<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
(AMENDMENT NO. 4)
Pursuant to Section 14(d)(4) of the
Securities Exchange Act of 1934
PENNZOIL COMPANY
(Name of Subject Company)
PENNZOIL COMPANY
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $0.83 1/3 PER SHARE
(including the associated Preferred Stock Purchase Rights)
(Title of Class of Securities)
709903 10 8
(CUSIP Number of Class of Securities)
LINDA F. CONDIT
CORPORATE SECRETARY
PENNZOIL COMPANY
PENNZOIL PLACE, P.O. BOX 2967
HOUSTON, TEXAS 77252-2967
(713) 546-8910
(Name, address and telephone number of person authorized
to receive notice and communications on behalf of the person(s) filing
statement)
Copies To:
<TABLE>
<S> <C>
Moulton Goodrum, Jr. Charles F. Richards, Jr.
Baker & Botts, L.L.P. Richards, Layton & Finger
One Shell Plaza One Rodney Square
Houston, Texas 77002-4995 P.O. Box 551
(713) 229-1234 Wilmington, Delaware 19899-0551
(302) 658-6541
</TABLE>
<PAGE> 2
This Amendment No. 4 (this "Amendment") amends and supplements the
Solicitation/ Recommendation Statement on Schedule 14D-9, as amended, originally
filed on July 1, 1997 by Pennzoil Company, a Delaware corporation (the
"Company"), relating to a tender offer commenced by Resources Newco, Inc., a
wholly owned subsidiary of Union Pacific Resources Group Inc. on June 23, 1997.
All capitalized terms used in this Amendment without definition have the
meanings attributed to them in the Schedule 14D-9.
The items of the Schedule 14D-9 set forth below are hereby amended by
adding the following:
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
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<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
35 Published message dated July 17, 1997.
36 Text of press release dated July 15, 1997 issued by the
Company.
37 Second Amended Complaint filed by UPR and Newco against the
Company (dated July 11, 1997, United States District Court
for the Northern District of Texas, Fort Worth Division).
</TABLE>
<PAGE> 3
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
PENNZOIL COMPANY
Dated: July 17, 1997 By: /s/ James L. Pate
James L. Pate
Chairman of the Board, President
and Chief Executive Officer
26
<PAGE> 4
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
35 Published message dated July 17, 1997.
36 Text of press release dated July 15, 1997 issued by
the Company.
37 Second Amended Complaint filed by UPR and Newco against
the Company (dated July 11, 1997, United States District
Court for the Northern District of Texas, Fort Worth
Division).
<PAGE> 1
EXHIBIT 35
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<S> <C> <C> <C>
[Pennzoil Logo] DON'T BE MISLED BY UPR [Pennzoil Logo]
STOCK PRICES PER SHARE EARNINGS PER SHARE
[chart] [chart]
Since the initial public offering by Union Wall Street analysts currently project that
Pacific Resources (UPR) in October 1995 until Pennzoil's earnings per share, on a recurring
June 20, 1997 (prior to announcement of UPR's basis, will increase significantly over the
tender offer), the total return on Pennzoil's next two years, while projecting that UPR's
stock has been 42%, double the return on UPR. will decline. Further, the combination
And, from the beginning of 1997 to June 20, proposed by UPR is substantially dilutive to
Pennzoil's stock was up 5.5%, while UPR was UPR's earnings in amounts UPR has been
down 9.1%. unwilling to disclose.
FINDING & DEVELOPMENT COST PER BARREL RESERVES ADDED PER NET WELL DRILLED
[chart] [chart]
UPR is much less efficient in finding and developing reserves than Pennzoil and adds substantially less reserves for
each well drilled. UPR's highest producing area is the short-lived Austin Chalk, which generally has small reserve
pockets that deplete rapidly. UPR has minimal production and interests in the Gulf of Mexico and no international
presence. In essence, UPR is landlocked, with little growth potential. Pennzoil has a substantial presence in the
Gulf of Mexico and international projects with huge reserve potential. It is not credible that UPR, with little if
any offshore or international experience, can manage these high-growth assets better than Pennzoil.
THE VALUE OF UPR'S OFFER IS SIGNIFICANTLY LESS THAN $84 PER SHARE
UPR IS OFFERING $84 PER SHARE FOR HALF OF YOUR STOCK. UPR PROPOSES TO ISSUE UPR STOCK FOR THE OTHER HALF. BECAUSE OF
UPR'S PRIOR MARKET PERFORMANCE AND THE UNCERTAINTIES WITH RESPECT TO ITS FUTURE BUSINESS, THE VALUE OF THE UPR STOCK
TO BE DELIVERED IN THE SECOND STEP IS SUBJECT TO SUBSTANTIAL DOWNWARD PRESSURE AND UNCERTAINTY. THE STOCK WOULD NOT BE
DELIVERED AT ALL IF UPR'S SHAREHOLDERS DO NOT APPROVE THE TRANSACTION. FINALLY, THE UPR PROPOSAL LIMITS THE NUMBER OF
SHARES TO BE ISSUED TO YOU WITH NO WALKAWAY RIGHTS OR DOWNSIDE PROTECTION ONCE UPR'S STOCK DECLINES BELOW $25 PER SHARE.
