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Section 240.14a-101 Schedule 14A.
Information required in proxy statement.
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [ ]
Filed by a party other than the Registrant [X]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
PENNZOIL COMPANY
.................................................................
(Name of Registrant as Specified In Its Charter)
GUY P. WYSER-PRATTE
.................................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction
applies:
............................................................
(2) Aggregate number of securities to which transaction
applies:
.......................................................
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount
on which the filing fee is calculated and state how it was
determined):
.......................................................
(4) Proposed maximum aggregate value of transaction:
.......................................................
(5) Total fee paid:
.......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
.......................................................
(2) Form, Schedule or Registration Statement No.:
.......................................................
(3) Filing Party:
.......................................................
(4) Date Filed:
.......................................................
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SOLICITATION OF PROXIES
IN CONNECTION WITH THE
1998 ANNUAL MEETING OF SHAREHOLDERS
OF
PENNZOIL COMPANY
--------------------
PROXY STATEMENT
OF
MR. GUY P. WYSER-PRATTE
Wyser-Pratte & Co., Inc.
63 Wall Street
New York, New York 10005
(212) 495-5350
--------------------
This Proxy Statement and the accompanying GOLD Annual Meeting proxy card
are furnished in connection with the solicitation of proxies by Guy P.
Wyser-Pratte ("Mr. Wyser-Pratte") of Wyser-Pratte & Co., Inc. ("WPC") to be used
at the annual meeting of shareholders of Pennzoil Company, a Delaware
corporation ("Pennzoil" or the "Company"), to be held at on ,
at local time, and any adjournments or postponements thereof (the "Annual
Meeting"). This Proxy Statement and the enclosed proxy card are first being sent
to shareholders on or about , 1998. The solicitation is being made by
Mr. Wyser-Pratte on behalf of Mr. Wyser-Pratte and WPC.
SUMMARY AND INTRODUCTION
Between June and November 1997 Union Pacific Resources Group Inc.
("UPR") attempted to acquire the Company for $84 per share in cash, plus
contingent payments for Pennzoil's international assets. The Pennzoil
stockholders showed their support for the UPR offer by tendering 62% of their
shares to UPR in July. However, the Pennzoil board resolutely opposed the UPR
offer, and succeeded in driving UPR away. When UPR dropped its offer, the
Pennzoil stock immediately lost 10% of its market value ($365 million). The new
$67.75 market price was approximately 20% less than UPR's $84 per share cash
offer.
Mr. Wyser-Pratte believes that the Pennzoil board's response to the UPR
offer demonstrates a breakdown in the Company's corporate governance system. In
his opinion, the board did not even try to give a persuasive justification for
its opposition to the UPR Offer, despite the devastating impact that the board's
policy had on the market price of the Pennzoil stock. The board said that the
Company can achieve greater value
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for shareholders by pursuing its Strategic Plan, but the board has vigorously
resisted disclosing the contents of the Strategic Plan, and in Mr.
Wyser-Pratte's opinion, has prevented shareholders from making an informed
judgment about whether the Strategic Plan offers a better alternative than
selling at $84 per share.
Given this history, Mr. Wyser-Pratte believes that the present Pennzoil
board can not be relied upon to act in the best interests of shareholders when
responding to acquisition proposals. Therefore, he is running for a seat on the
board and is proposing the adoption of bylaws that would limit the board's
ability to block acquisition proposals favored by a majority of the
shareholders. Under Mr. Wyser-Pratte's bylaw proposals:
The board would have to obtain shareholder approval to use the
"Poison Pill" for more than ninety days to block a qualified premium offer to
acquire the Company's shares (the "Shareholder Rights Bylaw"), and
The board would have to act unanimously or obtain shareholder
approval to take other Defensive Actions against a qualified offer (the
"Shareholder Interests Protection Bylaw"). If Mr. Wyser-Pratte is elected to the
board, and the Shareholder Interests Protection Bylaw is adopted, he would be
able to block a board vote in favor of any Defensive Actions he opposed; and in
such event, the board would not be able to take such Defensive Actions without
shareholder approval.
Mr. Wyser-Pratte is also proposing bylaws that would allow shareholders
to call a special meeting, ease the requirements for shareholder nominations and
proposals and opt out of Section 203 of the Delaware General Corporation Law. He
is also asking shareholders to recommend to the board that the Company reimburse
his expenses in connection with this proxy solicitation.
Mr. Wyser-Pratte is a Pennzoil shareholder who has only one pecuniary
interest in the Company: to maximize the value of his shares. Although he owns
only 1% of the stock, he is financing the cost of this proxy contest because he
believes that the Pennzoil board will not put shareholder interests first unless
there is a change in the Company's corporate governance system.
REASONS FOR SOLICITATION
On November 17, 1997, Union Pacific Resources Group Inc. ("UPR")
terminated its all cash $84 per share tender offer to acquire Pennzoil. This
action follows the continued rejection by Pennzoil's board of UPR's tender offer
and its offers to negotiate a value maximizing transaction. The Pennzoil board
unilaterally adopted this defensive policy despite the fact that nearly 62% of
the Pennzoil shares were tendered in July into the initial UPR $84 per share
tender offer for 50.1% in cash and the balance in stock. That offer was
subsequently improved on October 6, 1997 to $84 per share cash for all shares
(and was accompanied by a proposal to allow the Pennzoil shareholders to benefit
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directly from any increase in the value of Pennzoil's international exploration
and production assets above $600 million).
Mr. Wyser-Pratte believes that the termination of the UPR offer was a
response to the Pennzoil board's uncompromising rejection of UPR's proposal to
negotiate an acquisition of the Company. While UPR's public statements about the
termination of the offer have also referred to events indicating a possible
reduction in the value of Pennzoil's international assets, Mr. Wyser-Pratte
believes that these developments would not have affected the UPR offer if the
Pennzoil board had promptly accepted the offer or entered into negotiations with
UPR.
The termination of the UPR offer, resulting from the Pennzoil board's
unilateral decision to block the offer, had an immediate and dramatic effect on
the Pennzoil stock price, as well as on Pennzoil shareholders who wanted to
accept the offer. The closing price of the Pennzoil stock on the New York Stock
Exchange on November 10, 1997, the day before UPR announced that the offer might
be terminated, was $75.50. On November 11, 1997, the day UPR announced that its
offer might be terminated, the closing stock price was $67.75. Table 1 below
shows clearly this damaging effect on the Pennzoil stock price:
TABLE 1
Value Lost due to the Termination of the UPR Offer
<TABLE>
<CAPTION>
Per Share Total Market Value % Value Lost
<S> <C> <C> <C>
Pennzoil's Stock Price of $67.75
on 11/11 Relative to Closing
Price of $75.50 on 11/10: $ (7.75) $ (365.8) million -10.26%
Pennzoil's Stock Price of $67.75
on 11/11 Relative to UPR's $84
Tender Offer: $ (16.25) $ (873.2) million -19.30%
</TABLE>
Mr. Wyser-Pratte believes that the board's response to the UPR offer
demonstrated a breakdown in Pennzoil's corporate governance system. In Mr.
Wyser-Pratte's opinion, the ultimate decision about accepting a premium offer to
acquire a company should normally be made by the shareholders, who own the
company and have the most to lose from a bad decision about the offer. If the
directors believe a sale of control is not in the shareholders' best interests,
Mr. Wyser-Pratte believes the board should attempt to persuade the shareholders
to reject the offer, rather than forcing that decision upon them.
In Mr. Wyser-Pratte's opinion, if the directors own a large amount of
stock in the company, there is some basis for the shareholders to rely on the
board to act in the
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shareholders' best interests. That safeguard is lacking, however, in a company
like Pennzoil where the directors own an insignificant amount of stock (a total
of 1.9% of the Common Stock, or approximately .75% of the Common Stock without
taking into account such individuals' stock options, according to the Company's
1997 Proxy Statement). When the directors have such a small stake in the
company, Mr. Wyser-Pratte believes the directors should exercise restraint in
blocking an offer favored by a majority of the shareholders.
In Mr. Wyser-Pratte's opinion, the Pennzoil board failed to live up to
these standards in their response to the UPR offer. The Pennzoil shareholders
demonstrated their support for a sale of the Company by tendering nearly 62% of
their shares in July to UPR. While the shareholders were showing their support
for the UPR Offer, however, the board was doing everything in its power to repel
UPR. Mr. Wyser-Pratte believes that by repeatedly rejecting UPR's requests for
negotiations, the Pennzoil board showed that it was not trying to improve UPR's
offer, but was seeking to drive UPR away. He also believes that there is no
evidence that Pennzoil tried to find a buyer who would offer more than UPR.
In Mr. Wyser-Pratte's opinion, the Pennzoil board failed to give the
Pennzoil shareholders an adequate explanation of why the board rejected the UPR
offer and demonstrated a shocking lack of regard for the opinion of the Pennzoil
shareholders. The board claimed to base its rejection of the UPR offer on its
belief that the Pennzoil "Strategic Plan" (the "Plan") would create greater
value for shareholders than UPR's $84 per share cash offer. Yet the board
vigorously resisted disclosing the contents of that Plan to the Company's
shareholders. According to press reports, the judge who heard a motion by UPR to
compel disclosure of the Plan stated that "he had `tentatively concluded,' based
on the parties' filings, that Pennzoil had violated the Williams Act and would
have to make additional disclosures." As a result of the withdrawal of the UPR
Offer, the litigation was terminated before the motion had been decided. See
"BACKGROUND AND RECENT EVENTS--- LITIGATION; The Texas Litigation.
Mr. Wyser-Pratte believes these actions show that the present board
cannot be relied upon to advance the shareholders' interests in responding to a
proposal to acquire Pennzoil, and that a change of policy at Pennzoil is
required to repair the Company's corporate governance system. In his opinion,
the Pennzoil shareholders should replace these directors and/or put in place
mechanisms that prevent the board from summarily blocking a premium acquisition
proposal that is favored by the majority of the Company's shareholders.
Mr. Wyser-Pratte is, therefore, soliciting proxies to adopt a series of
proposals to amend the Company's bylaws to limit the power of the board of
directors to block acquisition proposals favored by a majority of the
shareholders, and to increase the shareholders' ability to initiate shareholder
action.
These proposals would:
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Adopt a "Shareholder Rights Bylaw" that sets a time limit on the
board's use of the Company's "Poison Pill" against certain offers unless such
continued use is approved by shareholders.
Adopt a "Shareholder Interests Protection Bylaw" that would require a
unanimous vote of all the directors for "Defensive Actions" by the board unless
such Defensive Actions have been approved by shareholders. "Defensive Actions"
would be defined to include (1) any action by the board with the purpose or
effect, in whole or in part, of impeding a change in control of the Company,
other than a decision to use the Poison Pill to block an offer or (2) the
expenditure of any corporate funds on a proxy contest against a shareholder
unless the Company agreed to reimburse the shareholder's costs if 10% of the
Company's shares were voted in favor of any of the shareholder's proposals. If
Mr. Wyser-Pratte is elected to the board, as proposed below, the board would
require either Mr. Wyser-Pratte's support or shareholder ratification to take a
Defensive Action.
Allow the holders of 10% of the Company's shares to call a special
meeting of shareholders. Mr. Wyser-Pratte's purpose in making this proposal is
to enable shareholders to initiate shareholder action on such matters as
amending the bylaws, removing directors for cause and introducing advisory
resolutions.
Allow shareholders to submit proposals and director nominations for
the annual meeting between 60 and 120 days in advance of the anniversary of the
prior annual meeting (rather than the present 90 to 120 days). A shareholder who
has made such a proposal or nomination would be permitted to amend such proposal
or add new proposals up to ten days before the meeting date and to substitute
nominees at any time up to and including the meeting.
Require the vote of a majority of the outstanding shares to change any
of the foregoing bylaws.
Elect not to be governed by Section 203 of the Delaware General
Corporation Law, which limits the Company's ability to engage in business
combinations with certain shareholders and their affiliates.
Repeal any bylaws adopted by the board of directors after November 1,
1997.
In addition, Mr. Wyser-Pratte is soliciting proxies to elect Mr.
Wyser-Pratte to the board of directors and to adopt a resolution recommending
that the Company reimburse Mr. Wyser-Pratte's expenses in connection with this
proxy solicitation.
PLEASE SUPPORT OUR EFFORTS TO REFORM THE COMPANY'S CORPORATE GOVERNANCE
SYSTEM. YOU ARE URGED TO VOTE IN FAVOR
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OF THESE PROPOSALS BY PROMPTLY SIGNING, DATING AND MAILING THE GOLD PROXY CARD
IN THE POSTAGE-PAID ENVELOPE PROVIDED.
ONLY YOUR LATEST-DATED PROXY WILL COUNT AT THE ANNUAL MEETING.
THEREFORE, DO NOT SIGN ANY PROXY THAT MANAGEMENT MAY DELIVER TO YOU.
If you have any questions concerning this Proxy Statement or need
assistance in voting your Common Stock, feel free to call our proxy solicitor,
- ---------- (the "Proxy Solicitor") toll-free at or Eric Longmire,
Senior Managing Director of WPC, at (212) 495-5357.
YOU HAVE A SAY IN THE FUTURE OF YOUR INVESTMENT
EXERCISE THAT RIGHT AND VOTE FOR THE SHAREHOLDER RIGHTS BY-LAW PROPOSAL
PROPOSAL TO AMEND THE BY-LAWS TO SET A TIME LIMIT ON THE USE OF THE COMPANY'S
"POISON PILL" AGAINST CERTAIN OFFERS UNLESS SUCH CONTINUED USE IS APPROVED BY
SHAREHOLDERS (ITEM 1 ON PROXY CARD)
SHAREHOLDERS ARE ASKED TO CONSIDER AND VOTE UPON THE PROPOSAL TO AMEND
THE BY-LAWS TO SET A TIME LIMIT ON THE USE OF THE COMPANY'S "POISON PILL"
AGAINST CERTAIN OFFERS UNLESS SUCH CONTINUED USE IS APPROVED BY SHAREHOLDERS:
"RESOLVED, that the Shareholders hereby amend the Company's By-laws by
adding a new Article IX, which shall read as follows:
`If an Offer is made to purchase all of the Common Stock, the Board of
Directors shall at the request of any shareholder Withdraw the Poison Pill at
the end of the ninetieth day after such Offer is first published or sent to
security holders unless the decision of the Board of Directors not to Withdraw
the Poison Pill at such time is approved by a vote of a majority of the votes
which all shareholders are entitled to cast (i.e., by the vote of a majority of
the outstanding shares entitled to vote) at a meeting of shareholders which is
held on or before such ninetieth day, which meeting has a Conforming Record Date
(as defined below); provided, however, that the Board of Directors shall not be
required to Withdraw the Poison Pill at the end of such ninetieth day unless at
such time such Offer has an expiration date which is at least ten business days
thereafter. "Withdraw the Poison Pill" shall mean redeem the outstanding Rights
under the Rights Agreement between the Company and Chemical Bank, as Rights
Agent or take other action so that the existence of such Rights does not
interfere with the consummation of such Offer. A "Conforming Record Date" shall
mean a record date that is at least five business days after the date on which
the Company files its statement of position with respect to such offer in
accordance with Rule 14e-2 of the Securities Exchange Act of 1934, as amended.
An "Offer" shall
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mean either (a) a Fully Financed offer to purchase all the Company's outstanding
shares of Common Stock for cash by means of a tender offer at a price that is
least 25% greater than the average closing price of such shares on the New York
Stock Exchange during the twenty trading days prior to the date on which such
offer is first publicly disclosed ("Prior Market Price") or (b) any offer to
acquire all the Company's outstanding shares of Common Stock by means of a
tender offer or exchange offer if the average closing price of such shares on
the New York Stock Exchange during the five trading days following the date on
which such offer is first publicly disclosed is at least 25% greater than the
Prior Market Price. If there is another Offer outstanding at the time such offer
is first publicly disclosed then the references to 25% in the preceding sentence
shall be changed to 10% An offer is "Fully Financed" if the offer is not subject
to a financing contingency and the offeror has a reasonable basis for believing
that it has sufficient financing available to consummate the offer. This Bylaw
shall apply to Offers that are outstanding when this Bylaw is adopted, but the
ninety-day period provided for in this Bylaw shall not begin to run until this
Bylaw is adopted.' "
The Poison Pill is one of the Company's principal anti-takeover devices.
