<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 30, 1998
REGISTRATION NO. 333-43003
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 3
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
PENNZOIL COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 1311, 2911 74-159720
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBERS) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
----------------
PENNZOIL PLACE, P.O. BOX 2967
HOUSTON, TEXAS 77252-2967
(713) 546-4000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
LINDA F. CONDIT
CORPORATE SECRETARY
PENNZOIL COMPANY
PENNZOIL PLACE, P.O. BOX 2967
HOUSTON, TEXAS 77252-2967
(713) 546-4000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
WITH A COPY TO:
MOULTON GOODRUM, JR. G. MICHAEL O'LEARY
BAKER & BOTTS, L.L.P. ANDREWS & KURTH L.L.P.
3000 ONE SHELL PLAZA 4200 CHASE TOWER
HOUSTON, TEXAS 77002 HOUSTON, TEXAS 77002
(713) 229-1234 (713) 220-4200
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the
same offering. [_]
----------------
THE REGISTRANT HEREBY AMENDS THE REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JUNE 30, 1998
LOGO
[Logo of Pennzoil Company appears here]
OFFER TO EXCHANGE OFFER TO EXCHANGE
NEWLY ISSUED NEWLY ISSUED
4.90% EXCHANGEABLE 4.95% EXCHANGEABLE SENIOR DEBENTURES DUE 2008
SENIOR DEBENTURES DUE FOR A PORTION OF
2008 OUTSTANDING 4 3/4% EXCHANGEABLE SENIOR DEBENTURES
FOR A PORTION OF DUE 2003
OUTSTANDING 6 1/2%
EXCHANGEABLE SENIOR
DEBENTURES
DUE 2003
----------
EACH OF THE EXCHANGE OFFERS, PRORATION PERIODS AND WITHDRAWAL RIGHTS
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON FRIDAY, JULY 31, 1998
UNLESS ONE OR BOTH OF THE EXCHANGE OFFERS ARE EXTENDED.
----------
Certain capitalized terms are defined in the Glossary beginning on page 5.
Pennzoil Company hereby offers to issue its new 4.90% exchangeable senior
debentures due August 15, 2008 in exchange for a portion of its $397.1 million
of outstanding 6 1/2% exchangeable senior debentures due 2003 and its new 4.95%
exchangeable senior debentures due August 15, 2008 in exchange for a portion of
its $491.5 million of outstanding 4 3/4% exchangeable senior debentures due
2003. The aggregate principal amount of Old Debentures to be accepted for
exchange and the principal amount of New Debentures to be issued will be
determined as described herein.
The holders of the Old Debentures currently have the option to exchange their
Old Debentures any time prior to maturity, unless previously redeemed, for
shares of common stock of Chevron Corporation beneficially owned by Pennzoil.
Subject to adjustment in certain events, the exchange rates for the Old
Debentures are 23.7741 shares of Chevron Stock per $1,000 principal amount (the
equivalent of $42 1/16 per share) for the 6 1/2% Debentures and 17.0032 shares
of Chevron Stock per $1,000 principal amount (the equivalent of $58 13/16 per
share) for the 4 3/4% Debentures. On June 26, 1998, the reported closing price
of Chevron Stock on the NYSE was $83 5/8 per share. See "Chevron Corporation--
Dividend and Price Range of Chevron Stock."
The 6 1/2% Exchange Offer will be for a principal amount of 6 1/2% Debentures
(the "6 1/2% Target Amount") that is exchangeable into between 4.76 million and
6.00 million shares of Chevron Stock under Existing Exchange Rights (a range of
between $200.17 million and $252.50 million principal amount of 6 1/2%
Debentures). The 6 1/2% Target Amount will be determined by reference to the
Average Chevron Stock Price. See "The Exchange Offers--Target Amounts."
The principal amount of New 4.90% Debentures to be issued in exchange for 6
1/2% Debentures will be equal to the product of (i) 103% of the Average Chevron
Stock Price and (ii) the aggregate number of shares of Chevron Stock for which
the 6 1/2% Debentures validly tendered by a holder and accepted by the Company
for exchange are exchangeable as of the 6 1/2% Acceptance Date (subject to the
payment of cash in lieu of the issuance of a Fractional New 4.90% Debenture).
(continued on next page)
----------
SEE "RISK FACTORS" ON PAGE 18 OF THIS PROSPECTUS.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
----------
The Dealer Manager for the Exchange Offers:
PAINEWEBBER INCORPORATED
----------
The date of this Prospectus is July , 1998.
<PAGE>
The 4 3/4% Exchange Offer will be for a principal amount of 4 3/4%
Debentures (the "4 3/4% Target Amount") that is exchangeable into between 3.40
million and 4.29 million shares of Chevron Stock under Existing Exchange
Rights (a range of between $200.17 million and $252.50 million principal
amount of 4 3/4% Debentures). The 4 3/4% Target Amount will be determined by
reference to the Average Chevron Stock Price. See "The Exchange Offers--Target
Amounts."