- ------------------------------------------------------------------------------------------------------------------------
WHAT'S THE RUSH?
UPR HAS BEEN RUSHING PENNZOIL SHAREHOLDERS TO TENDER THEIR SHARES BEFORE THE PURPORTED EXPIRATION DATE OF
UPR'S OFFER ON JULY 21, 1997. HOWEVER, UPR'S OFFER IS CONDITIONED, AMONG OTHER THINGS, UPON AN OUTCOME
FAVORABLE TO UPR IN ITS LAWSUIT CHALLENGING PENNZOIL'S RIGHTS PLAN IN THE DELAWARE CHANCERY COURT. NOW
UPR'S COUNSEL HAS ADMITTED THAT UPR HAS NO INTENTION OF EVEN SUBMITTING THE CASE TO THE COURT PRIOR TO THE
JULY 21, 1997 EXPIRATION DATE.
THE FOLLOWING EXCERPT IS FROM THE TRANSCRIPT OF A TELEPHONE CONFERENCE ON JULY 9, 1997 IN THE DELAWARE
CHANCERY COURT, CIVIL ACTION NO. 15755:
"MR. WELCH (COUNSEL FOR UPR):
YOUR HONOR, ED WELCH. ONE COMMENT I DID WANT TO MAKE, IF THE COURT WILL PERMIT IT, IN RESPONSE TO
YOUR HONOR'S COMMENT AT THE END OF MY PRESENTATION. YOUR HONOR MADE REFERENCE TO THE FACT THAT
THE 21ST IS FAST APPROACHING. THAT IS CORRECT.
I DID WANT TO ADD THAT AT THIS POINT IN TIME, WE DO NOT INTEND TO BRING ON A MOTION FOR A
PRELIMINARY INJUNCTION PRIOR TO JULY THE 21ST IN CHANCERY. IT SIMPLY DOESN'T MAKE SENSE. THINGS
AT THIS POINT ARE TO FLUID. THERE IS MUCH WORK THAT NEEDS BE DONE BEFORE A CASE LIKE THIS
IS PROPERLY PRESENTED...."
WHY IS UPR MISLEADING SHAREHOLDERS ABOUT JULY 21?
- ------------------------------------------------------------------------------------------------------------------------
DO NOT TENDER INTO UPR'S INADEQUATE OFFER.
IMPORTANT: NEED A WITHDRAWAL FORM?
IF YOU WOULD LIKE A COPY OF OUR SCHEDULE 14D-9, HAVE ANY QUESTIONS OR NEED ASSISTANCE
IN WITHDRAWING A TENDER, PLEASE CALL D.F. KING & CO., INC., TOLL-FREE AT 1-800-735-3591.
</TABLE>
<PAGE> 1
EXHIBIT 36
[PENNZOIL LETTERHEAD]
FOR IMMEDIATE RELEASE CONTACT: Robert G. Harper
713/546-8536
STATEMENT BY J. HUGH LIEDTKE
HOUSTON (July 15, 1997) -- Contrary to the report in USA Today, Pennzoil
founder, J. Hugh Liedtke said he "is not backing the takeover of Pennzoil by
Union Pacific Resources." Mr. Liedtke further stated that "I do not intend to
tender any of my Pennzoil shares pursuant to the UPR Offer."
<PAGE> 1
EXHIBIT 37
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
FORT WORTH DIVISION
UNION PACIFIC RESOURCES GROUP
INC. and RESOURCES NEWCO, INC.
Plaintiffs, NO. 4-97-CV: 509-Y
vs.
PENNZOIL COMPANY,
Defendant.
PLAINTIFFS' SECOND AMENDED COMPLAINT
Pursuant to Rule 15(a) of the Federal Rules of Civil Procedure, Plaintiffs
Union Pacific Resources Group Inc. and Resources Newco, Inc. ("Newco") file
their Second Amended Complaint seeking declaratory and injunctive relief
arising out of an offer to purchase shares of Defendant Pennzoil Company's
stock.
The Parties
1. Plaintiff Union Pacific Resources Group Inc. is a corporation organized
and existing under the laws of the State of Utah with its principal place of
business in Fort Worth, Texas. Union Pacific Resources Group Inc. and its
affiliates engage primarily in the exploration, development and production of
natural gas, natural gas liquids and crude oil in the United States and Canada.
