, will contain all statements that are required to be
stated in accordance with the Securities Act, the Exchange Act and the Trust
Indenture Act of 1939, as amended (together with the rules and regulations
thereunder, the "Trust Indenture Act") and will in all material respects conform
to the requirements of the Securities Act, the Exchange Act and the Trust
Indenture Act, (b) the Registration Statement and any amendment or supplement
thereto at their respective effective dates will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
(c) the Prospectus and the other Exchange Offer Documents, together with any
supplement thereto, will not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
except that this representation and warranty does not apply to statements or
omissions made in reliance upon and in conformity with information relating to
PaineWebber, furnished in writing to the Company in connection with the
Registration Statement or Prospectus and the other Exchange Offer Documents or
any amendment or supplement thereto by PaineWebber expressly for use in the
Registration Statement or Prospectus or such other Exchange Offer Documents or
to statements or omissions in that part of the Registration Statement which
shall constitute the Statement of Eligibility and Qualification under the Trust
Indenture Act (Form T-1) of the Trustee.
<PAGE>
PaineWebber Incorporated
January _______, 1998
Page 9
(vi) The consolidated financial statements included and
incorporated by reference in the Registration Statement and Prospectus
present fairly the consolidated financial position of the Company and its
consolidated subsidiaries as at the dates indicated and the consolidated
results of their operations for the periods specified and have been
prepared in conformity with generally accepted accounting principles
applied on a consistent basis during the periods involved, except as
indicated therein, and the supporting schedules incorporated by reference
in the Registration Statement present fairly the information required to be
stated therein.
(vii) The issuance and delivery of the New Debentures, the
execution and delivery of this Agreement and the Supplemental Indenture,
the consummation of the transactions herein and therein contemplated,
and compliance with the terms hereof and thereof do not and will not
conflict with, or result in a breach of, any of the terms or provisions of,
or constitute a default under, the Certificate of Incorporation or By-Laws,
as amended, of the Company or any of its subsidiaries or any material
indenture, mortgage, or other agreement or instrument to which the Company
or any of its subsidiaries is a party or by which any of their respective
properties are bound, or any applicable law, rule, regulation, judgment,
order or decree of any government, governmental instrumentality or court,
domestic or foreign, having jurisdiction over the Company or any of its
subsidiaries or any of their respective properties; and no consent,
approval, authorization or order of any government, governmental
instrumentality or court, domestic or foreign, is required for the valid
authorization, issuance and delivery of the New Debentures, the valid
authorization, execution, delivery and performance by the Company of this
Agreement and the Supplemental Indenture or the consummation by the Company
of the transactions contemplated by this Agreement and the Supplemental
Indenture, except such as are required under the Securities Act, the
Exchange Act, the Trust Indenture Act and the securities or Blue Sky laws
of the various states.
(viii) The Supplemental Indenture has been duly authorized by the
Company and, when duly executed and delivered by the Company, will
constitute a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms and will have been duly
qualified under the Trust Indenture Act.
<PAGE>
PaineWebber Incorporated
January _______, 1998
Page 10
(ix) The New Debentures to be issued pursuant to the Supplemental
Indenture have been duly authorized, and when duly executed by the Company
and authenticated by the Trustee pursuant to the provisions of the
Supplemental Indenture and delivered in accordance with the terms of the
Exchange Offer, will be duly issued and will constitute valid and binding
obligations of the Company, the holders thereof will be entitled to the
benefits of the Supplemental Indenture.
(x) The New Debentures and the Supplemental Indenture conform in
all material respects to the descriptions thereof in the Prospectus.
(xi) The Company represents that the Exchange Offer Documents
have been or will be prepared and approved by, and are the sole
responsibility of, the Company, and the Company authorizes PaineWebber to
use the Exchange Offer Documents in connection with Exchange Offer
Transactions. PaineWebber agrees that it shall not use any materials in
connection with the exchange for New Debentures other than the Exchange
Offer Documents and such other materials, if any, as the Company may
approve (except for materials only for PaineWebber's own internal use that
are derived by PaineWebber only from the Exchange Offer Documents or from
filings made by the Company pursuant to the Exchange Act), and will provide
no oral information that is not contained in, or consistent with, the
Exchange Offer Documents or the Information.
(xii) The Company has no knowledge that any legal or
governmental proceeding has been instituted or threatened against the
Company that seeks to enjoin the Exchange Offer or that otherwise would
affect the making of the Exchange Offer or the consummation of the
transactions contemplated thereby.
(xiii) Except as described in or contemplated by the Prospectus,
there has not been any material adverse change in, or any adverse
development that materially affects, the business, properties, financial
condition or results of operations of the Company taken as a whole from the
dates of which information is given in the Prospectus.
(xiv) Neither the Company nor any affiliate thereof shall
publicly disclose or refer to any opinion or advice rendered by PaineWebber
to the Company without PaineWebber's prior written consent.
<PAGE>
PaineWebber Incorporated
January _______, 1998
Page 11
SECTION 8. Certain Events.
The Company will advise PaineWebber promptly of (i) the occurrence of any
event that might reasonably cause the Company to withdraw, rescind or terminate
the Exchange Offer, or that might reasonably permit the Company to exercise any
right not to purchase Securities tendered pursuant to the Exchange Offer or to
consummate the transactions contemplated in the Prospectus, (ii) any material
information relating to the Exchange Offer, including, without limitation, any
proposal or requirement to make, amend or supplement any filing required by the
Exchange Act, (iii) the issuance of any comment or order or the taking of any
other action by the Commission or any Other Agency concerning the Exchange
Offer, and (iv) any other information relating to the Exchange Offer or the
transactions contemplated in the Prospectus that PaineWebber may from time to
time reasonably request.
SECTION 9. Securityholder Information.
The Company will cause PaineWebber to be provided, to the extent the same
is available to the Company, with any cards or lists showing the names and
addresses of, and the number of Securities held by, the holders of Securities as
of a recent date and will endeavor to cause PaineWebber to be advised from day
to day during the period of the Exchange Offer as to any transfers of record of
the Securities known to the Company.
The Company has appointed Texas Commerce Bank National Association to serve
as Exchange Agent and Depositary in connection with the Exchange Offer and has
instructed the Exchange Agent and Depositary to advise you daily as to such
matters as you may reasonably request.
SECTION 10. Miscellaneous.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York applicable to agreements made and to be performed
entirely in such state.
The Company, by its execution of this Agreement, hereby consents to the
jurisdiction of the courts of, and consents to be sued in any court in, the
County of New York of the State of New York or in the United States District
Court for the Southern District of New York in any action or proceeding brought
by PaineWebber or any other Indemnified Person under this Agreement. Service of
process on the Company may be effected by mailing process, by registered mail,
return receipt requested, to the Company at the address set forth above, with a
copy to [David P. Alderson].
<PAGE>
PaineWebber Incorporated
January _______, 1998
Page 12
The Company and PaineWebber each hereby irrevocably waive any right they
may have to a trial by jury in respect of any claim based upon or arising out of
this Agreement or the transactions contemplated hereby.
The agreements contained in Sections 3, 5 and 6 and the representations and
warranties contained in Sections 2 and 7 shall remain operative and in full
force regardless of (i) any failure to commence, or the withdrawal, termination
or consummation of, the Exchange Offer, (ii) any investigation made by or on
behalf of any Indemnified Person, (iii) any withdrawal by PaineWebber as dealer
manager for the Exchange Offer pursuant to Section 2 or otherwise or (iv) any
termination of this Agreement.
Simultaneously with the execution and delivery of this Agreement, the
Company shall deliver to you the opinion of Baker & Botts, L.L.P., counsel for
the Company, in the form attached hereto as Exhibit B.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto, and the respective successors and permitted assigns of each, and
shall inure to the benefit of the parties hereto and the other Indemnified
Persons, and the respective successors and permitted assigns of the foregoing.
If any provision of this Agreement shall be determined to be invalid or
unenforceable in any respect, such determination shall not affect such provision
in any other respect or any other provision of this Agreement, which shall
remain in full force and effect. This Agreement may not be amended or otherwise
modified or waived except by an instrument in writing signed by both PaineWebber
and the Acquiring Company.
This Agreement may be executed in counterparts, each of which shall be
deemed an original but all of which together shall be considered a single
instrument.
The Prior Agreement dated August 1, 1997, and the Amendment between
PaineWebber and the Company shall remain operative and in full force. Except as
set forth in the preceding sentence, this Agreement sets forth our entire
agreement with you with respect to the subject matter hereof, and supersedes any
prior agreements or understandings (whether written or oral) between us with
respect thereto.
<PAGE>
PaineWebber Incorporated
January _______, 1998
Page 13
Please confirm that the foregoing is in accordance with your understanding by
signing and returning to us the enclosed copy of this letter.
Very truly yours,
PENNZOIL COMPANY
By:
----------------------------
Name:
Title:
Accepted and Agreed to as of
the date first written above:
PAINEWEBBER INCORPORATED
By:
-----------------------------
Name:
Title:
<PAGE>
EXHIBIT 4.2
================================================================================
PENNZOIL COMPANY
AND
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
As Trustee
----------------------
Third Supplemental Indenture
Providing for
_____% Exchangeable Senior Debentures Due _______________, 2008
Dated as of _______________, 1998
Supplementing Indenture dated as of December 15, 1992
================================================================================
<PAGE>
THIRD SUPPLEMENTAL INDENTURE, dated as of _______________, 1998
("Third Supplemental Indenture") between PENNZOIL COMPANY, a corporation
organized and existing under the laws of the State of Delaware (hereinafter
called the "Company"), and TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national
banking association, incorporated and existing under the laws of the United
States of America, having its principal corporate trust office in the City of
Houston, Texas (hereinafter called the "Trustee").
WHEREAS, the Company has executed and delivered its Indenture dated as
of December 15, 1992 (hereinafter called the "Indenture"), to provide for the
issue of one or more series of debt securities of the Company; and
WHEREAS, Section 901 of the Indenture authorizes the Company and the
Trustee to enter into supplemental indentures to establish the form or terms of
securities of any series as permitted by sections 201 and 301 of the Indenture;
and
WHEREAS, to so provide for the establishment of such a series, the
Company has authorized the execution of this Third Supplemental Indenture to the
Indenture and has requested the Trustee to execute the Third Supplemental
Indenture; and
WHEREAS, all conditions and requirements necessary to make this Third
Supplemental Indenture a valid, binding and legal instrument have been done
and performed and the execution and delivery hereof have been in all respects
duly authorized, including the delivery to the Trustee of the Opinion of Counsel
referenced in Section 903 of the Indenture;
NOW, THEREFORE, THIS THIRD SUPPLEMENTAL INDENTURE WITNESSETH that the
Company and the Trustee hereby covenant, declare and agree as follows:
ARTICLE ONE
101. Third Series of Debentures.
There shall be a series of Securities (capitalized terms used herein
and not otherwise defined have the meanings given to such terms in the
Indenture) designated "____% exchangeable senior debentures due _______________,
2008" (herein sometimes referred to as "Debentures"), and the form thereof,
which shall be established by Board Resolution, shall contain suitable
provisions with respect to the matters hereinafter in this Section 101
specified. Debentures shall mature on and bear interest and be limited in
aggregate principal amount as to each maturity as set forth below:
Aggregate Interest
Principal Rate
Amount Maturity Per Annum
---------------- -------------- ----------
$_____________ February 1, 2008 ____%
<PAGE>
Debentures shall be issued as Registered Securities in denominations of U.S.
$1,000; interest on Debentures shall be payable semiannually on February 1 and
August 1 of each year, commencing August 1, 1998. The Place of Payment with
respect to the Debentures maintained in accordance with Section 1002(A) of
the Indenture is Texas Commerce Trust Company, 80 Broad Street, 4th Floor, New
York, New York 10004, and Texas Commerce Bank National Association, 600 Travis
Street, 8th Floor, Houston, Texas 77002.
102. Exchange or Transfer.
Upon any exchange or transfer of Debentures, the Company may make a
charge therefor sufficient to reimburse it for any tax or taxes or other
governmental charge, as provided in Section 305 of the Indenture, but the
Company hereby waives any right to make a charge in addition thereto for any
exchange or transfer of Debentures.
103. Redemption.
(a) The Debentures shall be subject to redemption upon not less than
30 nor more than 60 days' prior notice as provided in Sections 107 and 1104 of
the Indenture at any time on or after February 1, 2000, in whole or from time to
time in part, at the option of the Company, at the following redemption prices
(expressed as a percentage of the principal amount at maturity) if redeemed
during the 12-month period beginning February 1 of the following years:
Redemption
Year Price
---- -----
2000.................
2001.................
2002.................
2003.................
2004.................
2005.................
2006.................
2007.................
in each case together with accrued interest to the redemption date, provided,
however, that installments of interest on Securities whose Stated Maturity is on
or prior to the Redemption Date shall be payable to the Holders of such
Securities, registered as such at the close of business on the relevant Regular
Record Dates according to their terms and the provisions of Section 307 of the
Indenture.
-3-
<PAGE>
(b) Notice of intention to redeem the Debentures in whole or in part
shall be given in accordance with Section 1104 of the Indenture.
104. Sinking Fund.
The Debentures shall not be entitled to the benefits of any sinking
fund provisions.
105. Tax Matters.
In addition to the conditions set forth in Section 401 of the
Indenture, the right of the Company to satisfy the Indenture with respect to the
Debentures to the extent set forth in Section 401 of the Indenture shall be
subject to the condition that the Company has delivered to the Trustee an
Opinion of Counsel (as defined in the Indenture) that the satisfaction and
discharge pursuant to Section 401 of the Indenture will not cause the Holders of
the Debentures to recognize income, gain or loss for United States federal
income tax purposes.
In addition to the conditions set forth in Section 403 of the
Indenture, the right of the Company to satisfy the Indenture with respect to the
Debentures to the extent set forth in Section 403 of the Indenture shall be
subject to the conditions that the Company shall have received from, or there
shall have been published by, the United States Internal Revenue Service a
ruling to the effect that the satisfaction and discharge to the extent set forth
in Section 403 of the Indenture will not cause the Holders of the Debentures to
recognize income, gain or loss for United States federal income tax purposes.
106. Issuance of Debentures.
Upon the delivery of this Third Supplemental Indenture, Debentures in
the aggregate principal amount of $_________ shall be issued and be Outstanding
as provided in the Indenture.
ARTICLE TWO
201. Right of Exchange.
Subject to and upon compliance with the provisions of this Section
201, at the option of the Holder thereof, beginning _______________, 1998, any
Debenture or any portion of the principal amount thereof which is $1,000 or an
integral multiple of $1,000, may (unless the Company shall have elected,
pursuant to Section 216 hereof, to pay to the Holder an amount in cash equal to
the value of the Exchange Property, in which case the provisions of Section 216
hereof shall be followed), at any time on or before the close of business on
February 1, 2008, or in the case of Debentures or portions thereof called for
redemption in accordance with Section 1101 of the Indenture, on or before the
close of business on the Business Day next preceding the Redemption Date, be
exchanged for fully paid and nonassessable shares (calculated as to each
exchange to the nearest 1/10,000 of a share) of Chevron Common Stock (as defined
in Section 219 hereof) (or such
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other securities, property or cash as shall be added to such Chevron Common
Stock or as such Chevron Common Stock shall have been changed into pursuant to
this Article Two) at the Exchange Rate (as defined below) hereinafter provided.
The rate at which shares of Chevron Common Stock shall be deliverable
upon exchange (herein called the "Exchange Rate") shall be initially 0.823
shares of Chevron Common Stock for each $1,000 principal amount of Debentures
exchanged. The Exchange Rate shall be subject to adjustment as provided in
Sections 204, 205, 211 and 215 hereof.
202. Method of Exchange.
In order to exercise the right of exchange, the Holder shall surrender
such Debenture to the Exchange Agent (as defined in Section 219 hereof) for
exchange by delivering such Debenture to, or mailing such Debenture by
registered mail, postage prepaid, addressed to the Exchange Agent at the office
or agency of the Company, maintained for that purpose pursuant to Section 1002
of the Indenture, accompanied in each case by written notice to the Company and
the Exchange Agent that the Holder elects to exchange such Debenture, or, if
less than the entire principal amount of such Debenture is to be exchanged, the
portion thereof to be exchanged.
The notices in the above paragraph shall also state the name or names
(with address) in which the certificate or certificates for shares of Chevron
Common Stock or, to the extent applicable, other Exchange Property which shall
be issuable on such exchange shall be issued. Debentures surrendered for
exchange shall be accompanied (if so required by the Company or the Exchange
Agent) by proper assignments thereof to the Company.
If the Company does not elect to deliver cash in lieu of Chevron
Common Stock or other Exchange Property pursuant to Section 216 hereof, as
promptly as practicable after the proper surrender of such Debenture for
exchange as aforesaid (subject however to the following paragraph of this
Section 202 and Section 216 hereof) and in accordance with the procedures set
forth in the Exchange Agreement (as defined in Section 219 hereof), the Company
shall or shall cause the Exchange Agent to deliver to such Holder, or on his
written order a certificate or certificates for the number of whole shares of
Chevron Common Stock and/or any other Exchange Property deliverable upon
exchange of such Debenture (or specified portion thereof). In addition,
provision shall be made for any fraction of a share as provided in Section 203
hereof and any payment of interest as provided by the following paragraph. Such
exchange shall be deemed to have been effected immediately prior to the close of
business on the date on which such Debenture shall have been properly
surrendered for exchange as aforesaid, which shall be the date on which such
Debenture and notice and any such required payment and assignment shall be
received by the Exchange Agent, and at such time the rights of the Holder of
such Debenture as a Debenture holder shall cease and the Person or Persons in
whose name or names any certificate or certificates for shares of Chevron Common
Stock or other Exchange Property shall be deliverable upon such exchange shall,
as between such Person or Persons and the Company, be deemed to have become the
Holder or Holders of record of the shares or other property represented thereby.
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Upon any exchange of a Debenture pursuant to this Article Two (i) if
the Debenture to be exchanged has been called for redemption by the Company, the
Holder shall receive accrued interest thereon through the date an exchange under
this Section 202 is deemed effective and (ii) if the Debenture to be exchanged
has not been called for redemption by the Company, the Holder shall not receive
any payment of accrued and unpaid interest.
Delivery of such certificate or certificates and of any check for any
cash or other Exchange Property may be delayed for a reasonable period of time
at the request of the Company in order to effectuate the calculations of the
adjustments pursuant to this Article Two, to obtain any certificate representing
securities to be delivered, to complete any reapportionment of the shares of
Chevron Common Stock or other Exchange Property apportioned thereto which is
required by this Article Two or to comply with any applicable law. If, between
the date an exchange under this Section 202 is deemed effected and the date of
delivery of the applicable security or securities, such security or securities
shall cease to have any or certain rights, or a record date or effective date of
a transaction to which Section 204, 205 or 211 hereof applies shall occur, the
Person entitled to receive such security or securities shall be entitled only to
receive such security or securities as so modified and any dividends or proceeds
received thereon on or after the date such exchange is deemed effected and none
of the Company, the Trustee and the Exchange Agent shall be otherwise liable
with respect to the modification of such security or securities, from the date
such exchange is deemed effected and the date of such delivery.
Except as otherwise expressly provided in this Article Two, no payment
or adjustment shall be made upon any exchange on account of any interest accrued
on the Debentures surrendered for exchange or on account of any dividends on the
Chevron Common Stock or other Exchange Property delivered upon such exchange;
provided, however that interest accrued on any Debentures surrendered for
exchange on or after any Regular Record Date and before any Interest Payment
Date relating thereto shall be paid to, as applicable, the Holder of record as
of such record date.
In the case of any Debenture which is exchanged in part only, upon
such exchange the Company shall execute and the Trustee shall authenticate and
deliver to the Holder thereof, at the expense of the Company, a Debenture or
Debentures of authorized denominations in principal amount equal to the
unexchanged portion of such Debenture.
203. Fractional Interests.
No fractional shares of Chevron Common Stock (or any form of
fractional interest in any other security or property which is part of the
Exchange Property) shall be delivered upon exchanges of Debentures. If more
than one Debenture shall be surrendered for exchange at one time by the same
Holder, the number of whole shares (or other integral units of such other
securities or property), which shall be delivered upon exchange shall be
computed by the Company on the basis of the aggregate principal amount of the
Debentures (or specified portions thereof to the extent permitted hereby) so
surrendered. Instead of any fractional share (or other fractional unit) which
would otherwise be deliverable upon exchange of any Debenture or Debentures (or
specified
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portions thereof), the Exchange Agent on behalf of the Company shall pay, on the
date the exchange is deemed to be effected, a cash adjustment in respect of such
fractional interest in an amount equal to the same fraction of the Market Price
(as defined in Section 219 hereof) per share of the Chevron Common Stock (or per
unit of such other security or property) on the Business Day next preceding the
date the exchange is deemed to be effected. The Company shall authorize the
Exchange Agent to obtain the funds necessary or anticipated by the Exchange
Agent to be necessary, for payment of such fractional interests by the sale of
shares of Chevron Common Stock (or other securities or property which are part
of the Exchange Property) held by the Exchange Agent, provided that after such
sale the number of shares of Chevron Common Stock (and of such other securities
or property) held by the Exchange Agent shall be sufficient to permit the
exchange of all Outstanding Debentures for Chevron Common Stock (and any other
Exchange Property), on the basis of the Exchange Rate then in effect, in
accordance with the provisions of this Article Two. The Company agrees to
furnish or cause to be furnished to the Exchange Agent any additional funds
required to permit such cash payments with respect to fractional interests.