The Poison Pill makes it economically infeasible to acquire control of the
Company in a transaction which is opposed by the board--- even if all, let alone
a majority, of the shareholders were to favor the acquisition. The Poison Pill
has this effect because it dilutes the ownership of stock by any purchaser who
acquires more than a threshold amount of the Company's stock without the board's
approval (see "OPERATION OF THE POISON PILL " below).
Mr. Wyser-Pratte approves of the limited use of the Poison Pill to delay
completion of an offer for a reasonable period of time so that so that there is
an opportunity for higher bids to emerge and for the board to communicate its
views to shareholders. He believes, however, that the board should normally
refrain from permanently blocking a premium offer for the Company's shares
unless shareholders support such action after receiving a full explanation of
the board's reasons for blocking the offer. Mr. Wyser-Pratte believes that
shareholders are generally able to judge for themselves whether an offer is in
their best interests, provided that they are given adequate information.
Therefore, Mr. Wyser-Pratte is proposing that shareholders adopt an amendment
(the "Shareholder Rights By-law") to the Pennzoil by-laws. The Shareholder
Rights By-law would create a new policy at Pennzoil whereby a time limit would
be set on the board's use of the Poison Pill against certain premium offers.
Under the Shareholder Rights By-law, if an offer were made to acquire all the
Common Stock at a 25% premium over the market price (reduced to 10% under some
circumstances), the board of directors would be required to cease using the
Poison Pill to block the offer after ninety days unless the shareholders had
voted in favor of continuing to use the Poison Pill against such offer. The
shareholder vote would give the board an opportunity to persuade shareholders
that the continued use of the Poison Pill to block the offer was in the best
interests of shareholders.
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Mr. Wyser-Pratte believes that the Shareholder Rights Bylaw will give
the ultimate decision about whether shareholders can sell their shares into a
premium offer to those most directly affected by the decision - the owners of
the Company. Under the Shareholder Rights Bylaw a board of directors that wants
to continue using the Poison Pill to block a premium offer after ninety days
would be required to conduct a shareholder referendum on the board's blocking
policy. Although the board could block an unsolicited premium offer for ninety
days, and during that time period try to convince shareholders to reject the
offer, the shareholders would have the ultimate ability to exercise their
property rights and business judgment to decide for themselves whether they want
to sell their shares into the offer - and would be able to do so without being
hindered by the board's use of the Poison Pill. Mr. Wyser-Pratte believes that
the arguments for allowing stockholders to accept an offer for their shares,
free from interference by the board, are particularly strong when a premium
offer has been outstanding for ninety days or more. By then the board will have
had an opportunity to persuade shareholders that it is in their best interests
to retain their shares. The bidder will have been able to make the case for
accepting its offer, and SEC filings by both bidder and target will have
provided full disclosure of the most important issues relating to the offer.
The Shareholder Rights By-law would only apply to an offer to acquire
all of the Common Stock that met the following criteria: (i) it was a Fully
Financed cash offer at a price that was at least 25% greater than the average
closing price of such shares on the New York Stock Exchange during the twenty
trading days prior to the date on which such offer was first publicly disclosed
(such average closing price is hereinafter called the "Prior Market Price") or
(ii) the average closing price of such shares on the New York Stock Exchange
during the five trading days following the date on which such offer to acquire
all of the Common Stock was first publicly disclosed was at least 25% greater
than the Prior Market Price. If at the time such offer was first publicly
disclosed there was another Offer outstanding that met such criteria, then the
references to 25% in the preceding sentence shall be changed to 10% (such 25% or
10% premium, as the case may be, is hereafter referred to as the "Trigger
Premium"). Under the Shareholder Rights By-law, if the stockholders received
such an offer, the Board would be required to withdraw the Poison Pill at the
request of a shareholder unless the holders of a majority of the outstanding
shares approved the continued use of the Poison Pill against the offer by a vote
of stockholders within ninety days after the offer was made. "Withdraw the
Poison Pill" means redeem the outstanding Rights under the Rights Agreement
between the Company and Chemical Bank, as Rights Agent, or take other action so
that the existence of such Rights does not interfere with the consummation of
such offer. The bylaw defines an offer as "Fully Financed" if "the offer is not
subject to a financing contingency and the offeror has a reasonable basis for
believing that it has sufficient financing available to consummate the offer."
The Shareholder Rights By-law would not affect the ability of the Board
under Sections 251 and 271 of the Delaware General Corporation Law to approve or
disapprove of a proposed merger or sale of all or substantially all of the
assets of the Company. The By-law follows an approach to tender offer regulation
that is followed in Canada, the
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United Kingdom and other European Countries in that it prevents the board from
unilaterally electing to block a qualified offer for an indefinite period of
time, but allows the board to protect shareholder interests by blocking offers
that do not provide a control premium to all shareholders or delaying the
consummation of a bid while the board seeks a better offer or tries to persuade
stockholders to retain their shares. The idea of allowing shareholders to
control the use of the Poison Pill after a period of time is not new. The Poison
Pill described in Georgia Pacific Corp. v. Great Northern Nekoosa Corp., 727
F.Supp. 31 (D. Me. 1989) followed a similar approach. There the board was
required, within 90 to 120 days after receiving an offer, to hold a shareholder
referendum on whether to accept the offer and redeem the company's poison pill.
OPERATION OF POISON PILL. Pennzoil's Poison Pill operates in the
following fashion: Pursuant to the Poison Pill, each certificate for shares of
Common Stock also represents the same number of rights ("Rights") to purchase
from the Company a unit consisting of one one-hundredth of a share (a "Unit") of
Series A Junior Participating Preferred Stock, par value $1.00 per share (the
"Preferred Stock"), at a purchase price of $140 per Unit, subject to adjustment
(the "Purchase Price"). The Rights will separate from the Common Stock and a
"Distribution Date" will occur upon the earlier of (i) ten days following a
public announcement that a person or group of affiliated or associated persons
(an "Acquiring Person") has acquired, or obtained the right to acquire,
beneficial ownership of 15% or more of the outstanding shares of Common Stock
(the date of the announcement being the "Stock Acquisition Date"), or (ii) ten
business days (or such later date as may be determined by the Company's Board of
Directors before the Distribution Date occurs) following the commencement of a
tender offer or exchange offer that would result in a person's becoming an
Acquiring Person.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on October 28, 1999, unless earlier redeemed or
exchanged by the Company as described below.
As soon as practicable after the Distribution Date, certificates
representing the Rights will be mailed to holders of record of Common Stock as
of the close of business on the Distribution Date and, from and after the
Distribution Date, the separate Rights Certificates alone will represent the
Rights. All shares of Common Stock issued prior to the Distribution Date will be
issued with Rights. Shares of Common Stock issued after the Distribution Date in
connection with certain employee benefit plans or upon conversion of certain
securities will be issued with Rights. Except as otherwise determined by the
Board of Directors, no other shares of Common Stock issued after the
Distribution Date will be issued with Rights.
In the event (a "Flip-In Event") that a person becomes an Acquiring
Person (except pursuant to a tender or exchange offer for all outstanding shares
of Common Stock at a price and on terms that a majority of the independent
directors of the Company determines to be fair to and otherwise in the best
interests of the Company and its stockholders (a "Permitted Offer")), each
holder of a Right will thereafter have the right to
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receive, upon exercise of such Right, a number of shares of Common Stock (or, in
certain circumstances, cash, property or other securities of the Company) having
a Current Market Price (as defined in the Rights Agreement) equal to two times
the exercise price of the Right. Notwithstanding the foregoing, following the
occurrence of any Flip-In Event, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by or
transferred to any Acquiring Person (or by certain related parties) will be null
and void in the circumstances set forth in the Rights Agreement. However, Rights
are not exercisable following the occurrence of any Flip-In Event until such
time as the Rights are no longer redeemable by the Company as set forth below.
In the event (a "Flip-Over Event") that, at any time from and after the
time an Acquiring Person becomes such, (i) the Company is acquired in a merger
or other business combination transaction (other than certain mergers that
follow a Permitted Offer), or (ii) 50% or more of the Company's assets or
earning power is sold or transferred, each holder of a Right (except Rights that
previously have been voided as set forth above) shall thereafter have the right
to receive, upon exercise, a number of shares of common stock of the acquiring
company having a Current Market Price equal to two times the exercise price of
the Right. Flip-In Events and Flip-Over Events are collectively referred to as
"Triggering Events." The Purchase Price payable, and the number of Units of
Preferred Stock or other securities or property issuable, upon exercise of the
Rights are subject to adjustment from time to time to prevent dilution (i) in
the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Preferred Stock, (ii) if holders of the Preferred Stock
are granted certain rights or warrants to subscribe for Preferred Stock or
convertible securities at less than the current market price of the Preferred
Stock, or (iii) upon the distribution to holders of the Preferred Stock of
evidences of indebtedness or assets (excluding regular quarterly cash dividends)
or of subscription rights or warrants (other than those referred to above).
At any time until ten days following the first date of public
announcement of the occurrence of a Flip-In Event, the Company may redeem the
Rights in whole, but not in part, at a price of $.01 per Right, payable, at the
option of the Company, in cash, shares of Common Stock or such other
consideration as the Board may determine. Immediately upon the effectiveness of
the action of the Board ordering redemption of the Rights, the Rights will
terminate and the only right of the holders of Rights will be to receive the
$.01 redemption price.
At any time after the occurrence of a Flip-In Event and prior to a
person's becoming the beneficial owner of 50% or more of the shares of Common
Stock then outstanding, the Company may exchange the Rights (other than Rights
owned by an Acquiring Person or an affiliate or an associate of an Acquiring
Person, which will have become void), in whole or in part, at an exchange ratio
of one share of Common Stock, and/or other equity securities deemed to have the
same value as one share of Common Stock, per Right, subject to adjustment.
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Other than the redemption price, any of the provisions of the Rights
Agreement may be amended by the Board of Directors of the Company as long as the
Rights are redeemable. Thereafter, the provisions of the Rights Agreement may be
amended by the Board of Directors in order to cure any ambiguity, defect or
inconsistency, to make changes that do not materially adversely affect the
interests of holders of Rights (excluding the interests of any Acquiring
Person), or to shorten or lengthen any time period under the Rights Agreement;
provided, however, that no amendment to lengthen the time period governing
redemption shall be made at such time as the Rights are not redeemable.
THE FOREGOING IS A SUMMARY OF THE RELEVANT MATERIAL PROVISIONS OF THE POISON
PILL AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE THERETO. THE DESCRIPTION OF
THE RIGHTS SET FORTH AS ITEM 1 OF THE COMPANY'S REGISTRATION STATEMENT ON FORM
8-A, DATED OCTOBER 31, 1994, IS ATTACHED HERETO AS EXHIBIT A.
Under the Shareholder Rights By-law, the board can use the Poison Pill
to block an offer temporarily. However, if the Company received an Offer that
remained open for 90 days and no person became an Acquiring Person during such
period, the Board would be required to either redeem the Rights or amend the
Poison Pill so that it would no longer be an impediment to such an Offer, unless
the holders of a majority of the outstanding shares voted to continue the use of
the Poison Pill against such Offer. The Board would be required to take such
action even if the Board believed in the exercise of its fiduciary duties that
the Offer was not advantageous for the shareholders of Pennzoil. Mr.
Wyser-Pratte believes that this result is in the best interest of shareholders
because the shareholders, rather than the Board of Directors, should have the
ultimate decision on whether to accept the Offer.
IMPACT ON BOARD'S EXERCISE OF FIDUCIARY DUTIES. The Shareholder Rights
Bylaw would enable the Company's shareholders, including Mr. Wyser-Pratte, who
wished accept an Offer opposed by the Board to require the Board to stop using
the Poison Pill to block the Offer by the vote of a majority of the outstanding
shares. While the Shareholder Rights By-law could require the Board to terminate
such use of the Poison Pill, whether or not the Offer was advantageous for the
Company's shareholders, Mr. Wyser-Pratte believes that the shareholders' failure
to approve continued use of the Poison Pill to block the Offer would be prima
facie evidence that the Offer was advantageous for the Company's shareholders,
and therefore, in his opinion, the adoption of the Shareholder Rights By-law is
in the shareholders' best interests.
The Shareholder Rights By-law only applies to offers of at least the
Trigger Premium. The Trigger Premium is reduced from 25% to 10% if there is
another outstanding Offer, because in such circumstances the market price of the
stock is likely to reflect the expectation that the Company will be acquired at
a premium. Although the average acquisition premium in Pennzoil's industry has
been higher than the Trigger Premium, Mr. Wyser-Pratte believes that a premium
of this size is large enough to be
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worthy of consideration by stockholders. While there can be no assurance that
the Company will ultimately get a price higher than the Trigger Premium,
acquisition bids often attract competition that leads to subsequent offers at a
price higher than the initial offer or the initial bidder may raise its price.
Mr. Wyser-Pratte is aware of only one example of a mechanism like the
Shareholder Rights Bylaw being adopted by a public corporation. This was the
Great Northern Nekoosa poison pill, described in Georgia Pacific Corp. v. Great
Northern Nekoosa Corp., supra. There, according to Wall Street Journal reports,
Georgia Pacific made an initial offer of $58 per share for Great Northern
Nekoosa and was ultimately successful in acquiring Great Northern Nekoosa at
$65.75 per share. Except for the Great Northern Nekoosa acquisition, the
generalization that target companies tend to receive subsequent offers higher
than the initial acquisition proposal is based on companies that did not have in
place a mechanism similar to the Shareholder Rights Bylaw. Mr. Wyser-Pratte
believes, however, that the enactment of the Shareholder Rights Bylaw will not
eliminate the competitive process that produces subsequent offers higher than
the initial offer. Rather, in his opinion, the Shareholder Rights Bylaw will
stimulate the auction process and encourage potential bidders to come forward
with higher offers after an initial bid is made, because the board will not have
the power to discourage potential bidders by blocking their offers indefinitely.
Furthermore, he believes that the ninety-day waiting period built into the
Shareholder Rights Bylaw will assure that potential bidder have an adequate
period of time in which to evaluate the Company and formulate their offers.
Based on his experience as an investor in target company securities, Mr.
Wyser-Pratte believes that ninety days is normally sufficient time for a target
company, seeking a higher offer, to complete the bidding process. For example,
the Great Northern Nekoosa poison pill discussed above provided for a
shareholder referendum-- 90 to 120 days after an offer was received--- on
whether the offer should be accepted and the pill redeemed. However,
circumstances could arise in which a board of directors seeking a higher offer
was unable to complete the entire process of finding and closing an alternative
transaction within the ninety-day period prescribed by the Shareholder Rights
By-law. Similarly, if a board were trying to negotiate the terms of an
acquisition with a prospective purchaser, the inability to resist a hostile
tender offer by that purchaser beyond an initial ninety-day period could reduce
the board's leverage to negotiate favorable terms for stockholders. Mr.
Wyser-Pratte believes the ninety-day limit in the Shareholder Rights By-law need
not prevent the Board from obtaining the best possible terms for stockholders in
either of these situations, because the Board would be free to explain to
shareholders why more time was needed and to seek stockholder approval to
continue using the Poison Pill against an Offer. The adoption of the Shareholder
Rights Bylaw would not force the acceptance of any offer. If shareholders did
not believe that an offer reflected the Company's intrinsic values, they would
be free to vote for the continued use of the Poison Pill against the Offer.
However, given the time periods required to solicit proxies and possibly to call
and hold a stockholders meeting, the Board would have to plan ahead to get such
approval before the end of the ninety-day period; and if the Board failed to do
so,
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it is possible that under the Shareholder Rights By-law the Board would lose the
power to use the Poison Pill against an Offer that was not in the best interests
of Shareholders.
Mr. Wyser-Pratte believes that the provision for a shareholder vote
assures that the By-law will not be used to facilitate coercive offers. The
courts have defined a coercive offer as "an offer which has the effect of
compelling shareholders to tender their shares out of fear of being treated less
favorably in the second stage." Moore Corp. v. Wallace Computer Servs, Inc., 907
F.Supp. 1545, 1557 n.13 (D. Del. 1995) (interpreting Delaware law). If a
majority of the Company's shareholders consider an offer coercive, the Board
will be able to win shareholder approval to continue using the Poison Pill
against the Offer for more than ninety days.