2. Plaintiff Newco is a corporation organized and existing under the laws
of the State of Delaware with its principal place of business in Fort Worth,
Texas. As a wholly-owned subsidiary of Union Pacific Resources Group Inc.,
Newco was recently
PLAINTIFFS' SECOND AMENDED COMPLAINT Page 1
<PAGE> 2
organized for purposes of making the Tender Offer and consummating the Merger
described and alleged below.
3. Defendant Pennzoil Company ("Pennzoil") is a corporation organized and
existing under the laws of the State of Delaware with its principal place of
business in Houston, Texas. It may be served with summons by serving its
registered agent, CT Corporation Systems at 811 Dallas, Houston, Texas 77002.
Pennzoil is an energy company engaged primarily in oil and gas exploration and
production, in processing, refining and marketing of oil and motor oil and
refined products and in fast automotive oil change operations.
4. Pennzoil's common stock is registered pursuant to Section 12(b) of the
Exchange Act, 15 U.S.C. ss. 781(b), and is listed and traded on the New York
Stock Exchange. According to Pennzoil's Annual Report for the fiscal year ended
December 31, 1996, there were 46,839,557 shares of Pennzoil common stock
outstanding with a par value of 83 1/3 cents per share.
Jurisdiction and venue
5. This action arises under Sections 14(d), 14(e) and 28 of the Securities
Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. ss.ss. 78n(d), 78n(e) and
78bb, and the rules and regulations promulgated thereunder by the Securities
and Exchange Commission ("S.E.C."), 17 C.F.R. ss.ss. 240.14d-1 et seq. It also
arises under the Declaratory Judgment Act, 28 U.S.C. ss. 2201.
6. This Court has subject matter jurisdiction pursuant to:
a) Section 27 of the Exchange Act, 15 U.S.C. ss. 78aa, because this
action is brought to declare and to
PLAINTIFFS' SECOND AMENDED COMPLAINT Page 2
<PAGE> 3
enforce rights and duties created by the Exchange Act and regulations
thereunder;
b) 28 U.S.C. ss. 1331, because the matter in controversy arises under
the Constitution and the laws of the United States; and
c) 28 U.S.C. ss. 1337(a), because the action arises under the Exchange
Act, and Act of Congress regulating commerce.
7. Venue is proper in the Northern District of Texas pursuant to 15 U.S.C.
ss. 78aa because Pennzoil is and can be found in the district, because
Pennzoil is an inhabitant of and/or transacts business in this district, and
because some or all of the acts or transactions which are, or could be alleged
to constitute, a violation of the Exchange Act occurred in this district.
The Tender Offer
8. On June 23, 1997, immediately prior to the filing of this action,
Plaintiff Newco announced a tender offer (the "Tender Offer") for 50.1% of the
issued and outstanding shares of Pennzoil common stock that it and Union
Pacific Resources Group Inc. do not already own. The Tender Offer is being made
to all Pennzoil stockholders throughout the United States and elsewhere. The
Tender Offer is being made at a price of $84.00 per share, a substantial
premium to the market price of Pennzoil common stock prior to commencement of
the Tender Offer. The Tender Offer and related merger will constitute a major
transaction in interstate commerce, representing a commitment of approximately
six billion, four hundred million dollars. The Tender Offer, if successful,
will be followed by a second-step merger (the "Merger") pursuant to which each
remaining share of Pennzoil stock will be converted into shares of Union
Pacific Resources Group Inc. stock, designed to
PLAINTIFFS' SECOND AMENDED COMPLAINT Page 3
<PAGE> 4
have a value of $84 per share subject to the terms of a definitive merger
agreement to be entered into.
9. The Tender Offer is, and will continue to be, in full compliance with
all applicable federal laws and regulations governing tender offers - the
provisions of the Williams Act, embodied in Sections 14(d) and 14(e) of the
Exchange Act, 15 U.S.C. ss.ss. 78n(d), (e), and in the rules and regulations
promulgated thereunder by the S.E.C. In connection with the Tender Offer, a
Schedule 14D-1 has been filed with the S.E.C. pursuant to Section 14(d)(1)d of
the Exchange Act and Rule 14d-3 promulgated thereunder. (A true and correct
copy of the Schedule 14D-1 is appended to Plaintiffs' First Amended Complaint
as Union Pacific Resources Group Exhibit 1. It is incorporated as if set forth
fully herein.)
Nature of Relief
10. The Williams Act referred to in paragraph 9 herein was enacted by
Congress to provide a comprehensive uniform national system regulating all
aspects of interstate cash tender offers. Congress thereby recognized that
tender offers served beneficial economic functions by, among other things,
providing investors with an opportunity to sell their shares at advantageous
premiums over prevailing market prices.