204. Adjustment of Exchange Rate.
(a) In the event Chevron (as defined in Section 219 hereof) shall (i)
pay a dividend on Chevron Common Stock in shares of Chevron Common Stock, (ii)
subdivide the outstanding shares of Chevron Common Stock into a greater number
of shares of Chevron Common Stock, (iii) combine outstanding shares of Chevron
Common Stock into a smaller number of shares of Chevron Common Stock, or (iv)
issue, by reclassification of shares of Chevron Common Stock, any shares of its
common stock (which in any such case shall apply to the shares of Chevron Common
Stock held by the Exchange Agent under the Exchange Agreement), the Exchange
Rate in effect immediately prior thereto shall be proportionately adjusted so
that the Holder of any Debentures thereafter surrendered for exchange shall be
entitled (subject to Sections 215 and 216 hereof) to receive the number and kind
of shares of Chevron Common Stock which such Holder would have owned or have
been entitled to receive after the happening of any of the events described
above, had such Debentures been exchanged immediately prior to the record date
(or if there is no record date, the effective date) of such event. Such
adjustments shall be made whenever any of the events listed above shall occur
and shall become effective as of immediately after the close of business on the
record date in the case of a stock dividend and shall become effective as of
immediately after the close of business on the effective date in the case of a
subdivision or combination or reclassification. Any Holder surrendering any
Debentures for exchange after such record date or such effective date, as the
case may be, shall be entitled to receive shares of Chevron Common Stock at the
Exchange Rate as so adjusted pursuant to this Section 204(a) (subject to
Sections 215 and 216 hereof) and any other Exchange Property apportioned
thereto.
(b) Notwithstanding the foregoing provisions, no adjustment in the
Exchange Rate shall be required unless such adjustment would require an increase
or decrease in such Exchange Rate of more than 1%, provided, however, that any
adjustments which by reason of this paragraph (b) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
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(c) All calculations under this Section 204 shall be made to the
nearest 1/10,000 of a share.
(d) Whenever the Exchange Rate is adjusted as herein provided, the
Company shall determine the adjusted Exchange Rate in accordance with this
Section 204 and shall prepare an Officer's Certificate setting forth such
adjusted Exchange Rate and any cash or other property apportioned to the Chevron
Common Stock and showing in detail the facts upon which such adjustment is
based. Such certificate shall be conclusive evidence of the correctness of such
adjustment. Such certificate shall forthwith be filed with the Exchange Agent
and the Trustee, who may rely on such Officer's Certificate as conclusive
evidence of the correctness of the adjustment. A notice stating that the
Exchange Rate has been adjusted and setting forth the adjusted Exchange Rate and
any cash or other property apportioned to the Chevron Common Stock shall, as
soon as practicable, be mailed by or on behalf of the Company to the Holders of
Debentures at their last addresses as they shall appear upon the Security
Register.
205. Exchange Agreement.
(a) Simultaneously with the execution and delivery of this Indenture
Supplement, the Company is entering into the Exchange Agreement with Texas
Commerce Bank National Association, a national banking association, incorporated
and existing under the laws of the United States of America, as Exchange Agent,
pursuant to which the Company is depositing with the Exchange Agent __________
shares of Chevron Common Stock, which in the aggregate shall initially
constitute the Exchange Property. The Exchange Agent shall be the exchange
agent for the exchange of Debentures for Chevron Common Stock and other Exchange
Property, if any, hereunder. The Company shall deposit with the Exchange Agent
from time to time such additional number of shares of Chevron Common Stock not
already held by the Exchange Agent as the Holders of all Outstanding Debentures
shall from time to time be entitled to receive from the Exchange Agent pursuant
to this Article Two upon exchange thereof.
(b) All cash received by the Exchange Agent as herein provided will be
invested upon written request of the Company by the Exchange Agent from time to
time as so requested by the Company pursuant to the Exchange Agreement. The
Company shall be entitled to all cash dividends paid on the Exchange Property
held by the Exchange Agent except to the extent that such dividends are paid
pursuant to a plan of liquidation or partial liquidation or a recapitalization
or restructuring or other extraordinary cash dividends, and to all interest
payments on any debt securities included in the Exchange Property which Holders
of Debentures may be entitled to receive on exchange hereunder; provided, that
if the Exchange Agent shall receive any such cash dividends or interest to which
the Company is entitled pursuant hereto, the Exchange Agent shall not be
required to transfer to the Company any such dividends or interest to which the
Company is entitled pursuant hereto until receipt of an Officers' Certificate to
the effect that the Company is entitled to such dividends or interest pursuant
hereto. The Company shall also be entitled to any interest or gain on
investments made by the Exchange Agent pursuant to Section 11 of the Exchange
Agreement, which shall be paid to the Company on demand as provided in the
Exchange Agreement. Any loss on such investments shall be for the account of
the Company and the amount thereof shall be
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reimbursed to the Exchange Agent by the Company. The Exchange Agent shall hold
and apply as hereinafter provided all other dividends paid on the Exchange
Property held by the Exchange Agent under the Exchange Agreement.
(c) In case there shall be, at any time while any Debentures are
Outstanding, any distribution of cash, securities or other property on Exchange
Property (other than (i) cash dividends to which the Company is entitled and
interest paid on debt securities, as specified in paragraph (b) of this Section
205, (ii) dividends, subdivisions, combinations and reclassifications for which
an adjustment in the Exchange Rate is made pursuant to Section 204 hereof and
(iii) securities or other property received in a transaction to which Section
211 hereof applies) or in case there shall be granted with respect to any
Exchange Property, any transferable subscription rights, options, warrants or
other similar transferable rights, the Company shall, as soon as reasonably
practicable after its receipt thereof, notify the Exchange Agent of such receipt
and promptly, and in any event within five business days of the receipt thereof,
deposit with the Exchange Agent all such securities and other property,
including any transferable rights, pursuant to the Exchange Agreement, and
concurrently with such deposit, shall (except as provided in the succeeding
paragraph) instruct the Exchange Agent to sell all securities and other property
so received by way of distribution and all rights for cash so distributed in
such manner as the Company shall instruct in writing and shall apply the
proceeds from the sale thereof as hereinafter provided. To the extent that the
Company shall, within 10 days of its notification to the Exchange Agent of the
Company's receipt of such cash, securities or other property, including any
transferrable rights, furnish the Exchange Agent with an Opinion of Counsel to
the effect that such distribution or grant or the sale of the securities or
other property received on such distribution or the rights received by such
grant is taxable to the Company or the Exchange Agent and an Officers'
Certificate as to the amount of federal, state and local tax payable by the
Company and the Exchange Agent as a result of such distribution or grant and
estimated to be payable as a result of such sale (computed by the Company at the
highest marginal tax rates applicable to such transaction or transactions), the
Exchange Agent shall pay to, or to the order of the Company, in the case of
taxes payable by the Company, or itself, in the case of taxes payable by it,
from the cash received in such distribution, if any, or cash apportioned to
Chevron Common Stock hereunder or from the net cash proceeds received from such
sale, the amount of such tax as so computed by the Company. In the case of
taxes estimated to be payable as a result of such sale, the Company shall
deliver an Officers' Certificate within 10 days after completion of such sale
stating the actual taxes payable as so computed and appropriate adjustment of
such payments shall thereupon be made. The remaining portion of such cash
received, if any, and net cash proceeds shall be apportioned equally among the
Exchange Property for which outstanding Debentures are exchangeable as of
immediately after the close of business on the record date for. the distribution
or grant to which this paragraph (c) applies, or, if there is no such record
date, the effective date of such distribution or grant. Any Holder surrendering
any Debentures after such record date, or such effective date, as the case may
be, shall be entitled to receive, in addition to the Exchange Property for which
such Debentures are exchangeable and any cash theretofore apportioned hereunder,
the amount of cash so apportioned to such shares of Chevron Common Stock.
Notwithstanding the foregoing, however, in the event of any such
distribution of securities or other property, including transferable rights,
which is convertible, without payment of
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consideration, into Exchange Property, and which right of conversion does not
expire before the retirement of such securities or other property, the Company
shall, after any sale required for payment of any taxes owed by the Company, or
the Exchange Agent, as provided in the preceding paragraph, instruct the
Exchange Agent to retain and hold all such securities and other property as
additional Exchange Property for apportionment equally among other Exchange
Property for which Debentures are exchangeable as of immediately after the close
of business on the record date for the distribution or grant to which this
Section 205 applies, or, if there is no such record date, the effective date of
such distribution or grant; provided, however, that if the amount of cash
deliverable to the holders of such securities or other property, including
transferable rights, for each unit of such securities or other property upon the
retirement thereof is less than the average of the high and low reported public
sales prices for each such unit for the seven Business Days preceding the date
15 Business Days prior to the date of their retirement the Exchange Agent shall
sell all such securities and other property prior to the third Business Day
prior to the date of their retirement and, after the payment, from the net
proceeds received from such sale by the Exchange Agent, of any taxes incurred by
the Exchange Agent or the Company in connection with such sale, the remaining
cash proceeds of such sale shall be apportioned equally among the Exchange
Property for which Outstanding Debentures are exchangeable as of the Business
Day following the day such sale is concluded.
In the event that a distribution or grant of cash, securities or other
property on Exchange Property shall be effected as contemplated by the two
immediately preceding paragraphs, a notice stating that such distribution or
grant has occurred and setting forth the additional cash, securities or other
property on the Exchange Property shall as soon as practicable be mailed by or
on behalf of the Company to the Holders of Debentures at their last addresses as
they appear upon the Security Register.
In case there shall be, at any time while any Debentures are
outstanding, any distribution or grant to holders of Chevron Common Stock (or
other Exchange Property), including the Company (with respect to any Exchange
Property held by the Exchange Agent), of any nontransferable subscription
rights, options, warrants or other similar nontransferable rights that shall, by
the terms of such rights, permit the Company to distribute such rights to the
Holders of Debentures, then the Company and the Exchange Agent shall cause such
rights to be distributed to the Holders of record of Debentures shown on the
Security Register as of immediately after the close of business on the record
date (and if there is no record date, the close of business on the effective
date) for such distribution or grant; provided, however, that if the Company
shall furnish the Exchange Agent with an Opinion of Counsel to the effect that
such distribution or grant, or such distribution by the Company or the Exchange
Agent to Holders of Debentures, is taxable to the Company or the Exchange Agent
and an Officer's Certificate as to the amount of federal, state and local tax
payable by the Company and the Exchange Agent as a result of such distribution
or grant, the Exchange Agent shall to the extent legally permissible sell for
cash in such manner as the Company shall instruct in writing such of the rights
as shall be sufficient to provide to the Company and the Exchange Agent a cash
payment equal to the amount of taxes payable by the Company and the Exchange
Agent, respectively, arising from such distribution or grant (as computed by the
Company at the highest marginal tax rates applicable to such transaction or
transactions and any sale
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of such rights or, if such sale is not permissible or the proceeds thereof are
not sufficient, the Exchange Agent shall cause an amount of cash held for
exchange by the Exchange Agent (if any) and, if such cash is not sufficient for
the applicable tax payments, an amount of Exchange Property, to be segregated
for the benefit of or delivered to the Company. The remaining Exchange Property
held by the Exchange Agent shall be proportionately adjusted so as to be
apportioned equally to the Debentures outstanding as of immediately after the
close of business on the record date for the distribution or grant to which this
paragraph applies, or, if there is no such record date, immediately after the
close of business on the effective date of such distribution or grant. Any
Holder surrendering any Debentures after such record date, or such effective
date, as the case may be, shall be entitled to receive any Exchange Property
apportioned thereto as so adjusted pursuant to this paragraph.
(d) In the event of any reduction of the principal amount of
Debentures Outstanding (other than as a result of surrender for exchange for
Exchange Property pursuant to this Article Two), as evidenced by the delivery to
the Trustee by the Company of Debentures for cancellation, the Company shall be
entitled to the kind and amount of Exchange Property as shall at the time be in
excess of the kind and amount of Exchange Property which would be required for
the exchange of all Debentures then Outstanding for the Exchange Property on the
basis of the then Exchange Rate and the other terms and provisions of this
Article Two and the Exchange Agreement. Upon expiration of the right to
surrender Debentures for exchange pursuant to this Article Two and the Exchange
Agreement and when all other obligations of the Company shall have been
satisfied under this Article Two and the Exchange Agreement, the Company's
obligation to exchange Debentures for Exchange Property shall be terminated.
(e) The Exchange Agent shall not make any distribution of Exchange
Property to the Company prior to the receipt by the Exchange Agent from the
Company of an Officers' Certificate to the effect that no Event of Default
exists hereunder and no event or condition which with notice or lapse of time or
both would become such an Event of Default and which states in detail the basis
asserted by the Company for such distribution.
(f) The Company shall be entitled to any net income or gain resulting
from investments of cash made by the Exchange Agent pursuant to the Exchange
Agreement and shall reimburse the Exchange Agent for any losses realized in
respect of such investments.
(g) The Company shall have the full and unqualified right and power to
exercise any rights to vote, or to give consents or take any other action in
respect of, the Chevron Common Stock or any other securities included in the
Exchange Property at any time held by the Exchange Agent, and the Exchange Agent
shall have no duty to exercise any such rights. The Company shall not be liable
to any Holder as a result of any vote, or failure to vote, consent or failure to
consent, or any other act or failure to act taken by the Company in respect of
the Chevron Common Stock or any other securities included in the Exchange
Property.
(h) The obligations, covenants and agreements contained in the
Exchange Agreement shall not constitute obligations, covenants or agreements
contained in the Indenture, this
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Third Supplemental Indenture or any of the Debentures and neither the failure by
the Company to observe any obligation, covenant or agreement contained in the
Exchange Agreement (unless such obligation, covenant or agreement shall also be
contained in this Third Supplemental Indenture) nor the failure of the Exchange
Agent to fulfill any obligations, agreements or covenants set forth therein
shall constitute (with or without the giving of notice, the passage of time or
both) an Event of Default; provided, however, that nothing in this paragraph
shall impair the right of a Holder to receive the Exchange Property apportioned
to such Holder's Debentures in exchange for such Debentures in accordance with
the terms and conditions of this Article Two, and nothing in this paragraph
shall impair the rights and remedies of the Trustee and the Holders under
Article Five of the Indenture with respect to a failure by the Company to
observe its express agreements and covenants to cause the exchange of Debentures
actually surrendered for exchange pursuant to this Article Two for Exchange
Property apportioned thereto in accordance with the terms and conditions of this
Article Two.
206. Company to Give Notice of Certain Events.
If at any time:
(a) Chevron shall declare a dividend (or any other distribution) on
the Chevron Common Stock which the Exchange Agent would be required to apply for
the benefit of the Holders of the Debentures in accordance with Section 205
hereof; or
(b) Chevron shall authorize the granting of subscription rights,
options, warrants or other similar rights to holders of Chevron Common Stock; or
(c) there shall occur any reclassification of Chevron Common Stock
(other than a subdivision or combination of outstanding shares of Chevron Common
Stock) or any consolidation or merger to which Chevron is a party and for which
approval of any stockholders of Chevron is required, or the sale or transfer of
all or substantially all of the assets of Chevron; or
(d) there shall occur the voluntary or involuntary dissolution,
liquidation or winding up of Chevron;
then the Company shall as promptly as practicable cause to be filed at the
office or agency maintained pursuant to Section 1002 of the Indenture and cause
to be mailed to the Holders of Debentures at their last addresses as they shall
appear upon the Securities Register a notice stating (x) the date, if known by
the Company, on which a record is to be taken for the purpose of such dividend,
distribution or grant of rights, or, if a record is not to be taken, the date as
of which the holders of Chevron Common Stock of record to be entitled to such
dividend or distribution or grant of rights are to be determined, or (y) the
date, if known by the Company, on which such reclassification, merger,
consolidation, sale, transfer, dissolution, liquidation or winding up is
expected to become effective, and the date as of which it is expected that
holders of Chevron Common Stock of record shall be entitled to exchange their
shares of Chevron Common Stock for
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securities or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up.
207. Covenants by the Company.
So long as any Debentures shall be Outstanding and exchangeable for
Chevron Common Stock or other Exchange Property pursuant to this Article Two,
the Company shall (i) preserve unimpaired the right of each Holder of
Debentures, upon exchange thereof, to receive shares of Chevron Common Stock or
other Exchange Property as such Holder shall from time to time be entitled to
receive in accordance with the provisions of this Article Two, and (ii) not
pledge, mortgage, hypothecate or grant a security interest in, or permit any
mortgage, pledge, security interest or other lien upon, the Exchange Property.
208. Transfer Taxes.
The Company will pay any and all taxes that may be payable in respect
of the transfer and delivery of shares of Chevron Common Stock (or other
securities included in the Exchange Property) pursuant hereto, other than
income, capital gains and similar taxes imposed on any Holder by reason of
exchange of Debentures for Exchange Property; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the delivery, upon an exchange of Debentures, of shares
of Chevron Common Stock (or other securities included in the Exchange Property)
in a name other than that in which the Debentures so exchanged were registered,
and no such transfer shall be made unless and until the Person requesting such
transfer has paid to the Company or the Exchange Agent the amount of any such
tax, or has established to the satisfaction of the Company and the Exchange
Agent that such tax has been paid.
209. Fully Paid Shares.
The Company warrants and covenants that all shares of Chevron Common
Stock delivered upon the exchange of Debentures will be fully paid and
nonassessable and that each Holder of Debentures who receives shares of Chevron
Common Stock or other Exchange Property in exchange for his Debentures pursuant
to this Article Two will receive valid and marketable title to such Exchange
Property, free and clear of all claims, liens and encumbrances (other than those
that may be created or suffered to exist by such Holder). Except as provided in
Section 208 hereof, the Company will pay all taxes, liens and charges with
respect to the delivery of Exchange Property in exchange for Debentures
hereunder.
210. Cancellation of Debentures.
All Debentures delivered for exchange shall be delivered by the
Exchange Agent to the Trustee and be canceled by the Trustee, and the Trustee
shall dispose of the same as provided in Section 309 of the Indenture.
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211. Merger of Chevron
In case of any consolidation or merger of Chevron with or into any
other Person that results in shares of Chevron Common Stock, as constituted
prior to the consummation of such transaction, being converted into other
securities and/or property (including cash), or in case of any sale or transfer
of all or substantially all of the assets of Chevron (if in connection with such
sale or transfer holders of Chevron Common Stock receive other securities and/or
property including cash, in exchange for their shares of Chevron Common Stock),
or of any voluntary or involuntary dissolution, liquidation or winding-up of
Chevron, the Company shall execute and deliver to the Trustee a supplemental
indenture, and to the Exchange Agent a supplement to the Exchange Agreement,
each providing that the Holder of each Debenture then Outstanding shall have the
right thereafter (subject to Sections 215 and 216 hereof) to exchange such
Debenture (i) for the kind and amount of securities and other property
receivable upon such consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up by a holder of the number of shares of Chevron Common
Stock for which such Debenture was exchangeable immediately prior to such
consolidation, merger, sale, transfer, dissolution, liquidation or winding up
and (ii) the kind and amount of securities (other than Chevron Common Stock) and
other Exchange Property for which such Debenture was exchangeable immediately
prior to such consolidation, merger, sale, transfer, dissolution, liquidation or
winding up. Such supplemental indenture shall provide for adjustments and
rights to receive and retain dividends or their equivalents, which shall be as
nearly equivalent as may be practicable to the adjustments and rights to receive
and retain dividends or their equivalents provided for in this Article Two. The
above provisions of this Section 211 shall similarly apply to any successive
consolidation, merger, sale, transfers, dissolution, liquidation or winding-up.
Notice of such supplemental indenture shall as soon as practicable be
filed with the Exchange Agent and mailed by or on behalf of the Company to the
Holders of Debentures at their last addresses as they shall appear on the
Securities Register.
The Trustee shall not be under any responsibility to determine the
correctness of any provisions contained in any such supplemental indenture
relating either to the kind or amount of shares of stock or securities or
property or cash receivable by the Debenture holders upon the exchange of their
Debentures as herein provided after any such consolidation, merger, sale,
transfer, dissolution, liquidation or winding up or to any adjustment to be made
with respect thereto.
212. Certain Tender or Exchange Offers for Exchange Property.
In the event of a tender offer or exchange offer for any class of
securities included within the Exchange Property (i) if the Company owns shares
of such class which are not subject to the Exchange Agreement, the Company will
cause the Exchange Agent to tender such shares of such class in the same
proportion that the Company tenders its securities in such class which are not
subject to the Exchange Agreement, and (ii) if the Company does not own
securities of a class which are subject to the Exchange Agreement, the Company
may, at its option and in its sole discretion, elect to cause the Exchange Agent
to tender all or any portion or none of such class of security included within
the Exchange Property held by the Exchange Agent. The proceeds of the sale of
any
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such Exchange Property pursuant to any such tender or exchange offer will be
held by the Exchange Agent for the benefit of Holders as provided in this Third
Supplemental Indenture.