The principal amount of New 4.95% Debentures to be issued in exchange for 4
3/4% Debentures will be equal to the product of (i) 103% of the Average
Chevron Stock Price and (ii) the aggregate number of shares of Chevron Stock
for which the 4 3/4% Debentures validly tendered by a holder and accepted by
the Company for exchange are exchangeable as of the 4 3/4% Acceptance Date
(subject to the payment of cash in lieu of the issuance of a Fractional New
4.95% Debenture).
Pennzoil will issue a press release publicly announcing the Average Chevron
Stock Price, the Target Amounts and the principal amount of New Debentures to
be issued in the Exchange Offers prior to the opening of trading on the second
trading day prior to the respective Expiration Dates. Such information can
also be obtained from D. F. King & Co., Inc., the Information Agent, by
calling 1-800-735-3591 beginning on the second trading day prior to the
respective Expiration Dates.
If holders validly tender, and do not withdraw, more than the 6 1/2% Target
Amount of 6 1/2% Debentures for exchange prior to the 6 1/2% Expiration Date,
the Company will accept 6 1/2% Debentures for exchange on a pro rata basis
from among the 6 1/2% Debentures tendered. If holders validly tender, and do
not withdraw, more than the 4 3/4% Target Amount of 4 3/4% Debentures for
exchange prior to the 4 3/4% Expiration Date, the Company will accept 4 3/4%
Debentures for exchange on a pro rata basis from among the 4 3/4% Debentures
tendered.
The Company will issue the New Debentures on the next calendar day following
the respective Acceptance Dates. Interest on the New Debentures will accrue
from their date of issuance and will be payable in cash semi-annually on
February 15 and August 15 of each year, commencing February 15, 1999. The
Company may not redeem the New Debentures prior to August 15, 2000. See
"Description of New Debentures--Redemption Provisions."
A holder will have the option to exchange the New Debentures at any time
prior to maturity, unless previously redeemed, for shares of Chevron Stock
owned by Pennzoil. Subject to adjustment in certain events, the exchange rate
for the New Debentures will be 0.8230 shares of Chevron Stock for each share
of Chevron Stock into which exchanged Old Debentures were exchangeable as of
the respective Acceptance Dates under Existing Exchange Rights (excluding
shares of Chevron Stock exchangeable for that portion of Old Debentures for
which cash is paid in lieu of the issuance of a Fractional New Debenture). See
"Prospectus Summary--Illustration." In lieu of delivering certificates
representing Chevron Stock in exchange for any New Debentures, Pennzoil may
pay to the holder surrendering such New Debentures an amount in cash equal to
the market price of the Chevron Stock for which the New Debentures are
exchangeable.
The New Debentures will constitute unsecured senior debt obligations of
Pennzoil ranking pari passu with all other present and future unsecured
general obligations of Pennzoil that are not expressly subordinated to senior
indebtedness. Pennzoil currently conducts substantially all of its operations
through subsidiaries, and the holders of the New Debentures will have a junior
position to any creditors of Pennzoil's subsidiaries. As of March 31, 1998,
the aggregate outstanding debt of Pennzoil's subsidiaries was approximately
$63 million, and, on a pro forma basis after giving effect to the Spin-Off,
such subsidiary debt will be zero. See "Prospectus Summary--Recent
Developments."
The Company is making the Exchange Offers only to holders of Old Debentures
in registered form. See "The Exchange Offers--Procedures for Tendering." The
Company will issue the New Debentures only in registered book-entry form and
in denominations of $1,000 and integral multiples thereof. See "Description of
New Debentures." Holders who would otherwise be entitled to receive a
Fractional New Debenture will receive a cash payment in lieu of the issuance
of such Fractional New Debenture. See "The Exchange Offers--Terms of the
Exchange Offers."
2
<PAGE>
Pennzoil currently expects to redeem all Old Debentures that remain
outstanding after completion of the Exchange Offers. Pennzoil's Board of
Directors, however, will determine whether to redeem and when to redeem either
or both series of the Old Debentures according to market and other factors
prevailing at the time. If Pennzoil redeems the Old Debentures, Pennzoil
expects that the terms of the Old Debentures and the currently prevailing
market prices for Chevron Stock will cause substantially all holders of Old
Debentures to exercise their Existing Exchange Rights to obtain shares of
Chevron Stock (although Pennzoil has the right to pay cash instead of
delivering shares of Chevron Stock). Although Pennzoil has had the right to
redeem the 6 1/2% Debentures since January 15, 1998, Pennzoil does not intend
to redeem them before August 15, 1998. Pennzoil currently expects to redeem
the 4 3/4% Debentures on October 1, 1998, which is the first date on which the
Company can redeem them.