LEGAL VALIDITY. Mr. Wyser-Pratte believes that the Shareholder Rights
Bylaw is valid under Delaware law because Delaware law authorizes shareholders
to adopt bylaws that relate to the powers of the shareholders and the board of
directors. However, he recognizes that the Delaware courts have not considered
the validity of the Shareholder Rights Bylaw or any similar by-law and,
therefore, have not resolved the extent to which stockholder-adopted bylaws may
limit the authority of the board of directors to oppose, or to adopt or employ
defensive measures against, takeover bids favored by a majority of the
shareholders. Accordingly, it is uncertain whether the Shareholder Rights Bylaw
would survive a court challenge.
However, there is support for the validity of the Shareholder Rights
By-law in a recent Oklahoma Federal Court decision involving provisions of the
Oklahoma Corporation Law that are substantially the same as the Delaware
provisions applicable to the Company. International Brotherhood of Teamsters
General Fund v. Fleming Companies, Inc., No. Civ-96-1650-A (W.D. Okla. Jan. 14,
1997). The Fleming court required a corporation to include in its proxy
statement for its 1997 annual shareholders meeting a proposal to adopt a by-law
requiring the board of directors to redeem the existing poison pill and to
submit any successor poison pill to a shareholder vote. In reaching this
decision the court found that the shareholders had the power to nullify or amend
a poison pill adopted by the board. The court's decision has been appealed to
the Tenth Circuit Court of Appeals, which has requested a ruling on the validity
of the bylaw under Oklahoma law from the Oklahoma Supreme Court.
Mr. Wyser-Pratte believes that Section 109 of the Delaware General
Corporation Law authorizes the enactment of the Shareholder Rights By-law.
Section 109(a) gives stockholders the power to "adopt, amend or repeal By-laws."
Section 109(b) states: "The by-laws may contain any provision, not inconsistent
with law or with the certificate of incorporation, relating to the business of
the corporation, the conduct of its affairs, and its rights or powers or the
rights or powers of its stockholders, directors, officers or employees."
(emphasis added). The Shareholder Rights By-law relates to "the rights or powers
of...stockholders, [or] directors" because after 90 days from the time a
qualified offer is received, the By-law takes away the board's unilateral power
to use the Poison Pill
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against the offer and requires shareholder approval of a decision by the board
not to end such use.
Section 109 does invalidate by-laws that are "inconsistent with law or
with the certificate of incorporation . . . ." In a review of the Delaware
General Corporation Law, the Certificate of Incorporation and By-laws, Mr.
Wyser-Pratte has not discovered any provisions that bar stockholders from
adopting the Shareholder Rights By-law. He believes that Section 141(a) of the
Delaware General Corporation Law does not bar the adoption of the Shareholder
Rights By-law. That section states: "The business and affairs of every
corporation organized under this chapter shall be managed by or under the
direction of a board of directors, except as may be otherwise provided in this
chapter or in its certificate of incorporation." (emphasis added) Mr.
Wyser-Pratte believes that the adoption of the Shareholder Rights By-law is not
inconsistent with Section 141(a) for several reasons. First, Mr. Wyser-Pratte
believes that the enactment of the Shareholder Rights By-law does not involve
management of the "business and affairs of the corporation" within the meaning
of Section 141(a), but rather the creation of a framework or parameters within
which such management takes place. Second, to the extent that Section 141(a) is
read as granting the board of directors authority over the business and affairs
of the corporation, that grant is not by its terms exclusive and is qualified by
the phrase "except as may be otherwise provided in this chapter or in its
certificate of incorporation." Therefore, Mr. Wyser-Pratte believes, Section
141(a) leaves room for the grant of authority in Section 109 for stockholders to
adopt by-laws which relate to the rights and powers of stockholders and
directors and, in particular, permits the adoption of bylaws like the
Shareholder Rights By-law that require shareholder approval of important
corporate governance decisions by the board, such as the decision to continue
using the Poison Pill to block an offer for the Company's shares. Finally, Mr.
Wyser-Pratte believes that any reading of Section 141(a) that invalidated the
Shareholder Rights By-law would make meaningless Section 109's broad grant of
authority for stockholders to adopt by-laws relating to the rights and powers of
stockholders and directors.
While no case other than Fleming has considered the validity of bylaws
similar to the Shareholder Rights Bylaw, there are cases that have upheld bylaws
allocating corporate governance powers to the shareholders, against claims that
these bylaws illegally invade the board's power to manage the business and
affairs of the corporation. Such cases include Securities and Exchange
Commission v. Transamerica Corp., 163 F. 2d 511 (3rd Cir. 1947), cert. denied,
332 U.S. 847 (1948) (upholding bylaw allowing the shareholders of a Delaware
corporation to select the company's independent auditors) and Ripley v. Storer,
N.Y. Sup. Ct., 139 N.Y.S. 2d 786, aff'd N.Y. App. Div., 142 N.Y.S. 2d 269 (1955)
(involving a New York corporation which adopted a bylaw requiring shareholder
approval of contracts entered into by the board of directors).
More generally, the Delaware Supreme Court has strongly endorsed the
power of shareholders to adopt corporate bylaws. The Delaware Supreme Court has
stated: "The power [of stockholders] to make and amend the bylaws of a
corporation has been recognized as an inherent feature of the corporate
structure. The bylaws of a corporation
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are presumed to be valid, and the courts will construe the bylaws in a manner
consistent with the law rather than strike down the bylaws." Frantz
Manufacturing Co. v. EAC Industries, Del. Supr., 501 A.2d 401, 407 (1985)
(citations ommitted). Other courts have recognized that shareholders, as the
owners of a corporation, have the ultimate power over corporate governance. An
example is the opinion of the United States Supreme Court in Rogers v. Hill, 289
U.S. 582, 589 (1933), which quoted the statement in a New Jersey state court
opinion that "It would be preposterous to leave the real owners of the corporate
property at the mercy of their agents, and the law has not done so."
Courts interpreting Delaware law have also recognized that the use of
the Poison Pill against an offer is a defensive action by the board. Moran v.
Household Int'l, Inc., 500 A.2d 1346, 1354 (Del. 1985) (board faced with tender
offer and request to redeem rights plan will be held to same fiduciary duties
under Unocal as would apply to any decision to adopt defensive mechanism); Moore
Corp. v. Wallace Computer Servs, Inc., 907 F.Supp. 1545, 1556 (D. Del. 1995)
("With respect to the failure to redeem the poison pill, the Court finds this to
be a defensive measure.").
Mr. Wyser-Pratte also believes that there is no inconsistency between
the Shareholder Rights By-law and Section 157 of the Delaware General
Corporation Law. While Section 157 states that rights or options to purchase a
company's stock shall be subject to agreements approved by the board of
directors, Section 157 does not require that the board of directors shall
exclusively control the exercise of the company's rights under such agreements,
and Mr. Wyser-Pratte believes that any agreement that purports to bar a company
from allowing shareholders to participate in the control of such rights is an
illegal infiringement on the power of shareholders to enact bylaws. The opinion
in the Fleming case, cited above, rejected the company's argument that an
Oklahoma provision identical to Section 157 prevented shareholders from
requiring redemption of the company's Poison Pill. Section 157 differs from the
Georgia statutory provision that was at issue in Invacare Corp. v. Healthdyne
Technologies, Inc., 968 F.Supp. 1578 (N.D. Ga. 1997). There a federal district
court, interpreting the Georgia statute dealing with rights or options to
purchase a company's stock, held that the statute barred shareholders from
requiring the redemption of the Poison Pill. However, the Georgia statute,
unlike Delaware Section 157, states that the board shall have "sole discretion"
over the terms of rights to acquire the company's stock, language which, the
Invacare court determined, was enacted to give the board of a Georgia
corporation sole discretionary control over the terms and conditions of a Poison
Pill. Section 157 has no such language or statutory history and therefore, Mr.
Wyser-Pratte believes, the Invacare case does not apply to the Shareholder
Rights By-law.
Mr. Wyser-Pratte also believes that the Shareholder Rights By-law does
not conflict with Delaware case law dealing with the fiduciary duties of boards
of directors. In certain cases, courts interpreting Delaware law have, on the
basis of particular facts presented, upheld reasonable defensive measures
adopted by directors who, in good faith and upon reasonable investigation,
believed that a hostile offer posed a danger to
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corporate policy and effectiveness, even though a majority of the stockholders
may have tendered their shares. Mr. Wyser-Pratte believes, however, that those
cases do not support invalidating the Shareholder Rights By-law because those
cases only dealt with whether the board had properly exercised its powers, and
not with whether those powers can be circumscribed by bylaws previously adopted
by the shareholders pursuant to Section 109. In none of those cases was the
board's discretion limited by a by-law previously adopted by stockholders
pursuant to the grant of authority in Section 109. Mr. Wyser-Pratte believes it
is inherent in the Delaware scheme of corporate law that while the board is
entitled to exercise its judgment in responding to a tender offer or other
takeover bid, the board must exercise its judgment within the framework of
statutes (including Section 109), charter provisions and by-laws, such as the
Shareholder Rights By-law, which in certain instances limit the actions that
directors may take even when the directors believe that their chosen course of
action is in the best interests of stockholders. Mr. Wyser-Pratte further
believes that the Shareholder Rights By-law is supported by Delaware case law
recognizing that at some point in time the failure to redeem a poison pill can
constitute a fiduciary breach (See Moore, 907 F.Supp. at 1556), and by Delaware
case law recognizing that directors' exercise of their fiduciary duties is
limited by the voting rights of shareholders (See Blasius Industries, Inc. v.
Atlas Corporation, Del. Ch., 564 A.2d 651 (1988) and Stahl v. Apple Bancorp,
Del. Ch., 579 A.2d 1115, 1124 (1990)).
IN ORDER TO GIVE SHAREHOLDERS A GREATER VOICE IN THE GOVERNANCE OF THE COMPANY,
MR. WYSER-PRATTE RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO AMEND THE BY-LAWS
TO SET A TIME LIMIT ON THE USE OF THE COMPANY'S POISON PILL AGAINST CERTAIN
OFFERS.
PROPOSAL TO ADOPT A "SHAREHOLDER INTERESTS PROTECTION BYLAW" THAT WOULD
REQUIRE A UNANIMOUS VOTE OF THE DIRECTORS TO APPROVE "DEFENSIVE ACTIONS" BY THE
BOARD UNLESS SUCH ACTIONS HAVE BEEN APPROVED BY A SHAREHOLDER VOTE
(ITEM 2 ON PROXY CARD)
SHAREHOLDERS ARE ASKED TO CONSIDER AND VOTE UPON THE PROPOSAL TO ADOPT A
"SHAREHOLDER INTERESTS PROTECTION BYLAW" THAT WOULD REQUIRE A UNANIMOUS VOTE OF
THE DIRECTORS TO APPROVE "DEFENSIVE ACTIONS" BY THE BOARD UNLESS SUCH ACTIONS
HAVE BEEN APPROVED BY SHAREHOLDERS:
"RESOLVED, that the Shareholders hereby amend the Company's Bylaws by
adding a new Article X, which shall read as follows:
`Notwithstanding any provision to the contrary contained in these
Bylaws, the unanimous vote of all the directors then in office shall be required
to approve any Defensive Action by the board of directors, provided, however,
that any such Defensive
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Action may be authorized by the vote of a majority of the directors present
at a meeting at which a quorum is present if such authorization is ratified by
a vote of a majority of the votes which all shareholders are entitled to
cast (i.e., by the vote of a majority of the outstanding shares entitled to
vote). `Defensive Action' shall mean any action by the board with the purpose
or effect, in whole or in part, of impeding a change in control of the
Company or increasing the board's power to impede such a change in control in
the future, including without limitation (1) the extension of the expiration
date of the Company's Shareholder Rights Plan past October 28, 1999 or the
addition of a "Dead Hand" provision to such Plan, or (2) the expenditure of
any corporate funds on a proxy contest against a shareholder of the
Company (including litigation in connection with such proxy contest),
unless the Company agrees to reimburse all such costs incurred by such
shareholder if 10% of the Company's shares are voted in favor of any of such
shareholder's proposals; provided, however, that (a) subject to clauses (1) and
(2) of this sentence, if an offer is made to acquire the Company or all of the
Company's shares, and the Board determines (by a vote of a majority of the
directors present at a meeting at which a majority of the directors are present)
that such offer will maximize the company's value at a sale for the
stockholders' benefit, no action taken by the Board to facilitate such offer
shall be a Defensive Action within the meaning of this Article X and (b)the term
"Defensive Action" shall not include a decision by the board not to redeem the
outstanding Rights under the Rights Agreement between the Company and Chemical
Bank, as Rights Agent or to take other action so that the existence of such
Rights does not interfere with the acquisition of the Company's shares or an
offer to acquire such shares. A "Dead Hand" provision shall mean any provision
of the Rights agreement between the Company and Chemical Bank, as Rights Agent,
or any related document (the "Poison Pill") that limits in any way the voting
power of directors elected after a certain date or event on matters relating to
the Poison Pill, compared to either the voting power of directors elected prior
to such date or event or the voting power of directors elected on the
recommendation of directors elected prior to a specified date or event.'"
The Poison Pill is not the only device by which the board can interfere
with a takeover bid opposed by the board of directors. For example, the board
can dilute the bidder's voting power by issuing voting shares to a person
opposed to the takeover bid. Wyser-Pratte believes it is important to limit the
use of these other anti-takeover devices.
Therefore, Wyser-Pratte is proposing the adoption of a bylaw (the
"Shareholder Interests Protection Bylaw") that would require a unanimous board
vote to approve any Defensive Action by the board, unless such action was
approved by a shareholder vote. If this bylaw is adopted and Wyser-Pratte is
elected to the board, Wyser-Pratte's vote would be required to approve any
Defensive Action by the board.
The proposed bylaw defines "Defensive Action" to include any action with
the purpose or effect, in whole or in part, of impeding a change in control of
the Company or increasing the board's power to impede such a change in control
in the future. Mr. Wyser-Pratte believes it is desirable to include a general
definition of Defensive Action in the
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bylaw, so that the bylaw covers any new devices that are created to block
takeover bids in the future. He also believes that such a general definition
can be applied by the courts, since the Delaware courts already apply a
similar test in determining whether a board is engaged in anti-takeover defenses
that give rise to "enhanced" duties under Unocal Corp. v. Mesa Petroleum Co.,
493 A.2d 946 (Del. 1985). With limited exceptions, the definition of
Defensive Action specifically excludes any action taken by the board to
facilitate an offer that a majority of the board determines will maximize
the Company's value in a sale for the benefit of stockholders. Therefore,
if after receiving an acquisition proposal, the Company receives a
higher offer from a "white knight," the board would not have to act by a
unanimous vote to block the original acquisition proposal and facilitate the
offer from the white knight.
The use of the Poison Pill to block an acquisition has been specifically
excluded from the definition of "Defensive Action," because the use of the
Poison Pill is already covered by the Shareholder Rights Bylaw. However, the
Shareholder Interests Protection Bylaw does deal with certain matters relating
to the Poison Pill. The Bylaw will require a unanimous board vote (or
shareholder approval) to extend the Pill past its present October 28, 1999
expiration date or to amend the Pill to include a Dead Hand clause. A "Dead
Hand" clause typically prevents a newly elected board from voting to redeem the
Pill by only allowing such action to be taken by "Continuing Directors" (i.e.,
directors who were in office before a change in control, or their designees).
Mr. Wyser-Pratte believes that it would be a breach of the directors' fiduciary
duties to add a Dead Hand clause to the Company's Poison Pill. When the Delaware
Supreme Court upheld the adoption of a Poison Pill in Moran, its decision was
premised in part on the assumption that the Poison Pill would not prevent a
bidder from replacing the existing board through a successful proxy contest and
then redeeming the Poison Pill. A Dead Hand clause would prevent a bidder from
redeeming the Poison Pill by this means. Nevertheless, Mr. Wyser-Pratte has
included a specific reference to the Dead Hand Clause in the Shareholder
Interests Protection Bylaw, to reduce the risk that the board would adopt such a
provision and that it would be upheld.