213. Obligations of Trustee and Exchange Agent.
Subject to the provisions of Section 601 of the Indenture, neither the
Trustee nor the Exchange Agent shall at any time be under any duty or
responsibility to any Holder of Debentures to determine whether any facts exist
which may require any adjustment of the Exchange Rate, or with respect to the
nature or extent of any such adjustment when made, or with respect to the method
employed, or herein or in any supplemental indenture provided to be employed, in
making the same. Neither the Trustee nor the Exchange Agent shall be accountable
with respect to the validity or value (or the kind or amount) of any Exchange
Property which may at any time be issued or delivered upon the exchange of any
Debenture or the market conditions existing at the time of sale of any Exchange
Property; and neither the Trustee nor the Exchange Agent makes any
representation with respect thereto. Neither the Trustee nor the Exchange Agent
shall be responsible, for any failure of the Company to transfer or deliver any
Exchange Property or certificates or other evidence thereof to the Exchange
Agent as provided herein, or subject to the provisions of Section 601 of the
Indenture and the obligations assumed under the Exchange Agreement, to comply
with any of the covenants of the Company contained in this Article Two.
214. Exchange Arrangements in Case of Redemption.
In connection with any redemption of Debentures, the Company may
arrange for the purchase and exchange of Exchange Property of all or any part of
such Debentures by an arrangement with one or more investment bankers or other
purchasers to purchase such Debentures by paying to the Holders thereof, or to
the Trustee in trust for such Holders, on or before the close of business on the
Business Day next preceding the Redemption Date, an amount not less than the
applicable Redemption Price of the Debentures to be purchased, plus interest
accrued to the Redemption Date. Notwithstanding anything to the contrary
contained in Article Eleven of the Indenture, the obligation of the Company to
pay the Redemption Price of such Debentures, plus interest accrued to the
Redemption Date, shall be satisfied and discharged to the extent such amount is
so paid by such purchasers. Any Debentures to be purchased pursuant to such
agreement which are not presented for redemption or not duly surrendered for
exchange by the Holders thereof shall be deemed acquired by such purchasers from
the Holders and surrendered by such purchasers for exchange, all as of
immediately prior to the close of business on the Business Day next preceding
the Redemption Date, subject to payment of the above amount as aforesaid.
Notwithstanding anything to the contrary contained in this Article Two, in the
event that any Debentures subject to such agreement are surrendered for exchange
(other than by the purchasers) by the close of business on the Business Day next
preceding the Redemption Date, the amounts so paid to the Trustee in trust for
the Holders of the Debentures so surrendered for exchange shall be returned to
such purchasers.
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215. Tax Adjustments in Exchange Rate.
If an event shall occur which causes the Exchange Rate to be subject
to adjustment pursuant to Section 204 hereof, or a merger, consolidation or sale
or transfer of assets or of any voluntary or involuntary dissolution,
liquidation or winding up of Chevron shall occur requiring a supplemental
indenture under Section 211 hereof, and if, within ten days after the effective
date of such transaction, the Company shall furnish the Exchange Agent with an
Opinion of Counsel to the effect that such transaction is taxable to the Company
or the Exchange Agent and an Officers' Certificate as to the amount of federal,
state and local tax payable by the Company or the Exchange Agent as a result of
such transaction (computed by the Company at the marginal tax rate applicable to
such transaction), the Exchange Agent shall pay to, or to the order of, the
Company, in the case of taxes payable by the Company, or itself, in the case of
taxes payable by it, the cash held by it and apportioned or to be apportioned to
the Exchange Property for which Outstanding Debentures are exchangeable, up to
the amount of such taxes. In the event that the cash held by the Exchange Agent
and so apportioned or to be apportioned is insufficient to pay to the Company or
the Exchange Agent the amount of such taxes, the Exchange Agent shall, as soon
as reasonably practicable and to the extent legally permissible, sell in
accordance with written instructions received by the Company, or if no such
instructions are received, as determined by the Exchange Agent, such Exchange
Property (including any securities or other property included therein) as may be
necessary to pay, from the proceeds thereof after payment of any taxes by the
Company or the Exchange Agent on such sale, the amount of any such
insufficiency. The Exchange Agent shall notify the Company and the Trustee of
any such sale and the Exchange Property sold. Following payment of all
necessary amounts to the Company or the Exchange Agent, such Exchange Property
held by the Exchange Agent and any cash apportioned thereto shall be
proportionately adjusted so as to be apportioned equally to the Debentures
Outstanding as of immediately after the close of business on the record date or
the effective date for the transaction to which this Section 215 applies (as
shall be specified in Section 204 or 211 hereof, whichever is applicable). Any
Holder surrendering any Debentures after such record date, or such effective
date, as the case may be, shall be, entitled to receive the Exchange Property
and any cash apportioned thereto as so adjusted pursuant to this paragraph. If
this Section 215 shall apply to a transaction and the sale by the Company of the
consideration receivable therein shall not be legally permissible and the amount
of cash apportioned to the Exchange Property shall not be sufficient to pay all
taxes payable by the Company or the Exchange Agent which arise from such
transaction, the Company may direct the Exchange Agent to segregate for the
benefit of the Company or the Exchange Agent (as the case may be) or deliver to
the Company or the Exchange Agent (as the case may be) an amount of Exchange
Property theretofore held by the Exchange Agent for exchange of Debentures
having a Market Value equal to the unsatisfied portion of the tax payable by the
Company or the Exchange Agent (as the case may be) with respect to such
transaction including any tax payable upon the delivery or sale thereof in order
to satisfy the aforementioned tax, and the Exchange Property shall thereafter be
solely for the account of the Company or the Exchange Agent (as the case may be)
and Holders of Debentures shall have no rights thereto.
In the event that an Opinion of Counsel given pursuant to this Third
Supplemental Indenture concludes that whether taxes are payable by the Company
or the Exchange Agent is
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uncertain under the then state of the law or facts or both, the Company shall
have the option of requesting the Exchange Agent to segregate the amount of
funds that would be payable (or securities or other property in lieu thereof),
if such taxes were deemed payable, together with the amount estimated in good
faith to be the reasonable costs and expenses (including attorneys' fees) of
obtaining a determination as set forth below. The Holders shall have no rights
to such funds or securities or other property, which shall be held by the
Exchange Agent for the Company (or itself, as the case may be), the Exchange
Property and any cash apportioned thereto deliverable upon exchange of
Debentures pursuant to this Article Two shall be reapportioned as though such
segregated amounts had been paid to the Company or the Exchange Agent for such
taxes, and any Holder surrendering any Debenture after the record or effective
date of the applicable transaction giving rise to an adjustment pursuant to this
Section 215 shall be entitled to receive only such Exchange Property and any
cash apportioned thereto upon exchange of Debentures pursuant to this Article
Two as so reapportioned. The Company shall thereupon in good faith seek an
appropriate determination from the appropriate agencies and, if judged necessary
by the Company in good faith, from appropriate courts, as to whether taxes are
so payable. If an appropriate determination is made that such taxes are so
payable, then the Exchange Agent shall immediately pay the funds or deliver the
securities or other property so segregated to the Company (or, if taxes are
payable by the Exchange Agent, retain such funds or securities or other property
for itself), and if an appropriate determination is made that such taxes are not
payable or an amount of tax is payable which is less than the amount of funds or
property so segregated, then the Exchange Agent, after paying to the Company (or
itself, as the case may be) out of such funds or securities or other property
the reasonable expenses and costs (including attorneys' fees) of obtaining such
determination (and any taxes so payable), shall apportion such remaining funds
or securities or other property which had been so segregated among the Exchange
Property and cash apportioned thereto as of immediately after the close of
business on the record date or the effective date of such transaction giving
rise to an adjustment pursuant to Section 204 or 211 hereof, whichever is
applicable. If any Debenture has been exchanged on or after such record date or
such effective date, as the case may be, and before a determination is made that
no taxes are payable or an amount of tax is payable which is less than the
amount of funds or securities or other property so segregated, the Company to
the extent not previously delivered, shall deliver such Exchange Property and
any cash apportioned thereto as reapportioned following such determination, to
the person to which and in the manner in which the other proceeds of the
exchange of such Debenture were delivered.
216. Cash Equivalent.
Notwithstanding any other provisions in this Article Two, in lieu of
delivering certificates representing shares of Chevron Common Stock or other
Exchange Property in exchange for Debentures surrendered in accordance with
Section 202 hereof, the Company may, at the Company's option, pay to the Holder
surrendering such Debentures an amount in cash equal to the value of the
Exchange Property for which such Debentures are exchangeable (based on the
Market Price on the date of receipt by the Company of the notice of exchange
delivered by such Holder pursuant to Section 202 hereof). Prior to so directing
the Exchange Agent to make any such cash payment, the Company shall deposit with
the Exchange Agent the cash so payable.
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217. Repurchase Rights.
In the event that the Company obtains or otherwise releases any
Chevron Common Stock or other Exchange Property in any manner otherwise than as
contemplated by Section 218 hereof, each Holder will have the right ("Repurchase
Right"), at such Holder's option, to require the Company to repurchase all of
such Holder's Debentures, or a portion thereof which is $1,000 or any integral
multiple thereof, in the manner and at the price described below.
Promptly (and in any event within 10 days) after the Company has
obtained or released any Chevron Common Stock or any other Exchange Property in
any manner otherwise than as contemplated by Section 218 hereof, the Exchange
Agent will mail to all Holders of record of the Debentures a notice thereof and
the Repurchase Right arising as a result thereof (a "Repurchase Notice"). To
exercise the Repurchase Right, a Holder of Debentures must deliver on or before
the fifteenth day after the date of the Repurchase Notice irrevocable written
notice to the Exchange Agent of the Holder's exercise of such right, together
with the Debentures with respect to which the right is being exercised, duly
endorsed for transfer.
On the date ("Repurchase Date") that is 30 days after the date of the
Repurchase Notice, the Company will be required to repurchase all Debentures in
respect of which the Repurchase Right has been exercised at the following price:
(i) if the date on which the Company's obtaining or release of Exchange Property
in a manner not contemplated by Section 218 hereof first occurs (the "Triggering
Date") is before February 1, 2000, the product of (a) 120% and (b) the greater
of the principal amount of such Debentures (plus accrued and unpaid interest,
if any, to the Repurchase Date) and the Market Price of the Exchange Property
deliverable in exchange for such Debentures on the Triggering Date (or if such
date is not a Business Day, on the next succeeding Business Day); and (h) if the
Triggering Date occurs on or after February 1, 2000, the greater of (a) the
redemption price specified in Section 103 hereof on the Triggering Date and (b)
the Market Price of the Exchange Property deliverable in exchange for such
Debentures on the Triggering Date (or if such date is not a Business Day, on the
next succeeding Business Day).
The obligation of the Company to deliver Exchange Property (or cash in
lieu thereof) in exchange for Debentures shall survive and continue to apply in
full force and effect following and notwithstanding the occurrence of any event
triggering a Repurchase Right. Failure by the Company to exchange Debentures in
accordance with this Third Supplemental Indenture or to repurchase Debentures
upon valid exercise of a Repurchase Right will constitute an Event of Default
with respect to the Debentures pursuant to Section 501(7) of the Indenture, and
Holders of Debentures will have the remedies provided for in the Indenture,
including acceleration of the indebtedness evidenced by the Debentures, in the
event of any such failure.
If an offer is made to repurchase Debentures in connection with a
Repurchase Right, the Company will comply with all tender offer rules, including
but not limited to Sections 13(e) and 14(e) under the Exchange Act and Rules
13e-1 and 14e-1 thereunder, to the extent applicable to such offer.
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218. Withdrawals of Exchange Property. The Company shall be entitled,
out of the Exchange Property held by the Exchange Agent, to such kind and
quantity of Exchange Property and such amount of any cash (the investments
contemplated by Section 205 hereof being deemed for these purposes to be cash
and to be valued at their outstanding principal balance) and other Exchange
Property as shall be in excess of the quantity of Exchange Property held by the
Exchange Agent that would be deliverable by the Exchange Agent upon the exchange
of all Debentures then outstanding, and such excess shall be held by the
Exchange Agent for the account of the Company and, upon delivery of the
Officers' Certificate provided for in the following sentence, released to the
Company upon demand. Upon demand of any withdrawal of Exchange Property from
the Exchange Agent, the Company shall deliver to the Trustee an Officers'
Certificate (and a copy thereof to the Exchange Agent) which shall state (i) the
principal amount of Debentures then outstanding and the kind and amount of
Exchange Property required for delivery to the Holders thereof upon exchange,
(ii) that the withdrawal of the kind and amount of Exchange Property referred to
in such demand is permitted by the provisions of this Third Supplemental
Indenture and (iii) that the Exchange Property so to be withdrawn would not be
deliverable upon exchange of all Debentures then outstanding. In delivering
such certificate, the Company may rely on information furnished to it by the
Exchange Agent as to the kind and amount of Exchange Property held by it and the
kind and amount thereof previously delivered to Holders of Debentures.
219. Certain Definitions. All terms used but not defined in this
Third Supplemental Indenture that are defined in the Indenture shall have the
meanings specified in the Indenture unless the context otherwise requires. As
used in this Third Supplemental Indenture, the following terms shall have the
following meanings:
"Chevron" means Chevron Corporation, a Delaware corporation.
"Chevron Common Stock" means the common stock of Chevron of the class
authorized and designated as common stock, par value $3.00 per share, as such
common stock may be changed or reclassified from time to time.
"Exchange Agent" means Texas Commerce Bank National Association,
Exchange Agent under the Exchange Agreement, until a successor Exchange Agent
shall have become such pursuant to the provisions of Section 16 of the Exchange
Agreement, and thereafter "Exchange Agent" shall mean such successor Exchange
Agent thereunder and from time to time any subsequent successor pursuant to such
provisions.
"Exchange Agreement" means the Exchange Agent Agreement entered into
pursuant to the provisions of Section 205 hereof, as the same may be
supplemented and amended from time to time.
"Exchange Property" means initially the aggregate of the ____________
shares of Chevron Common Stock delivered to the Exchange Agent by the Company
pursuant to the Exchange Agreement simultaneously with the execution and
delivery of this Third Supplemental Indenture, and thereafter means the
securities, cash and other property, if any, which at the time are deliverable
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upon surrender of the Debentures for exchange in accordance with Article Two of
this Third Supplemental Indenture.
"Market Price" means, when used with respect to any security as of any
date, (i) if such security is not then listed or admitted to trading on any
national securities exchange registered under the Securities Exchange Act of
1934, the average of the high bid and low asked prices in the over-the-counter
market on such date as reported by the National Association of Securities
Dealers Automated Quotation System or (ii) if such security is then listed or
admitted to trading on any such national securities exchange, the last reported
sales price regular way on such date or, in case no such reported sale takes
place on such date, the average of the reported closing bid and asked prices
regular way on such date, in each case on the principal national securities
exchange on which such security is then listed or admitted to trading, or (iii)
if such prices are not available on such date, the market value of such security
on such date determined in such manner as shall be satisfactory to the Exchange
Agent, which shall be entitled to rely for such purposes on the advice of any
firm of investment bankers or security dealers having familiarity with such
security. "Market Price" means, when used with respect to any property (other
than any security) as of any date, the market value of such property on such
date determined in such manner as shall be satisfactory to the Exchange Agent,
which shall be entitled to rely for such purposes on the advice of any firm of
investment bankers having familiarity with such property.
ARTICLE THREE
301. Acceptance of Trust.
The Trustee accepts the trust hereby created and agrees to perform the
same upon the terms and conditions herein and in the Indenture set forth.
302. Trustee Not Responsible for Validity, Due Execution or Recitals.
The Trustee shall not be responsible in any manner whatsoever for or
in respect of the validity or sufficiency of this Third Supplemental Indenture
or the due execution thereof by the Company or for or in respect of the recitals
herein contained, all such recitals being made by the Company solely.
303. Counterparts.
This Third Supplemental Indenture may be executed in several
counterparts, each of which shall be an original and all of which together shall
constitute but one and the same instrument.
IN WITNESS WHEREOF, PENNZOIL COMPANY, party hereto of the first part,
has caused its corporate name to be hereunto affixed, and this instrument to be
signed and sealed by a Group Vice President, for and on its behalf, in the [City
of New York, New York] and TEXAS COMMERCE BANK NATIONAL ASSOCIATION, party
hereto of the second part, has caused its corporate name to be hereunto affixed,
and this instrument to be signed and sealed by a Vice
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President, for and on its behalf, in the [City of New York], all as of the _____
day of _____________, 1998.
PENNZOIL COMPANY
[Corporate Seal] By:-----------------------------------------
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
As Trustee
[Corporate Seal] By:-----------------------------------------
[Name]
[Title]
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STATE OF NEW YORK (S)
(S)
COUNTY OF NEW YORK (S)
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared David P. Alderson, II, Group Vice President of Pennzoil
Company, known to me to be the person whose name is subscribed to the foregoing
instrument, and acknowledged to me that he executed the same for the purposes
therein expressed, in the capacity therein set forth and as the act and deed of
said association.
GIVEN UNDER MY HAND AND SEAL of office, this the _____ day of
_____________, 1998.
--------------------------------------------
[NOTARIAL SEAL] Notary Public
STATE OF NEW YORK (S)
(S)
COUNTY OF NEW YORK (S)
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared _____________ of Texas Commerce Bank National Association,
known to me to be the person whose name is subscribed to the foregoing
instrument, and acknowledged to me that he executed the same for the purposes
therein expressed, in the capacity therein set forth and as the act and deed of
said association.
GIVEN UNDER MY HAND AND SEAL of office, this the _____ day of
_____________, 1998.
[NOTARIAL SEAL] --------------------------------------------
Notary Public
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EXHIBIT 4.3
EXCHANGE AGENT AGREEMENT
THIS EXCHANGE AGENT AGREEMENT dated as of __________________, 1998 is
entered into among Pennzoil Company, a Delaware corporation (the "Company"), and
Texas Commerce Bank National Association, as Exchange Agent for Holders of
Debentures (the "Exchange Agent").
WITNESSETH THAT:
WHEREAS, the Company has executed and delivered an Indenture dated as
of December 15, 1992 (the "Indenture") and a Third Supplemental Indenture dated
as of ________________, 1998 (the "Supplemental Indenture"), in each case to
Texas Commerce Bank National Association, as trustee (in such capacity, the
"Trustee"); and
WHEREAS, under and pursuant to the Indenture and the Supplemental
Indenture the Company may issue up to $___________ aggregate principal amount of
____% Exchangeable Senior Debentures due February 1, 2008 (the "Debentures"),
issuable in registered form, and
WHEREAS, pursuant and subject to the terms of the Debentures and the
Supplemental Indenture, each $1,000 principal amount of Debentures is
exchangeable at the option of the Holder thereof for a number of shares of the
common stock, par value $3.00 per share, of Chevron Corporation, a Delaware
corporation ("Chevron"), at the Exchange Rate (as defined in the Supplemental
Indenture) as provided in the Supplemental Indenture;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and in order to set forth the terms upon which the
Chevron Common Stock deposited with the Exchange Agent by the Company for
delivery upon exchange of the Debentures and all other property held by the
Exchange Agent hereunder shall be held and dealt with by the Exchange Agent and
its successors, the Company and the Exchange Agent hereby agree as follows:
SECTION 1. Definitions. All terms used but not defined in this
Agreement that are defined in the Supplemental Indenture or the Indenture shall
have the meanings specified in the Supplemental Indenture or the Indenture
unless the context otherwise requires. As used in this Agreement, the following
terms shall have the following meanings:
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<PAGE>
"Cash Dividend" means a dividend on Chevron Common Stock paid in cash
(other than a dividend paid pursuant to a plan of liquidation or partial
liquidation of Chevron or a recapitalization or restructuring of Chevron or
other extraordinary cash dividend of Chevron).
"Chevron Common Stock" means the common stock of Chevron of the class
authorized and designated as common stock, par value $3.00 per share, as such
common stock may be changed or reclassified from time to time.
"Exchange Property" means initially the __________ shares of Chevron
Common Stock delivered to the Exchange Agent by the Company pursuant to this
Exchange Agreement simultaneously with the execution and delivery of the
Supplemental Indenture, and thereafter means the securities, cash and other
property, if any, which at the time are deliverable upon surrender of the
Debentures for exchange in accordance with Article Two of the Supplemental
Indenture.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, a Vice Chairman of the Board, the President or a Vice President, and
by the Treasurer, the Controller, the Secretary or an Assistant Treasurer,
Assistant Controller or Assistant Secretary of the applicable entity. Each
certificate with respect to compliance with a condition or covenant provided for
in this Agreement shall include (i) a statement that the person making such
certificate has read such covenant or condition; (ii) a brief statement as to
the nature and scope of the examination or investigation upon which the
statements contained in such certificate are based; (iii) a statement that, in
the opinion of such person, such person has made such examination or
investigation as is necessary to enable such person to express an informed
opinion as to whether or not such covenant or condition has been complied with;
and (iv) a statement as to whether or not, in the opinion of such person, such
covenant or condition has been complied with.
"Opinion of Counsel" means an opinion in writing, signed by legal
counsel, who shall be satisfactory to the Exchange Agent and who may be an
employee of or counsel to the Company.
"Stock Record Date" means the record date for determining the holders
of Chevron Common Stock, or any other securities included within the Exchange
Property, entitled to notice of, and to vote on, a matter to be voted upon by
holders of such securities.