Application will be made to list the New Debentures for trading on the NYSE.
----------------
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain
Documents by Reference. 4
Glossary................ 5
Prospectus Summary...... 7
Risk Factors............ 18
Capitalization.......... 19
Use of Proceeds......... 21
Ratio of Earnings to
Combined Fixed Charges
and Preferred Stock
Dividends.............. 21
Chevron Corporation..... 22
Price Range of Old
Debentures............. 23
The Exchange Offers..... 24
Description of New
Debentures............. 34
Material Federal Income
Tax Consequences....... 47
Dealer Manager.......... 53
Legal Matters........... 53
Experts................. 54
Available Information... 54
Appendix A: Selected
Information Concerning
Chevron................ A-1
Appendix B: Description
of Old 6 1/2%
Debentures............. B-1
Appendix C: Description
of Old 4 3/4%
Debentures............. C-1
</TABLE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by Pennzoil with the
Commission (File No. 1-5591) pursuant to the Exchange Act are incorporated in
this Prospectus by reference and shall be deemed to be a part hereof:
(a) Pennzoil's Annual Report on Form 10-K for the year ended December 31,
1997;
(b) Pennzoil's Quarterly Report on Form 10-Q for the quarter ended March
31, 1998; and
(c) Pennzoil's Current Reports on Form 8-K dated March 12, 1998, April
17, 1998, April 20, 1998, May 20, 1998 and May 29, 1998.
All documents filed by Pennzoil pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering made hereby shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of the filing of such documents. Any statement contained in this
Prospectus, in a supplement to this Prospectus or in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any subsequently filed supplement to this
Prospectus or in any document that also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
This Prospectus incorporates documents by reference that are not presented
herein or delivered herewith. Copies of these documents (excluding exhibits
unless such exhibits are specifically incorporated by reference into the
information incorporated herein) will be provided by first-class mail without
charge to each person to whom this Prospectus is delivered, upon written or
oral request, to Linda F. Condit, Corporate Secretary, Pennzoil Company,
Pennzoil Place, P.O. Box 2967, Houston, Texas 77252 (telephone number: (713)
546-4000).
No person is authorized in connection with any offering made hereby to give
any information or to make any representation in connection with the Exchange
Offers other than those contained in this Prospectus, and, if given or made,
such information or representation must not be relied upon as having been
authorized by Pennzoil or by the Dealer Manager. This Prospectus does not
constitute an offer to sell or a solicitation of any offer to buy any of the
securities offered hereby by any person in any jurisdiction in which it is
unlawful to make such an offer or solicitation. Neither the delivery of this
Prospectus nor any sale made hereunder shall under any circumstances create an
implication that the information contained herein is correct as of any date
subsequent to the date hereof.
4
<PAGE>
GLOSSARY
Certain of the capitalized terms used herein are defined below.
4 3/4% ACCEPTANCE DATE: The date Pennzoil accepts 4 3/4% Debentures pursuant
to the 4 3/4% Exchange Offer.
4 3/4% DEBENTURES: Pennzoil's outstanding 4 3/4% exchangeable senior
debentures due August 15, 2003.
4 3/4% EXCHANGE OFFER: The offer by Pennzoil to issue New 4.95% Debentures
in exchange for outstanding 4 3/4% Debentures, upon the terms and subject to
the conditions of this Prospectus and the applicable Letter of Transmittal.
4 3/4% EXPIRATION DATE: 5:00 p.m. New York City time, on Friday, July 31,
1998 unless the 4 3/4% Exchange Offer is extended.
6 1/2% ACCEPTANCE DATE: The date Pennzoil accepts 6 1/2% Debentures pursuant
to the 6 1/2% Exchange Offer.
6 1/2% DEBENTURES: Pennzoil's outstanding 6 1/2% exchangeable senior
debentures due August 15, 2003.
6 1/2% EXCHANGE OFFER: The offer by Pennzoil to issue New 4.90% Debentures
in exchange for outstanding 6 1/2% Debentures, upon the terms and subject to
the conditions of this Prospectus and the applicable Letter of Transmittal.
6 1/2% EXPIRATION DATE: 5:00 p.m. New York City time, on Friday, July 31,
1998 unless the 6 1/2% Exchange Offer is extended.
ACCEPTANCE DATES: The 6 1/2% Acceptance Date and the 4 3/4% Acceptance Date,
together.
AVERAGE CHEVRON STOCK PRICE: The average of the closing prices of Chevron
Stock on the NYSE on the two trading days immediately preceding the second
trading day prior to the respective Expiration Dates (i.e., if an Expiration
Date is on a Friday, the Average Chevron Stock Price will be the average of
the closing prices of Chevron Stock on the NYSE on the Monday and Tuesday of
the same week).
CHEVRON: Chevron Corporation.
CHEVRON STOCK: Shares of common stock of Chevron.