While there are no Delaware cases considering the validity of a
Shareholder Interests Protection Bylaw, Mr. Wyser-Pratte believes this bylaw is
legally valid.
The essential feature of the Shareholder Interests Protection Bylaw is a
requirement for the Board to act unanimously to authorize Defensive Actions. The
Bylaw also permits the Board to authorize Defensive Actions by a lesser vote if
the shareholders ratify the board's action; but the board does not need
shareholder approval as long as the board acts unanimously.
A unanimous vote requirement for action by the board is authorized by
Section 141(b) of the Delaware General Corporation Law which states in relevant
part: "The vote of a majority of the directors present at a meeting at which a
quorum is present shall be the act of the board of directors unless the
certificate of incorporation or the bylaws shall
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require a vote of a greater number." (emphasis added). In Frantz Mfg. Co. v. EAC
Indus., 501 A.2d 401, 407 (Del. 1985) (citations omitted) the Delaware Supreme
Court ruled that a majority shareholder may adopt a bylaw requiring a unanimous
vote for action by the board in order "to limit the Frantz board's anti-takeover
maneuvering after EAC had gained control of the corporation."
The Shareholder Interests Protection Bylaw would enable individual
directors (including Mr. Wyser-Pratte if he is elected to the board) to block a
Defensive Action approved by a majority of the board unless such actions were
ratified by a shareholder vote. While the Shareholder Interests Protection Bylaw
would have this effect, whether or not such Defensive Action was in the best
interests of shareholders, Mr. Wyser-Pratte believes that the failure of such
Defensive Action to obtain approval by a unanimous board vote or majority
shareholder vote would be evidence that the Defensive Action was not
advantageous for shareholders and, therefore, he believes the adoption of the
Shareholder Interests Protection Bylaw is in the shareholders' best interests.
The definition of Defensive Actions also includes the expenditure of
Company funds on a proxy contest against a shareholder (including expenditures
on litigation) unless the board agrees to reimburse the shareholder's expenses
if at least 10% of the Company's shares are voted in favor of any of the
shareholder's proposals. Mr. Wyser-Pratte included this provision in the
definition of Defensive Action to help create a level playing field in future
proxy contests. Today management is able to utilize Company funds in a proxy
contest with shareholders, while the shareholders (who may be seeking to
vindicate the interests of all shareholders) must fund their own expenses.
Typically, the shareholder's expenses do not get reimbursed by a company unless
a court orders these expenses to be reimbursed or there is a change in control
of the company and the new board votes to reimburse the expenses. The provision
for reimbursement of proxy statement expenses would apply to any shareholder
proposal on any subject.
PROPOSAL TO AMEND THE BYLAWS TO ALLOW THE HOLDERS OF 10% OF THE SHARES TO CALL A
SPECIAL MEETING OF SHAREHOLDERS
(ITEM 3 ON PROXY CARD)
"RESOLVED, that in accordance with Article VIII of the Bylaws of the
Company, the Shareholders of the Company hereby amend Article I, Section 2 of
the Bylaws so that it reads in its entirety as follows:
"Special meetings of the shareholders may be called at any time by the
Board of Directors, the Chairman of the Board, the Executive Committee, the
Chairman of the Executive Committee or the President. Upon written request of
any person or persons who have duly called a special meeting, it shall be the
duty of the Secretary of the Corporation to fix the date of the meeting to be
held not less than ten nor more than sixty days after the receipt of the request
and to give due notice thereof. If the Secretary shall
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neglect or refuse to fix the date of the meeting and give notice thereof, the
person or persons calling the meeting may do so.
Notwithstanding anything to the contrary contained in these By-laws, a
special meeting of the shareholders may also be called at any time by
shareholders entitled to cast 10% of the votes which all shareholders are
entitled to cast (i.e., by 10% of the shares entitled to vote). The shareholders
calling such a meeting may also fix the date, time and place of the meeting,
which may be held within or without the State of Delaware. If such shareholders
have fixed any such items, such shareholders shall have all the power to change
the date, time and/or place of such meeting or to adjourn such meeting that the
board of directors or any officer of the Corporation would have in respect of a
special meeting called by the board of directors; and agent designations
executed by shareholders in connection with calling such meeting may delegate
such power to the agents designated to call such meeting. Such shareholders
shall call such special meeting and, if they have elected to do so, shall fix
the date, time and/or place of the meeting by means of a written notice to the
Secretary of the Company." (Additions to the Bylaw have been italicized.)
PROPOSAL TO INCREASE THE ABILITY OF SHAREHOLDERS TO MAKE PROPOSALS AND TO
NOMINATE DIRECTORS AT SHAREHOLDER MEETINGS
(ITEM 4 ON PROXY CARD)
"RESOLVED, that the Shareholders of the Company hereby amend Article I,
Sections 9 and 10 of the By-laws so that they read in their entirety as follows:
SECTION 9. Subject to such rights of the holders of Preferred Stock or
Preference Common Stock or any series thereof as shall be prescribed in the
Certificate of Incorporation or in the resolutions of the Board of Directors
providing for the issuance of any such series, only persons who are nominated in
accordance with the procedures set forth in this Section 9 shall be eligible for
election as, and to serve as, directors. Nominations of persons for election to
the Board of Directors may be made at a meeting of shareholders at which
directors are to be elected (a) by or at the direction of the Board of Directors
(or any duly authorized committee thereof) or (b) by any shareholder of the
Corporation (i) who is a shareholder of record on the date of the giving of the
notice provided for in this Section 9 and on the record date for the
determination of shareholders entitled to vote at such annual meeting and (ii)
who complies with the requirements of this Section 9. In addition to any other
applicable requirements, nominations, other than those made by or at the
direction of the Board of Directors (or any duly authorized committee thereof)
shall be preceded by timely notice thereof in proper written form to the
Secretary of the Corporation.
To be timely, a shareholder's notice must be delivered to, or mailed and
received at, the principal executive offices of the Corporation not less than 60
days nor more than 120 days prior to the anniversary date of the immediately
preceding annual meeting of shareholders; provided, however, that in the event
that the annual meeting is called for a
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date that is not within 30 days before or after such anniversary date, notice by
the shareholder, in order to be timely, must be so received not later than the
close of business on the 30th day following the day on which such notice of the
date of the annual meeting was mailed or public disclosure of the date of the
annual meeting was made, whichever first occurs. In no event shall the public
disclosure of an adjournment of an annual meeting commence a new time period for
the giving of a shareholder's notice as described above.
To be in proper written form, a shareholder's notice to the Secretary
must set forth (a) as to each person whom the shareholder proposes to nominate
for election as a director (i) the name, age, business address and residence
address of such person, (ii) the principal occupation or employment of such
person, (iii) the class or series and number of shares of capital stock of the
Corporation which are owned beneficially or of record by such person and (iv)
any other information relating to such person that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations promulgated thereunder; and (b) as to the
shareholder giving the notice (i) the name and record address of such
shareholder, (ii) the class or series and number of shares of capital stock of
the Corporation which are owned beneficially or of record by such shareholder,
(iii) a description of all arrangements or understandings between such
shareholder and each proposed nominee and any other person or persons (including
their names) pursuant to which the nomination(s) are to be made by such
shareholder, (iv) a representation that such shareholder intends to appear in
person or by proxy at the meeting to nominate the persons named in its notice
and (v) any other information relating to such shareholder that would be
required to be disclosed in a proxy statement or other filings required to be
made in connection with solicitations of proxies for election of directors
pursuant to Section 14 of the Exchange Act and the rules and regulations
promulgated thereunder. Such notice must be accompanied by a written consent of
each proposed nominee to be named as a nominee and to serve as a director if
elected.
No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 9. If the Chairman of the meeting determines that a nomination was not
made in accordance with the foregoing procedures, the Chairman shall declare to
the meeting that the nomination was defective and such defective nomination
shall be disregarded, subject to the power of a majority of the shares present
at such meeting in person or by proxy to overrule the Chairman's ruling.
Notwithstanding anything in the second paragraph of this Section 9 to
the contrary, in the event that the number of directors to be elected to the
Board of Directors of the Corporation is increased and there is no public
disclosure by the Corporation naming all of the nominees for director or
specifying the size of the increased Board of Directors at least 90 days prior
to the first anniversary of the preceding year's annual meeting, a shareholder's
notice required by the by-law shall also be considered timely, but
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only with respect to nominees for any new positions created by such increase, if
it shall be delivered to the Secretary at the principal offices of the
Corporation not later than the close of business on the 30th day following the
day on which such public disclosure is first made by the Corporation.
For purposes of this Section 9 and Section 10 of these by-laws, "public
disclosure" shall mean disclosure in a press release reported by the Dow Jones
News Service, Associated Press, PR Newswire, Bloomberg or comparable national
news service or in a document publicly filed by the Corporation with the
Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the
Exchange Act.
Notwithstanding anything to the contrary contained in these
By-laws, if any shareholder has properly given notice, pursuant to this Section
9, of his intention to nominate a director pursuant to this Article, such
shareholder may substitute another nominee at any time up to and including the
time of the meeting if the candidacy of the former nominee is withdrawn for any
reason. (Additions to the Bylaws have been italicized.)
SECTION 10. No business may be transacted at an annual meeting of
shareholders, other than business that is either (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors (or any duly authorized committee thereof), (b) otherwise properly
brought before the annual meeting by or at the direction of the Board of
Directors (or any duly authorized committee thereof) or (c) otherwise properly
brought before the annual meeting by any shareholder of the Corporation (i) who
is a shareholder of record on the date of the giving of the notice provided for
in this Section 10 and on the record date for the determination of shareholders
entitled to vote at such annual meeting and (ii) who complies with the notice
procedures set forth in this Section 10. In addition to any other applicable
requirements, for business to be properly brought before an annual meeting by a
shareholder, such shareholder must have given timely notice thereof in proper
written form to the Secretary of the Corporation.
To be timely, a shareholder's notice must be delivered to or mailed and
received at the principal executive offices of the Corporation not less than 60
days nor more than 120 days prior to the anniversary date of the immediately
preceding annual meeting of shareholders; provided, however, that in the event
that the annual meeting is called for a date that is not within 30 days before
or after such anniversary date, notice by the shareholder, in order to be
timely, must be so received not later than the close of business on the 30th day
following the day on which such notice of the date of the annual meeting was
mailed or public disclosure (as defined in Section 9) of the date of the annual
meeting was made, whichever first occurs. In no event shall the public
disclosure of an adjournment of an annual meeting commence a new time period for
the giving of a shareholder's notice as described above.
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To be in proper written form, a shareholder's notice to the Secretary
must set forth as to each matter such shareholder proposed to bring before the
annual meeting (i) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (ii) the name and record address of such shareholder, (iii) the
class or series and number of shares of capital stock of the Corporation which
are owned beneficially or of record by such shareholder, (iv) a description of
all arrangements or understandings between such shareholder and any other person
or persons (including their names) in connection with the proposal of such
business by such shareholder and any material interest of such shareholder in
such business and (v) a representation that such shareholder intends to appear
in person or by proxy at the annual meeting to bring such business before the
meeting.
No business shall be conducted at the annual meeting of shareholders
except business brought before the annual meeting in accordance with the
procedures set forth in this Section 10; provided, however, that, once business
has been properly brought before the annual meeting in accordance with such
procedures, nothing in this Section 10 shall be deemed to preclude discussion by
any shareholder of any such business. If the Chairman of an annual meeting
determines that business was not properly brought before the annual meeting in
accordance with the foregoing procedures, the Chairman shall declare to the
meeting that the business was not properly brought before the meeting and such
business shall not be transacted, subject to the power of a majority of the
shares present at such meeting in person or by proxy to overrule the Chairman's
ruling.
At a special meeting of shareholders, only such business shall be
conducted as shall have been set forth in the notice relating to the meeting. At
any meeting, matters incident to the conduct of this meeting may be voted upon
or otherwise disposed of as the presiding officer of the meeting (or the holders
of a majority of the shares present at such meeting in person or by proxy) shall
determine to be appropriate.
Notwithstanding anything to the contrary contained in these By-laws, if
a shareholder has properly given notice, pursuant to this Section 10, of
business to be brought before an annual shareholders meeting in accordance with
this Article, such shareholder may alter, amend, add to or revoke any such
notice or give notice of any additional business to be transacted at such
meeting at any time up to ten days prior to the date of such meeting."
(Additions to the Bylaws have been italicized.)
The ability of the board to finance a proxy contest with Company funds
is not the only respect in which Mr. Wyser-Pratte believes there is a lack of a
level playing field in proxy contests between the board and shareholders. Under
the existing bylaws, only the board and management can call a special meeting of
shareholders. At an annual meeting, shareholders must comply with a strict
timetable for making proposals and nominations, and have no explicit right to
change these items, while the board is free to add items and names to the
agenda, subject to compliance with the proxy rules and fiduciary duties. If the
board makes such changes after the shareholder notification period has ended,
shareholders may not be able to respond by changing their proposals or making
new
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proposals. In interpreting other advance notification bylaws involving
nominations to the board, the Delaware courts have ruled that when there is a
material change in circumstances after the period for shareholder nominations
ends, corporations may be required to make an exception to such advance
notification requirements to give shareholders a fair opportunity to nominate
directors. Hubbard v. Hollywood Park Realty Enterprises, 1991 WL 3151 (Del. Ch.
Jan. 14, 1991). However, the Hollywood Park case applies an equitable principle;
it does not define the circumstances in which the courts will require companies
to relax the application of their shareholder notification bylaws. Mr.
Wyser-Pratte is proposing to amend the bylaws dealing with the call of a special
meeting and shareholder proposals and nominations to eliminate or reduce some of
the board's tactical advantages in a proxy contest with shareholders as a result
of these provisions.
Mr. Wyser-Pratte's purpose in proposing a bylaw that would allow
shareholders to call a special meeting is to enable shareholders to initiate
action on such matters as amending the bylaws, removing directors for cause and
introducing advisory resolutions. This bylaw would enable shareholders,
including Mr. Wyser-Pratte, by a vote of 10% of the outstanding shares to call a
special meeting of shareholders when the board of directors and officers were
not willing to call such a meeting. His purpose in changing the window period
for shareholder proposals and nominations at the annual meeting is to give
shareholders greater flexibility in making such proposals and nominations. These
changes would enable shareholders, including Mr. Wyser-Pratte, to make proposals
and nominations under circumstances in which the existing bylaws would bar such
proposals and nominations.
As a general matter, Mr. Wyser-Pratte believes it is preferable for the
holders of a majority of the shares to be able to remove the board at any time,
with or without cause, and that the terms of all the directors should expire at
each annual meeting. This is not the system that prevails at the Company,
however, because the Company's certificate of incorporation provides for a
classified or "staggered" board of directors. As a result, under Delaware law
and the Company's certificate of incorporation, shareholders may only remove the
directors for cause by a vote of a majority of the outstanding shares. The
certificate also purports to give the remaining directors, if any, the power to
fill any vacancies arising from the removal of directors although, as discussed
below, Delaware law gives shareholders the right to fill vacancies in some
circumstances. The staggered board also results in only [four] of the [twelve]
directors coming up for reelection in any year.
Mr. Wyser-Pratte believes that the staggered board can be a powerful
weapon against an acquisition proposal that is favored by shareholders and
opposed by the board. In the absence of a staggered board, the holders of a
majority of the shares would be free to remove a board that was interfering with
an acquisition proposal that they favored, and a bidder that acquired a majority
of the Company's shares would be able to take control of the board either
immediately or at the next annual meeting Under a staggered board regime,
neither of these actions is possible unless the directors can be removed for
cause. If a bidder acquires more than 90% of each class of stock, the bidder can
acquire the
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balance of the shares through a short-form merger without board action. However,
a bidder who purchases a majority of the Company's shares, but fails to acquire
90% of each class, may have to live with a hostile board of directors for
several years, without the ability to acquire the remainder of the Company's
shares. Since the staggered board is imposed by the certificate of
incorporation, which cannot be amended without board approval, the holders of a
majority of the voting shares lack the power to repeal the staggered board.
Mr. Wyser-Pratte believes that these aspects of the staggered board,
along with the Company's Poison Pill and its subjection to Section 203 of the
Delaware General Corporation Law (discussed below), discourage prospective
bidders from making acquisition proposals that would be in the best interests of
shareholders.