SECTION 2. Deposit. The Company will from time to time (i) cause
The Depository Trust Company to make the appropriate book-entry transfers,
and/or (ii) deliver to the Exchange Agent to be held by the Exchange Agent
hereunder a certificate or certificates, registered in the name of the Company
or its nominee and endorsed in blank or accompanied by stock powers endorsed in
blank, in each case representing such number of shares of Chevron Common Stock
and such other Exchange Property, if any, not already held by the Exchange Agent
as the Holders of outstanding Debentures shall from time to time be entitled to
receive upon exchange thereof as provided in the Supplemental Indenture. The
Exchange Agent will
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<PAGE>
acknowledge in writing receipt of such certificate or certificates and such
other Exchange Property, if any.
SECTION 3. Record Owner. The record owner of the Exchange
Property shall be the Company or its nominee; provided, however, that if at any
time in the judgment of the Exchange Agent it shall be necessary or desirable
for the purpose of facilitating the present or future exchange of Debentures
pursuant to Article Two of the Supplemental Indenture, the Exchange Agent may
register the Exchange Property or any part thereof in its name, as the Exchange
Agent, or in the name of its nominee; provided further that if any Exchange
Property shall be registered in the name of the Exchange Agent, or its nominee,
the Exchange Agent shall cause any Cash Dividends which the Company is entitled
to receive and retain under Article Two of the Supplemental Indenture to be paid
or delivered to the Company, and except as expressly permitted by this Agreement
or required by the Supplemental Indenture, no action may be taken by the
Exchange Agent with respect to the Exchange Property without the prior written
consent of the Company.
SECTION 4. Representations and Warranties of the Company. The
Company represents and warrants that it has and will have full legal right,
power and authority to transfer and deliver the Exchange Property in the manner
provided in this Agreement and the Supplemental Indenture.
SECTION 5. Covenants of the Exchange Agent. The Exchange Agent
covenants and agrees that it will perform all of the undertakings, duties and
obligations described in the Supplemental Indenture as the undertakings, duties
or obligations of the Exchange Agent. The Exchange Agent covenants and agrees
that the Exchange Property received by it pursuant to this Agreement shall be
held for and applied only in conformity with the purposes and upon the terms and
conditions set forth in this Agreement.
SECTION 6. Voting. With respect to each matter that is voted upon
by securities included within the Exchange Property, the Company shall be
entitled to cast all votes to which the securities included within the Exchange
Property are entitled, or to execute any written consent with respect thereto,
so long as such securities included within the Exchange Property, on the Stock
Record Date, shall not have been registered in the name of a holder other than
the Company or the Exchange Agent or a nominee of either of them.
If the Exchange Agent or its nominee is the record owner of any
securities included within the Exchange Property as of the Stock Record Date,
the Exchange Agent shall from time to time deliver, or cause to be delivered, to
the Company such proxies, duly executed and in the form required by applicable
law, as may be necessary or appropriate to permit the Company to vote on each
matter submitted to the holder of the securities included within the Exchange
Property so deposited.
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<PAGE>
SECTION 7. Exchanges and Adjustment of the Chevron Shares and the
Cash Apportioned Thereto. (a) The Company will notify the Exchange Agent in an
Officers' Certificate of any adjustment of the Exchange Rate or the Exchange
Property or of the cash apportioned thereto pursuant to the Supplemental
Indenture which is deliverable upon exchange of a Debenture. The Company will,
upon request, notify the Exchange Agent in writing of the amount of cash
adjustments to be paid upon exchanges in lieu of fractional shares.
(b) Subject to the terms and conditions of this Agreement and the
Supplemental Indenture, upon proper surrender to the Exchange Agent of any
Debenture (or any portion of the principal amount thereof in the amount of
$1,000 or integral multiples) for exchange by the Holder thereof in accordance
with the terms thereof and of the Supplemental Indenture, the Exchange Agent
shall promptly accept the same for exchange, subject to subsection (c) of this
Section, and upon such acceptance promptly (unless the Company shall have
elected, pursuant to Section 216 of the Supplemental Indenture, to pay to the
Holder an amount in cash equal to the value of the Exchange Property, in which
case the provisions of Section 216 of the Supplemental Indenture shall be
followed): (i) present a certificate or certificates representing at least the
number of whole securities included within the Exchange Property which the
Holder of such Debenture shall be entitled to receive, in accordance with the
terms thereof and the Supplemental Indenture, to the transfer agent or agents
for the Exchange Property and deliver or cause to be delivered, to or on the
order of the Holder of such Debenture (or portion thereof), a certificate or
certificates representing such number of whole securities included within the
Exchange Property, together with a check in payment of any cash adjustment in
lieu of fractional shares or units computed by the Company in accordance with
the Supplemental Indenture and such additional cash or property as may have been
apportioned under the Supplemental Indenture to the Exchange Property which the
Holder or Holders of such Debenture (or portion thereof) shall be entitled to
receive in accordance with the terms thereof and of the Supplemental Indenture,
(ii) deliver to the Trustee the Debenture so exchanged, and (iii) if only a
portion of said Debenture is exchanged, obtain from the Trustee and deliver to
or on the order of the Holder of the Debenture surrendered for exchange a new
Debenture or Debentures for the principal amount thereof not exchanged.
(c) If the Company shall deliver an Officers' Certificate to the
effect that, in connection with a specific exchange or a category of exchanges
or all exchanges by the Exchange Agent, the transfer and delivery of any
Exchange Property upon the exchange of any Debenture would (in the opinion of
counsel for the Company) violate any applicable law (including, without
limitation, the Securities Act of 1933, as amended, the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, or any successors thereto), then
the Exchange Agent shall not, and shall not be required to, accept such
Debenture for exchange or effect the exchange of such Debenture and shall so
notify the Holder surrendering such Debenture; provided, however, that the
provisions of this subsection (c) shall not relieve the Company of any of its
obligations under the Indenture.
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<PAGE>
SECTION 8. Covenants of the Company. The Company hereby
authorizes the Exchange Agent to apply to any transfer agent of the Exchange
Property for any division of share certificates which may be required in
connection with exchanges of Debentures. The Company covenants and agrees to
pay (i) any and all documentary, stamp, transfer or other similar taxes that may
be payable to the United States of America or any state thereof or political
subdivision thereof in respect of the deposit of Exchange Property hereunder, or
the delivery of Exchange Property upon exchange of Debentures; (ii) any income
or other taxes incurred by the Exchange Agent as a result of its acting in its
capacity as such under this Agreement (except for any such taxes incurred by
reason of the payment or accrual of its own fees); and (iii) all reasonable fees
or charges of the Exchange Agent (including reasonable fees and expenses of its
agents and counsel) in connection with or arising out of this Agreement or any
exchange of Debentures in accordance with the terms hereof. The Company further
covenants and agrees to deposit with the Exchange Agent from time to time (i)
cash in an amount equal to the amount necessary to make payments in lieu of
fractional securities included within the Exchange Property (after the Exchange
Agent shall have applied to such payments any other monies held by the Exchange
Agent and not needed for the exchange of Debentures) and (ii) cash in an amount
equal to any losses on investments made pursuant to Section 11 of this Agreement
to the extent necessary to maintain on deposit with the Exchange Agent funds
(investment securities held pursuant to such Section being valued as funds at
the outstanding principal balance thereof) equal from time to time to the
aggregate amount of cash apportioned to all Exchange Property at each such time
deliverable upon exchange by the Exchange Agent of all Debentures then
outstanding. Notwithstanding the foregoing provisions of this Section, the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the delivery of Exchange Property in a name other than
that in which the Debentures so exchanged were registered, and no such transfer
or delivery shall be made unless and until the person requesting such transfer
has paid to the Company the amount of any such tax or has established, to the
satisfaction of the Company, that such tax has been paid.
SECTION 9. Withdrawals of Exchange Property. The Company may demand
(which demand must be in writing), at its election, that the Exchange Agent
release to the Company any Exchange Property held by the Exchange Agent. Upon
receipt of such written demand, the Exchange Agent shall, as promptly as
possible, forthwith deliver to the Company the kind and amount of Exchange
Property requested to be withdrawn as specified in such written demand.
SECTION 10. Cash Dividends. The Company shall be entitled to all
Cash Dividends, other than Cash Dividends after an exchange of Debentures or
Exchange Property has been deemed effected under Section 202 of the Supplemental
Indenture.
SECTION 11. Investments. All money apportioned to Exchange Property
pursuant to the Supplemental Indenture and this Agreement or otherwise held
pursuant to this Agreement shall be invested by the Exchange Agent from time to
time in accordance with the written instructions of the Company in U.S.
Government Obligations (as defined in the Indenture)
-5-
<PAGE>
with maturity dates of twelve months or less. Any interest or gain on such
investments shall be for the sole account of the Company and shall be paid over
to the Company by the Exchange Agent on demand by the Company. Any loss on such
investments shall be for the account of the Company. The Company shall have the
option either to furnish to the Exchange Agent all money payable to Holders upon
any exchange of Debentures or to require the Exchange Agent to sell investment
securities in an amount necessary to permit the Exchange Agent to make such
payments.
SECTION 12. Merger, etc., of the Company. (a) Nothing contained in
this Agreement, the Indenture, the Supplemental Indenture or any of the
Debentures shall prevent any merger, liquidation or consolidation of the Company
with or into another corporation or corporations, or successive consolidations
or mergers in which the Company or its successor or successors shall be a party
or parties, or any sale or other conveyance of all or substantially all the
property of the Company to another corporation; provided, however, and the
Company hereby covenants and agrees, that upon any such merger, liquidation,
consolidation or merger in which the Company is not the continuing corporation,
the rights and obligations of the Company under this Agreement shall be
expressly assumed, by a supplemental agreement satisfactory in form to the
Exchange Agent, executed and delivered to the Exchange Agent by the corporation
formed by such consolidation, or into which the Company shall have merged, or to
which the assets of the Company shall have been distributed in liquidation, or
which shall have acquired such property.
(b) In the case of any consolidation, merger, sale or conveyance of or
by the Company referred to in subsection (a) hereof, and upon the execution and
delivery to the Exchange Agent of the supplemental agreement referred to therein
by the successor or acquiring corporation and the delivery to the Exchange Agent
of an Officers' Certificate and an Opinion of Counsel stating that such
transaction complies with this Section, such successor or acquiring corporation
shall succeed to the rights and obligations of and be substituted for the
Company under this Agreement, with the same effect as if such corporation had
been named herein as the Company, and in the event of any such sale or
conveyance, the Company (which term shall for this purpose mean the corporation
named as the "Company" in the first paragraph of this Agreement or any successor
corporation which shall theretofore have become such in the manner described in
this Section) shall be discharged from all obligations and covenants under this
Agreement and may (but need not) be dissolved and liquidated.
(c) The Exchange Agent may rely on an Officers' Certificate and an
Opinion of Counsel as conclusive evidence that any such consolidation, merger,
sale or conveyance of or by the Company complies with the provisions of this
Section 12.
SECTION 13. Reliance on Information Supplied. The Exchange Agent may
rely on the contents of any Officers' Certificate furnished hereunder and, in
delivering any such certificate, the Company may rely on information furnished
to the Company by the Exchange Agent as to the quantity and identity of Exchange
Property held by the Exchange Agents and the
-6-
<PAGE>
quantity and identity of Exchange Property delivered to Holders of Debentures
upon exchange thereof and on published information as of no earlier than the end
of the preceding year as to matters concerning Exchange Property and Chevron.
The Exchange Agent will furnish on request to the Company such information as to
the Exchange Agent's holdings hereunder and as to the Exchange Property
delivered to Holders of Debentures on exchange.
SECTION 14. Expenses and Indemnification of the Exchange Agent. The
Company covenants and agrees to pay to the Exchange Agent from time to time, and
the Exchange Agent shall be entitled to, reasonable compensation, and the
Company will pay or reimburse the Exchange Agent upon its request for all
reasonable expenses, disbursements and advances incurred or made by the Exchange
Agent in connection with any of the provisions of this Agreement (including the
reasonable compensation and the expenses and disbursements of its counsel,
dealers engaged pursuant to Section 22 hereof and of all persons not regularly
in its employ) except any such expense, disbursement or advance as may arise
from its gross negligence or willful misconduct. The Company also covenants to
indemnify the Exchange Agent for, and to hold it harmless against, any loss,
liability or expense incurred without gross negligence or willful misconduct on
the part of the Exchange Agent and arising out of or in connection with its
duties under this Agreement including the costs and expenses of defending itself
against any claim of liability in the premises. The obligations of the Company
pursuant to this Section 14 will survive the resignation or removal of the
Exchange Agent and the termination of this Agreement.
Promptly after receipt by the Exchange Agent of notice of the
commencement of any action, the Exchange Agent shall, if a claim in respect
thereof is to be made against the Company under the preceding paragraph, notify
the Company in writing of the commencement thereof. In case any such action
shall be brought against the Exchange Agent, it shall notify the Company of the
commencement thereof.
SECTION 15. Resignation and Removal of the Exchange Agent. (a) The
Exchange Agent may at any time resign by giving written notice of such
resignation to the Company and by mailing notice thereof to the Holders of
Debentures at their addresses as they shall appear on the Security Register (as
defined in the Indenture). Upon such resignation, a successor Exchange Agent
shall be appointed in any manner provided in the Indenture for the appointment
of a successor Trustee thereunder. If at any time the Exchange Agent resigns
hereunder, it shall also resign in its capacity as Trustee under the Indenture.
The Exchange Agent may be removed as Exchange Agent hereunder in any manner
provided in the Indenture for the removal of the Trustee thereunder.
(b) Any resignation or removal of the Exchange Agent and any
appointment of a successor Exchange Agent pursuant to any of the provisions of
the Indenture shall become effective upon acceptance of appointment by the
successor as provided in Section 16 hereof. In the event of any resignation of
the Exchange Agent, the Company shall appoint a successor Exchange Agent.
-7-
<PAGE>
SECTION 16. Acceptance by Successor Exchange Agent. Any successor
Exchange Agent appointed as provided above shall execute, acknowledge and
deliver to the Company and to its predecessor Exchange Agent an instrument
accepting such appointment hereunder, and thereupon the resignation or removal
of the predecessor Exchange Agent shall become effective and such successor
Exchange Agent, without any further act, deed or conveyance shall become vested
with all the right, title and interest of its predecessor to all property held
hereunder, and all other rights, powers, duties and obligations of such
predecessor Exchange Agent hereunder; but nevertheless such predecessor Exchange
Agent shall forthwith deliver to such successor Exchange Agent physical
possession of the certificates evidencing the Chevron Common Stock deposited
hereunder and of all other Exchange Property, and such predecessor Exchange
Agent shall, on the written request of the Company or such successor Exchange
Agent and upon payment of any amounts then due it pursuant to the provisions of
Section 8 and 15 hereof, execute and deliver to such successor Exchange Agent an
instrument transferring to such successor Exchange Agent all right, title and
interest hereunder in and to the Chevron Common Stock deposited hereunder and
the other Exchange Property, and all other rights and powers of such predecessor
Exchange Agent hereunder. The Company shall give written notice of (i) the
identity and address of any successor Exchange Agent or (ii) an effective
resignation or removal of the Exchange Agent pursuant to the last sentence of
Section 15(b) hereof, by mailing notice thereof to the Holders of Debentures at
their addresses as they shall appear on the Security Register (as defined in the
Indenture).
SECTION 17. Succession by Merger, etc. Any Person into which the
Exchange Agent may be merged or converted or with which it may be consolidated,
or any Person resulting from any merger, conversion or consolidation to which
the Exchange Agent shall be a party, or any corporation succeeding to the
business of the Exchange Agent, shall be the successor of the Exchange Agent
hereunder without the execution or filing of any paper or any further act on the
part of any of the parties hereto; provided, however, that such corporation
shall be eligible under Section 18 hereof and shall comply with Section 16
hereof.
SECTION 18. Eligibility of Exchange Agent. The Exchange Agent
hereunder shall at all times be the Trustee under the Indenture. In case at any
time the Exchange Agent shall cease to be eligible in accordance with the
provisions of this Section, the Exchange Agent shall resign immediately in the
manner and with the effect specified in Section 15.
SECTION 19. Amendments. (a) The Company and the Exchange Agent may
by mutual accord enter into supplemental agreements, all without the consent of
the Holders of any of the Debentures, notwithstanding the further provisions of
this Section 19 (i) to cure any ambiguity or correct or otherwise amend any
provision contained herein which may be defective or inconsistent with any other
provision contained herein or in the Indenture, the Supplemental Indenture or
any additional supplemental indenture; or (ii) to evidence the succession of
another corporation to the Company or the Exchange Agent, or successive
successions and the assumption by such successor corporation of the covenants,
agreements and obligations of the Company or the Exchange Agent pursuant to
Section 12 hereof as applicable; or (iii) to make such other
-8-
<PAGE>
provisions in regard to matters or questions arising under this Agreement which
shall not adversely affect the interests of the Holders of the Debentures in any
material respect.
(b) With the consent of the Holders of not less than a majority in
aggregate principal amount at maturity of the Debentures at the time
outstanding, the Company and the Exchange Agent may from time to time and at any
time enter into an amendment or amendments hereof for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of any amendment hereof or of modifying in any manner the
rights of the Holders of the Debentures hereunder or revoking any or all of the
powers of the Exchange Agent under this Agreement; provided, however, that
without the consent of the Holder of each Debenture so affected no such
amendment or modification or revocation shall (i) affect adversely the right to
exchange any Debenture for Exchange Property at the rate and upon the terms set
forth in the Indenture Supplement or (ii) reduce the aforesaid percentage of
Debentures the Holders of which are required to consent to any such amendment or
modification or revocation.
(c) This Agreement may be amended or supplemented without the consent
of Chevron.
(d) The Exchange Agent shall be entitled to receive and rely on an
Officer's Certificate to the effect that any amendment is authorized or
permitted by this Section 19.
SECTION 20. Termination of Agreement. This Agreement shall terminate
when the rights of all Holders under the Supplemental Indenture to surrender
Debentures for exchange pursuant to Article Two of the Supplemental Indenture
shall have expired or been terminated, which termination or expiration shall be
evidenced by an Officers' Certificate of the Company to that effect, and all
other obligations of the Company hereunder shall have been satisfied. Upon
termination of this Agreement, any Exchange Property remaining in the hands of
either Exchange Agent hereunder shall be delivered to the Company, free and
clear of any and all interests of the Exchange Agent, the Trustee and the
Holders of the Debentures, or any of them.
SECTION 21. Rights and Duties of the Exchange Agent. (a) The
Exchange Agent in performing its duties as such pursuant to this Agreement is
not acting as a fiduciary for the Company or the Holders. The Exchange Agent
shall be obligated to perform only such duties as are herein specifically set
forth and no duties or obligations shall be implied against the Exchange Agent.
The Exchange Agent shall not be liable for any action taken, omitted or suffered
by it in good faith and believed by it to be authorized or within the discretion
or rights or powers conferred upon it by this Agreement, and may conclusively
rely and shall be protected in acting or refraining from acting in reliance upon
an Opinion of Counsel or upon any certificate, request or other document
reasonably believed by it to be genuine and to have been signed or presented by
the proper party or parties. Without limiting the generality of the foregoing,
it is expressly agreed that the Exchange Agent shall not be responsible for any
governmental approvals which may be required in connection with the issuance or
delivery of Exchange Property and further that
-9-
<PAGE>
the Exchange Agent shall be entitled to rely upon an Opinion of Counsel. The
Exchange Agent shall not be required to take any action hereunder which, in the
opinion of its counsel, will be contrary to law. The Exchange Agent shall not be
responsible for any failure of the Company to comply with any covenants of the
Company contained in this Agreement or the Indenture or Supplemental Indenture.
(b) The Exchange Agent shall not be under any duty to give the
Exchange Property held by it hereunder any greater degree of care than it gives
its own similar property. The Exchange Agent shall in no event be liable for any
loss incurred in connection with any investment of money in accordance with
Section 11 hereof or in connection with any sale of Exchange Property pursuant
to Section 9 hereof, including without limitation any liability for any delays
(not resulting from its gross negligence or willful misconduct) in making such
investment or sale.
SECTION 22. Use of Dealer by Domestic Exchange Agent. The Company
and the Exchange Agent agree that the Exchange Agent shall use a registered
securities dealer in effecting exchanges of the Chevron Common Stock or any
other Exchange Property that is a security.
SECTION 23. No Lien Created Hereby. Nothing in this Agreement, the
Indenture, the Supplemental Indenture or any of the Debentures shall grant, and
the Exchange Agent shall not assert, any lien, pledge or mortgage on or of the
Exchange Property as security for any indebtedness for money borrowed.
SECTION 24. Benefits of Agreement. Nothing in this Agreement or the
Debentures, expressed or implied, shall give or be construed to give any person,
firm or corporation, other than the parties hereto, the Holders of Debentures as
such and the Trustee as such Holders' representative, any legal or equitable
right, remedy or claim under any covenant, condition or provisions contained in
this Agreement being for the sole benefit of the parties hereto, the Holders of
the Debentures as such and the Trustee as such Holders' representative.
SECTION 25. Headings. The headings contained in this Agreement are
for convenience of reference only and shall have no effect on the interpretation
or operation of this Agreement.
SECTION 26. Choice of Law. This Agreement shall be construed in
accordance with the law of the State of New York.
-10-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by duly authorized officers as of the day and year first above
written.