COMMISSION: Securities and Exchange Commission.
EXCHANGE ACT: Securities Exchange Act of 1934, as amended.
EXCHANGE OFFERS: The 6 1/2% Exchange Offer and the 4 3/4% Exchange Offer,
together.
EXISTING EXCHANGE RIGHTS: The option of holders of Old Debentures to
exchange Old Debentures at any time prior to maturity, unless previously
redeemed, for Chevron Stock beneficially owned by Pennzoil at exchange rates
of 23.7741 shares and 17.0032 shares per $1,000 principal amount of the 6 1/2%
Debentures and the 4 3/4% Debentures, respectively (the principal amount
equivalents of $42 1/16 per share and $58 13/16 per share, respectively),
subject to adjustment in certain events.
EXPIRATION DATES: The 6 1/2% Expiration Date and the 4 3/4% Expiration Date,
together.
5
<PAGE>
FRACTIONAL NEW DEBENTURES: The Fractional New 4.90% Debentures and
Fractional New 4.95% Debentures, together.
FRACTIONAL NEW 4.90% DEBENTURES: A New 4.90% Debenture in a principal amount
of less than $1,000.
FRACTIONAL NEW 4.95% DEBENTURES: A New 4.95% Debenture in a principal amount
of less than $1,000.
NEW DEBENTURES: The New 4.90% Debentures and New 4.95% Debentures, together.
NEW 4.90% DEBENTURES: New 4.90% exchangeable senior debentures due August
15, 2008, to be issued by Pennzoil in exchange for 6 1/2% Debentures.
NEW 4.95% DEBENTURES: New 4.95% exchangeable senior debentures due August
15, 2008, to be issued by Pennzoil in exchange for 4 3/4% Debentures.
NYSE: New York Stock Exchange, Inc.
OLD DEBENTURES: The 6 1/2% Debentures and the 4 3/4% Debentures, together.
PENNZOIL or the COMPANY: Pennzoil Company, a Delaware corporation.
PRODUCTS GROUP: Pennzoil's motor oil, refined products and franchise
operations (which generally includes Pennzoil Products Company, Jiffy Lube
International, Inc. and their respective subsidiaries).
REGISTRATION STATEMENT: The Registration Statement on Form S-4 filed by
Pennzoil with the Commission under the Securities Act with respect to the
offering of the New Debentures.
SECURITIES ACT: Securities Act of 1933, as amended.
SPIN-OFF: The pro rata distribution of Downstream to the holders of Pennzoil
common stock.
6
<PAGE>
PROSPECTUS SUMMARY
This general summary is provided solely for the convenience of holders of the
Old Debentures and is qualified in its entirety by reference to the full text
of and the more specific details contained in the Exchange Offers, the related
Letters of Transmittal and any amendments hereto and thereto. Capitalized terms
used in this summary without definition shall have the respective meanings
ascribed to such terms in the Exchange Offers.
PENNZOIL COMPANY
Pennzoil is an energy company engaged primarily in oil and gas exploration
and production, in processing, refining and marketing of oil and motor oil and
refined products and in fast automotive oil change operations. Pennzoil's
operations are conducted primarily through subsidiaries. Pennzoil Exploration
and Production Company ("PEPCO") conducts the majority of Pennzoil's oil and
gas exploration and production operations. The refining of oil and the
processing and marketing of motor oil, refined products and industrial
specialities are conducted by Pennzoil Products Company ("PPC"). Jiffy Lube
International, Inc. ("Jiffy Lube") franchises, owns and operates automotive
fast lubrication and fluid maintenance service centers.
As of March 31, 1998, Pennzoil beneficially owned approximately 17.8 million
shares of Chevron Stock (which have been deposited with exchange agents for
possible exchange of the Old Debentures). At the current dividend rate,
Pennzoil receives approximately $43.4 million annually in dividends on its
current investment in Chevron Stock.
RECENT DEVELOPMENTS
On April 15, 1998, Pennzoil announced a comprehensive restructuring that will
result in the separation of Products Group (Pennzoil's motor oil, refined
products and franchise operations (which generally include PPC, Jiffy Lube and
their respective subsidiaries)) from Pennzoil's exploration and production
operations. The restructuring includes the pro rata distribution, or Spin-Off,
of Products Group (i.e., the common stock of PPC (which will at such time hold
the motor oil and refined products operations of PPC and the common stock of
Jiffy Lube)) to holders of Pennzoil common stock. After the Spin-Off, Pennzoil
will be primarily an exploration and production company and will no longer be
engaged in the processing, refining and marketing of motor oil and refined
products or in fast automotive oil change and franchise operations.