While Mr. Wyser-Pratte believes that the staggered board will always be
an impediment to maximizing shareholder value, he believes that its effects can
be ameliorated in appropriate circumstances by exercising the shareholders'
right to remove directors for cause.
Procedurally, a shareholder seeking to remove a director for cause must
make specific charges against the director and give the director adequate notice
of such charges and an opportunity to present the director's case to the
stockholders before they vote. The leading Delaware authority on the removal of
directors for cause, Campbell v. Loew's, Inc., 134 A. 2d 852, 859 (Del. Ch.
1957), indicates that "if the charges are legally sufficient on their face,"
shareholders would be entitled to proceed with a proposal to remove the
directors, with any judicial review occurring after the shareholders meeting.
The Campbell court also stated that "[m]atters for stockholder consideration
need not be conducted with the same formality as judicial proceedings." Id. at
860.
The standard of cause for removal mentioned most frequently in the cases
in Delaware and other jurisdictions is conduct that is harmful or burdensome to
the corporation. The cases do not state that such conduct must also be a breach
of the directors' fiduciary duties, although some Delaware commentators have
concluded that this requirement exists.
Mr. Wyser-Pratte believes that if the removal proceeding arose out of
the board's response to a takeover bid, the courts would consider the effect of
the directors' action on the shareholders, since the board is obligated to act
in the best interests of the corporation and its shareholders in responding to a
takeover bid.
Cases from other jurisdictions indicate that the shareholders are
entitled to weigh the evidence presented in a removal proceeding, and that if
the shareholders decide to remove the directors, a court will overturn that
decision only if there was no evidence to support the shareholders' action. By
contrast, a shareholder bringing a derivative or class action against the
directors in connection with the board's response to a takeover bid has the
burden of establishing that the directors violated their fiduciary duties.
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Mr. Wyser-Pratte believes that if the board rejects an acquisition that
is in the best interests of shareholders, removal of the board may be the
shareholders' most appropriate remedy if there is adequate cause for removal.
However, under the existing by-laws the shareholders could only take this action
at an annual meeting, and even then only if the action were proposed 90 to 120
days in advance of the meeting. Mr. Wyser-Pratte believes that this timetable
may make removal for cause an ineffective remedy, since a prospective purchaser
may have abandoned its effort to acquire the Company (as UPR did) by the time of
the annual meeting. Therefore, Mr. Wyser-Pratte believes shareholders should be
able to call a special meeting to consider removal of the board promptly after
the board rejects an offer that is in the shareholders' best interests.
The Company's certificate of incorporation gives the board the power to
fill vacancies arising from the removal of directors. However, under Section
223(c) of the Delaware General Corporation Law, the court may order a
shareholder vote to fill vacancies if shareholders remove a majority of the
directors.
PROPOSAL TO AMEND THE BY-LAWS TO PREVENT THE BOARD FROM CHANGING ANY OF
THE BYLAWS ADOPTED BY THE SHAREHOLDERS AT THIS ANNUAL MEETING
(ITEM 5 ON PROXY CARD)
SHAREHOLDERS ARE ASKED TO CONSIDER AND VOTE UPON THE PROPOSAL TO AMEND
THE BY-LAWS TO PREVENT THE BOARD FROM CHANGING ANY OF THE BY-LAWS ADOPTED BY THE
SHAREHOLDERS AT THIS ANNUAL MEETING:
"RESOLVED, that in accordance with Article VIII of the By-laws of the
Company, the shareholders of the Company hereby amend the By-laws by deleting
Article VIII of the By-laws in its entirety and replacing therewith the
following:
"These By-laws may be altered, amended, added to or repealed by the
shareholders at any annual or special meeting, by the vote of shareholders
entitled to cast at least a majority of the votes which all shareholders are
entitled to cast (i.e., by the vote of a majority of the outstanding shares
entitled to vote), and, except as may be otherwise required by law, the power to
alter, amend, add to or repeal these By-laws is also vested in the Board of
Directors (subject always to the power of the shareholders to change such
action); provided, however, that notice of the general nature of any such action
proposed to be taken at a Board of Directors meeting shall be included in the
notice of the meeting of the Board of Directors at which such action is taken;
and provided further that the Board of Directors shall have no power to alter,
amend, add to or repeal Section 2, 9 or 10 of Article I, this Article VIII or
Articles IX or X of these By-laws."
The purpose of this proposal is to prevent the board of directors from
repealing or otherwise changing any bylaws adopted by the shareholders at this
Annual Meeting.
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Article Fifth of the Certificate of Incorporation authorizes the board of
directors, "[e]xcept as may be otherwise provided in the By-laws, to make,
alter, amend and repeal the By-laws of the corporation, subject always to the
power of the stockholders to change such action." (emphasis added.) This
proposal would add a provision to the By-laws denying the board of directors the
power to amend the by-laws to be adopted by shareholders at the annual meeting.
If this proposal is adopted by shareholders, the board would be barred from
eliminating the benefits that shareholders, including Mr. Wyser-Pratte, and
individual directors (including Mr. Wyser-Pratte if he is elected to the board)
will derive from the adoption of these bylaws.
PROPOSAL TO AMEND THE BYLAWS TO ELECT NOT TO BE GOVERNED BY THE BUSINESS
COMBINATION STATUTE
(ITEM 6 ON PROXY CARD)
SHAREHOLDERS ARE ASKED TO CONSIDER AND VOTE UPON THE PROPOSAL TO AMEND
THE BY-LAWS TO ELECT NOT TO BE GOVERNED BY THE BUSINESS COMBINATION STATUTE:
"RESOLVED, that pursuant to Section 203(b)(3) of the Delaware General
Corporation Law, the Shareholders hereby amend the Company's By-laws by adding a
new Article XI which shall read as follows:
`The corporation shall not be governed by Section 203 of the Delaware
General Corporation Law.' "
Mr. Wyser-Pratte is proposing that stockholders adopt an amendment to
the By-laws electing not to be governed by Section 203 of the Delaware General
Corporation Law (the "Business Combination Statute").
The Business Combination Statute provides, in effect, that if any person
acquires beneficial ownership of 15% or more of the Company's outstanding shares
(thereby becoming an "Interested Shareholder"), the Interested Shareholder may
not engage in a business combination with the Company for three years
thereafter, subject to certain exceptions. Among the exceptions are (i) the
Board's prior approval of such acquisition; (ii) the acquisition of at least 85%
of the Company's shares (subject to certain exclusions) in the transaction in
which such person becomes an Interested Shareholder; and (iii) the approval of
such business combination by 66 2/3% of the outstanding stock not owned by the
Interested Shareholder. The Company's shareholders may, by a vote of a majority
of the outstanding shares, adopt an amendment to the By-laws or Certificate of
Incorporation electing not to be governed by the Business Combination Statute.
Such amendment would become effective twelve months after adoption and would not
be subject to amendment by the Board and would not apply to a business
combination with a person who became an Interested Shareholder prior to the
adoption of such amendment.
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THE FOREGOING IS A SUMMARY OF THE RELEVANT MATERIAL PROVISIONS OF THE BUSINESS
COMBINATION STATUTE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE HERETO. THE
TEXT OF THE BUSINESS COMBINATION STATUTE IS ATTACHED HERETO AS EXHIBIT B.
While the proposed By-law could facilitate a business combination with a
15% or greater shareholder, whether or not the transaction was advantageous for
shareholders, Mr. Wyser-Pratte believes that the adoption of this By-law is in
the best interests of shareholders because the Business Combination Statute
discourages offers to acquire the Company's shares; and Mr. Wyser-Pratte
believes that the Company's Certificate of Incorporation and the Delaware
"entire fairness" doctrine provides more than adequate protection of the
interests of the other shareholders in a business combination with a controlling
shareholder. If the shareholders adopt the proposed By-law, prospective bidders
may be encouraged to make offers to acquire control of the Company, thereby
benefiting shareholders such as Mr. Wyser-Pratte who wish to have the
opportunity to consider offers to acquire a controlling interest in the Company.
The Business Combination Statute discourages offers to acquire the
Company's shares, in Mr. Wyser-Pratte's opinion, by creating obstacles to
second-stage mergers in which successful offerors acquire the remainder of the
Company's shares. The Business Combination Statute has this effect because it
requires the offeror to win the votes of a two-thirds super-majority of the
minority shareholders to approve a second-stage merger unless the offeror
acquired at least 85% of the Company's shares (subject to certain exclusions) in
the transaction in which the offeror became an Interested Shareholder or unless
such transaction was approved by the Board of Directors.
Mr. Wyser-Pratte believes that the Company's minority shareholders do
not require the protection of the Business Combination Statute in a second-stage
merger because Article Sixth of the Company's Certificate of Incorporation
provides that an 80% super-majority vote would be required to approve any
second-stage merger with "any corporation, person or entity that is the
beneficial owner, directly or indirectly, of 5% or more of the outstanding
shares of any class or series of voting stock" of the Company (a "5% Holder").
As further protection to the minority shareholders, Article Sixth of the
Company's Certificate of Incorporation also requires the affirmative vote or
consent of a majority of all voting stock of the Company exclusive of all voting
stock of the Company of which such 5% Holder is, directly or indirectly, a
beneficial owner, in order to approve such transaction.
Mr. Wyser-Pratte believes that the Company's minority stockholders also
are protected in a second-stage merger because under Delaware law a second-stage
merger with a controlling shareholder would have to satisfy the entire fairness
test. This test requires the courts to conduct a comprehensive review of the
fairness of such a transaction. Its scope has been described by the Delaware
Supreme Court in Weinberger v. UOP, Inc., 457 A.2d 701, 711 (Del. 1983): "The
concept of fairness has two basic aspects: fair dealing and fair price. The
former embraces questions of when the transaction was timed, how it was
initiated, structured, negotiated, disclosed to the
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directors, and how the approvals of the directors and shareholders were
obtained. The latter aspect of fairness relates to the economic and financial
considerations of the proposed merger, including all relevant factors: assets,
market value, earnings, future prospects, and any other elements that affect the
intrinsic or inherent value of a company's stock."
PROPOSAL TO REPEAL ANY BYLAWS ADOPTED BY THE BOARD OF DIRECTORS SINCE
NOVEMBER 1, 1997
(ITEM 7 ON PROXY CARD)
SHAREHOLDERS ARE ASKED TO CONSIDER AND VOTE UPON THE PROPOSAL TO REPEAL
ANY BYLAWS ADOPTED BY THE BOARD OF DIRECTORS SINCE NOVEMBER 1, 1997:
"RESOLVED, that any By-laws adopted by the board of directors since
November 1, 1997 be, and they hereby are, repealed."
The purpose of this proposal is to prevent the board from interfering
with the implementation of the proposals being voted upon by the shareholders at
this Annual Meeting. Mr. Wyser-Pratte, and other similarly situated shareholders
and directors will benefit from the adoption of this proposal to the extent of
the benefits, described above, that they will derive from the adoption of the
other proposals being voted upon at this Annual Meeting.
REQUIRED VOTE
Under Section 13 of the Bylaws, the affirmative vote of a majority of
the outstanding shares of Common Stock is required to adopt the amendments to
the Bylaws being proposed by Mr. Wyser-Pratte. With respect to abstentions and
broker non-votes, the shares will be considered present at the Annual Meeting,
but since they are not affirmative votes for the By-law, they will have the same
effect as votes against the proposals.
PROPOSAL TO ADOPT A RESOLUTION RECOMMENDING TO THE BOARD THAT THE
COMPANY REIMBURSE MR. WYSER-PRATTE'S EXPENSES IN CONNECTION WITH THIS PROXY
SOLICITATION
(ITEM 8 ON PROXY CARD)
SHAREHOLDERS ARE ASKED TO CONSIDER AND VOTE UPON THE PROPOSAL TO ADOPT A
RESOLUTION RECOMMENDING TO THE BOARD THAT THE COMPANY REIMBURSE MR.
WYSER-PRATTE'S EXPENSES IN CONNECTION WITH THIS PROXY SOLICITATION:
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"RESOLVED, that the shareholders recommend to the board that the Company
reimburse all of Guy Wyser-Pratte's expenses (including any litigation expenses)
in connection with the solicitation of proxies for this shareholders meeting."
The purpose of the proposals being made by Mr. Wyser-Pratte at this
Annual Meeting is to advance shareholder interests. Therefore, he believes that
his expenses in connection with the proxy solicitation (including any litigation
expenses) should be reimbursed. Mr. Wyser-Pratte estimates that his expenses
incurred through ------, 1998 are $------- and that his total expenses will be
$-------.
One of the bylaws being proposed by Mr. Wyser-Pratte would require a
unanimous board vote or shareholder approval for the board to spend any funds on
a proxy contest with a shareholder unless the board agreed to reimburse the
shareholder's expenses if any of the shareholder's proposals were approved by
the holders of 10% of the shares. However, this proposal will not assist Mr.
Wyser-Pratte in getting his expenses in the current proxy contest reimbursed,
because this proposal will only operate prospectively.
The proposed resolution is precatory and will not bind the board of
directors. If the shareholders adopted this proposal, and the Board followed the
shareholders' recommendation, Mr. Wyser-Pratte would benefit by having his
expenses for this proxy contest reimbursed.
Adoption of the proposal requires the affirmative vote of a majority of
the shares present in person or represented by proxy at a meeting at which a
quorum is present. A majority of the outstanding shares, present in person or
represented by proxy, constitute a quorum.
If the board does not reimburse Mr. Wyser-Pratte's expenses, he intends
to seek a court order requiring the board to reimburse these expenses, because
of the benefits conferred on the Company's shareholders.
PROPOSAL TO ELECT GUY P. WYSER-PRATTE TO THE BOARD OF DIRECTORS
(ITEM 9 ON PROXY CARD)
[Four] directors will be elected at the 1998 Annual Meeting to a
three-year term ending at the 2001 Annual Meeting (or until their respective
successors are duly elected and qualified). The [four] directors will be elected
by a plurality of the votes cast.
Guy P. Wyser-Pratte has been nominated as a director and is soliciting
proxies to vote for his election. Under the Company's system of cumulative
voting, mandated by the certificate of incorporation, each share will have
[four] votes, which can be divided among the candidates or all cast for a single
candidate. Mr. Wyser-Pratte is seeking proxies with cumulative voting
instructions to cast four votes per share for Mr. Wyser-Pratte. If Mr.
Wyser-Pratte received [four] votes per share from all shareholders voting for
him, he
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could be elected by shareholders holding as little as 20% of the shares
voted, plus one share.
Mr. Wyser-Pratte believes that the board of directors should seek to
maximize shareholder value through a sale of the Company. He also believes that
the board's response to the UPR offer shows that the present board is not
committed to that goal. Mr. Wyser-Pratte believes that his election to the board
would improve the chances that the Company would enter into a value-maximizing
transaction, although at least initially there would not be a majority of
directors who share Mr. Wyser-Pratte's views. If he were elected, and the
shareholders adopted the bylaw requiring a unanimous vote for Defensive Actions,
Mr. Wyser-Pratte would cast his vote to prevent the board from taking Defensive
Actions unless they were part of a strategy that he believed would maximize
shareholder value. If the bylaw were not adopted, Mr. Wyser-Pratte believes that
he could still be effective as a director by pressing the board to negotiate and
give serious consideration to premium acquisition proposals. If Mr. Wyser-Pratte
is elected to the Board, he would benefit to the extent that he was able to
influence the Board to pursue the corporate goals which he favors and which are
described in this Proxy Statement.
Mr. Wyser-Pratte, 57, is President of WPC and Wyser-Pratte Management
Co., Inc. He serves on the Board of Directors of Comsat Corporation, Maurel et
Prom S.A., and the International Rescue Committee, a non-governmental
international refugee organization. He also serves as a trustee of the U.S.
Marine Corps University Foundation.
BACKGROUND AND RECENT EVENTS
A. TENDER OFFER
On June 23, 1997, UPR through a wholly-owned subsidiary, Resources
Newco, Inc., offered to purchase 50.1% of the outstanding common shares of
Pennzoil for $84 in cash per share. In its Schedule 14D-1 ("Tender Offer
Statement") filed with the SEC, UPR announced that the tender offer was the
first part of a proposed two-step transaction to acquire Pennzoil. In the second
step of the transaction, UPR proposed to exchange the remaining Pennzoil shares
for shares of UPR common stock designed to have a value of $84 per share.