11. The Williams Act reflects the intent of Congress that the success or
failure of tender offers for the shares of publicly traded corporations should
be left to the free and informed investment judgment of the marketplace and not
be held hostage to self-serving efforts of entrenched senior management seeking
to preserve their positions and substantial corporate
PLAINTIFFS' SECOND AMENDED COMPLAINT Page 4
<PAGE> 5
perquisites. The Williams Act therefore establishes even-handed regulation that
favors neither the offeror nor the incumbent management of the company to whom
a tender offer has been made.
12. It is also a purpose of the Williams Act to promote informed decisions
by shareholders concerning the desirability and adequacy of a tender offer. The
Williams Act therefore requires that stockholders promptly be given all
material information with respect to a tender offer so that they may make their
investment decisions in possession of full and complete information.
13. To implement those objectives, Section 14(d) of the Exchange Act, 15
U.S.C. ss. 78n(d), and the rules and regulations promulgated thereunder by the
S.E.C. require that any person or entity making a tender offer for beneficial
ownership of more than five percent of a class of registered equity securities
file and disclose certain specified information with respect to the tender
offer. Any such bidder must disclose, among other things, its identity and
background, any past contacts, transactions or negotiations between the bidder
and the company in whom the bidder seeks to acquire stock, the source and
amount of funds needed for the tender offer, and any plans the bidder may have
to change the capitalization, corporate structure or business of the company
whose stock it seeks to acquire.
14. Section 14(d) and Rule 14d-9 promulgated thereunder, 17 C.F.R. ss.
240.l4d- 9, regulate solicitations or recommendations made by "subject", or
"target" companies in response to a tender offer. Under Rule 14d-9, no such
solicitation or recommendation is permitted unless prior thereto, the target
company has filed with
PLAINTIFFS' SECOND AMENDED COMPLAINT Page 5
<PAGE> 6
the S.E.C. and delivered to the offeror a Schedule 14D-9 containing certain
specified information, including, among other things, the nature of the
solicitation or recommendation, particularized reasons for the solicitation or
recommendation, and recent transactions in respect of the target company's
securities by the target company or its officers and directors.
15. In addition, Section 14(e) of the Exchange Act, 15 U.S C. ss. 78n(e),
makes it "unlawful for any person to make any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statement made, in light of the circumstances under which they are made, not
misleading, or to engage in any fraudulent, deceptive, or manipulative acts or
practice in connection with any tender offer. . . ." Plaintiffs have not
violated this provision.
16. In connection with the Tender Offer, Newco has filed a Schedule 14D-1
with the S.E.C. and is in the process of disseminating to Pennzoil's
stockholders an offer to purchase containing all material information required
by applicable law to be disclosed. That offer is more than fair and is plainly
in the best interests of Pennzoil's stockholders.
17. Notwithstanding, senior management of corporations to which such
offers are made, such as the management of Pennzoil, frequently, if not
invariably, resist unsolicited tender offers, even tender offers which are
fairly and attractively priced and in the best interests of shareholders. In
order to entrench themselves in office, it is typical for such management to
cause the target corporation to commence litigation against the bidder and
PLAINTIFFS' SECOND AMENDED COMPLAINT Page 6
<PAGE> 7
others challenging, among other things, the legal sufficiency of the
disclosures made by the bidder in its tender offer documents under Sections
14(d) and 14(e) of the Exchange Act and applicable S.E.C. regulations.
18. Pennzoil's officers and directors previously signaled, in unmistakable
terms, that they will seek to delay and resist the Tender Offer and Merger by
any and every conceivable means, all in order to preserve their positions and
substantial corporate perquisites. Their efforts in this respect now include
causing Pennzoil to commence baseless litigation against Plaintiffs under the
provisions of the federal securities laws regulating tender offers and
acquisition efforts and, subsequently, filing a Schedule l4D-9 which in part,
is false and/or misleading.
19. In hopes of working with Pennzoil management, Union Pacific Resources
Group Inc. management contacted Pennzoil management on several occasions in an
effort to initiate discussions concerning a negotiated "friendly" business
combination of Pennzoil by Union Pacific Resources Group Inc. Most recently, in
a letter dated June 10, 1997, Union Pacific Resources Group Inc. proposed such
a transaction at a substantial premium to the market price of Pennzoil common
stock, i.e., $80 per share payable in a combination of cash and stock of Union
Pacific Resources Group Inc. (the "June 10 proposal"). Those efforts, like the
Tender Offer and Merger, are fully consistent with a representation made by
James L. Pate, the Chairman of the Board, President and Chief Executive Officer
of Pennzoil, that combining Union Pacific Resources Group Inc. and Pennzoil
would result in "the premier exploration and production
PLAINTIFFS' SECOND AMENDED COMPLAINT Page 7
<PAGE> 8
company in the world." Although the business justifications cited by Pennzoil
for such a combination are at least as strong now as they were when Pennzoil
itself proposed such a deal in 1995, Pennzoil has rebuffed and rejected Union
Pacific Resources Group Inc.'s efforts to discuss such a transaction, including
the June 10 proposal, stating that the Board of Directors of Pennzoil had
determined that Pennzoil should remain an independent, publicly-held company
and that the board was not interested in any acquisition proposal from Union
Pacific Resources Group Inc.