The Old Debentures are, and the New Debentures to be issued in the Exchange
Offers will be, obligations of Pennzoil, and not obligations of Products Group,
and the Exchange Offers are not conditioned on the occurrence or non-occurrence
of the Spin Off. At the time of the Spin-Off, Products Group will be
capitalized with approximately $500 million of net indebtedness, approximately
$380 million of which will be used to repay indebtedness owed from Products
Group to Pennzoil. Pennzoil intends to use the proceeds from Products Group's
repayment primarily to reduce indebtedness under its variable rate credit
arrangements. In June 1998, Pennzoil completed the offering of $150 million of
6.49% Cumulative Preferred Stock, Series A. The net proceeds of approximately
$147 million were used to repay borrowings consisting of commercial paper and
lines of credit with banks. See "Capitalization" for the pro forma consolidated
capitalization of Pennzoil and its subsidiaries after giving effect to (i) the
Exchange Offers and the related transactions described herein, (ii) the
issuance by Pennzoil of $150 million of 6.49% Cumulative Preferred Stock,
Series A, in June 1998 and the application of the net proceeds thereof, and
(iii) the Spin-Off and related transactions.
Pennzoil intends that James L. Pate will become Chairman and Chief Executive
Officer of Products Group and continue as a non-executive Chairman of the Board
of Pennzoil after the Spin-Off, and Steven D. Chesebro', President and Chief
Operating Officer of Pennzoil, and Donald A. Frederick, Group Vice President--
Oil and Gas of Pennzoil, will continue as senior executive officers of Pennzoil
after the Spin-Off.
Pennzoil has been informally notified by the Internal Revenue Service (the
"IRS") that Pennzoil will receive a revenue agent's report that will propose to
disallow the timing of $310.4 million in deductions claimed by Pennzoil in its
1994 federal income tax return. Under the IRS position, this amount would be
allowed as a deduction against taxable income in years after 1994. Pennzoil
strongly disagrees with the IRS position as informally communicated, and
Pennzoil intends to contest the issues involved, which will not likely be
resolved for a number of years. However, if the issues were assumed to be
resolved completely in the IRS's favor during 1998, the effect of the IRS's
position would be to increase 1998 after-tax interest expense by $30.2 million
and to reduce Pennzoil's 1998 cash flow by $127.7 million, with an increase in
Pennzoil's cash flow in future years when the deductions could be taken against
taxable income.
7
<PAGE>
THE EXCHANGE OFFERS
Purpose of the Exchange The purpose of the Exchange Offers is to replace
Offers..................... a portion of Pennzoil's outstanding Old
Debentures with the New Debentures. The Company
is undertaking the Exchange Offers to take
advantage of what it believes to be favorable
conditions in the equity-linked securities
markets. In addition, the Company will use the
net tax loss created by the Exchange Offers to
offset (at least in part) gains recognized by
Pennzoil (1) from the expected exercise of
Existing Exchange Rights on unexchanged Old
Debentures and (2) on any sale or exchange of
shares of Chevron Stock that may be released
(from deposit with exchange agents for possible
exchange of Old Debentures as a result of the
Exchange Offers) and sold by Pennzoil.
The Exchange Offers......... Pennzoil is offering to issue the New Debentures
in exchange for the Target Amounts of the Old
Debentures. The Target Amounts of Old Debentures
to be accepted for exchange and the principal
amount of New Debentures to be issued will be
determined as described herein.
Target Amounts..............
The Target Amounts will be determined by
reference to the Average Chevron Stock Price. See
"The Exchange Offers--Target Amounts." However,
Pennzoil reserves the right to accept more than
the Target Amounts of Old Debentures for exchange
(such higher amount will then become the "Target
Amount" for purposes of proration). On June 26,
1998, the reported closing price of Chevron Stock
on the NYSE was $83 5/8 per share. See "Chevron
Corporation--Dividend and Price Range of Chevron
Stock" for the recent trading prices of Chevron
Stock.
6 1/2% Target Amount........
The 6 1/2% Exchange Offer will be for the 6 1/2%
Target Amount, which is a principal amount of 6
1/2% Debentures that is exchangeable into between
4.76 million and 6.00 million shares of Chevron
Stock under Existing Exchange Rights (a range of
between $200.17 million and $252.50 million
principal amount of 6 1/2% Debentures).
4 3/4% Target Amount........
The 4 3/4% Exchange Offer will be for the 4 3/4%
Target Amount, which is a principal amount of 4
3/4% Debentures that is exchangeable into between
3.40 million and 4.29 million shares of Chevron
Stock under Existing Exchange Rights (a range
between $200.17 million and $252.50 million
principal amount of 4 3/4% Debentures).
Minimum Number of New
Debentures................. The Company will not accept for exchange any 6
1/2% Debentures if the 6 1/2% Exchange Offer
would result in less than $100 million in
principal amount of New 4.90% Debentures being
issued. The Company will not accept for exchange
any 4 3/4% Debentures if the 4 3/4% Exchange
Offer would result in less than $100 million in
principal amount of New 4.95% Debentures being
issued.