On July 1, 1997, the Pennzoil Board of Directors filed a Schedule 14D-9
in which it urged its shareholders to reject the offer. The Board described the
offer as "inadequate and not in the best interests of the company and its
stockholders." The Board further stated that UPR's proposal "does not reflect
the inherent value of Pennzoil" and that "continued pursuit of Pennzoil's
strategic plan will produce greater value for Pennzoil shareholders than UPR's
proposal."
UPR's offer was scheduled to expire on July 21, 1997. On July 22, 1997,
UPR announced that 61.5% of Pennzoil's outstanding shares had been tendered and
that the
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offer would be extended until September 24, 1997. UPR later extended the offer
until October 29, 1997.
On October 7, 1997, UPR amended its original offer and proposed to
purchase all of Pennzoil's shares (rather than 50.1% of the fully diluted
shares) at a price of $84 per share in cash. UPR announced that if the revised
offer were successful, UPR intended to effect a merger with Pennzoil in which
each outstanding share not tendered in the offer would be converted to $84 in
cash. The revised offer was scheduled to expire on November 5, 1997, but UPR
later extended the revised offer until November 24, 1997.
The Pennzoil Board rejected the amended offer on October 14, 1997, again
characterizing the offer as "inadequate." The Board reaffirmed its faith in
Pennzoil's strategic plan and reiterated its view that "the Company's and its
stockholders' interests would be best served if the Company remains an
independent company."
On November 11, 1997, UPR announced that it would terminate the all-cash
offer on November 17, 1997, unless Pennzoil entered into good faith negotiations
with UPR and demonstrated that "the value of Pennzoil as a whole has not
declined." In a press release, Jack L. Messman, Chairman and CEO of UPR, stated
that because the value of Pennzoil's international oil and gas assets "appears
to have eroded sharply" and because Pennzoil still refused to negotiate, "it is
not in the best interests of our shareholders to continue to pursue our offer on
an unsolicited basis for an indeterminate period."
Within hours of UPR's announcement, Pennzoil issued a press release
stating that it had "no plans to negotiate with UPR" and that UPR's disparaging
statements about Pennzoil were "nothing more than sour grapes." Pennzoil
restated its opinion that the UPR offer was inadequate and not in the
stockholders' best interests. "Pennzoil believes that its own programs and
projects will deliver greater value to Pennzoil shareholders than UPR's offer,"
the company said.
On November 12, 1997, Mr. Wyser-Pratte issued a statement calling on the
Pennzoil Board to negotiate with UPR and asking UPR to delay its November 17
deadline for Pennzoil to begin negotiating with UPR. Mr. Wyser-Pratte said: "We
believe that this board is ignoring the clear wishes of its shareholders.
Therefore, we have demanded from Pennzoil a copy of the shareholder list in
order to communicate with shareholders regarding ways of persuading the board to
negotiate with Union Pacific Resources."
UPR terminated its offer on November 17, 1997.
B. LITIGATION
In connection with the tender offer, UPR and Pennzoil have been engaged
in a number of lawsuits in various jurisdictions. A summary of certain
proceedings relating to these actions follows.
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The Texas Litigation. On June 23, 1997, in U.S. District Court for the
Northern District of Texas, Fort Worth Division, UPR filed an action titled
Union Pacific Resources Group Inc. et al. v. Pennzoil Co., Civil Action No.
497-CV-509-Y (the "Texas Litigation"). UPR asked the court to declare that the
Schedule 14D-1 which UPR had filed with the SEC complied with all applicable
securities laws.
This action was one of three lawsuits filed by UPR on the same day. In a
press release issued on June 23, 1997, UPR stated that all three filings were
part of its strategy to "ensure that Pennzoil's Board of Directors does not
prevent Pennzoil shareholders from realizing the substantial premium value UPR
is offering for Pennzoil shares."
On June 25, 1997, UPR amended its complaint to allege that Pennzoil had
violated securities laws by making public statements recommending against the
tender offer without first filing a Schedule 14D-9 with the SEC. Several weeks
later, after Pennzoil had filed its Schedule14D-9, UPR amended its complaint to
allege that the Pennzoil 14D-9 contained false and misleading statements.
On June 25, 1997, meanwhile, Pennzoil had filed a lawsuit in the U.S.
District Court for the District of Delaware making similar allegations of
securities law violations against UPR. Specifically, Pennzoil claimed that UPR's
Schedule 14D-1 contained false and misleading statements.
On June 26, 1997, UPR asked the Texas federal district court to prohibit
Pennzoil from prosecuting the Delaware lawsuit on the ground that both the
Delaware and Texas actions involved the same subject matter and UPR had filed
its lawsuit first. On June 27, 1997, Pennzoil responded to UPR's argument by
asking the Texas court to dismiss the Texas Litigation in favor of Pennzoil's
action in Delaware.
On July 18, 1997, the Texas federal district court denied Pennzoil's
motion to dismiss the Texas Litigation. The court ruled that because the two
cases shared common subject matter and because UPR had filed its lawsuit first,
the Texas proceeding had priority. The court partially granted UPR's motion for
a preliminary injunction by prohibiting Pennzoil from pursuing its Delaware
lawsuit or any similar litigation until the Texas action had been adjudicated.
On September 15, 1997, UPR filed a motion for a preliminary injunction
to compel Pennzoil to disclose the strategic plan upon which it had relied in
rejecting the tender offer. Mr. Wyser-Pratte asked the court for permission to
file an amicus curiae brief in support of UPR's motion. The court denied Mr.
Wyser-Pratte's request. The publication, "Corporate Control Alert" reported in
its December 1997 issue that: "On October 28, Judge Means [the trial court judge
in that case] told four lawyers---two from each side---that he had `tentatively
concluded,' based on the parties' filings, that Pennzoil had violated the
Williams Act and would have to make additional disclosures." The case was mooted
after UPR withdrew its offer on November 11.
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On September 22, 1997, Pennzoil filed a lawsuit in the District Court of
Dallas County, Texas (the "Dallas County Action") against Smith Barney, Inc.
("Smith Barney"), UPR's financial advisor. Pennzoil claimed that Smith Barney
had wrongly used privileged Pennzoil documents while providing financial advice
to UPR, and it asked the court to enjoin Smith Barney from acting as UPR's
financial advisor. Pennzoil asserted that Smith Barney's actions violated a
confidentiality agreement between Pennzoil and UPR (the "Stipulation and Order"
or "Stipulation") designed to facilitate discovery in the numerous lawsuits
between the parties. The Stipulation provided that confidential documents would
be provided only to each side's attorneys for the sole purpose of litigation,
and that in no case were such documents to be provided to the parties themselves
or to their business advisors. As UPR's advisor, Smith Barney had signed a
separate agreement to be bound by the Stipulation. In the Dallas County Action,
Pennzoil claimed that Smith Barney had improperly received highly confidential
information relating, among other things, to Pennzoil's strategic plan.
On October 2, 1997, the court in the Dallas County Action ruled that
Pennzoil should file its claim against Smith Barney, if at all, in the context
of the Texas Litigation.
Pennzoil did so on October 14, 1997, filing an action in the Texas
Litigation seeking a permanent injunction against the tender offer. Smith Barney
was named as a third-party defendant. Expanding on the allegations made in the
Dallas County Action, Pennzoil claimed that both UPR and Smith Barney had used
confidential Pennzoil documents to draft UPR's revised tender offer, in direct
violation of the Stipulation. "Under long-established principles of federal
securities laws," Pennzoil argued, "UPR is barred from buying or selling
Pennzoil stock so long as it possesses material inside information regarding
Pennzoil." Pennzoil sought to prohibit both UPR from pursuing the tender offer
and Smith Barney from trading in Pennzoil stock.
The Delaware Chancery Court Litigation. On June 23, 1997, in the Court
of Chancery of the State of Delaware in and for New Castle County, UPR filed an
action captioned Union Pacific Resources Group Inc. et al. v. Pennzoil Co. et
al., Civil Action No. 15755 NC (the "Delaware Chancery Court Litigation"). In
this complaint, UPR asked the court to compel the Pennzoil Board to lift its
anti-takeover defenses. UPR argued that these defenses, including a shareholder
rights plan ("poison pill"), would unlawfully prevent Pennzoil shareholders from
participating in the tender offer.
Pennzoil filed an answer on June 27, 1997. On October 24, 1997, Pennzoil
asked the court to declare that the Pennzoil Board's decisions not to lift the
company's anti-takeover defenses in response to UPR's tender offer had been
reasonable and had not constituted a breach of any duty under Delaware law.
On October 28, 1997, in the context of a discovery dispute, the Delaware
court refused to order Pennzoil to turn over documents sought by UPR on the
ground that Smith Barney had already received confidential information on
Pennzoil. According to a report published in the Wall Street Journal on October
30, 1997, the court ruled that
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Smith Barney could not act as both a litigation adviser and as a financial
adviser to UPR. The court denied UPR's request for reconsideration of this
ruling on November 5, 1997.
The Louisiana Litigation. On June 23, 1997, in U.S. District Court for
the Middle District of Louisiana, UPR filed an action styled Union Pacific
Resources Group Inc. et al. v. Pennzoil Co. et al. (the "Louisiana Litigation").
UPR asked the court to declare that a Louisiana anti-takeover statute was
unconstitutional, both on its face and as applied to the UPR offer.
The Delaware Federal Court Litigation. On June 25, 1997, in the U.S.
District Court for the District of Delaware, Pennzoil filed an action styled
Pennzoil Co. v. Union Pacific Resources Group, Inc. et al., Civil Action No.
97-353 (the "Delaware Federal Court Litigation"), claiming that UPR's Schedule
14D-1 contained false and misleading statements. Pennzoil asked the court to
prohibit UPR from making false and misleading statements, to direct UPR to
correct the alleged misrepresentations, and to enjoin UPR from purchasing any
Pennzoil stock until at least 30 days after such corrections were disseminated.
On July 2, 1997, UPR filed an answer and moved to dismiss the case on
several grounds, including that Pennzoil's claim was a compulsory counterclaim,
if at all, in the Texas Litigation. The Texas Litigation had been filed two days
before Pennzoil's action in Delaware federal district court and also involved
alleged violations of the securities laws.
On July 18, 1997, the court in the Texas Litigation ruled that because
UPR had filed its lawsuit first, the Texas action had priority. Accordingly, the
court prohibited Pennzoil from pursuing the Delaware Federal Court Litigation,
or any other lawsuit involving similar issues, until the Texas Litigation had
been adjudicated.
The Class Action Lawsuits. In June and July of 1997, in Delaware
Chancery Court, six Pennzoil shareholders filed separate class action lawsuits
(the "Class Action Lawsuits") against Pennzoil and its Board of Directors. Each
suit alleged that the Pennzoil Board had breached its fiduciary duties to
shareholders by rejecting the UPR offer, and asked the court to direct the Board
to cooperate with UPR while seeking to maximize value to shareholders.
The Garfinkle Litigation. On October 21, 1997, in U.S. District Court
for the Northern District of Texas, Fort Worth Division, two Pennzoil
shareholders filed a lawsuit titled Garfinkle et al. v. Pennzoil Co., Civil
Action No. 4-97-CV-882-A (the "Garfinkle Litigation"). The suit alleged, among
other things, that the Schedule 14D-9 filed by Pennzoil in response to UPR's
revised tender offer contained material misstatements and omissions. The
complaint stated in part:
The Revised Schedule 14D-9 states that the Pennzoil
directors have concluded that the Revised Tender Offer
"does not reflect the long-term values inherent" in
Pennzoil. However, the Revised Schedule
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14D-9 fails to disclose the amount or range or [sic] such
long-term values or when such values can be expected to
be realized by Pennzoil stockholders, or if no
quantification was made, the reason why.
The Revised Schedule 14D-9 refers to the Pennzoil Board's
consideration of presentations by Pennzoil management as
to Pennzoil's "prospects for future growth, profitability
and share price appreciation, as reflected in Pennzoil's
strategic plan." However, the Revised Schedule 14D-9
fails to disclose meaningful detail regarding the
supposed prospects for future growth, profitability, and
share price appreciation, including the amount or range
thereof and when such profitability and share price
appreciation can be expected to be realized by Pennzoil
stockholders.
The plaintiffs asked the court to compel Pennzoil to amend its 14D-9 and
to provide complete and accurate information.
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CERTAIN INFORMATION CONCERNING
MR. WYSER-PRATTE
AND OTHER PARTICIPANTS
IN THE SOLICITATION
Mr. Wyser-Pratte is President and Chief Executive Officer of
Wyser-Pratte Management Company and WPC, which are principally engaged in money
management and event arbitrage. The principal executive offices of WPC are
located at 63 Wall Street, New York, New York 10005. Mr. Wyser-Pratte owns
beneficially 451,500 shares of the Common Stock, representing approximately
0.95% of the 47,486,431 shares of Common Stock outstanding as of October 31,
1997, as reported in the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997. This includes shares owned directly by Mr.
Wyser-Pratte and shares owned by investment partnerships and other managed
accounts for which affiliates of WPC are the general partner or investment
manager. Neither WPC nor Mr. Wyser-Pratte has any voting or investment power or
authority with respect to shares of Common Stock held in such accounts. Both Mr.
Wyser-Pratte and WPC disclaim beneficial ownership of such shares. Certain
information about the directors and executive officers of WPC is set forth in
Schedule I attached hereto. Other than Mr. Wyser-Pratte, no other officer of WPC
owns any shares of Common Stock.
Except as set forth in this Proxy Statement or in the Appendices hereto,
to the best knowledge of Mr. Wyser-Pratte, none of Mr. Wyser-Pratte, any of the
persons participating in this solicitation on behalf of Mr. Wyser-Pratte, and
any associate of any of the foregoing persons (i) owns beneficially, directly or
indirectly, or has the right to acquire, any securities of the Company or any
parent or subsidiary of the Company, (ii) owns any securities of the Company of
record but not beneficially, (iii) has purchased or sold any securities of the
Company within the past two years, (iv) has incurred indebtedness for the
purpose of acquiring or holding securities of the Company, (v) is or has been a
party to any contract, arrangement or understanding with respect to any
securities of the Company within the past year, (vi) has been indebted to the
Company or any of its subsidiaries since the beginning of the Company's last
fiscal year or (vii) has any arrangement or understanding with respect to future
employment by the Company or with respect to any future transactions to which
the Company or any of its affiliates will or may be a party. In addition, except
as set forth in this Proxy Statement or in the Appendices hereto, to the best
knowledge of Mr. Wyser-Pratte, none of Mr. Wyser-Pratte, any of the persons
participating in this solicitation on behalf of Mr. Wyser-Pratte, and any
associate or immediate family member of any of the foregoing persons has had or
is to have a direct or indirect material interest in any transaction with the
Company since the beginning of the Company's last fiscal year, or any proposed
transaction, to which the Company or any of its affiliates was or is a party.
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VOTING RIGHTS
According the Company's Quarterly Report on Form 10Q for the quarter
ended September 30, 1997, at October 31, 1997, 47,486,431 shares of Common Stock
were outstanding and entitled to vote. Only holders of record as of the close of
business on [_______________], 1998 will be entitled to vote at the Annual
Meeting. Mr. Wyser-Pratte intends to vote all shares of Common Stock
beneficially owned by him in favor of the proposals set forth herein.
GENERAL INFORMATION
This Proxy Statement and the accompanying GOLD Proxy Card are first
being made available to shareholders on or about ___________, 1998. Executed
Proxies will be solicited by mail advertisement, telephone, telecopier and in
person. Solicitation will be made by Mr. Wyser-Pratte and Eric Longmire, Senior
Managing Director of WPC neither of whom will receive additional compensation
for such solicitation. Proxies will be solicited from individuals, brokers,
banks, bank nominees and other institutional holders. Mr. Wyser-Pratte has
requested banks, brokerage houses and other custodians, nominees and fiduciaries
to forward all solicitation materials to the beneficial owners of the shares
they hold of record. Mr. Wyser-Pratte will reimburse these record holders for
their reasonable out-of-pocket expenses.