PENNZOIL COMPANY
By: ____________________________________
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
By: ____________________________________
-11-
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement on Form S-4 relating to the Pennzoil
Company Offer To Exchange Newly Issued Exchangeable Senior Debentures due 2008
For A Portion Of Its Outstanding 6 1/2% And 4 3/4% Exchangeable Senior
Debenture Due 2003 of our report dated February 25, 1997, included in Pennzoil
Company's Annual Report on Form 10-K for the year ended December 31, 1996, and
to all references to our firm included in this registration statement.
ARTHUR ANDERSEN LLP
Houston, Texas
December 19, 1997
<PAGE>
EXHIBIT 23.2
CONSENT OF RYDER SCOTT COMPANY PETROLEUM ENGINEERS,
INDEPENDENT PETROLEUM ENGINEERS
We hereby consent to the reference to our firm under the caption "Experts"
and to the incorporation by reference of our summary report included as
Exhibit 99(a) to the Annual Report on Form 10-K of Pennzoil Company
("Pennzoil") for the year ended December 31, 1996 and the estimates from the
reports of our firm appearing under the caption "Oil and Gas--Oil and Gas
Reserves" in Item 1 of such Annual Report and under "Oil and Gas Information"
included in the Supplemental Financial and Statistical Information contained
in such Annual Report in the Registration Statement on Form S-4 and related
Prospectus of Pennzoil filed herewith.
/s/ RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
-------------------------------------
RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
<PAGE>
EXHIBIT 24
PENNZOIL COMPANY
POWER OF ATTORNEY
WHEREAS, PENNZOIL COMPANY, a Delaware corporation (the "Company"),
intends to file with the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Act"), a Registration
Statement on Form S-4 (the "Registration Statement") relating to the offer to
exchange newly issued exchangeable senior debentures due 2008 of the Company for
a portion of the Company's outstanding 6 1/2% Exchangeable Senior Debentures due
2003 and its 4 3/4% Exchangeable Senior Debentures due 2003, with such
amendments, supplements or apendices thereto as may be necessary or appropriate,
together with any and all exhibits and other documents having relation thereto;
NOW, THEREFORE, the undersigned in his capacity as a director or
officer, or both, as the case may be, of the Company, does hereby appoint DAVID
P. ALDERSON, II, STEPHEN D. CHESEBRO' and JAMES L. PATE, and each of them
severally, his true and lawful attorneys or attorney with power to act with or
without the others and with full power of substitution and resubstitution, to
execute in his name, place and stead, in his capacity as a director or officer
or both, as the case may be, of the Company, the Registration Statement and any
and all amendments, supplements or appendices thereto as said attorneys or any
of them shall deem necessary or incidental in connection therewith, and to file
the same or cause the same to be filed with the commission. Each of said
attorneys shall have full power and authority to do and perform in the name and
on behalf of the undersigned, in any and all capacities, every act whatsoever
necessary or desirable to be done to the premises, as fully and to all intents
and purposes as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument on this
11th day of December, 1997.
/s/ HOWARD H. BAKER, JR.
--------------------------
Howard H. Baker, Jr.
<PAGE>
EXHIBIT 24
PENNZOIL COMPANY
POWER OF ATTORNEY
WHEREAS, PENNZOIL COMPANY, a Delaware corporation (the "Company"),
intends to file with the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Act"), a Registration
Statement on Form S-4 (the "Registration Statement") relating to the offer to
exchange newly issued exchangeable senior debentures due 2008 of the Company for
a portion of the Company's outstanding 6 1/2% Exchangeable Senior Debentures due
2003 and its 4 3/4% Exchangeable Senior Debentures due 2003, with such
amendments, supplements or apendices thereto as may be necessary or appropriate,
together with any and all exhibits and other documents having relation thereto;
NOW, THEREFORE, the undersigned in his capacity as a director or
officer, or both, as the case may be, of the Company, does hereby appoint DAVID
P. ALDERSON, II, STEPHEN D. CHESEBRO' and JAMES L. PATE, and each of them
severally, his true and lawful attorneys or attorney with power to act with or
without the others and with full power of substitution and resubstitution, to
execute in his name, place and stead, in his capacity as a director or officer
or both, as the case may be, of the Company, the Registration Statement and any
and all amendments, supplements or appendices thereto as said attorneys or any
of them shall deem necessary or incidental in connection therewith, and to file
the same or cause the same to be filed with the commission. Each of said
attorneys shall have full power and authority to do and perform in the name and
on behalf of the undersigned, in any and all capacities, every act whatsoever
necessary or desirable to be done to the premises, as fully and to all intents
and purposes as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument on this
11th day of December, 1997.
/s/ W. J. BOVAIRD
------------------
W. J. Bovaird
<PAGE>
EXHIBIT 24
PENNZOIL COMPANY
POWER OF ATTORNEY
WHEREAS, PENNZOIL COMPANY, a Delaware corporation (the "Company"),
intends to file with the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Act"), a Registration
Statement on Form S-4 (the "Registration Statement") relating to the offer to
exchange newly issued exchangeable senior debentures due 2008 of the Company for
a portion of the Company's outstanding 6 1/2% Exchangeable Senior Debentures due
2003 and its 4 3/4% Exchangeable Senior Debentures due 2003, with such
amendments, supplements or apendices thereto as may be necessary or appropriate,
together with any and all exhibits and other documents having relation thereto;
NOW, THEREFORE, the undersigned in his capacity as a director or
officer, or both, as the case may be, of the Company, does hereby appoint DAVID
P. ALDERSON, II, STEPHEN D. CHESEBRO' and JAMES L. PATE, and each of them
severally, his true and lawful attorneys or attorney with power to act with or
without the others and with full power of substitution and resubstitution, to
execute in his name, place and stead, in his capacity as a director or officer
or both, as the case may be, of the Company, the Registration Statement and any
and all amendments, supplements or appendices thereto as said attorneys or any
of them shall deem necessary or incidental in connection therewith, and to file
the same or cause the same to be filed with the commission. Each of said
attorneys shall have full power and authority to do and perform in the name and
on behalf of the undersigned, in any and all capacities, every act whatsoever
necessary or desirable to be done to the premises, as fully and to all intents
and purposes as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument on this
11th day of December, 1997.
/s/ W. L. LYONS BROWN, JR.
---------------------------
W. L. Lyons Brown, Jr.
<PAGE>
EXHIBIT 24
PENNZOIL COMPANY
POWER OF ATTORNEY
WHEREAS, PENNZOIL COMPANY, a Delaware corporation (the "Company"),
intends to file with the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Act"), a Registration
Statement on Form S-4 (the "Registration Statement") relating to the offer to
exchange newly issued exchangeable senior debentures due 2008 of the Company for
a portion of the Company's outstanding 6 1/2% Exchangeable Senior Debentures due
2003 and its 4 3/4% Exchangeable Senior Debentures due 2003, with such
amendments, supplements or apendices thereto as may be necessary or appropriate,
together with any and all exhibits and other documents having relation thereto;
NOW, THEREFORE, the undersigned in his capacity as a director or
officer, or both, as the case may be, of the Company, does hereby appoint DAVID
P. ALDERSON, II, STEPHEN D. CHESEBRO' and JAMES L. PATE, and each of them
severally, his true and lawful attorneys or attorney with power to act with or
without the others and with full power of substitution and resubstitution, to
execute in his name, place and stead, in his capacity as a director or officer
or both, as the case may be, of the Company, the Registration Statement and any
and all amendments, supplements or appendices thereto as said attorneys or any
of them shall deem necessary or incidental in connection therewith, and to file
the same or cause the same to be filed with the commission. Each of said
attorneys shall have full power and authority to do and perform in the name and
on behalf of the undersigned, in any and all capacities, every act whatsoever
necessary or desirable to be done to the premises, as fully and to all intents
and purposes as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument on this
11th day of December, 1997.
/s/ ERNEST H. COCKRELL
-----------------------
Ernest H. Cockrell
<PAGE>
EXHIBIT 24
PENNZOIL COMPANY
POWER OF ATTORNEY
WHEREAS, PENNZOIL COMPANY, a Delaware corporation (the "Company"),
intends to file with the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Act"), a Registration
Statement on Form S-4 (the "Registration Statement") relating to the offer to
exchange newly issued exchangeable senior debentures due 2008 of the Company for
a portion of the Company's outstanding 6 1/2% Exchangeable Senior Debentures due
2003 and its 4 3/4% Exchangeable Senior Debentures due 2003, with such
amendments, supplements or apendices thereto as may be necessary or appropriate,
together with any and all exhibits and other documents having relation thereto;
NOW, THEREFORE, the undersigned in his capacity as a director or
officer, or both, as the case may be, of the Company, does hereby appoint DAVID
P. ALDERSON, II, STEPHEN D. CHESEBRO' and JAMES L. PATE, and each of them
severally, his true and lawful attorneys or attorney with power to act with or
without the others and with full power of substitution and resubstitution, to
execute in his name, place and stead, in his capacity as a director or officer
or both, as the case may be, of the Company, the Registration Statement and any
and all amendments, supplements or appendices thereto as said attorneys or any
of them shall deem necessary or incidental in connection therewith, and to file
the same or cause the same to be filed with the commission. Each of said
attorneys shall have full power and authority to do and perform in the name and
on behalf of the undersigned, in any and all capacities, every act whatsoever
necessary or desirable to be done to the premises, as fully and to all intents
and purposes as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument on this
11th day of December, 1997.
/s/ HARRY H. CULLEN
--------------------
Harry H. Cullen
<PAGE>
EXHIBIT 24
PENNZOIL COMPANY
POWER OF ATTORNEY
WHEREAS, PENNZOIL COMPANY, a Delaware corporation (the "Company"),
intends to file with the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Act"), a Registration
Statement on Form S-4 (the "Registration Statement") relating to the offer to
exchange newly issued exchangeable senior debentures due 2008 of the Company for
a portion of the Company's outstanding 6 1/2% Exchangeable Senior Debentures due
2003 and its 4 3/4% Exchangeable Senior Debentures due 2003, with such
amendments, supplements or apendices thereto as may be necessary or appropriate,
together with any and all exhibits and other documents having relation thereto;
NOW, THEREFORE, the undersigned in his capacity as a director or
officer, or both, as the case may be, of the Company, does hereby appoint DAVID
P. ALDERSON, II, STEPHEN D. CHESEBRO' and JAMES L. PATE, and each of them
severally, his true and lawful attorneys or attorney with power to act with or
without the others and with full power of substitution and resubstitution, to
execute in his name, place and stead, in his capacity as a director or officer
or both, as the case may be, of the Company, the Registration Statement and any
and all amendments, supplements or appendices thereto as said attorneys or any
of them shall deem necessary or incidental in connection therewith, and to file
the same or cause the same to be filed with the commission. Each of said
attorneys shall have full power and authority to do and perform in the name and
on behalf of the undersigned, in any and all capacities, every act whatsoever
necessary or desirable to be done to the premises, as fully and to all intents
and purposes as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument on this
11th day of December, 1997.
/s/ ALFONSO FANJUL
-------------------
Alfonso Fanjul
<PAGE>
EXHIBIT 24
PENNZOIL COMPANY
POWER OF ATTORNEY
WHEREAS, PENNZOIL COMPANY, a Delaware corporation (the "Company"),
intends to file with the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Act"), a Registration
Statement on Form S-4 (the "Registration Statement") relating to the offer to
exchange newly issued exchangeable senior debentures due 2008 of the Company for
a portion of the Company's outstanding 6 1/2% Exchangeable Senior Debentures due
2003 and its 4 3/4% Exchangeable Senior Debentures due 2003, with such
amendments, supplements or apendices thereto as may be necessary or appropriate,
together with any and all exhibits and other documents having relation thereto;
NOW, THEREFORE, the undersigned in his capacity as a director or
officer, or both, as the case may be, of the Company, does hereby appoint DAVID
P. ALDERSON, II, STEPHEN D. CHESEBRO' and JAMES L. PATE, and each of them
severally, his true and lawful attorneys or attorney with power to act with or
without the others and with full power of substitution and resubstitution, to
execute in his name, place and stead, in his capacity as a director or officer
or both, as the case may be, of the Company, the Registration Statement and any
and all amendments, supplements or appendices thereto as said attorneys or any
of them shall deem necessary or incidental in connection therewith, and to file
the same or cause the same to be filed with the commission. Each of said
attorneys shall have full power and authority to do and perform in the name and
on behalf of the undersigned, in any and all capacities, every act whatsoever
necessary or desirable to be done to the premises, as fully and to all intents
and purposes as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument on this
11th day of December, 1997.
/s/ BERDON LAWRENCE
-----------------------
Berdon Lawrence
<PAGE>
EXHIBIT 24
PENNZOIL COMPANY
POWER OF ATTORNEY
WHEREAS, PENNZOIL COMPANY, a Delaware corporation (the "Company"),
intends to file with the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Act"), a Registration
Statement on Form S-4 (the "Registration Statement") relating to the offer to
exchange newly issued exchangeable senior debentures due 2008 of the Company for
a portion of the Company's outstanding 6 1/2% Exchangeable Senior Debentures due
2003 and its 4 3/4% Exchangeable Senior Debentures due 2003, with such
amendments, supplements or apendices thereto as may be necessary or appropriate,
together with any and all exhibits and other documents having relation thereto;
NOW, THEREFORE, the undersigned in his capacity as a director or
officer, or both, as the case may be, of the Company, does hereby appoint DAVID
P. ALDERSON, II, STEPHEN D. CHESEBRO' and JAMES L. PATE, and each of them
severally, his true and lawful attorneys or attorney with power to act with or
without the others and with full power of substitution and resubstitution, to
execute in his name, place and stead, in his capacity as a director or officer
or both, as the case may be, of the Company, the Registration Statement and any
and all amendments, supplements or appendices thereto as said attorneys or any
of them shall deem necessary or incidental in connection therewith, and to file
the same or cause the same to be filed with the commission. Each of said
attorneys shall have full power and authority to do and perform in the name and
on behalf of the undersigned, in any and all capacities, every act whatsoever
necessary or desirable to be done to the premises, as fully and to all intents
and purposes as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument on this
11th day of December, 1997.
/s/ BRENT SCOWCROFT
--------------------
Brent Scowcroft
<PAGE>
EXHIBIT 24
PENNZOIL COMPANY
POWER OF ATTORNEY
WHEREAS, PENNZOIL COMPANY, a Delaware corporation (the "Company"),
intends to file with the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Act"), a Registration
Statement on Form S-4 (the "Registration Statement") relating to the offer to
exchange newly issued exchangeable senior debentures due 2008 of the Company for
a portion of the Company's outstanding 6 1/2% Exchangeable Senior Debentures due
2003 and its 4 3/4% Exchangeable Senior Debentures due 2003, with such
amendments, supplements or apendices thereto as may be necessary or appropriate,
together with any and all exhibits and other documents having relation thereto;
NOW, THEREFORE, the undersigned in his capacity as a director or
officer, or both, as the case may be, of the Company, does hereby appoint DAVID
P. ALDERSON, II, STEPHEN D. CHESEBRO' and JAMES L. PATE, and each of them
severally, his true and lawful attorneys or attorney with power to act with or
without the others and with full power of substitution and resubstitution, to
execute in his name, place and stead, in his capacity as a director or officer
or both, as the case may be, of the Company, the Registration Statement and any
and all amendments, supplements or appendices thereto as said attorneys or any
of them shall deem necessary or incidental in connection therewith, and to file
the same or cause the same to be filed with the commission. Each of said
attorneys shall have full power and authority to do and perform in the name and
on behalf of the undersigned, in any and all capacities, every act whatsoever
necessary or desirable to be done to the premises, as fully and to all intents
and purposes as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument on this
11th day of December, 1997.
/s/ GERALD B. SMITH
--------------------
Gerald B. Smith
<PAGE>
EXHIBIT 24
PENNZOIL COMPANY
POWER OF ATTORNEY
WHEREAS, PENNZOIL COMPANY, a Delaware corporation (the "Company"),
intends to file with the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Act"), a Registration
Statement on Form S-4 (the "Registration Statement") relating to the offer to
exchange newly issued exchangeable senior debentures due 2008 of the Company for
a portion of the Company's outstanding 6 1/2% Exchangeable Senior Debentures due
2003 and its 4 3/4% Exchangeable Senior Debentures due 2003, with such
amendments, supplements or apendices thereto as may be necessary or appropriate,
together with any and all exhibits and other documents having relation thereto;
NOW, THEREFORE, the undersigned in his capacity as a director or
officer, or both, as the case may be, of the Company, does hereby appoint DAVID
P. ALDERSON, II, STEPHEN D. CHESEBRO' and JAMES L. PATE, and each of them
severally, his true and lawful attorneys or attorney with power to act with or
without the others and with full power of substitution and resubstitution, to
execute in his name, place and stead, in his capacity as a director or officer
or both, as the case may be, of the Company, the Registration Statement and any
and all amendments, supplements or appendices thereto as said attorneys or any
of them shall deem necessary or incidental in connection therewith, and to file
the same or cause the same to be filed with the commission. Each of said
attorneys shall have full power and authority to do and perform in the name and
on behalf of the undersigned, in any and all capacities, every act whatsoever
necessary or desirable to be done to the premises, as fully and to all intents
and purposes as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument on this
11th day of December, 1997.
/s/ CYRIL WAGNER, JR.
----------------------
Cyril Wagner, Jr.
<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) ____
____________________
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
74-0800980
(I.R.S. Employer Identification Number)
712 MAIN STREET, HOUSTON, TEXAS 77002
(Address of principal executive offices) (Zip code)
LEE BOOCKER, 712 MAIN STREET, 26TH FLOOR
Houston, Texas 77002 (713) 216-2448
(Name, address and telephone number of agent for service)
PENNZOIL COMPANY
(Exact name of obligor as specified in its charter)
DELAWARE 74-159720
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
PENNZOIL PLACE, P.O. BOX 2967, HOUSTON, TEXAS 77252-2967
(Address of principal executive offices) (Zip code)
EXCHANGEABLE SENIOR DEBENTURES DUE 2008
(Title of indenture securities)
================================================================================
<PAGE>
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING
AUTHORITY TO WHICH IT IS SUBJECT.
Comptroller of the Currency, Washington, D.C. Federal Deposit Insurance
Corporation, Washington, D.C. Board of Governors of the Federal Reserve
System, Washington, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee. (See Note on Page 7.)
ITEM 3. VOTING SECURITIES OF THE TRUSTEE.
FURNISH THE FOLLOWING INFORMATION AS TO EACH CLASS OF VOTING SECURITIES
OF THE TRUSTEE.
COL. A COL. B
TITLE OF CLASS AMOUNT OUTSTANDING
-------------- ------------------
Not applicable by virtue of Form T-1 General Instruction B and response
to Item 13.
ITEM 4. TRUSTEESHIPS UNDER OTHER INDENTURES.
IF THE TRUSTEE IS A TRUSTEE UNDER ANOTHER INDENTURE UNDER WHICH ANY
OTHER SECURITIES, OR CERTIFICATES OF INTEREST OR PARTICIPATION IN ANY OTHER
SECURITIES, OF THE OBLIGOR ARE OUTSTANDING, FURNISH THE FOLLOWING INFORMATION:
(A) TITLE OF THE SECURITIES OUTSTANDING UNDER EACH SUCH OTHER
INDENTURE.
Not applicable by virtue of Form T-1 General Instruction B and response
to Item 13.
1
<PAGE>
ITEM 4. (CONTINUED)
(B) A BRIEF STATEMENT OF THE FACTS RELIED UPON AS A BASIS FOR THE CLAIM
THAT NO CONFLICTING INTEREST WITHIN THE MEANING OF SECTION 310(B)(1) OF
THE ACT ARISES AS A RESULT OF THE TRUSTEESHIP UNDER ANY SUCH OTHER
INDENTURE, INCLUDING A STATEMENT AS TO HOW THE INDENTURE SECURITIES
WILL RANK AS COMPARED WITH THE SECURITIES ISSUED UNDER SUCH OTHER
INDENTURE.
Not applicable by virtue of Form T-1 General Instruction B and response
to Item 13.
ITEM 5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH OBLIGOR OR
UNDERWRITERS.
IF THE TRUSTEE OR ANY OF THE DIRECTORS OR EXECUTIVE OFFICER OF THE
TRUSTEE IS A DIRECTOR, OFFICER, PARTNER, EMPLOYEE, APPOINTEE, OR REPRESENTATIVE
OF THE OBLIGOR OR OF ANY UNDERWRITER FOR THE OBLIGOR, IDENTIFY EACH SUCH PERSON
HAVING ANY SUCH CONNECTION AND STATE THE NATURE OF EACH SUCH CONNECTION.
Not applicable by virtue of Form T-1 General Instruction B and response
to Item 13.
ITEM 6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS OFFICIALS.
FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF THE
TRUSTEE OWNED BENEFICIALLY BY THE OBLIGOR AND EACH DIRECTOR, PARTNER AND
EXECUTIVE OFFICER OF THE OBLIGOR.
COL. A COL. B COL. C COL. D
PERCENTAGE OF
VOTING SECURITIES
REPRESENTED BY
AMOUNT OWNED AMOUNT GIVEN IN
NAME OF OWNER TITLE OF CLASS BENEFICIALLY COL. C
------------- -------------- ------------ -----------------
Not applicable by virtue of Form T-1 General Instruction B and response to
Item 13.
2
<PAGE>
ITEM 7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR
OFFICIALS.
FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF THE TRUSTEE
OWNED BENEFICIALLY BY EACH UNDERWRITER FOR THE OBLIGOR AND EACH DIRECTOR,
PARTNER AND EXECUTIVE OFFICER OF EACH SUCH UNDERWRITER.