Market Price of Old
Debentures................. There are currently $397.1 million aggregate
principal amount of 6 1/2% Debentures outstanding
and $491.5 aggregate principal amount of 4 3/4%
Debentures outstanding. The NYSE currently lists
8
<PAGE>
the 6 1/2% Debentures for trading under the
symbol PZL.F and the 4 3/4% Debentures for
trading under the symbol PZM.F. On June 26, 1998,
the closing prices for the 6 1/2% Debentures and
the 4 3/4% Debentures on the NYSE Composite Tape
were $190 and $142 5/8, respectively. Trades of
small amounts of Old Debentures typically take
place on the NYSE, while trades of larger amounts
generally take place in the over-the-counter
market. Because the Old Debentures may trade in
small amounts and sometimes infrequently on the
NYSE, the most recently reported NYSE trading
price may or may not be indicative of the current
market value. See "Price Range of Old Debentures"
for the recent trading prices of the Old
Debentures.
Consideration Offered.......
The principal amount of New 4.90% Debentures to
be issued in exchange for 6 1/2% Debentures will
be equal to the product of (i) 103% of the
Average Chevron Stock Price and (ii) the
aggregate number of shares of Chevron Stock for
which the 6 1/2% Debentures validly tendered by a
holder and accepted by the Company for exchange
are exchangeable as of the 6 1/2% Acceptance Date
(subject to the payment of cash in lieu of the
issuance of a Fractional New 4.90% Debenture).
The principal amount of New 4.95% Debentures to
be issued in exchange for 4 3/4% Debentures will
be equal to the product of (i) 103% of the
Average Chevron Stock Price and (ii) the
aggregate number of shares of Chevron Stock for
which the 4 3/4% Debentures validly tendered by a
holder and accepted by the Company for exchange
are exchangeable as of the 4 3/4% Acceptance Date
(subject to the payment of cash in lieu of the
issuance of a Fractional New 4.95% Debenture).
Proration................... If holders validly tender, and do not withdraw,
more than the 6 1/2% Target Amount of 6 1/2%
Debentures for exchange prior to the Expiration
Date, the Company will accept 6 1/2% Debentures
for exchange on a pro rata basis from among the 6
1/2% Debentures validly tendered. (All validly
tendering holders will be prorated if more than
the 6 1/2% Target Amount is tendered.) If holders
validly tender, and do not withdraw, more than
the 4 3/4% Target Amount of 4 3/4% Debentures for
exchange prior to the Expiration Date, the
Company will accept 4 3/4% Debentures for
exchange on a pro rata basis from among the 4
3/4% Debentures validly tendered. (All validly
tendering holders will be prorated if more than
the 4 3/4% Target Amount is tendered.)
Public Announcement......... Pennzoil will issue a press release publicly
announcing the Average Chevron Stock Price, the
Target Amounts and the principal amount of New
Debentures to be issued in the Exchange Offers
prior to the opening of trading on the second
trading day prior to the respective Expiration
Dates. Such information can also be obtained from
D. F. King & Co., Inc., the Information Agent, by
calling 1-800-735-3591 beginning on the second
trading day prior to the respective Expiration
Dates.
Expiration Dates............
5:00 p.m., New York City time, on Friday, July
31, 1998, unless the Exchange Offers are extended
as provided herein, in which case the term "4
3/4% Expiration Date" means the latest date and
time to
9
<PAGE>
which the 4 3/4% Exchange Offer is extended, and
the term "6 1/2% Expiration Date" means the
latest date and time to which the 6 1/2% Exchange
Offer is extended. Pennzoil may extend or
terminate either of the Exchange Offers as
provided herein independently of the other
Exchange Offer.
Conditions to the Exchange
Offers; Termination;
Waiver; Amendment..........
The Company expressly reserves the right, prior
to the respective Expiration Dates, to (i)
withdraw or terminate either or both of the
Exchange Offers and promptly return all Old
Debentures, at any time, (a) if either or both of
the Exchange Offers would result in less than
$100 million in principal amount of the
respective series of New Debentures being issued
or upon the failure of any of the conditions
specified in "The Exchange Offers--Procedures for
Tendering," (b) if the Average Chevron Stock
Price is less than $76.00 per share or is more
than $89.00 per share or (c) upon the occurrence
of any of the other events listed in "The
Exchange Offers--Conditions of the Exchange
Offers," (ii) waive any condition to the Exchange
Offers and accept all the Old Debentures
previously tendered, (iii) extend the Expiration
Date of either or both of the Exchange Offers for
any reason and retain all Old Debentures tendered
until the Expiration Date, subject, however, to
all withdrawal rights of holders (see "The
Exchange Offers--Withdrawal of Tenders") or (iv)
amend or modify the terms of either or both of
the Exchange Offers in any manner for any reason,
including (without limitation) the form of the
consideration, the formula for calculating the
amount of the consideration to be paid pursuant
to the Exchange Offers or the coupon for either
series of New Debentures. Any amendment
applicable to either or both of the Exchange
Offers will apply to all Old Debentures tendered
pursuant to the respective Exchange Offer or the
Exchange Offers. If the Company materially
changes the terms of either or both of the
Exchange Offers or if it waives a material
condition of either or both of the Exchange
Offers, the Company will extend the Expiration
Date of respective Exchange Offer or the Exchange
Offers. The minimum period that the Company will
extend either or both of the Exchange Offers
following a material change in the terms of
either or both of the Exchange Offers or a waiver
by the Company of a material condition of either
or both of the Exchange Offers, other than a
change in the Target Amounts or in the formula
for calculating the consideration offered, will
depend upon the facts and circumstances,
including the relative materiality of the change
or waiver. See "The Exchange Offers--Expiration
Date; Extensions; Amendments; Termination."