In addition, Mr. Wyser-Pratte has retained the Proxy Solicitor to
solicit proxies in connection with the Annual Meeting for which the Proxy
Solicitor will be paid a fee of approximately $______ and will be reimbursed for
its reasonable expenses. The Proxy Solicitor will employ approximately people in
its efforts. Costs incidental to this solicitation include expenditures for
printing, postage, legal and related expenses and are expected to be
approximately ______. The total costs incurred to date in connection with this
solicitation are not in excess of $______.
If the Shareholder Rights By-law is adopted, or the Board adopts a
change in policy or takes other action in response to this solicitation that
increases shareholder value, Mr. Wyser-Pratte will ask the Board to have the
Company reimburse him for costs and expenses incurred in connection with this
proxy solicitation. Mr. Wyser-Pratte does not intend to request that its
reimbursement request be submitted to a vote of stockholders.
OTHER MATTERS TO BE CONSIDERED
AT THE ANNUAL MEETING
Except as set forth in the Proxy Statement, Mr. Wyser-Pratte is not
aware of other matters to be considered at the Annual Meeting. However, if any
other matters properly come before the Annual Meeting, Mr. Wyser-Pratte will
vote his Common Stock and all proxies held by him in accordance with his best
judgment with respect to such maters. Your attention is directed to the
Company's 1998 Proxy Statement regarding the
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procedures for submitting proposals for consideration at the Company's 1999
Annual Meeting.
CERTAIN OTHER INFORMATION REGARDING THE COMPANY
Shareholders are referred to the Company's 1998 Proxy Statement with
respect to the compensation and remuneration paid and payable and other
information related to the Company's officers and directors, beneficial
ownership of the Company's securities.
VOTING OF PROXY CARDS
Shares of Common Stock represented by properly executed GOLD PROXY CARDS
will be voted at the Annual Meeting as marked, and in the discretion of the
persons named as proxies on all other matters as may properly come before the
Annual Meeting, including all motions for an adjournment or postponement of
Annual Meeting, unless otherwise indicated in the Proxy Statement.
IF YOU WISH TO VOTE FOR THE PROPOSAL AND IN THE DISCRETION OF THE
PERSONS NAMED AS PROXIES ON ALL MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL
MEETING, PLEASE SIGN, DATE AND RETURN PROMPTLY THE ENCLOSED PROXY CARD IN THE
PROVIDED POSTAGE-PAID ENVELOPE.
REVOCABILITY OF SIGNED PROXIES
A proxy executed by a holder of the Company's Common Stock may be
revoked at any time before its exercise by sending a written revocation of such
proxy, by submitting another proxy with a later date marked on it or by
appearing in person at the Annual Meeting and voting. A written revocation must
clearly state that the proxy to which it relates is no longer effective and must
be executed and delivered prior to the time that the action authorized by the
executed proxy is taken. The written revocation may be delivered either to Mr.
Wyser-Pratte or the Secretary of the Company. Although a written revocation or
later dated proxy delivered only to Pennzoil will be effective, Mr. Wyser-Pratte
requests that a written revocation or subsequent proxy also be delivered to Mr.
Wyser-Pratte so that he will be aware of such written revocation.
THE RETURN OF A SIGNED AND DATED GOLD PROXY CARD WILL FULLY REVOKE ANY
PREVIOUSLY DATED PROXY YOU MAY HAVE RETURNED. THE LATEST DATED PROXY IS THE ONE
THAT COUNTS.
YOUR VOTE IS IMPORTANT. IT WILL HELP DECIDE WHETHER THE SHAREHOLDERS
WILL HAVE AN ADEQUATE VOICE IN THE AFFAIRS OF THE COMPANY. PLEASE MARK, SIGN AND
DATE THE ENCLOSED GOLD PROXY CARD AND RETURN IT PROMPTLY IN THE PROVIDED
POSTAGE-PAID ENVELOPE.
GUY P. WYSER-PRATTE
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IF YOUR SHARES OF PENNZOIL COMMON STOCK ARE HELD IN THE NAME OF A
BROKERAGE FIRM, BANK NOMINEE OR OTHER INSTITUTION, ONLY IT CAN SIGN A PROXY WITH
RESPECT TO YOUR COMMON STOCK. ACCORDINGLY, PLEASE CONTACT THE PERSON RESPONSIBLE
FOR YOUR ACCOUNT AND GIVE INSTRUCTIONS FOR A PROXY CARD TO BE SIGNED
REPRESENTING YOUR SHARES OF COMMON STOCK
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EXHIBIT A
Effective October 28, 1994, the Board of Directors of Pennzoil Company
(the "Company") declared a dividend of one right to purchase preferred stock
("Right") for each outstanding share of the Company's Common Stock, par value
$0.83 1/3 per share ("Common Stock"), to stockholders of record at the close of
business on November 11, 1994. Each Right entitles the registered holder to
purchase from the Company a unit consisting of one one-hundredth of a share (a
"Unit") of Series A Junior Participating Preferred Stock, par value $1.00 per
share (the "Preferred Stock"), at a purchase price of $140 per Unit, subject to
adjustment (the "Purchase Price"). The description and terms of the Rights are
set forth in a Rights Agreement dated as of October 28, 1994 as it may from time
to time be supplemented or amended (the "Rights Agreement") between the Company
and Chemical Bank, as Rights Agent.
Initially, the Rights will be attached to all certificates representing
outstanding shares of Common Stock, and no separate certificates for the Rights
("Rights Certificates") will be distributed. The Rights will separate from the
Common Stock and a "Distribution Date" will occur upon the earlier of (i) ten
days following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired, or obtained the right
to acquire, beneficial ownership of 15% or more of the outstanding shares of
Common Stock (the date of the announcement being the "Stock Acquisition Date"),
or (ii) ten business days (or such later date as may be determined by the
Company's Board of Directors before the Distribution Date occurs) following the
commencement of a tender offer or exchange offer that would result in a person's
becoming an Acquiring Person. Certain inadvertent acquisitions will not result
in a person's becoming an Acquiring Person if the person promptly divests itself
of sufficient Common Stock. Until the Distribution Date, (a) the Rights will be
evidenced by the Common Stock certificates (together with a copy of a Summary of
Rights or bearing the notation referred to below) and will be transferred with
and only with such Common Stock certificates, (b) new Common Stock certificates
issued after November 11, 1994 will contain a notation incorporating the Rights
Agreement by reference and (c) the surrender for transfer of any certificate for
Common Stock (with or without a copy of the Summary of Rights) will also
constitute the transfer of the Rights associated with the Common Stock
represented by such certificate.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on October 28, 1999, unless earlier redeemed or
exchanged by the Company as described below.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of Common Stock as of the close of business
on the Distribution Date and, from and after the Distribution Date, the separate
Rights Certificates alone will represent the Rights. All shares of Common Stock
issued prior to the Distribution Date will be issued with Rights. Shares of
Common Stock issued after the Distribution Date in connection with certain
employee benefit plans or upon conversion of
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certain securities will be issued with Rights. Except as otherwise determined by
the Board of Directors, no other shares of Common Stock issued after the
Distribution Date will be issued with Rights.
In the event (a "Flip-In Event") that a person becomes an Acquiring
Person (except pursuant to a tender or exchange offer for all outstanding shares
of Common Stock at a price and on terms that a majority of the independent
directors of the Company determines to be fair to and otherwise in the best
interests of the Company and its stockholders (a "Permitted Offer")), each
holder of a Right will thereafter have the right to receive, upon exercise of
such Right, a number of shares of Common Stock (or, in certain circumstances,
cash, property or other securities of the Company) having a Current Market Price
(as defined in the Rights Agreement) equal to two times the exercise price of
the Right. Notwithstanding the foregoing, following the occurrence of any
Flip-In Event, all Rights that are, or (under certain circumstances specified in
the Rights Agreement) were, beneficially owned by or transferred to any
Acquiring Person (or by certain related parties) will be null and void in the
circumstances set forth in the Rights Agreement. However, Rights are not
exercisable following the occurrence of any Flip-In Event until such time as the
Rights are no longer redeemable by the Company as set forth below.
For example, at an exercise price of $140 per Right, each Right not
owned by an Acquiring Person (or by certain related parties) following an event
set forth in the preceding paragraph would entitle its holder to purchase $280
worth of Common Stock (or other consideration, as noted above), based upon its
then Current Market Price, for $140. Assuming that the Common Stock had a
Current Market Price of $50 per share at such time, the holder of each valid
Right would be entitled to purchase 5.6 shares of Common Stock for $140.
In the event (a "Flip-Over Event") that, at any time from and after the
time an Acquiring Person becomes such, (i) the Company is acquired in a merger
or other business combination transaction (other than certain mergers that
follow a Permitted Offer), or (ii) 50% or more of the Company's assets or
earning power is sold or transferred, each holder of a Right (except Rights that
previously have been voided as set forth above) shall thereafter have the right
to receive, upon exercise, a number of shares of common stock of the acquiring
company having a Current Market Price equal to two times the exercise price of
the Right. Flip-In Events and Flip-Over Events are collectively referred to as
"Triggering Events." The Purchase Price payable, and the number of Units of
Preferred Stock or other securities or property issuable, upon exercise of the
Rights are subject to adjustment from time to time to prevent dilution (i) in
the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Preferred Stock, (ii) if holders of the Preferred Stock
are granted certain rights or warrants to subscribe for Preferred Stock or
convertible securities at less than the current market price of the Preferred
Stock, or (iii) upon the distribution to holders of the Preferred Stock of
evidences of indebtedness or assets (excluding regular quarterly cash dividends)
or of subscription rights or warrants (other than those referred to above). With
certain exceptions, no adjustment in the Purchase Price will be required until
cumulative adjustments amount to at least 1% of the
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Purchase Price. No fractional Units are required to be issued and, in lieu
thereof, an adjustment in cash may be made based on the market price of the
Preferred Stock on the last trading date prior to the date of exercise. Pursuant
to the Rights Agreement, the Company reserves the right to require prior to the
occurrence of a Triggering Event that, upon any exercise of Rights, a number of
Rights be exercised so that only whole shares of Preferred Stock will be issued.
At any time until ten days following the first date of public
announcement of the occurrence of a Flip-In Event, the Company may redeem the
Rights in whole, but not in part, at a price of $.01 per Right, payable, at the
option of the Company, in cash, shares of Common Stock or such other
consideration as the Board of Directors may determine. Immediately upon the
effectiveness of the action of the Board of Directors ordering redemption of the
Rights, the Rights will terminate and the only right of the holders of Rights
will be to receive the $.01 redemption price.
At any time after the occurrence of a Flip-In Event and prior to a
person's becoming the beneficial owner of 50% or more of the shares of Common
Stock then outstanding, the Company may exchange the Rights (other than Rights
owned by an Acquiring Person or an affiliate or an associate of an Acquiring
Person, which will have become void), in whole or in part, at an exchange ratio
of one share of Common Stock, and/or other equity securities deemed to have the
same value as one share of Common Stock, per Right, subject to adjustment. Until
a Right is exercised, the holder thereof, as such, will have no rights as a
stockholder of the Company, including, without limitation, the right to vote or
to receive dividends. While the distribution of the Rights should not be taxable
to stockholders or to the Company, stockholders may, depending upon the
circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock (or other consideration) of the Company or for the
common stock of the acquiring company as set forth above or are exchanged as
provided in the preceding paragraph.
Other than the redemption price, any of the provisions of the Rights
Agreement may be amended by the Board of Directors of the Company as long as the
Rights are redeemable. Thereafter, the provisions of the Rights Agreement may be
amended by the Board of Directors in order to cure any ambiguity, defect or
inconsistency, to make changes that do not materially adversely affect the
interests of holders of Rights (excluding the interests of any Acquiring
Person), or to shorten or lengthen any time period under the Rights Agreement;
provided, however, that no amendment to lengthen the time period governing
redemption shall be made at such time as the Rights are not redeemable.
A copy of the Rights Agreement, specifying the terms of the Rights,
which includes as exhibits the Form of Certificate of Designations of Series A
Junior Participating Preferred Stock, the Form of Rights Certificate and the
Summary of Rights to Purchase Preferred Stock, has been filed with the
Securities and Exchange Commission as Exhibit 1 hereto. A copy of the Rights
Agreement is available free of charge from the Company. This summary description
of the Rights does not purport to be complete and is
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qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.
The Rights will have certain anti-takeover effects. The Rights will
cause substantial dilution to any person or group that attempts to acquire the
Company without the approval of the Company's Board of Directors. As a result,
the overall effect of the Rights may be to render more difficult or discourage
any attempt to acquire the Company even if such acquisition may be favorable to
the interests of the Company's stockholders. Because the Company's Board of
Directors can redeem the Rights or approve a Permitted Offer, the Rights should
not interfere with a merger or other business combination approved by the Board
of Directors of the Company.
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EXHIBIT B
203 BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS.
(a) Notwithstanding any other provisions of this chapter, a corporation shall
not engage in any business combination with any interested stockholder for a
period of 3 years following the time that such stockholder became an interested
stockholder, unless:
(1) prior to such time the board of directors of the corporation
approved either the business combination or the transaction which resulted
in the stockholder becoming an interested stockholder, or
(2) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced, excluding for purposes of determining the
number of shares outstanding those shares owned (i) by persons who are
directors and also officers and (ii) employee stock plans in which employee
participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange
offer, or
(3) At or subsequent to such time the business combination is approved
by the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least 66 2/3% of the outstanding voting stock which is not owned by the
interested stockholder.
(b) The restrictions contained in this section shall not apply if:
(1) the corporation's original certificate of incorporation contains a
provision expressly electing not to be governed by this section;
(2) the corporation, by action of its board of directors, adopts an
amendment to its bylaws within 90 days of the effective date of this
section, expressly electing not to be governed by this section, which
amendment shall not be further amended by the board of directors.
(3) the corporation, by action of its stockholders, adopts an amendment
to its certificate of incorporation or bylaws expressly electing not to be
governed by this section, provided that, in addition to any other vote
required by law, such amendment to the certificate of incorporation or
bylaws must be approved by the affirmative vote of a majority of the shares
entitled to vote. An amendment adopted pursuant to this paragraph shall be
effective immediately in the case of a corporation that both (i) has never
had a class of voting stock that falls within any of the three categories
set out in subsection (b)(4) hereof, and (ii) has not elected by a provision
in its original certificate of incorporation or any amendment thereto to be
governed by this section. In all other cases, an amendment adopted pursuant
to this paragraph shall not be effective until 12 months after the adoption
of such amendment and shall not apply to any business combination between
such corporation and any person who became an interested stockholder of such
corporation on or prior to such adoption. A bylaw
<PAGE>
<PAGE>
amendment adopted pursuant to this paragraph shall not be further amended by
the board of directors;
(4) the corporation does not have a class of voting stock that is (i)
listed on a national securities exchange, (ii) authorized for quotation on
The NASDAQ Stock Market or (iii) held of record by more than 2,000
stockholders, unless any of the foregoing results from action taken,
directly or indirectly, by an interested stockholder or from a transaction
in which a person becomes an interested stockholder;
(5) a stockholder becomes an interested stockholder inadvertently and
(i) as soon as practicable divests itself of ownership of sufficient shares
so that the stockholder ceases to be an interested stockholder and (ii)
would not, at any time within the 3 year period immediately prior to a
business combination between the corporation and such stockholder, have been
an interested stockholder but for the inadvertent acquisition of ownership;
(6) the business combination is proposed prior to the consummation or
abandonment of and subsequent to the earlier of the public announcement or
the notice required hereunder of a proposed transaction which (i)
constitutes one of the transactions described in the second sentence of this
paragraph; (ii) is with or by a person who either was not an interested
stockholder during the previous 3 years or who became an interested
stockholder with the approval of the corporation's board of directors or
during the period described in paragraph (7) of this subsection (b); and
(iii) is approved or not opposed by a majority of the members of the board
of directors then in office (but not less than 1) who were directors prior
to any person becoming an interested stockholder during the previous 3 years
or were recommended for election or elected to succeed such directors by a
majority of such directors. The proposed transactions referred to in the
preceding sentence are limited to (x) a merger or consolidation of the
corporation (except for a merger in respect of which, pursuant to section
251(f) of the chapter, no vote of the stockholders of the corporation is
required); (y) a sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions), whether as
part of a dissolution or otherwise, of assets of the corporation or of any
direct or indirect majority-owned subsidiary of the corporation (other than
to any direct or indirect wholly-owned subsidiary or to the corporation)
having an aggregate market value equal to 50% or more of either that
aggregate market value of all of the assets of the corporation determined on
a consolidated basis or the aggregate market value of all the outstanding
stock of the corporation; or (z) a proposed tender or exchange offer for 50%
or more of the outstanding voting stock of the corporation. The corporation
shall give not less than 20 days notice to all interested stockholders prior
to the consummation of any of the transactions described in clauses (x) or
(y) of the second sentence of this paragraph; or
(7) The business combination is with an interested stockholder who
became an interested stockholder at a time when the restrictions contained
in this section did not apply by reason of any paragraphs (1) through (4) of
this subsection (b), provided, however, that this paragraph (7) shall not
apply if, at the time such interested stockholder became an interested
stockholder, the corporation's certificate
<PAGE>
<PAGE>
of incorporation contained a provision authorized by the last sentence of
this subsection (b).