20. Indeed, on the very same day the Tender Offer was announced, Pennzoil
began to solicit and recommend against the Tender Offer, even though it had
filed no Schedule 14D-9. Specifically, on June 23, 1997, an Associated Press
release (the "A.P. Release") reported that a Pennzoil spokesperson, referring
to the June 10 proposal and the Tender Offer, stated, among other things, that
"[t]he [Pennzoil] board had discussed an offer that was essentially this same
offer last week and turned it down." (A true copy of the A.P. Release is
appended to Plaintiffs' First Amended Complaint as Union Pacific Resources
Group Exhibit 2. It is incorporated as if set forth fully herein.)
21. This statement was calculated and designed to convey, and did convey,
to Pennzoil stockholders and the investing public that Pennzoil would oppose
the Tender Offer and was calculated and designed to influence Pennzoil
stockholders to reject it, as well.
22. The foregoing June 23 statement by Pennzoil was also materially false
and misleading. The Tender Offer and Merger are
PLAINTIFFS' SECOND AMENDED COMPLAINT Page 8
<PAGE> 9
substantially different from, and indeed are much more attractive to Pennzoil
stockholders than, the June 10 proposal. In the June 10 proposal, Union Pacific
Resources Group Inc. proposed acquiring all of the outstanding shares of
Pennzoil at $80 per share, with the $80 consideration to consist of a
combination of cash and Union Pacific Resources Group Inc. stock with no
specified exchange ratio. The Tender Offer is priced at $84 per share in cash
for a majority of the outstanding shares of Pennzoil stock, and the Merger as
proposed by Union Pacific Resources Group Inc. has a specifically structured
"floating" exchange ratio designed to deliver to Pennzoil stockholders $84
worth of Union Pacific Resources Group Inc. stock for each remaining share of
Pennzoil stock. Under this ratio, each remaining Pennzoil share will be
exchanged for a number of Union Pacific Resources Group Inc. shares
determined, within a pricing collar of $25 to $30, by dividing $84 by the
average of the closing prices of Union Pacific Resources Group Inc. common
stock for the 20 trading days ending five days prior to the meeting of Pennzoil
stockholders called for the purpose of voting on the Merger. If such exchange
ratio price is less than $25 or greater than $30, the exchange ratio will be
fixed at 3.36 shares, or 2.80 shares, respectively, of Union Pacific Resources
Group Inc. stock.
23. In light of the fact that the Tender Offer and Merger would provide to
Pennzoil stockholders approximately $200 million more collectively than they
would have received under the June 10 proposal, it is not only materially false
and misleading but absurd for Pennzoil to have publicly stated that the Tender
PLAINTIFFS' SECOND AMENDED COMPLAINT Page 9
<PAGE> 10
Offer and Merger are "essentially [the] same offer" as the June 10 proposal.
24. On July 1, 1997, Pennzoil filed a Schedule 14D-9 with the SEC(1) and
issued a press release announcing that its Board of Directors had decided to
recommend that Pennzoil stockholders reject the Tender Offer. The Schedule
14D-9, which contains a laundry list of purported justifications for the
Board's recommendation, is materially false and/or misleading in numerous
respects.
25. More specifically, Pennzoil's Schedule 14D-9 contains a series of
false and/or materially misleading statements concerning the future value of
Pennzoil Common Stock:
a. Although the Schedule 14D-9 states that the Pennzoil Directors
have concluded that the Tender Offer does not reflect the "long-
term values inherent" Pennzoil, the Schedule 14D-9 fails to
disclose any amount or range of any such values or when such
values can be expected to be realized by Pennzoil stockholders.
b. Although the Schedule 14D-9 refers to the Board's consideration
of presentations by Pennzoil management concerning Pennzoil's
prospects for "future growth, profitability and share price
appreciation, as reflected in Pennzoil's strategic plan," the
Schedule 14D-9 fails to disclose any specific or meaningful
- --------------------
(1) Plaintiffs incorporate a true copy of the Schedule 14D-9 filed by
Pennzoil with the SEC as if set forth fully herein.