Procedures for Tendering
Old Debentures.............
The Company is making the Exchange Offers only to
holders of Old Debentures in registered form. If
holders of Old Debentures in bearer form desire
to participate in the Exchange Offers, they must
first exchange their Old Debentures in bearer
form for Old Debentures in registered form. In
order to exchange Old Debentures
10
<PAGE>
in bearer form for Old Debentures in registered
form, a holder must surrender the Old Debentures
in bearer form at the office or agency of the
Trustee (as defined under "Description of New
Debentures--General") with all unmatured coupons
and all matured coupons in default thereto
appertaining. Each holder of registered Old
Debentures desiring to accept either of the
Exchange Offers must either (1) properly
complete, sign and date the appropriate Letter of
Transmittal or a photocopy thereof (all
references in this Prospectus to a Letter of
Transmittal shall be deemed to include a
photocopy thereof) and mail or otherwise deliver
such Letter of Transmittal and any other required
documents to Chase Bank of Texas, National
Association (the "Exchange Agent") and either
deliver the Old Debentures to the Exchange Agent
along with the Letter of Transmittal or deliver
such Old Debentures pursuant to the procedure for
book-entry transfer set forth herein or (2)
request his or her broker, dealer, commercial
bank, trust company or nominee to effect the
transaction for him or her.
Special Procedures for
Beneficial Owners..........
Any beneficial owner whose Old Debentures are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender for exchange should
contact such broker, dealer, commercial bank,
trust company or nominee promptly and instruct
such registered holder to tender on such
beneficial owner's behalf.
Guaranteed Delivery Each holder of Old Debentures who desires to
Procedures................. accept either of the Exchange Offers and tender
Old Debentures for exchange and whose Old
Debentures are not immediately available, or who
cannot comply in a timely manner with the
procedure for book-entry transfer, should tender
such Old Debentures by following the procedures
for the guaranteed delivery set forth under "The
Exchange Offers-- Guaranteed Delivery
Procedures."
Withdrawal Rights........... Holders may withdraw their tenders of Old
Debentures at any time prior to the respective
Expiration Dates. See "The Exchange Offers--
Withdrawal of Tenders."
Delivery of New Debentures;
Payment of Cash............
The Company expects to deliver certificates
representing New Debentures to be issued in the
Exchange Offers, certificates representing
portions of Old Debentures not accepted for
exchange and checks in payment of the cash to be
paid in lieu of the issuance of Fractional New
Debentures and accrued and unpaid interest due on
Old Debentures accepted for exchange as soon as
practicable after the respective Expiration
Dates. See "The Exchange Offers--Terms of the
Exchange Offers."
Interest on the Old Pennzoil will pay accrued interest on Old
Debentures................. Debentures accepted for exchange through the
respective Acceptance Dates. Payment of such
accrued interest on the Old Debentures will
accompany delivery of the New Debentures.
11
<PAGE>
Redemption of the Old
Debentures................. Pennzoil currently expects to redeem all Old
Debentures that remain outstanding after
completion of the Exchange Offers. Pennzoil's
Board of Directors, however, will determine
whether to redeem and when to redeem either or
both series of the Old Debentures according to
market and other factors prevailing at the time.
If Pennzoil redeems the Old Debentures, Pennzoil
expects that the terms of the Old Debentures and
the currently prevailing market prices for
Chevron Stock will cause substantially all
holders of Old Debentures to exercise their
Existing Exchange Rights to obtain shares of
Chevron Stock (although Pennzoil has the right to
pay cash instead of delivering shares of Chevron
Stock). Although Pennzoil has had the right to
redeem the 6 1/2% Debentures since January 15,
1998, Pennzoil does not intend to redeem them
before August 15, 1998 and intends to pay accrued
interest through that date. Pennzoil currently
expects to redeem 4 3/4% Debentures on October 1,
1998, which is the first date on which the
Company can redeem them.