COL. A COL. B COL. C COL. D
PERCENTAGE OF
VOTING SECURITIES
REPRESENTED BY
AMOUNT OWNED AMOUNT GIVEN IN
NAME OF OWNER TITLE OF CLASS BENEFICIALLY COL. C
-------------- -------------- ------------ ------------------
Not applicable by virtue of Form T-1 General Instruction B and response to
Item 13.
ITEM 8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE.
FURNISH THE FOLLOWING INFORMATION AS TO THE SECURITIES OF THE OBLIGOR OWNED
BENEFICIALLY OR HELD AS COLLATERAL SECURITY FOR OBLIGATIONS IN DEFAULT BY THE
TRUSTEE.
COL. A COL. B COL. C COL. D
AMOUNT OWNED
WHETHER THE BENEFICIALLY OR PERCENT OF
SECURITIES HELD AS COLLATERAL CLASS
ARE VOTING SECURITY FOR REPRESENTED BY
OR NONVOTING OBLIGATIONS IN AMOUNT GIVEN
TITLE OF CLASS SECURITIES DEFAULT IN COL. C
- -------------- -------------- ----------------- ---------------
Not applicable by virtue of Form T-1 General Instruction B and response to
Item 13.
3
<PAGE>
ITEM 9. SECURITIES OF UNDERWRITERS OWNED OR HELD BY THE TRUSTEE.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT ANY SECURITIES OF AN UNDERWRITER FOR THE OBLIGOR, FURNISH
THE FOLLOWING INFORMATION AS TO EACH CLASS OF SECURITIES OF SUCH UNDERWRITER ANY
OF WHICH ARE SO OWNED OR HELD BY THE TRUSTEE.
COL. A COL. B COL. C COL. D
AMOUNT OWNED
BENEFICIALLY OR PERCENT OF
HELD AS COLLATERAL CLASS
TITLE OF ISSUER SECURITY FOR REPRESENTED BY
AND AMOUNT OBLIGATIONS IN AMOUNT GIVEN
TITLE OF CLASS OUTSTANDING DEFAULT BY TRUSTEE IN COL. C
- --------------- ----------- -------------------- ----------------
Not applicable by virtue of Form T-1 General Instruction B and response to
Item 13.
ITEM 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF
CERTAIN AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT VOTING SECURITIES OF A PERSON WHO, TO THE KNOWLEDGE OF
THE TRUSTEE (1) OWNS 10% OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR OR (2)
IS AN AFFILIATE, OTHER THAN A SUBSIDIARY, OF THE OBLIGOR, FURNISH THE FOLLOWING
INFORMATION AS TO THE VOTING SECURITIES OF SUCH PERSON.
COL. A COL. B COL. C COL. D
AMOUNT OWNED
BENEFICIALLY OR PERCENT OF
HELD AS COLLATERAL CLASS
TITLE OF ISSUER SECURITY FOR REPRESENTED BY
AND AMOUNT OBLIGATIONS IN AMOUNT GIVEN
TITLE OF CLASS OUTSTANDING DEFAULT BY TRUSTEE IN COL. C
- ---------------- -------------- -------------------- ---------------
Not applicable by virtue of Form T-1 General Instruction B and response to
Item 13.
4
<PAGE>
ITEM 11. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF ANY SECURITIES OF A PERSON
OWNING 50% OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT ANY SECURITIES OF A PERSON WHO, TO THE KNOWLEDGE OF THE
TRUSTEE, OWNS 50% OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR, FURNISH THE
FOLLOWING INFORMATION AS TO EACH CLASS OF SECURITIES OR SUCH PERSON ANY OF WHICH
ARE SO OWNED OR HELD BY THE TRUSTEE.
COL. A COL. B COL. C COL. D
AMOUNT OWNED
BENEFICIALLY OR PERCENT OF
HELD AS COLLATERAL CLASS
TITLE OF ISSUER SECURITY FOR REPRESENTED BY
AND AMOUNT OBLIGATIONS IN AMOUNT GIVEN
TITLE OF CLASS OUTSTANDING DEFAULT BY TRUSTEE IN COL. C
- ---------------- -------------- -------------------- ---------------
Not applicable by virtue of Form T-1 General Instruction B and response to
Item 13.
ITEM 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE.
Except as noted in the instructions, if the obligor is indebted to the trustee,
furnish the following information:
COL. A COL. B COL. C
NATURE OF AMOUNT
INDEBTEDNESS OUTSTANDING DATE DUE
------------ ----------- --------
Not applicable by virtue of Form T-1 General Instruction B and response to
Item 13.
ITEM 13. DEFAULTS BY THE OBLIGOR.
(A) STATE WHETHER THERE IS OR HAS BEEN A DEFAULT WITH RESPECT TO THE
SECURITIES UNDER THIS INDENTURE. EXPLAIN THE NATURE OF ANY SUCH DEFAULT.
There is not, nor has there been, a default with respect to the securities under
this indenture. (See Note on Page 7.)
5
<PAGE>
ITEM 13. (CONTINUED)
(B) IF THE TRUSTEE IS A TRUSTEE UNDER ANOTHER INDENTURE UNDER WHICH ANY
SECURITIES, OR CERTIFICATES OF INTEREST OR PARTICIPATION IN ANY OTHER
SECURITIES, OF THE OBLIGOR ARE OUTSTANDING, OR IS TRUSTEE FOR MORE THAN ONE
OUTSTANDING SERIES OF SECURITIES UNDER THE INDENTURE, STATE WHETHER THERE HAS
BEEN A DEFAULT UNDER ANY SUCH INDENTURE OR SERIES, IDENTIFY THE INDENTURE OR
SERIES AFFECTED, AND EXPLAIN THE NATURE OF ANY SUCH DEFAULT.
There has not been a default under any such indenture or series. (See Note on
Page 7.)
ITEM 14. AFFILIATIONS WITH THE UNDERWRITERS.
IF ANY UNDERWRITER IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
Not applicable by virtue of Form T-1 General Instruction B and response to
Item 13.
ITEM 15. FOREIGN TRUSTEE.
IDENTIFY THE ORDER OR RULE PURSUANT TO WHICH THE FOREIGN TRUSTEE IS
AUTHORIZED TO ACT AS SOLE TRUSTEE UNDER INDENTURES QUALIFIED OR TO BE QUALIFIED
UNDER THE ACT .
Not applicable.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF
ELIGIBILITY.
. 1. A copy of the articles of association of the trustee now in
effect.
# 2. A copy of the certificate of authority of the trustee to commence
business.
* 3. A copy of the certificate of authorization of the trustee to
exercise corporate trust powers issued by the Board of Governors of
the Federal Reserve System under date of January 21, 1948.
+ 4. A copy of the existing bylaws of the trustee.
5. Not applicable.
6
<PAGE>
6. The consent of United States institutional trustees required by
Section 321(b) of the Act.
[]7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority.
8. Not applicable.
9. Not applicable.
_______________________
. Incorporated by reference to exhibit bearing the same designation and
previously filed with the Securities and Exchange Commission as exhibits to the
Form S-3 File No. 33-56195.
# Incorporated by reference to exhibit bearing the same designation and
previously filed with the Securities and Exchange Commission as exhibits to the
Form S-3 File No. 33-42814.
* Incorporated by reference to exhibit bearing the same designation and
previously filed with the Securities and Exchange Commission as exhibits to the
Form S-11 File No. 33-25132.
+ Incorporated by reference to exhibit bearing the same designation and
previously filed with the Securities and Exchange Commission as exhibits to the
Form S-3 File No. 33-65055.
[] Incorporated by reference to exhibit bearing the same designation and
previously filed with the Securities and Exchange Commission as exhibits to the
Form S-3 File No. 333-34045.
____________________
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the trustee
of all facts on which to base responsive answers to Items 2 and 13, the answers
to said Items are based on incomplete information. Such Items may, however, be
considered as correct unless amended by an amendment to this Form T-1.
7
<PAGE>
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE TRUST INDENTURE ACT OF 1939 THE TRUSTEE,
TEXAS COMMERCE BANK NATIONAL ASSOCIATION, A NATIONAL BANKING ASSOCIATION
ORGANIZED AND EXISTING UNDER THE LAWS OF THE UNITED STATES OF AMERICA, HAS DULY
CAUSED THIS STATEMENT OF ELIGIBILITY TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ALL IN THE CITY OF HOUSTON, AND STATE OF
TEXAS, ON THE ___ DAY OF DECEMBER, 1997.
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
(Trustee)
By:
-----------------------------------
Donna Edmundson
Vice President and Trust Officer
8
<PAGE>
EXHIBIT 6
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
The undersigned is trustee under a Third Supplemental Indenture dated as
of___________, 1998, supplementing an Indenture dated as of December 15, 1992,
each by and between Pennzoil Company, a Delaware corporation (the "Company") and
Texas Commerce Bank National Association, as Trustee, entered into in connection
with the issuance of the Company's Exchangeable Senior Debentures Due 2008.
In accordance with Section 321(b) of the Trust Indenture Act of 1939, the
undersigned hereby consents that reports of examinations of the undersigned,
made by Federal or State authorities authorized to make such examinations, may
be furnished by such authorities to the Securities and Exchange Commission upon
its request therefor.
Very truly yours,
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
By:
------------------------------
Donna Edmundson
Vice President and Trust Officer
9
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
TO ACCOMPANY 6 1/2% EXCHANGEABLE SENIOR DEBENTURES DUE 2003
OR 4 3/4% EXCHANGEABLE DEBENTURES DUE 2003
OF
PENNZOIL COMPANY
TENDERED PURSUANT TO THE OFFER TO EXCHANGE
DATED , 1998
THE EXCHANGE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., NEW YORK CITY TIME, ON , UNLESS THE
EXCHANGE OFFER IS EXTENDED.
TO: TEXAS COMMERCE BANK NATIONAL ASSOCIATION, EXCHANGE AGENT
By Mail: By Facsimile: By Hand or Overnight
(registered or certified (214) 672-5746 Courier:
mail recommended) Confirm by Telephone To: c/o Texas Commerce Bank
Texas Commerce Bank (214) 672-5678 National Association
National Association Corporate Trust Services
Association Corporate 1201 Main, 18th Floor
Trust Services Dallas, Texas 75202
P.O. Box 2320 or
Dallas, Texas 75221-2320 Texas Commerce Trust
Company
of New York
55 Water Street, North
Building
Room 234, Windows 20 & 21
New York, New York 10041
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A NUMBER
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus, dated January ,
1998 (the "Prospectus"), of Pennzoil Company, a Delaware corporation
("Pennzoil" or the "Company"), which, together with this Letter of Transmittal
(the "Letter of Transmittal"), describes the Company's offer (the "Exchange
Offer") to issue its new exchangeable senior debentures due 2008 (the "New
Debentures") in exchange for a portion of its outstanding 6 1/2% exchangeable
senior debentures due 2003 (the "6 1/2% Debentures") and its outstanding 4
3/4% exchangeable senior debentures due 2003 (the "4 3/4% Debentures" and,
together with the 6 1/2% Debentures, the "Old Debentures").
<PAGE>
The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
PLEASE READ THE ENTIRE PROSPECTUS AND LETTER OF TRANSMITTAL CAREFULLY BEFORE
CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR ANY ADDITIONAL COPIES OF THE
PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE
AGENT.
List below the aggregate principal amount of Old Debentures to which this
Letter of Transmittal relates. If the space below is inadequate, the
certificate number(s), aggregate principal amount of Old Debenture(s) and the
principal amount of Old Debentures tendered should be listed on a separate
signed schedule affixed hereto.
DESCRIPTION OF OLD DEBENTURES TENDERED
(SEE INSTRUCTION 7)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
NAME(S) AND ADDRESS(ES) OF AGGREGATE AMOUNT OF
REGISTERED HOLDER(S) (PLEASE PRINCIPAL AMOUNT OLD
FILL IN EXACTLY AS NAME(S) CERTIFICATE OF OLD DEBENTURES
APPEAR(S) ON CERTIFICATE(S) NUMBER(S)* DEBENTURE(S) TENDERED**
- -------------------------------------------------------------------------------
<S> <C>
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
TOTAL
OLD
DEBENTURES.
- -------------------------------------------------------------------------------
</TABLE>
Indicate in this box the order (by certificate number) in which Old
Debentures are to be exchanged in the event of proration.*** (Attach
additional signed list if necessary.)
See Instruction 10.
1st: 2nd: 3rd: 4th: 5th:
* Need not be completed by holders tendering Old Debentures by book-entry
transfer.
** Unless otherwise indicated in this column, a holder will be deemed to have
tendered the aggregate principal amount of all of the Old Debentures
represented by the tendered certificates. See Instruction 2.
*** If you do not designate an order, then in the event less than all Old
Debentures tendered are accepted due to proration, the Exchange Agent will
select the Old Debentures for acceptance.
2
<PAGE>
This Letter of Transmittal is to be used if certificates for Old Debentures
are to be forwarded herewith. If delivery of Old Debentures is to be made
through book-entry transfer into the Exchange Agent's account at The
Depository Trust Company ("DTC"), this Letter of Transmittal need not be
delivered; provided, however, that tenders of Old Debentures must be effected
in accordance with DTC's Automated Tender Offer Program ("ATOP") procedures
and the procedures set forth in the Prospectus under the caption "The Exchange
Offer--Book-Entry Transfer."
Unless the context requires otherwise, the term "holder" for purposes of
this Letter of Transmittal means any person in whose name Old Debentures are
registered, any other person who has obtained a properly completed bond power
from the registered holder or any person whose Old Debentures are held of
record by DTC who desires to deliver such Old Debentures by book-entry
transfer at DTC.
Holders whose Old Debentures are not immediately available or who cannot
deliver their Old Debentures and all other documents required hereby to the
Exchange Agent prior to the Expiration Date may tender their Old Debentures
according to the guaranteed delivery procedure set forth in the Prospectus
under the caption "The Exchange Offer--Guaranteed Delivery." See Instruction
1.
(BOXES BELOW FOR USE BY ELIGIBLE INSTITUTIONS ONLY)
[_] CHECK HERE IF TENDERED DEBENTURES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE
THE FOLLOWING:
Name of Tendering Institution:_______________________________________________
Account Number:______________________________________________________________
Transaction Code Number:_____________________________________________________
[_] CHECK HERE IF TENDERED OLD DEBENTURES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s):_____________________________________________
Date of Execution of Notice of Guaranteed Delivery:__________________________
Name of Institution that Guaranteed Delivery:________________________________
If delivery is by book-entry transfer:_______________________________________
Name of Tendering Institution:_______________________________________________
Account Number:______________________________________________________________
Transaction Code Number:_____________________________________________________
3
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the above-described Old Debentures.
Subject to, and effective upon, acceptance for exchange of the Old Debentures
tendered herewith in accordance with the terms and subject to the conditions
of the Exchange Offer (including, if the Exchange Offer is extended or
amended, the terms and conditions of any such extension or amendment), the
undersigned hereby exchanges, assigns and transfers to, or upon the order of,
the Company all right, title and interest in and to all the Old Debentures.
The undersigned hereby irrevocably constitutes and appoints the Exchange Agent
the true and lawful agent and attorney-in-fact of the undersigned with respect
to such Old Debentures, with full power of substitution and resubstitution
(such power of attorney being deemed to be an irrevocable power coupled with
an interest), to:
(a) deliver certificates for such Old Debentures, or transfer ownership
of such Old Debentures on the account books maintained by DTC, together, in
any such case, with all accompanying evidences of transfer and
authenticity, to or upon the order of the Company upon receipt by the
Exchange Agent, as the undersigned's agent, of the New Debentures for which
the Old Debentures are exchanged;
(b) present certificates for such Old Debentures for cancellation and
transfer on the books of the Company; and
(c) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Old Debentures, all in accordance with the terms of the
Offer.
The undersigned hereby represents and warrants to the Company that:
(a) the undersigned has full power and authority to tender, exchange,
assign and transfer the Old Debentures tendered hereby and to acquire the
New Debentures issuable upon the exchange of such tendered Old Debentures;
(b) when and to the extent the Company accepts such Old Debentures for
exchange, the Company will acquire good, marketable and unencumbered title
to the tendered Old Debentures, free and clear of all security interests,
liens, restrictions, charges, encumbrances, conditional sales agreements or
other obligations relating to their sale or transfer and not subject to any
adverse claim;
(c) upon request, the undersigned will execute and deliver any additional
document that the Exchange Agent or the Company deems necessary or
desirable to complete the assignment, transfer and exchange of the Old
Debentures tendered hereby or transfer ownership of such Old Debentures on
the account books maintained by DTC;
(d) the undersigned understands that tenders of Old Debentures pursuant
to any one of the procedures described in the Exchange Offer and in the
instructions hereto will constitute the undersigned's acceptance of the
terms and conditions of the Exchange Offer, including the undersigned's
representation and warranty that:
(i) the undersigned has a net long position in Old Debentures or
equivalent securities at least equal to the Old Debentures tendered
within the meaning of Rule 14e-4 under the Securities Exchange Act of
1934, as amended (the "Exchange Act"); and
(ii) such tender of Old Debentures otherwise complies with Rule 14e-4
of the Exchange Act; and
(e) the undersigned has read and agrees to all of the terms of the
Exchange Offer.
All authorities conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned, and
every obligation of the undersigned hereunder shall be binding upon the heirs,
personal representatives, successors, assigns, trustees in bankruptcy and
legal representatives of the undersigned. Except as stated in the Exchange
Offer, this tender is irrevocable.
4
<PAGE>
The undersigned understands that the Exchange Offer will be for a principal
amount of Old Debentures (the "Target Amount") that is exchangeable into
between 7.35 million and 14.39 million shares of Chevron Stock under the
Existing Exchange Rights. The Target Amount will be determined by reference to
the Average Chevron Stock Price (as defined below). See "The Exchange Offer--
Target Amount." However, Pennzoil reserves the right, in its sole discretion,
to accept more than the Target Amount of Old Debentures for exchange. The
"Average Chevron Stock Price" will be the average of the closing prices of
Chevron Stock on the NYSE on the two trading days ending on the second trading
day prior to the Expiration Date. On January , 1998, the last reported
closing price of Chevron Stock on the NYSE was $ per share. The Company
will not accept for exchange any Old Debentures if the Exchange Offer would
result in less than $100 million in principal amount of New Debentures being
issued.
The undersigned understands that the principal amount of New Debentures to
be issued in exchange for Old Debentures in the Exchange Offer will be equal
to the product of (i) 103% of the Average Chevron Stock Price (as defined
below) and (ii) the aggregate number of shares of Chevron Stock for which the
Old Debentures tendered by a holder are exchangeable as of the date that the
Company accepts Old Debentures pursuant to the Exchange Offer (the "Acceptance
Date") (subject to the payment of cash in lieu of the issuance of New
Debentures in a principal amount of less than $1,000).
The undersigned also understands that the interest rate per annum for the
New Debentures will be neither less than 4 3/4% nor more than 6%. Each holder
of Old Debentures tendered for exchange must specify in the Letter of
Transmittal, in increments of 0.05%, the minimum interest rate (but in no
event less than 4 3/4%) that such holder is willing to accept for the New
Debentures. The Company will select the lowest interest rate (the "Determined
Rate") that will allow it to accept the Target Amount of Old Debentures (or
such lesser amount of Old Debentures as is properly tendered and not withdrawn
specifying a coupon neither less than 4 3/4% per annum nor more than 6% per
annum, or such greater amount as Pennzoil, in its sole discretion, may
determine to accept). Notwithstanding the foregoing, a holder may elect in the
Letter of Transmittal to specify that all Old Debentures being tendered are
tendered at the "Determined Rate" (as opposed to specifying a particular
rate), which should increase the likelihood that the Company would accept for
exchange such holder's Old Debentures being tendered. See "The Exchange
Offer--Terms of the Exchange Offer." All Old Debentures properly tendered by a
holder specifying an interest rate for the New Debentures at or below the
Determined Rate, and not withdrawn, will be accepted for exchange, subject to
the terms and conditions of the Exchange Offer (including the possibility of
proration), provided that not more than $889.1 million principal amount, and
not less than $100 million principal amount, of New Debentures will be issued.
All New Debentures issued pursuant to the Exchange Offer will bear interest at
the Determined Rate. The Company will pay accrued interest on Old Debentures
accepted for exchange through the Acceptance Date. Payment of such accrued
interest on the Old Debentures will accompany delivery of the New Debentures.
Unless otherwise indicated under "Special Issuance Instructions," please
issue the certificate for the New Debentures for any Old Debentures exchanged,
and/or return the certificate(s) for any Old Debentures not exchanged, and
issue checks in payment of the cash to be paid in lieu of principal amounts of
New Debentures of less than $1,000 in the name(s) of the undersigned (and, in
the case of Old Debentures tendered by book-entry transfer, by credit to the
account at DTC). Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail the certificate for the New Debentures, and/or any
certificate(s) for Old Debentures not tendered or not exchanged (and
accompanying documents, as appropriate), and any checks to the undersigned at
the address shown below the undersigned's signature(s). In the event that both
"Special Issuance Instructions" and "Special Delivery Instructions" are
completed, please issue the certificate for the New Debentures for any Old
Debentures exchanged, and/or return any Old Debentures not exchanged in the
name(s) of, and mail such check and/or any certificates to, the person(s) so
indicated. The undersigned recognizes that the Company has no obligation,
pursuant to the "Special Issuance Instructions," to transfer any Old
Debentures from the name of the registered holder(s) thereof if the Company
does not accept for exchange any of the Old Debentures so tendered.