PLAINTIFFS' SECOND AMENDED COMPLAINT Page 10
<PAGE> 11
information concerning that supposed plan or those 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.
c. Although the Schedule 14D-9 states that the Board believes that
pursuit of Pennzoil's strategic plan would produce greater
"long-term value for stockholders" than the $84 per share
Tender Offer and Merger, the Schedule 14D-9 fails to disclose
any meaningful information concerning such value, including the
amount thereof and when any such value can be expected to be
realized by Pennzoil stockholder.
d. Indeed, the Schedule 14D-9 adds insult to injury in respect to
inherent value, long-term value and future share price
appreciation because Pennzoil flatly - and falsely - denies in
the Schedule 14D-9 that Mr. Pate stated to Mr. Messman in 1997
that Pennzoil Common Stock could trade between $80 - $100 per
share in four to five years if Pennzoil's strategic plan were
implemented successfully. In truth and fact, Mr. Pate said just
that, and the $84
PLAINTIFFS' SECOND AMENDED COMPLAINT Page 11
<PAGE> 12
per share Tender Offer and Merger represent substantially better
value today than the present value of the $80 - $100 per share
in four to five years forecast by Mr. Pate if Pennzoil's
strategic plan is successful.
e. The Schedule 14D-9 states that the first quarter 1997 results
are much higher than first quarter 1996 results, representing
the sixth consecutive quarter of year-on-year improvement, but
fails to disclose that higher oil and gas prices, something over
which Pennzoil has no control, were responsible for a
significant portion of the supposed improvement.
f. The Schedule 14D-9 also states that 1996 earnings were 134
million dollars higher than 1995, but fails to disclose that
increased earnings were largely a result of non-operational
factors such as an extraordinary gain from property sales and
from the impact of higher product prices.
g. The Schedule 14D-9 states that the per barrel operating costs
and finding and development costs have been reduced from 1993 to
1996, but does not disclose any of the costs in intervening
years, nor the methods which have been used to calculate these
costs. The Schedule
PLAINTIFFS' SECOND AMENDED COMPLAINT PAGE 12
<PAGE> 13
14D-9 also fails to disclose Pennzoil's finding and development
costs without revisions and acquisitions, which is the truest
measure of ability to find oil and gas through drilling.
h. The Schedule 14D-9 fails to disclose the fact that Pennzoil's
production and reserves have been declining during the same
period that Pennzoil allegedly has reduced per barrel operating
and finding and development costs.
i. Although the Schedule 14D-9 makes numerous references to
Pennzoil's international oil and gas reserves, it fails to
disclose the net reserves which Pennzoil has booked, or expects
to book and instead refers to gross, unrisked. unproven reserve
potential on fields in which Pennzoil has small interests. This
creates the false and misleading impression that Pennzoil's
reserve potential is many times what in fact is currently, or
might possibly be.
j. The Schedule l4D-9 fails to disclose the terms of Pennzoil's
"capital carry" provision in the 1996 sale of part of its
interest in the ACG Field in Azerbaijan, and also fails to
disclose the impact such provision will have on
PLAINTIFFS' SECOND AMENDED COMPLAINT PAGE 13
<PAGE> 14
its remaining share of production after production begins in
1997.
k. The Schedule 14D-9 states that Pennzoil's domestic and
international oil and gas initiatives have a reasonable
probability of at least doubling Pennzoil's proved reserves
within the next three to five years, but fails to disclose how
those estimates are made or will be accomplished.
26. In attempting to justify the Pennzoil Directors' determination to
recommend rejection of the Tender Offer, the Schedule 14D-9 contains other
materially false and misleading statements, including the following:
a. The Schedule 14D-9 states that by virtue of the Tender Offer and
Merger, UPR is seeking to usurp for itself Pennzoil's future
growth and revenues, net income and cost flow, but fails to
disclose that the Merger is premised on and would result in a
substantial and continuing equity interest on the part of
existing Pennzoil stockho1ders in a combined Pennzoil and UPR.
b. Although the Schedule l4D-9 refers to "potential material
adverse effects" of the Tender Offer and Merger on Pennzoil's
rights under certain domestic and international joint venture
agreements and other contracts, it
PLAINTIFFS' SECOND AMENDED COMPLAINT PAGE 14
<PAGE> 15
fails to identify such joint ventures or other contracts and
fails to disclose the nature and amount of, or reason for, any
such potential material adverse effect.
c. The Schedule 14D-9 falsely states that "uncertainty" exists as
to Union Pacific Corporation's disclosure to the IRS in relation
to its 1996 spin-off of URC and that such uncertainty raises
"the possibility" that the IRS could revoke or challenge a
revenue ruling it issued in respect of that spin-off. In truth
and fact, there is no such uncertainty or possibility.
d. The Schedule 14D-9 discloses that the Tender Offer has had a
"preclusive effect" on a potential negotiated acquisition being
explored by Pennzoil involving a large exploration and
production company, but fails to reveal any information
concerning this supposed potential acquisition, including the
identity of the other enterprise involved, and why the Tender
Offer and Merger would preclude any such transaction.
e. Although the Schedule 14D-9 discloses that in response to the
Tender Offer the Pennzoil Board has adopted new employee
severance and benefit arrangements, and fails to disclose
PLAINTIFFS' SECOND AMENDED COMPLAINT PAGE 15
<PAGE> 16
any information concerning the costs of those arrangements.
f. The Schedule 14D-9 discloses that Pennzoil is involved in
various international projects in places such as Azerbaijan and
Qatar, but fails to disclose the high-risk nature of those
projects which are subject to local political considerations,
and also fails to disclose whether Pennzoil, which already is
highly leveraged, has sufficient capital or funding available to
pursue those projects.