Notwithstanding paragraphs (1), (2), (3) and (4) of this subsection, a
corporation may elect by a provision of its original certificate of
incorporation or any amendment thereto to be governed by this section; provided
that any such amendment to the certificate of incorporation shall not apply to
restrict a business combination between the corporation and an interested
stockholder of the corporation if the interested stockholder became such prior
to the effective date of the amendment.
(c) As used in this section only, the term:
(1) 'affiliate' means a person that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, another person.
(2) 'associate,' when used to indicate a relationship with any person,
means (i) any corporation, partnership, unincorporated association or other
entity of which such person is a director, officer or partner or is,
directly or indirectly, the owner of 20% or more of any class of voting
stock, (ii) any trust or other estate in which such person has at least a
20% beneficial interest or as to which such person serves as trustee or in a
similar fiduciary capacity, and (iii) any relative or spouse of such person,
or any relative of such spouse, who has the same residence as such person.
(3) 'business combination,' when used in reference to any corporation
and any interested stockholder of such corporation, means:
(i) any merger or consolidation of the corporation or any direct or
indirect majority-owned subsidiary of the corporation with (A) the
interested stockholder, or (B) with any other corporation, partnership,
unincorporated association or other entity if the merger or
consolidation is caused by the interested stockholder and as a result of
such merger or consolidation subsection (a) of this section is not
applicable to the surviving entity;
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions), except
proportionately as a stockholder of such corporation, to or with the
interested stockholder, whether as part of a dissolution or otherwise,
of assets of the corporation or of any direct or indirect majority-owned
subsidiary of the corporation which assets have an aggregate market
value equal to 10% or more of either the aggregate market value of all
the assets of the corporation determined on a consolidated basis or the
aggregate market value of all the outstanding stock of the corporation;
(iii) any transaction which results in the issuance or transfer by
the corporation or by any direct or indirect majority-owned subsidiary
of the corporation of any stock of the corporation or of any stock of
the corporation or of such subsidiary to the interested stockholder,
except (A) pursuant to the exercise, exchange or conversion of
securities exercisable for, exchangeable for or convertible into stock
of such corporation or any such subsidiary which securities
<PAGE>
<PAGE>
were outstanding prior to the time that the interested stockholder
became such, (B) pursuant to a merger under Section 251(g) of this
title; (C) pursuant to a dividend or distribution paid or made, or the
exercise, exchange or conversion of securities exercisable for,
exchangeable for or convertible into stock of such corporation or any
such subsidiary which security is distributed, pro rata to all holders
of a class or series of stock of such corporation subsequent to the time
the interested stockholder became such, (D) pursuant to an exchange
offer by the corporation to purchase stock made on the same terms to all
holders of said stock, or (E) any issuance or transfer of stock by the
corporation, provided however, that in no case under (C)-(E) above shall
there be an increase in the interested stockholder's proportionate share
of the stock of any class or series of the corporation or of the voting
stock of the corporation;
(iv) any transaction involving the corporation or any direct or
indirect majority-owned subsidiary of the corporation which has the
effect, directly or indirectly, of increasing the proportionate share of
the stock of any class or series, or securities convertible into the
stock of any class or series, of the corporation or of any such
subsidiary which is owned by the interested stockholder, except as a
result of immaterial changes due to fractional share adjustments or as a
result of any purchase or redemption of any shares of stock not caused,
directly or indirectly, by the interested stockholder; or
(v) any receipt by the interested stockholder of the benefit,
directly or indirectly (except proportionately as a stockholder of such
corporation) of any loans, advances, guarantees, pledges, or other
financial benefits (other than those expressly permitted in
subparagraphs (i)-(iv) above) provided by or through the corporation or
any direct or indirect majority owned subsidiary.
(4) 'control,' including the term 'controlling,' 'controlled by' and
'under common control with,' means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies
of a person, whether through the ownership of voting stock, by contract, or
otherwise. A person who is the owner of 20% or more of the outstanding
voting stock of any corporation, partnership, unincorporated association or
other entity shall be presumed to have control of such entity, in the
absence of proof by a preponderance of the evidence to the contrary.
Notwithstanding the foregoing, a presumption of control shall not apply
where such person holds voting stock, in good faith and not for the purpose
of circumventing this section, as an agent, bank, broker, nominee, custodian
or trustee for one or more owners who do not individually or as a group have
control of such entity.
(5) 'interested stockholder' means any person (other than the
corporation and any direct or indirect majority-owned subsidiary of the
corporation) that (i) is the owner of 15% or more of the outstanding voting
stock of the corporation, or (ii) is an affiliate or associate of the
corporation and was the owner of 15% or more of the outstanding voting stock
of the corporation at any time within the 3-year period immediately prior to
the date on which it is sought to be determined whether such person is an
interested stockholder; and the affiliates and associates of such person;
<PAGE>
<PAGE>
provided, however, that the term 'interested stockholder' shall not include
(x) any person who (A) owned shares in excess of the 15% limitation set
forth herein as of, or acquired such shares pursuant to a tender offer
commenced prior to, December 23, 1987, or pursuant to an exchange offer
announced prior to the aforesaid date and commenced within 90 days
thereafter and either (I) continued to own shares in excess of such 15%
limitation or would have but for action by the corporation or (II) is an
affiliate or associate of the corporation and so continued (or so would have
continued but for action by the corporation) to be the owner of 15% or more
of the outstanding voting stock of the corporation at any time within the
3-year period immediately prior to the date on which it is sought to be
determined whether such a person is an interested stockholder or (B)
acquired said shares from a person described in (A) above by gift,
inheritance or in a transaction in which no consideration was exchanged; or
(y) any person whose ownership of shares in excess of the 15% limitation set
forth herein in the result of action taken solely by the corporation
provided that such person shall be an interested stockholder if thereafter
such person acquires additional shares of voting stock of the corporation,
except as a result of further corporate action not caused, directly or
indirectly, by such person. For the purpose of determining whether a person
is an interested stockholder, the voting stock of the corporation deemed to
be outstanding shall include stock deemed to be owned by the person through
application of paragraph (8) of this subsection but shall not include any
other unissued stock of such corporation which may be issuable pursuant to
any agreement, arrangement or understanding, or upon exercise of conversion
rights, warrants or options, or otherwise.
(6) 'person' means any individual, corporation, partnership,
unincorporated association or other entity.
(7) 'Stock' means, with respect to any corporation, capital stock and,
with respect to any other entity, any equity interest.
(8) 'Voting stock' means, with respect to any corporation, stock of any
class or series entitled to vote generally in the election of directors and,
with respect to any entity that is not a corporation, any equity interest
entitled to vote generally in the election of the governing body of such
entity.
(9) 'owner' including the terms 'own' and 'owned' when used with respect
to any stock means a person that individually or with or through any of its
affiliates or associates:
(i) beneficially owns such stock, directly or indirectly; or
(ii) has (A) the right to acquire such stock (whether such right is
exercisable immediately or only after the passage of time) pursuant to
any agreement, arrangement or understanding, or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise;
provided, however, that a person shall not be deemed the owner of stock
tendered pursuant to a tender or exchange offer made by such person or
any of such person's affiliates or associates until such tendered stock
is accepted for purchase or exchange; or (B) the right to vote such
stock pursuant to any agreement, arrangement or understanding;
<PAGE>
<PAGE>
provided, however, that a person shall not be deemed the owner of any
stock because of such person's right to vote such stock if the
agreement, arrangement or understanding to vote such stock arises solely
from a revocable proxy or consent given in response to a proxy or
consent solicitation made to 10 or more persons; or
(iii) has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting (except voting pursuant to a
revocable proxy or consent as described in item (B) of clause (ii) of
this paragraph), or disposing of such stock with any other person that
beneficially owns, or whose affiliates or associates beneficially own,
directly or indirectly, such stock.
(d) No provision of a certificate of incorporation or bylaw shall require, for
any vote of stockholders required by this section a greater vote of stockholders
than that specified in this section.
(e) The Court of Chancery is hereby vested with exclusive jurisdiction to hear
and determine all matters with respect to this section.
<PAGE>
<PAGE>
SCHEDULE I
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS OF WPC
AND THEIR ADVISORS THAT MAY PARTICIPATE
IN THE SOLICITATION OF PROXIES
The name, business address, and present principal occupation or
employment of each of the directors and executive officers of WPC and its
advisors and certain other employees and representatives of WPC that may
participate in the solicitation of proxies are set forth below. Unless otherwise
indicated, the principal business address of each director or executive officer
of Wyser-Pratte & Co. is, 63 Wall Street, New York, NY 10005.
PARTICIPANT DIRECTORS AND EXECUTIVE OFFICERS OF WPC.
Present Office or Other
Name Principal Occupation or Employment
- ---- ----------------------------------
Guy P. Wyser-Pratte President
Eric Longmire Senior Managing Director
<PAGE>
<PAGE>
SCHEDULE II
The following sets forth the name, business address and the number of
shares of Common Stock of the Company owned beneficially by the participants in
this solicitation of proxies, or their associates. No shares are held of record
but not beneficially by the participants or their associates.
<TABLE>
<CAPTION>
Number of Shares of Common
Name & Stock Beneficially Owned
Business Address (December 29, 1997) Percent of Common Stock
---------------- -------------------- -----------------------
<S> <C> <C>
Guy P. Wyser-Pratte
Wyser-Pratte & Co., Inc.
63 Wall Street
New York, New York 10005 451,500 <1%
</TABLE>
<PAGE>
<PAGE>
SCHEDULE III
The following tables set forth information with respect to all purchases
and sales of Common Stock of the Company by Mr. Wyser-Pratte and his affiliates
during the past two years. Except as set forth below, no participant in this
solicitation has purchased or sold securities of the Company within the past two
years.
- ---------------------------- ---------------------------------------
DATE NO. OF SHARES PURCHASED/(SOLD)
- ---------------------------- ---------------------------------------
6/23/97 100
- ---------------------------- ---------------------------------------
6/27/97 13,000
- ---------------------------- ---------------------------------------
6/30/97 30,000
- ---------------------------- ---------------------------------------
7/2/97 107,000
- ---------------------------- ---------------------------------------
7/8/97 161,000
- ---------------------------- ---------------------------------------
7/25/97 8,300
- ---------------------------- ---------------------------------------
7/28/97 1,000
- ---------------------------- ---------------------------------------
8/1/97 8,550
- ---------------------------- ---------------------------------------
8/7/97 3,000
- ---------------------------- ---------------------------------------
8/20/97 112,900
- ---------------------------- ---------------------------------------
8/29/97 29,200
- ---------------------------- ---------------------------------------
8/1/97 (8,550)
- ---------------------------- ---------------------------------------
10/06/97 (13,000)
- ---------------------------- ---------------------------------------
10/30/97 (1,000)
- ---------------------------- ---------------------------------------
<PAGE>
<PAGE>
Appendix 1
GOLD PROXY
PENNZOIL COMPANY
ANNUAL MEETING OF SHAREHOLDERS -- , 1998
THIS PROXY IS SOLICITED BY GUY P. WYSER-PRATTE
IN OPPOSITION TO THE PENNZOIL BOARD OF DIRECTORS
The undersigned shareholder of Pennzoil Company ("Pennzoil") hereby
appoints _____, _____ and _____, each of them with full power of substitution,
to vote all shares of Common Stock, par value $0.83-1/3 per share, of Pennzoil
that the undersigned is entitled to vote if personally present at the 1998
Annual Meeting of Shareholders of Pennzoil to be held on , 1998, and
at any adjournments or postponements thereof as indicated below and in the
discretion of the proxies, to vote upon such other business as may properly come
before the meeting, and any adjournment or postponement thereof. The
undersigned hereby revokes any previous proxies with respect to matters
covered by this Proxy.
MR. WYSER-PRATTE RECOMMENDS A VOTE FOR PROPOSALS 1 THROUGH 9.
1. To amend the by-laws to set a time limit on the Board's use of the "Poison
Pill" against certain offers unless shareholders approve such continued use.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. To amend the by-laws to require a unanimous vote of the directors to approve
"defensive actions" by the board unless shareholders approve such actions.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To amend the by-laws to allow the holders of 10% of the shares to call a
special meeting of shareholders.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To amend the by-laws to increase the ability of shareholders to make
proposals and to nominate directors at shareholder meetings.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. To amend the by-laws to prevent the board from changing any of the by-laws
adopted by the shareholders at this annual meeting.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. To amend the by-laws to elect not to be governed by the Business Combination
Statute.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
7. To repeal any by-laws adopted by the board of directors since November 1,
1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
8. To adopt a resolution recommending to the board that the Company reimburse
Mr. Wyser-Pratte's expenses in connection with this proxy solicitation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
9. To elect Guy P. Wyser-Pratte to the board of directors.
[ ] FOR nominee [ ] WITHHOLD AUTHORITY for nominee
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER MARKED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO MARKING IS MADE, THIS PROXY WILL BE DEEMED TO
BE A DIRECTION TO VOTE FOR PROPOSALS 1 THROUGH 9 AND IN THE DISCRETION OF THE
PROXIES, TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING, AND ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
-----------------------------------
(Date)
-----------------------------------
(Signature)
-----------------------------------
(Title)
-----------------------------------
(Signature, if held jointly)
When shares are held by joint tenants, both should sign. When signing
an attorney, executor, administrator, trustee, guardian, corporate officer or
partner, please give full title as such. If a corporation, please sign in
corporate name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person. This Proxy votes
all shares held in all capacities.
PLEASE MARK, SIGN, DATE AND MAIL PROMPTLY
<PAGE>
<PAGE>
IMPORTANT
Your proxy is important. No matter how many shares you own, please give
Mr. Wyser-Pratte your proxy FOR approval of the his Proposals by:
MARKING the enclosed GOLD Annual Meeting proxy card,
SIGNING the enclosed GOLD Annual Meeting proxy card,
DATING the enclosed GOLD Annual Meeting proxy card and
MAILING the enclosed GOLD Annual Meeting proxy card TODAY in the
envelope provided (no postage is required if mailed in the United
States).
If you have already submitted a proxy to Pennzoil for the Annual
Meeting, you may change your vote to a vote FOR Mr. Wyser-Pratte Proposals by
marking, signing, dating and returning the enclosed GOLD proxy card for the
Annual Meeting, which must be dated after any proxy you may have submitted to
Pennzoil. Only your latest dated proxy for the Annual Meeting will count at such
meeting.
If you have any question or require any addition information concerning this
Proxy Statement or the proposals by Mr. Wyser-Pratte, please contact the Proxy
Solicitor at the address and telephone number set forth below.
IF ANY OF YOUR SHARES ARE HELD IN THE NAME OF A BROKERAGE FIRM, BANK, BANK
NOMINEE OR OTHER INSTITUTION, ONLY IT CAN VOTE SUCH SHARES AND ONLY UPON RECEIPT
OF YOUR SPECIFIC INSTRUCTIONS. ACCORDINGLY, PLEASE CONTACT THE PERSON
RESPONSIBLE FOR YOUR ACCOUNT AND INSTRUCT THAT PERSON TO EXECUTE THE GOLD ANNUAL
MEETING PROXY CARD.
<PAGE>