5
<PAGE>
THE UNDERSIGNED UNDERSTANDS THAT ACCEPTANCE OF OLD DEBENTURES
BY THE COMPANY FOR EXCHANGE WILL CONSTITUTE A BINDING AGREEMENT
BETWEEN THE UNDERSIGNED AND THE COMPANY UPON THE TERMS AND
SUBJECT TO THE CONDITIONS OF THE OFFER.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
INTEREST RATE PER DEBENTURE AT
WHICH OLD DEBENTURES ARE BEING TENDERED FOR EXCHANGE
(SEE INSTRUCTION 8)
CHECK ONLY ONE BOX. IF MORE THAN ONE BOX IS CHECKED
OR IF NO BOX IS CHECKED, THERE IS NO VALID TENDER OF OLD DEBENTURES.
OLD DEBENTURES TENDERED AT INTEREST RATE DETERMINED BY DUTCH AUCTION
[_] The undersigned wants to maximize the chance of having the Company accept
for exchange all of the Old Debentures that the undersigned is tendering
(subject to the possibility of proration). Accordingly, by checking this one
box INSTEAD OF ONE OF THE INTEREST RATE BOXES BELOW, the undersigned hereby
tenders Old Debentures at, and is willing to accept, the Interest Rate
resulting from the Dutch auction tender process. This action could result in
receiving interest rate as low as 4 3/4% or as high as 6%.
*** CHECK EITHER THE BOX ABOVE OR ONE BOX BELOW ***
OLD DEBENTURES TENDERED AT INTEREST RATE DETERMINED BY HOLDER
[_] 4.75% [_] 5.10% [_] 5.45% [_] 5.80%
[_] 4.80% [_] 5.15% [_] 5.50% [_] 5.85%
[_] 4.85% [_] 5.20% [_] 5.55% [_] 5.90%
[_] 4.90% [_] 5.25% [_] 5.60% [_] 5.95%
[_] 4.95% [_] 5.30% [_] 5.65% [_] 6%
[_] 5% [_] 5.35% [_] 5.70%
[_] 5.05% [_] 5.40% [_] 5.75%
IF OLD DEBENTURES ARE BEING TENDERED AT MORE THAN ONE INTEREST
RATE, YOU MUST USE A SEPARATE LETTER OF TRANSMITTAL
FOR EACH INTEREST RATE TO BE SPECIFIED
6
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 2, 3, 4 AND 12)
To be completed ONLY if the
certificate for the New
Debentures, and/or the
certificate(s) for Old Debentures
not accepted for exchange, and any
check issued in payment of the
cash to be paid in lieu of
principal amounts of New
Debentures of less than $1,000,
are to be issued or paid to or
credited to the account of someone
other than the undersigned.
Issue [_] Check
[_] Certificate(s) to:
Name(s) ___________________________
(Please Print)
Address ___________________________
(Zip Code)
-----------------------------------
(Tax Identification or Social
Security No.)
(complete accompanying Substitute
Form W-9)
[_] Credit Old Debentures
delivered by book-entry
transfer and not accepted for
exchange to the account set
forth below:
Account Number: ___________________
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 2, 3, 4 AND 12)
To be completed ONLY if the
certificate for the New
Debentures, and/or the
certificate(s) for Old Debentures
not accepted for exchange, and any
check issued in payment of the
cash to be paid in lieu of
principal amounts of New
Debentures of less than $1,000,
are to be mailed to someone other
than the undersigned, or to the
undersigned at an address other
than that shown above.
Deliver [_] Check [_] Certificates
to:
Name(s) ___________________________
(Please Print)
Address ___________________________
(Zip Code)
-----------------------------------
(Tax Identification or Social
Security No.)
(complete accompanying Substitute
Form W-9)
7
<PAGE>
IMPORTANT
TENDERING HOLDER(S) SIGN HERE
(PLEASE COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9)
---------------------------------------------------------------
---------------------------------------------------------------
SIGNATURE(S) OF HOLDER(S)
Dated: , 1998
If the holder is tendering any Old Debentures, the Letter of Transmittal must
be signed by the registered holder(s) exactly as the name(s) appear(s) on
certificate(s) for the Old Debentures, any person(s) authorized to become
registered holder(s) by endorsements and documents transmitted herewith or, if
the Old Debentures are held of record by DTC, the person in whose name such Old
Debentures are registered on the books of DTC. If signature is by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation,
or other person acting in a fiduciary or representative capacity, please set
forth the full title of such person. See Instruction 3.
Name(s):________________________________________________________________________
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title):__________________________________________________________
Address:________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone No.:____________________________________________________
Tax Identification or Social Security No.:______________________________________
(SEE ACCOMPANYING SUBSTITUTE FORM W-9)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 3 AND 4)
Name of Firm:___________________________________________________________________
Authorized Signature:___________________________________________________________
Name:___________________________________________________________________________
- --------------------------------------------------------------------------------
(Please Print)
Title:__________________________________________________________________________
Address:________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number:_________________________________________________
Dated ____________________________________________________________________, 1998
8
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. Only a holder of the Old Debentures may tender such Old Debentures
in the Exchange Offer. A holder who wishes to tender any Old Debentures for
exchange pursuant to the Exchange Offer must transmit a properly completed and
duly executed Letter of Transmittal, or a facsimile thereof, including any
other required documents, to the Exchange Agent prior to 5:00 p.m., New York
City time, on the Expiration Date. In addition, either (i) certificates for
such Old Debentures must be received by the Exchange Agent along with the
Letter of Transmittal, (ii) a timely confirmation of a book-entry transfer (a
"Book-Entry Confirmation") of such Old Debentures, if such procedure is
available, into the Exchange Agent's account at DTC pursuant to the procedure
for book-entry transfer described below must be received by the Exchange Agent
prior to the Expiration Date or (iii) the holder must comply with the
guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE OLD DEBENTURES,
AND ANY OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER
AND, EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY
WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY MAIL, IT
IS SUGGESTED THAT REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, BE USED.
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Old Debentures to reach the Exchange Agent before the
Expiration Date or the procedure for book-entry transfer cannot be completed
on a timely basis, a tender may be effected if the Exchange Agent has received
at its office, prior to the Expiration Date, a letter, a telegram, or
facsimile transmission from an Eligible Institution (as defined below) setting
for the name and address of the tendering holder, the name(s) in which the Old
Debentures are registered and, if the Old Debentures are held in certificated
form, the certificate number of the Old Debentures to be tendered, and stating
that the tender is being made thereby and guaranteeing that within three
trading days after the date of execution of such letter, telegram, or
facsimile transmission by the Eligible Institution, the Old Debentures, in
proper form for transfer together with a properly completed and duly executed
Letter of Transmittal (and any other required documents), or a confirmation of
book-entry transfer of such Old Debentures into the Exchange Agent's account
at DTC, will be delivered by such Eligible Institution. Unless the Old
Debentures being tendered by the above-described method are deposited with the
Exchange Agent within the time period set forth above (accompanied or preceded
by a properly completed Letter of Transmittal and any other required
documents) or a confirmation of book-entry transfer of such Old Debentures in
the Exchange Agent's account at DTC in accordance with DTC's ATOP procedures
is received, the Company may, at its option, reject the tender. Copies of a
Notice of Guaranteed Delivery which may be used by Eligible Institutions for
the purposes described in this paragraph are available from the Exchange Agent
and the Information Agent.
No alternative, conditional, irregular, or contingent tenders will be
accepted. All tendering holders, by execution of this Letter of Transmittal
(or facsimile thereof), shall waive any right to receive notice of the
acceptance of the Old Debentures for exchange.
2. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER); WITHDRAWALS. If less than all of the Old Debentures evidenced by a
submitted certificate are to be tendered, the tendering holder(s) must fill in
the aggregate principal amount at maturity of Old Debentures tendered in the
box above entitled "Principal Amount of Old Debentures Tendered." A newly
issued certificate for Old Debentures submitted but not tendered will be sent
to such tendering holder as soon an practicable after the Expiration Date,
unless otherwise indicated in the appropriate box in this Letter of
Transmittal. The entire aggregate principal amount at maturity of Old
Debentures evidenced by certificates delivered to the Exchange Agent will be
deemed to have been tendered unless otherwise indicated.
9
<PAGE>
Tenders of Old Debentures pursuant to the Exchange Offer may be withdrawn at
any time prior to the Expiration Date and, unless accepted for exchange by the
Company, may be withdrawn at any time after 40 business days after the date of
the Prospectus. To be effective, a written, telegraphic, telex, or facsimile
transmission notice of withdrawal must be timely received by the Exchange
Agent. Any such notice of withdrawal must specify the person(s) named in the
Letter of Transmittal as having tendered Old Debentures to be withdrawn, the
certificate number(s) of the Old Debentures to be withdrawn, the aggregate
principal amount at maturity of the Old Debentures delivered for exchange, a
statement that such holder(s) is withdrawing its election to have such Old
Debentures exchanged and the name(s) of the registered holder(s) of such Old
Debentures, and must be signed by the holder(s) in the same manner as the
original signature(s) on the Letter of Transmittal (including any required
signature guarantees) or be accompanied by evidence satisfactory to the
Company that the person withdrawing the tender has succeeded to the beneficial
ownership of the Old Debentures being withdrawn. The Exchange Agent will
return properly withdrawn Old Debentures promptly following receipt of notice
of withdrawal. If Old Debentures have been tendered pursuant to the procedure
for book-entry transfer, any notice of withdrawal must specify the name and
number of the account at DTC to be credited with the withdrawn Old Debentures
or otherwise comply with DTC's procedures. All questions as to the validity of
a notice of withdrawal, including the time of receipt, will be determined by
the Company, and such determination will be final and binding on all parties.
Withdrawals of tenders of Old Debentures may not be rescinded and any Old
Debentures withdrawn will thereafter be deemed not validly tendered for
purposes of the Exchange Offer. Properly withdrawn Old Debentures, however,
may be retendered by following the procedures therefor at any time prior to
the Expiration Date.
3. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS. If this Letter of Transmittal is signed by the registered
holder(s) of the Old Debentures tendered hereby, the signature must correspond
with the name(s) as written on the face of the certificates without
alteration, enlargement, or any change whatsoever.
If any of the Old Debentures tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal. If
any of the Old Debentures tendered hereby are registered in different names on
different certificates, it will be necessary to complete, sign, and submit as
many separate copies of this Letter of Transmittal an there are different
registrations of Old Debentures.
When this Letter of Transmittal is signed by the registered holder(s) of Old
Debentures listed and tendered hereby, no endorsements of certificates or
separate written instruments of transfer or exchange are required. If this
Letter of Transmittal is signed by a person other than the registered
holder(s) of the Old Debentures listed, such Old Debentures must be endorsed
or accompanied by separate written instruments of transfer or exchange in form
satisfactory to the Company and duly executed by the registered holder(s), in
either came signed exactly as the name(s) of the registered holder(s)
appear(s) on the Old Debentures. If this Letter of Transmittal, any
certificates or separate written instruments of transfer or exchange are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations, or others acting in a fiduciary or representative
capacity, such person should so indicate when signing, and, unless waived by
the Company, proper evidence satisfactory to the Company of their authority so
to act must be submitted. Endorsements on certificates or signatures on
separate written instruments of transfer or exchange required by this
Instruction 3 must be guaranteed by an Eligible Institution.
If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Debentures listed therein, such Old Debentures must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Old
Debentures.
If this Letter of Transmittal or any certificate(s) or bond power(s) are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and must submit proper
evidence satisfactory to the Company of their authority so to act. If the
certificate has been issued in the fiduciary or representative capacity, no
additional documentation will be required.
10
<PAGE>
4. GUARANTEE OF SIGNATURE. No signature guarantee is required if either:
(a) this Letter of Transmittal is signed by the registered holder of the
Old Debentures (which term, for purposes of this document, shall include
any participant of DTC whose name appears on a security position listing as
the owner of such Old Debentures) exactly as the name of the registered
holder appears on the certificate tendered with this Letter of Transmittal
and payment and delivery are to be made directly to such owner unless such
owner has completed either the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" above; or
(b) such Old Debentures are tendered for the account of a financial
institution (including most banks, savings and loan associations and
brokerage houses) that is a participant in the Security Transfer Agents
Medallion Program or The New York Stock Exchange Medallion Program or the
Stock Exchange Medallion Program (each such entity, an "Eligible
Institution").
In all other cases, an Eligible Institution must guarantee all signatures on
this Letter of Transmittal. See Instruction 3.
5. TRANSFER TAXES. The Company shall pay all transfer taxes, if any,
applicable to the transfer and exchange of Old Debentures to it or its order
pursuant to the Exchange Offer. If, however, certificates representing Old
Debentures are not tendered or accepted for exchange, are to be delivered to,
or are to be registered or issued in the name of, any person other than the
registered holder(s) of such Old Debentures tendered hereby, or if a transfer
tax is imposed for any reason other than the exchange of Old Debentures to the
Company or its order pursuant to the Exchange Offer, the amount of any such
transfer taxes (whether imposed on the registered holder(s) or any other
person) will be payable by the tendering holder(s). If satisfactory evidence
of payment of such taxes or exception therefrom in not submitted herewith, the
amount of such transfer taxes will be billed directly to such tendering
holder.
Except as provided in this Instruction 5, it will not be necessary for
transfer tax stamps to be affixed to the New Debentures listed in this Letter
of Transmittal.
6. EXTENSIONS, AMENDMENTS AND TERMINATION. The Company expressly reserves
the right to extend, waive, amend or modify the terms or conditions of the
Exchange Offer or withdraw or terminate the Exchange Offer at any time and for
any reason.
7. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. Any holder whose
certificates for Old Debentures have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated below for further
instructions.
8. INADEQUATE SPACE. If the space provided in the box captioned "Description
of Old Debentures Tendered" is inadequate, the certificate numbers, the
aggregate principal amount of Old Debentures represented by certificate(s)
and/or the principal amount of Old Debentures tendered should be listed on a
separate signed schedule and attached to this Letter of Transmittal.
9. INDICATION OF INTEREST RATE AT WHICH OLD DEBENTURES ARE BEING TENDERED.
For Old Debentures to be properly tendered, the holder MUST check the box
indicating the interest rate per debenture at which he or she is tendering Old
Debentures under "Interest Rate Per Debenture at Which Old Debentures Are
Being Tendered" on this Letter of Transmittal. ONLY ONE BOX MAY BE CHECKED. IF
MORE THAN ONE BOX IS CHECKED OR IF NO BOX IS CHECKED, THERE IS NO PROPER
TENDER OF OLD DEBENTURES. A holder wishing to tender portions of his or her
Old Debenture holdings at different interest rates must complete a separate
Letter of Transmittal for each interest rate at which he or she wishes to
tender each such portion of his or her Old Debentures. The same Old Debentures
cannot be tendered (unless previously properly withdrawn as provided in the
Exchange Offer) at more than one interest rate. HOLDERS WISHING TO MAXIMIZE
THE POSSIBILITY THAT THEIR OLD DEBENTURES WILL BE EXCHANGED AT THE RELEVANT
INTEREST RATE MAY CHECK THE BOX ON THE LETTER OF
11
<PAGE>
TRANSMITTAL MARKED "OLD DEBENTURES TENDERED AT INTEREST RATE DETERMINED BY
DUTCH AUCTION." Checking this box may result in an interest rate of the Old
Debentures so tendered at the minimum interest rate of 4 3/4%.
10. ORDER OF ACCEPTANCE FOR EXCHANGE IN EVENT OF PRORATION. Holders may
designate the order in which their Old Debentures are to be accepted for
exchange in the event the order of exchange may have an effect on the federal
income tax classification of any gain.
11. BENEFICIAL OWNERS. Any beneficial owner whose Old Debentures are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such beneficial owner's behalf, such
beneficial owner must, prior to completing and executing the Letter of
Transmittal (or delivering an Agent's Message) and delivering such beneficial
owner's Old Debentures, either make appropriate arrangements to register
ownership of the Old Debentures in such beneficial owner's name or obtain a
properly completed bond power from the registered holder. The transfer of
registered ownership may take considerable time and may not be able to be
completed prior to the Expiration Date.
12. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS. If the certificate for
New Debentures, and/or the certificate(s) for Old Debentures not tendered or
not purchased, and any check issued in payment of cash to be paid in lieu of
fractional amounts of New Debentures are to be issued in the name of a person
other than the signer of the Letter of Transmittal or if such certificates or
check are to be sent to someone other than the person signing the Letter of
Transmittal or to the signer at a different address, the boxes captioned
"Special Issuance Instructions" and/or "Special Delivery Instructions" on this
Letter of Transmittal should be completed as applicable, and signatures must
be guaranteed as described in Instruction 4. Holders tendering Old Debentures
by book-entry transfer will have any Old Debentures not accepted for payment
returned by crediting the account maintained by such holder at DTC.
13. IRREGULARITIES. All questions as to the validity, form, eligibility
(including time of receipt), acceptance and withdrawal of tendered Old
Debentures will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute
right to reject any and all Old Debentures not properly tendered or any Old
Debentures the Company's acceptance of which would, in the opinion of counsel
for the Company, be unlawful. The Company also reserves the right to waive any
defects, irregularities or conditions of tender as to particular Old
Debentures. The Company's interpretation of the terms and conditions of the
Exchange Offer (including the instructions in the Letter of Transmittal) will
be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Debentures must be cured
within such time as the Company shall determine. Although the Company intends
to notify holders of defects or irregularities with respect to tenders of Old
Debentures, neither the Company, the Exchange Agent nor any other person shall
incur any liability for failure to give such notification. Tenders of Old
Debentures will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Old Debentures received by the
Exchange Agent that the Company determines are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering holders, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
14. QUESTIONS AND REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions
and requests for assistance may be directed to, or additional copies of the
Exchange Offer, the Notice of Delivery and this Letter of Transmittal may be
obtained from, the Information Agent at the addresses and telephone numbers
set forth at the end of this Letter of Transmittal or from your broker,
dealer, commercial bank or trust company.
15. SUBSTITUTE FORM W-9. Except as described below under "Important Tax
Information," federal income tax laws require each tendering holder to provide
the Company with a correct taxpayer identification number ("TIN") on the
Substitute Form W-9, which is provided below, and to indicate whether the
holder is
12
<PAGE>
subject to backup withholding by crossing out Part 2 of the Substitute Form W-
9 if the holder is currently subject to backup withholding. Failure to provide
the information on such Form or to cross out Part 2 of such form, if
applicable, may subject the tendering holder to 31% federal income tax
withholding on payments made to the holder. The box in Part 3 of such Form may
be checked if the tendering holder has not been issued a TIN and has applied
for a TIN or intends to apply for a TIN in the near future. If the box in Part
3 is checked and the holder is not provided with a TIN within sixty (60) days,
the Company will withhold 31% on all such payments thereafter until a TIN is
provided to it.
16. DEFINITIONS. Capitalized terms used in this Letter of Transmittal and
not otherwise defined have the meanings given in the Prospectus.
13
<PAGE>
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A PHOTOCOPY THEREOF) TOGETHER WITH
OLD DEBENTURE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL
OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE OFFER, OR THE NOTICE
OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE OFFER, PRIOR TO THE
EXPIRATION DATE (AS DEFINED IN THE EXCHANGE OFFER).
IMPORTANT TAX INFORMATION
Under federal income tax law, a holder whose tendered Old Debentures are
accepted for exchange is required to provide the Company with such holder's
correct TIN on a Substitute Form W-9. if a holder is an individual, the TIN is
the holder's social security number. If the Company is not provided with the
correct TIN, the holder may be subject to a penalty imposed by the Internal
Revenue Service ("IRS"). In addition, payments that are made to such holder
with respect to New Debentures acquired pursuant to the Exchange Offer may be
subject to backup withholding.
If backup withholding applies, the Company is required to withhold 31% of
all payments with respect to the New Debentures made to a holder. Backup
withholding is not an additional tax. Rather, the tax liability of persons
subject to backup withholding will be reduced by the amount of tax withheld.
if withholding results in an overpayment of taxes, a refund may be obtained.
To prevent backup withholding on payments that are made to a holder with
respect to the New Debentures, the holder is required to notify the Company of
his, her or its correct TIN by completing the Substitute Form W-9 below,
certifying that the TIN provided on such Form is correct (or that such holder
is awaiting a TIN) and whether (i) the holder has been notified by the IRS
that the holder is subject to backup withholding as a result of a failure to
report all interest or dividends or (ii) the IRS has notified the holder that
the holder is no longer subject to backup withholding.
Certain holders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding requirements.
A corporation must, however, complete the Substitute Form W-9, including
providing its TIN (unless it is a foreign corporation that does not have a
TIN) and indicating that it is exempt from backup withholding, in order to
establish its exemption from backup withholding. A foreign corporation or
individual, or other foreign person, must submit a statement, signed under
penalties of perjury, attesting to such person's status as a non-United States
person. Such statements can be obtained from the Exchange Agent.
See the enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 for additional instructions.