COUNT ONE
---------
(For Declaratory Relief)
27. Plaintiffs repeat and reallege the above paragraphs as if fully set
forth herein.
28. The Declaratory Judgment Act, 28 U.S.C. ss. 2201, provides that "[i]n
a case of actual controversy within its jurisdiction, . . . any court of the
United states, upon the filing of an appropriate pleading, may declare the
rights and other legal relations of any interested party seeking such
declaration. . . ." Plaintiffs Union Pacific Resources Group Inc. and Newco are
entitled to a declaratory judgment that the Tender Offer which they have
commenced, is proper and complies with all applicable securities laws, rules or
regulations.
29. Although the Tender Offer and Merger are fairly and attractively
priced, Pennzoil has formally rejected the Tender Offer and is attempting to
defeat the Tender Offer by filing suit
PLAINTIFFS' SECOND AMENDED COMPLAINT PAGE 16
<PAGE> 17
attacking the Tender Offer in federal court in Delaware claiming that filings
made by Plaintiffs in conjunction therewith violate applicable federal
securities laws and regulations. Plaintiffs reasonably expect that Pennzoil is
taking and will continue to take every available measure to thwart or delay
Plaintiffs' lawful attempts to consummate the Tender Offer. Thus, there is a
substantial controversy between parties having adverse interests, Plaintiffs on
the one hand, and Pennzoil on the other hand, which are of sufficient immediacy
and reality to warrant the issuance of a declaratory judgment.
30. In the absence of declaratory relief, Plaintiffs will suffer
irreparable harm. Through the course of action that Pennzoil has pursued to
date, Pennzoil apparently intends to defend against the Tender Offer by, among
other things, filing false claims designed to delay or ultimately defeat
consummation of the Tender Offer and Merger. A declaratory judgment that the
Schedule 14D-1 and Tender Offer comply with all applicable securities laws will
serve the purpose of adjudicating the interests of the parties, resolving any
complaints concerning the propriety of the Tender Offer, and permitting an
otherwise lawful transaction to proceed.
31. Plaintiffs therefore request pursuant to the Federal Declaratory
Judgment Act, 28 U.S.C. ss.ss. 2201-2202, that this Court enter a declaratory
judgment that the disclosure documents which have been filed with the S.E.C. by
Plaintiffs and which have been disseminated to Pennzoil stockholders in
connection with the Tender Offer comply fully with all applicable provisions of
law.
PLAINTIFFS' SECOND AMENDED COMPLAINT PAGE 17
<PAGE> 18
COUNT TWO
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(For Violation of Section 14(d) of the Exchange Act and
Rule 14d-9 Promulgated Thereunder)
32. Plaintiffs repeat and reallege the above paragraphs as if set forth
herein.
33. Rule 14d-9, 17 C.F.R. ss. 240.14d-9, promulgated by the S.E.C.
pursuant to Section 14(d) of the Exchange Act, prohibits the target company and
its employees from making any solicitation or recommendation concerning a
tender offer to the target company stockholders unless, as soon as practicable
on the date any such solicitation or recommendation is made, a Schedule 14D-9
is filed with the S.E.C. and a copy is delivered to the offeror The Schedule
14D-9 must contain the information set forth in Rule 14d-9, including, among
other things, the nature of the solicitation or recommendation, particularized
reasons for the solicitation or recommendation, and recent transactions in
respect of the target company's securities by the target company or by its
officers and directors.
34. In violation of Section 14(d) and Rule 14d-9, on June 23, 1997,
Pennzoil made a solicitation and recommendation against the Tender Offer in the
A.P. Release, without having first filed with the S.E.C. or delivered to
Plaintiffs a Schedule 14D-9.
35. In further violation of Section 14(d) and Rule l4(d), the Schedule
14D-9 filed by Pennzoil with the SEC on July 1, 1997 contains material
misstatements and omissions as set forth in paragraphs 25 and 26 hereof.
36. By reason of the foregoing, Plaintiffs, Pennzoil stockholders and the
investing public have been and are being
PLAINTIFFS' SECOND AMENDED COMPLAINT PAGE 18
<PAGE> 19
irreparably harmed in that they are being deprived of, and/or misled as to,
important information required to be publicly, accurately and fully disclosed
by Pennzoil under applicable law, and Pennzoil stockholders and the investing
public are being misled by materially false information disseminated by
Pennzoil.