14
<PAGE>
- -------------------------------------------------------------------------------
PAYER'S NAME:
PART I--Taxpayer ----------------------
Identification Number--For Social Security
SUBSTITUTE all accounts, enter Number
FORM W-9 taxpayer identification OR____________________
number in the box at right. Employer
(For most individuals, this Identification Number
is your social security
number. If you do not have
a number, see Obtaining a
Number in the enclosed
Guidelines.) Certify by
signing and dating below.
DEPARTMENT OF THE
TREASURY
INTERNAL REVENUE (If awaiting TIN
SERVICE write
"Applied For")
PAYER'S REQUEST FOR NOTE: If the account is in the more than one name,
TAXPAYER see the chart in the enclosed Guidelines to
determine which number to give the payer.
IDENTIFICATION --------------------------------------------------------
NUMBER (TIN) --------------------------------------------------------
PART II--For Payees Exempt From Backup Withholding,
see the enclosed Guidelines and complete as
instructed therein.
- -------------------------------------------------------------------------------
CERTIFICATION--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me), and
(2) I am not subject to backup withholding either because I have not been
notified by the Internal Revenue Service (the "IRS") that I am subject to
backup withholding as a result of failure to report all interest or
dividends, or the IRS has notified me that I am no longer subject to
backup withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have
been notified by the IRS that you are subject to backup withholding because
of underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding you
receive another notification from the IRS that you are no longer subject to
backup withholding, do not cross out item (2). (Also see instructions in the
enclosed Guidelines.)
- -------------------------------------------------------------------------------
Signature _______________________________________________________ Date: , 1998
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE
OFFER. FOR ADDITIONAL DETAILS, PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
15
<PAGE>
The Exchange Agent:
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By Mail: By Facsimile: By Hand or Overnight
(registered or certified (214) 672-5746 Courier:
mail recommended) c/o Texas Commerce Bank
Texas Commerce Bank Confirm by Telephone to: National Association
National Association (214) 672-5678 Corporate Trust Services
Association Corporate 1201 Main, 18th Floor
Trust Services Dallas, Texas 75202
P.O. Box 2320 or
Dallas, Texas 75221-2320 Texas Commerce Trust
Company
of New York
55 Water Street, North
Building
Room 234, Windows 20 & 21
New York, New York 10041
The Information Agent:
D.F. KING & CO., INC.
CALL TOLL FREE 1-800-735-3591
77 Water Street Royex House
New York, New York 10005 Aldermanbury Square
(212) 269-5550 London EC2V 7HR
(Call Collect) 011-44-171-600-5005
(Call Collect)
The Dealer Manager is:
PAINEWEBBER INCORPORATED
1285 Avenue of the Americas
New York, New York 10019
Telephone: (800) 595-8360 (toll free)
Important: This Letter of Transmittal or a photocopy hereof or, in the case of
a book-entry transfer, an Agent's Message in lieu of the Letter of
Transmittal (together with certificates for the Old Debentures being
tendered and all other required documents), or a Notice of
Guaranteed Delivery must be received by the Exchange Agent prior to
5:00 p.m., New York City Time, on the Expiration Date.
16
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY FOR OFFER TO EXCHANGE
NEWLY ISSUED EXCHANGEABLE SENIOR DEBENTURES DUE 2008
OF
PENNZOIL COMPANY
FOR A PORTION OF ITS
6 1/2% EXCHANGEABLE SENIOR DEBENTURES DUE 2003
AND
4 3/4% EXCHANGEABLE SENIOR DEBENTURES DUE 2003
Registered holders of 6 1/2% exchangeable senior debentures due 2003 (the "6
1/2% Debentures") and 4 3/4% exchangeable senior debentures due 2003 (the "4
3/4% Debentures" and, together with the 6 1/2% Debentures, the "Old
Debentures") of Pennzoil Company, a Delaware corporation (the "Company" or
"Pennzoil"), who wish to tender any such Old Debentures in exchange for
exchangeable senior debentures due 2008 (the "New Debentures") of the Company,
on the terms and subject to the conditions set forth in the Prospectus of the
Company, dated , 1997 (the "Prospectus"), and the related Letter of
Transmittal, and whose Old Debentures are not immediately available or who
cannot deliver their Old Debentures and Letter of Transmittal (and any other
documents required by the Letter of Transmittal) to Texas Commerce Bank
National Association (the "Exchange Agent") prior to the Expiration Date (as
defined in the Prospectus), may use this Notice of Guaranteed Delivery or one
substantially equivalent hereto. This Notice of Guaranteed Delivery may be
delivered by hand or sent by facsimile transmission (receipt confirmed by
telephone and an original delivered by guaranteed overnight delivery) or
mailed to the Exchange Agent. See "The Exchange Offer--Procedures for
Tendering" in the Prospectus.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER:
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By Hand or Overnight Courier: By Mail:
c/o Texas Commerce Texas Commerce Trust (registered or certified
Bank Company of New York mail recommended)
National Association 55 Water Street, North Texas Commerce Bank National
Corporate Trust Building Association
Service or Room 234, Windows 20 & 21 Corporate Trust Services
1201 Main, 18th Floor New York, New York 10041 P.O. Box 2320
Dallas, Texas 75202 Dallas, Texas 75221-2320
Facsimile Number:
(For Eligible Institutions Only)
(214) 672-5746
Confirm by Telephone:
(214) 672-5678
Delivery of this Notice of Guaranteed Delivery to an address other than as
set forth above or transmission of instructions via a facsimile transmission
to a number other than as set forth above will not constitute a valid
delivery.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution, such signature guarantee must appear in
the applicable space provided in the Letter of Transmittal for the guarantee
of signatures.
<PAGE>
The undersigned hereby tenders the aggregate principal amount at maturity of
Old Debentures indicated below, upon the terms and subject to the conditions
contained in the Prospectus, dated , 1997, of the Company, receipt of
which is hereby acknowledged.
DESCRIPTION OF OLD DEBENTURES TENDERED
Aggregate Principal Amount at Maturity of 6 1/2% Debentures:$
Aggregate Principal Amount at Maturity of 4 3/4% Debentures:$
Certificate Number(s) (if available): ___________________
-------------------------------
INTEREST RATE PER DEBENTURE AT
WHICH OLD DEBENTURES ARE BEING TENDERED FOR EXCHANGE
CHECK ONLY ONE BOX.
IF MORE THAN ONE BOX IS CHECKED
OR IF NO BOX IS CHECKED, THERE IS
NO VALID TENDER OF OLD DEBENTURES.
OLD DEBENTURES TENDERED AT INTEREST RATE
DETERMINED BY DUTCH AUCTION
[_]The undersigned wants to maximize the chance of having the Company accept
for exchange all of the Old Debentures that the undersigned is tendering.
Accordingly, by checking this one box INSTEAD OF ONE OF THE INTEREST RATE
BOXES BELOW, the undersigned hereby tenders Old Debentures at, and is
willing to accept, the Interest Rate resulting from the Dutch auction
tender process. This action could result in receiving interest rate as low
as 4 3/4% or as high as 6%.
*** CHECK EITHER THE BOX ABOVE OR CHECK ONE BOX BELOW ***
OLD DEBENTURES TENDERED AT INTEREST RATE
DETERMINED BY HOLDER
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
[_] 4.75% [_] 5.10% [_] 5.45% [_] 5.80%
[_] 4.80% [_] 5.15% [_] 5.50% [_] 5.85%
[_] 4.85% [_] 5.20% [_] 5.55% [_] 5.90%
[_] 4.90% [_] 5.25% [_] 5.60% [_] 5.95%
[_] 4.95% [_] 5.30% [_] 5.65% [_] 6.00%
[_] 5.00% [_] 5.35% [_] 5.70%
[_] 5.05% [_] 5.40% [_] 5.75%
</TABLE>
2
<PAGE>
IF OLD DEBENTURES ARE BEING TENDERED AT MORE THAN ONE INTEREST
RATE, YOU MUST USE A SEPARATE LETTER OF TRANSMITTAL
FOR EACH INTEREST RATE TO BE SPECIFIED
Unless otherwise indicated, the undersigned will be deemed to have tendered
the entire aggregate principal amount at maturity of Old Debentures held for
the account of the undersigned.
Address(es):_____________________________________________
------------------------------------------------
Area Code and Telephone Number: _________________________
Signature(s):____________________________________________
------------------------------------------------
If Old Debentures will be delivered by book-
entry transfer to The Depository Trust
Company, provide account number.
Account Number:_________________________________________
The undersigned has a net long position in Old Debentures or equivalent
securities at least equal to the Old Debentures described above (that will be
delivered within three New York Stock Exchange, Inc. trading days after the
date of execution of this Notice of Guaranteed Delivery) within the meaning of
Rule 14e-4 under the Securities Exchange Act of 1934, as amended.
3
<PAGE>
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a member of a registered national securities
exchange or a member of the National Association of Securities Dealers, Inc.
or a commercial bank or trust company having an office, branch, agency, or
correspondent in the United States, hereby guarantees to deliver to the
Exchange Agent at one of its addresses set forth above, the certificates
representing the Old Debentures, together with a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, and any other documents required by the Letter of
Transmittal, within three New York Stock Exchange, Inc. trading days after the
date of execution of this Notice of Guaranteed Delivery.
Name of Firm:________________________ -------------------------------------
Address:_____________________________ (Authorized Signature)
------------------------------- -------------------------------------
------------------------------- Name: _______________________________
(Include Zip Code) (Please type or print)
Area Code and Telephone Number: _____ Title: ______________________________
Date: _______________________________
NOTE: DO NOT SEND CERTIFICATES OF OLD DEBENTURES WITH THIS NOTICE OF
GUARANTEED DELIVERY. CERTIFICATES OF OLD DEBENTURES SHOULD BE SENT WITH YOUR
LETTER OF TRANSMITTAL.
4
<PAGE>
EXHIBIT 99.3
OFFER TO EXCHANGE NEWLY ISSUED
EXCHANGEABLE SENIOR DEBENTURES DUE 2008
OF
PENNZOIL COMPANY
FOR A PORTION OF ITS
6 1/2% EXCHANGEABLE SENIOR DEBENTURES DUE 2003
AND
4 3/4% EXCHANGEABLE SENIOR DEBENTURES DUE 2003
To Registered Holders and Depository Trust Company Participants:
We are enclosing herewith the material listed below relating to the Exchange
Offer (as defined herein) by Pennzoil Company, a Delaware corporation (the
"Company"), to exchange its % Exchangeable Senior Debentures due 2008 (the
"New Debentures") for a portion of its outstanding 6 1/2% exchangeable senior
debentures due 2003 (the "6 1/2% Debentures") or 4 3/4% exchangeable senior
debentures due 2003 (the "4 3/4% Debentures" and, together with the 6 1/2%
Debentures, the "Old Debentures") of the Company.
The Exchange Offer will be for a principal amount of Old Debentures (the
"Target Amount") that is exchangeable into an aggregate 7.35 million and 14.39
million shares of common stock of Chevron Corporation under the existing
exchange rights, and upon the terms and subject the conditions set forth in
the Prospectus, dated , 1997 (the "Prospectus"), of the Company, and the
related Letter of Transmittal (which, together with the Prospectus,
constitutes the "Exchange Offer"). New Debentures will not be issued in
denominations of less than $1,000, and the Company will pay cash in lieu of
issuing New Debentures in a principal amount of less than $1,000.
Enclosed herewith are copies of the following documents:
1. Prospectus, dated , 1997;
2. Letter of Transmittal (together with accompanying Substitute Form W-9
Guidelines);
3. Notice of Guaranteed Delivery; and
4. A form of letter which may be sent to your clients for whose account you
hold Old Debentures in your name or in the name of your nominee, with
space provided for obtaining such client's instruction with regard to
the Exchange Offer.
WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE EXCHANGE
OFFER WILL EXPIRE AT 5:00 P.M. MIDNIGHT, NEW YORK CITY TIME, ON , 1998,
UNLESS EXTENDED BY THE COMPANY (THE "EXPIRATION DATE").
The Company expressly reserves the right, in its sole discretion, subject to
applicable law, to withdraw or terminate the Exchange Offer, and not accept
for exchange any Old Debentures and promptly return all Old Debentures at any
time for any reason, including (without limitation) if the Exchange Offer
would result in less than $100 million in principal amount of New Debentures
being issued, or upon the failure of certain other conditions described in the
Prospectus, which conditions may be waived by the Company. Each holder of Old
Debentures who desires to accept the Exchange Offer and tender Old Debentures
for exchange and whose Old Debentures are not immediately available, or who
cannot comply in a timely manner with the procedure for book-entry transfer,
should tender such Old Debentures by following the procedures for guaranteed
delivery set forth under "The Exchange Offer--Guaranteed Delivery Procedures."
D. F. King & Co., Inc. has been appointed Information Agent for the Exchange
Offer. All questions relating to the Exchange Offer, as well as requests for
assistance or additional copies of the Prospectus or the Letter of
<PAGE>
Transmittal, may be directed to D. F. King & Co., Inc., New York, New York,
telephone (800) 735-3591 (toll-free).
The Company will not pay any fee or commission to any broker or dealer or to
any other persons (other than the Dealer Manager and the Exchange Agent) in
connection with the solicitation of tenders of Old Debentures pursuant to the
Exchange Offer. The Company will pay or cause to be paid any transfer taxes
payable on the transfer of Old Debentures to it, except as otherwise provided
in Instruction 4 of the enclosed Letter of Transmittal.
Very truly yours,
PENNZOIL COMPANY
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
AS THE AGENT OF PENNZOIL COMPANY OR TEXAS COMMERCE BANK NATIONAL ASSOCIATION
OR AUTHORIZE YOU TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON THEIR BEHALF IN
CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH
AND THE STATEMENTS CONTAINED THEREIN.
<PAGE>
EXHIBIT 99.4
OFFER TO EXCHANGE NEWLY ISSUED
EXCHANGEABLE SENIOR DEBENTURES DUE 2008
OF
PENNZOIL COMPANY
FOR A PORTION OF ITS
6 1/2% EXCHANGEABLE SENIOR DEBENTURES DUE 2003
AND
4 3/4% EXCHANGEABLE SENIOR DEBENTURES DUE 2003
To Our Clients:
Enclosed for your consideration is a Prospectus, dated , 1997 (the
"Prospectus"), of Pennzoil Company, a Delaware corporation (the "Company"),
and a related Letter of Transmittal (which, together with the Prospectus,
constitutes the "Exchange Offer") relating to the offer by the Company to
issue its exchangeable senior debentures due 2008 (the "New Debentures") in
exchange for a portion of its outstanding 6 1/2% exchangeable senior
debentures due 2003 (the "6 1/2% Debentures") and 4 3/4% exchangeable senior
debentures due 2003 (the "4 3/4% Debentures" and, together with the 6 1/2%
Debentures, the "Old Debentures") of the Company, upon the terms and subject
to the conditions set forth in the Prospectus. This material is being
forwarded to you as the beneficial owner of the Old Debentures held by us in
your account but not registered in your name.
The Exchange Offer will be for a principal amount of Old Debentures (the
"Target Amount") that is exchangeable into an aggregate of 7.35 million and
14.39 million shares of common stock of Chevron Corporation under the existing
exchange rights. New Debentures will not be issued in denominations of less
than $1,000, and the Company will pay cash in lieu of issuing New Debentures
in principal amounts of less than $1,000.
Each holder of Old Debentures tendered for exchange must specify in the
Letter of Transmittal, in increments of 0.05%, the minimum interest rate (but
in no event less than 4 3/4%) that such holder is willing to accept for the
New Debentures. The Company will select the lowest interest rate (the
"Determined Rate") that will allow it to accept the Target Amount of Old
Debentures (or such lesser amount of Old Debentures as is properly tendered
and not withdrawn specifying a coupon neither less than 4 3/4% per annum nor
more than 6% per annum, or such greater amount as Pennzoil, in its sole
discretion, may determine to accept). Notwithstanding the foregoing, a holder
may elect in the Letter of Transmittal to specify that all Old Debentures
being tendered are tendered at the "Determined Rate" (as opposed to specifying
a particular rate), which should increase the likelihood that the Company
would accept for exchange such holder's Old Debentures being tendered. See
"The Exchange Offer--Terms of the Exchange Offer." All Old Debentures properly
tendered by a holder specifying an interest rate for the New Debentures at or
below the Determined Rate, and not withdrawn, will be accepted for exchange,
subject to the terms and conditions of the Exchange Offer (including the
possibility of proration), provided that not more than $889.1 million
principal amount, and not less than $100 million principal amount of New
Debentures will be issued. All New Debentures issued pursuant to the Exchange
Offer will bear interest at the Determined Rate. The Company will pay accrued
interest on Old Debentures accepted for exchange through the Acceptance Date.
Payment of such accrued interest on the Old Debentures will accompany delivery
of the New Debentures.
PLEASE NOTE THAT THE EXCHANGE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON , 1998, UNLESS EXTENDED BY THE COMPANY (THE "EXPIRATION
DATE").
<PAGE>
The Company has expressly reserved the right, in its sole discretion,
subject to applicable law, to withdraw or terminate the Exchange Offer, and
not accept for exchange any Old Debentures and promptly return all Old
Debentures at any time for any reason, including (without limitation) if the
Exchange Offer would result in less than $100 million in principal amount of
New Debentures being issued, or upon the failure of certain other conditions
described in the Prospectus, which conditions may be waived by the Company.
We are the holder of record of Old Debentures held by us for your account. A
tender of such Old Debentures can be made only by us as the record holder and
pursuant to your instructions. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU
FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER THE OLD
DEBENTURES HELD BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish to tender any or all of the
Old Debentures held by us for your account pursuant to the terms and
conditions of the Exchange Offer. Please so instruct us by completing,
executing, detaching, and returning to us the instruction form on the
detachable part hereof. An envelope to return your instructions to us is
enclosed. If you authorize tender of your Old Debentures, please forward to us
your instructions in ample time to permit us to submit a tender on your behalf
prior to the Expiration Date. Unless otherwise indicated on the instruction
form, you will be deemed to have tendered the entire aggregate principal
amount at maturity of Old Debentures held by us for your account.
Very truly yours,
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO EXCHANGE NEWLY ISSUED
EXCHANGEABLE SENIOR DEBENTURES DUE 2008
OF
PENNZOIL COMPANY
FOR A PORTION OF ITS
6 1/2% EXCHANGEABLE SENIOR DEBENTURES DUE 2003
AND
4 3/4% EXCHANGEABLE SENIOR DEBENTURES DUE 2003
The undersigned acknowledges receipt of your letter enclosing the Prospectus,
dated , 1997, of Pennzoil and the related Letter of Transmittal relating
to the Exchange Offer. This will instruct you to tender the principal amount at
maturity of Old Debentures indicated below held by you for the account of the
undersigned, pursuant to the terms and subject to the conditions of the
Exchange Offer, and confirm that you may make the representations contained in
the Letter of Transmittal on behalf of the undersigned.
- --------------------------------------------------------------------------------
DESCRIPTION OF OLD DEBENTURES TO BE TENDERED
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Aggregate Principal Aggregate Principal
Amount Amount
of 6 1/2% Debentures of 6 1/2% Debentures
Held by You for the Tendered
Account
of the Undersigned
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Aggregate Principal Aggregate Principal
Amount Amount
of 4 3/4%Debentures of 4 3/4% Debentures
Held by You for the Tendered
Account
of the Undersigned
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3
<PAGE>
INTEREST RATE PER DEBENTURE AT
WHICH OLD DEBENTURES ARE BEING TENDERED
CHECK ONLY ONE BOX.
IF MORE THAN ONE BOX IS CHECKED,
OR IF NO BOX IS CHECKED, THERE IS
NO VALID TENDER OF OLD DEBENTURES.
OLD DEBENTURES TENDERED AT INTEREST RATE
DETERMINED BY DUTCH AUCTION
[_]The undersigned wants to maximize the chance of having the Company accept
for exchange all of the Old Debentures that the undersigned is tendering.
Accordingly, by checking this one box INSTEAD OF ONE OF THE INTEREST RATE
BOXES BELOW, the undersigned hereby tenders Old Debentures at, and is
willing to accept, the Interest Rate resulting from the Dutch Auction
tender process. This action could result in receiving interest rate as low
as 4 3/4% or as high as 6%.
*** CHECK EITHER THE BOX ABOVE OR CHECK ONE BOX BELOW ***
OLD DEBENTURES TENDERED AT INTEREST RATE
DETERMINED BY HOLDER
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
[_] 4.75% [_] 5.10% [_] 5.45% [_] 5.80%
[_] 4.80% [_] 5.15% [_] 5.50% [_] 5.85%
[_] 4.85% [_] 5.20% [_] 5.55% [_] 5.90%
[_] 4.90% [_] 5.25% [_] 5.60% [_] 5.95%
[_] 4.95% [_] 5.30% [_] 5.65% [_] 6.00%
[_] 5.00% [_] 5.35% [_] 5.70%
[_] 5.05% [_] 5.40% [_] 5.75%
</TABLE>
IF OLD DEBENTURES ARE BEING TENDERED AT MORE THAN ONE INTEREST
RATE, YOU MUST USE A SEPARATE LETTER OF TRANSMITTAL
FOR EACH INTEREST RATE TO BE SPECIFIED
Unless otherwise indicated, the undersigned will be deemed to have tendered
the entire aggregate principal amount at maturity of Old Debentures held for
the account of the undersigned.
Signature(s): ____________________________
_________________________________________
Please print name(s): ____________________
_________________________________________
Date: , 1998
4