37. Plaintiffs have no adequate remedy at law.
COUNT THREE
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(For Violation of Section 14(e) of the Exchange Act)
38. Plaintiffs repeat and reallege the above paragraphs as if fully set
forth herein.
39. The A.P. Release was materially false and misleading, in violation of
Section 14(e), in that it falsely characterized the Tender Offer and Merger as
"essentially [the] same offer" made in Union Pacific Resources Group Inc.'s
June 10 proposal and rejected by Pennzoil the previous week. In truth and in
fact, the Tender Offer and Merger are substantially more attractive to Pennzoil
stockholders than the business combination proposed by Union Pacific Resources
Group Inc. in the June 10 proposal, and would provide Pennzoil stockholders
approximately $200 million more collectively than they would have received
under the June 10 proposal. Among other things, the Tender Offer is priced at
$84 per share in cash for a majority of outstanding Pennzoil shares, and the
Merger includes a specifically structured exchange ratio designed to deliver
$84 worth of Union Pacific Resources Group Inc. stock for each remaining share
of Pennzoil stock -- $4 per share more than the consideration proposed in the
June 10 proposal.
PLAINTIFFS' SECOND AMENDED COMPLAINT PAGE 19
<PAGE> 20
40. In further violation of Section 14(e) of the Exchange Act, the
Schedule 14D-9 contains material misstatements or omissions, as set forth in
paragraphs 25 and 26 hereof.
41. By reason of the foregoing, Plaintiffs, Pennzoil stockholders and the
investing public have been and are being irreparably harmed in that they are
being deprived of, and/or misled as to, important information required to be
publicly, accurately and fully disclosed by Pennzoil under applicable law, and
Pennzoil stockholders and the investing public are being misled by materially
false information disseminated by Pennzoil.
42. Plaintiffs have no adequate remedy at law.
WHEREFORE, Plaintiffs Union Pacific Resources Group Inc. and Newco
respectfully request that this Court enter a judgment:
i) declaring that Plaintiffs have disclosed all information required
by, and are otherwise in all respects in compliance with, Sections 14(d)
and 14(e) of the Exchange Act and any other federal securities laws, rules
or relations deemed or claimed to be applicable to the Schedule 14D-l and
Tender Offer;
ii) compelling Pennzoil to comply with the requirements of the
Exchange Act, and compelling Pennzoil to file immediately complete and
accurate statements on Schedule 14D-9 with respect to the A.P. Release;
iii) Compelling Pennzoil to comply with the requirements of the
Exchange Act, and compelling Pennzoil to file immediately an amended
Schedule 14D-9 which is complete and accurate and which corrects the
misleading and untrue statements in its Schedule 14D-9;
iv) preliminarily and permanently enjoining Pennzoil, its agents,
employees and anyone acting on its behalf, from making any false or
misleading statements in respect of the Tender Offer; and
v) awarding the Plaintiffs their reasonable and necessary attorneys'
fees together with all costs of court.
PLAINTIFFS' SECOND AMENDED COMPLAINT PAGE 20
<PAGE> 21
/s/ Ralph H. Duggins
- ----------------------
RALPH H. DUGGINS DEE J. KELLY
State Bar No. 06183700 State Bar No. 11217000
ESTIL VANCE, JR. E. GLEN JOHNSON
State Bar No. 20479000 State Bar No. 10709500
S. G. JOHNDROE, III DONALD E. HERRMANN
State Bar No. 10674000 State Bar No. 09541300
Cantey & Hanger, L.L.P. TIMOTHY J. VAN MEIR
2100 Burnett Plaza State Bar No. 00794781
801 Cherry Street Kelly, Hart & Hallman, P. C.
Fort Worth, Texas 76102 201 Main Street, Suite 2500
(817) 877-2800 Fort Worth, Texas 76102
(817) 577-2807 - Fax (817) 332-2500
(817) 878-9260 - Fax
JACK O'NEILL
State Bar No. 15288500
JESSE R. PIERCE
State Bar No. 15995400
Clements, O'Neill, Pierce
& Nickens
1000 Louisiana, Suite 1100
Houston, Texas 77002-5009
(713) 654-7600
(713) 654-7690 - Fax
ATTORNEYS FOR PLAINTIFFS
DATED: July 11, 1997
PLAINTIFFS' SECOND AMENDED COMPLAINT PAGE 21
<PAGE> 22
CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the above and foregoing
pleading has been properly served on Robin C. Gibbs, Charles F. Richards and
David E. Keltner by fax on this 11th day of July, 1997.
/s/ Ralph H. Duggins
---------------------
RALPH H. DUGGINS
PLAINTIFFS' SECOND AMENDED COMPLAINT PAGE 22