Dealer Manager; Exchange
Agent; Information Agent...
The Company has retained PaineWebber Incorporated
to act as Dealer Manager and solicit exchanges of
Old Debentures for New Debentures. See "Dealer
Manager." Chase Bank of Texas, National
Association is serving as Exchange Agent in
connection with the Exchange Offers. D.F. King &
Co., Inc. is serving as Information Agent in
connection with the Exchange Offers. See "The
Exchange Offers--Exchange Agent; Information
Agent."
Use of Proceeds............. The Company will not receive any proceeds from
the Exchange Offers. Successful completion of the
Exchange Offers will allow the Company to release
a portion of the shares of Chevron Stock that
have been deposited with exchange agents for
possible exchange of Old Debentures under
Existing Exchange Rights. See "Use of Proceeds."
The Company will pay all of its expenses incident
to the Exchange Offers.
Denominations............... The Company will issue the New Debentures only in
registered form and in denominations of $1,000.
See "Description of New Debentures." Holders who
would otherwise be entitled to receive a
Fractional New Debenture will receive a cash
payment in lieu of such Fractional New Debenture.
See "The Exchange Offers--Terms of the Exchange
Offers." The New Debentures will be issued only
in book-entry form. See "Description of New
Debentures--Book-Entry Issuance Only."
Material Federal Income Tax
Considerations Relating to
the Exchange Offers........
Based on the position taken by Pennzoil pursuant
to proposed Treasury regulations outstanding at
the time the Old Debentures were issued, an
exchange by a holder of Old Debentures for New
Debentures will constitute two separate exchanges
for federal income tax purposes: a Deemed Debt
Exchange, in which the right of the holder to
payments of stated principal and interest is
exchanged for a portion of the New Debentures
received by the
12
<PAGE>
holder, and a Deemed Option Exchange, in which
the right of the holder to exchange the Old
Debentures for Chevron Stock is exchanged for the
balance of the New Debentures received by the
holder (all capitalized terms not defined above
are defined below in "Material Federal Income Tax
Consequences"). For federal income tax purposes,
the Deemed Debt Exchange probably will be a
"recapitalization" of Pennzoil, so a holder
generally will not recognize loss, if any, on
such exchange, and probably will recognize gain,
if any, to the extent of the "boot" received in
such exchange. The Deemed Option Exchange will
not be pursuant to a "recapitalization," so a
holder will recognize any gain or loss on such
exchange. See "Material Federal Income Tax
Consequences--Treatment of Exchange Offers."
Appraisal Rights............ Holders of the Old Debentures do not have any
appraisal or dissenters' rights under the
Delaware General Corporation Law or the Indenture
(as defined under "Description of New
Debentures--General") in connection with the
Exchange Offers. The Company intends to conduct
the Exchange Offers in accordance with the
applicable requirements of the Exchange Act and
the rules and regulations of the Commission
promulgated thereunder.
No Recommendation........... Neither the Board of Directors of Pennzoil nor
Pennzoil makes any recommendation to holders of
the Old Debentures as to whether to tender in the
Exchange Offers. The Company urges holders of the
Old Debentures to consult their financial and tax
advisors on what action to take.
SUMMARY DESCRIPTION OF THE NEW DEBENTURES
Issuer...................... Pennzoil Company
Securities..................
4.90% Exchangeable Senior Debentures Due August
15, 2008 4.95% Exchangeable Senior Debentures Due
August 15, 2008.
Maturity Date...............
August 15, 2008
Interest Payment Dates......
February 15 and August 15, commencing February
15, 1999.
Dates of Issuance........... The Company will issue the respective New
Debentures on the next calendar day following the
respective Acceptance Dates. Interest on the New
Debentures will accrue from their dates of
issuance.
Book-Entry Issuance......... The New Debentures will be issued only in book-
entry form. See "Description of New Debentures--
Book-Entry Issuance Only."
Exchange Rights.............
A holder will have the option to exchange the New
Debentures at any time prior to maturity, unless
previously redeemed, for shares of Chevron Stock
owned by Pennzoil. Subject to adjustment in
certain events, the exchange rate for the New
Debentures will be 0.8230 shares of Chevron Stock
for each share of Chevron Stock into which
exchanged Old Debentures were exchangeable as of
the respective Acceptance Dates under Existing
Exchange Rights
13
<PAGE>
(excluding shares of Chevron Stock exchangeable
for that portion of Old Debentures for which cash
is paid in lieu of the issuance of a Fractional
New Debenture). See "--Illustration." In lieu of
delivering certificates representing Chevron
Stock in exchange for any New Debentures,
Pennzoil may pay to the holder surrendering such
New Debentures an amount in cash equal to the
market price of the Chevron Stock for which the
New Debentures are exchangeable.
Repurchase Rights........... Holders of New Debentures may exercise rights to
cause Pennzoil to repurchase the New Debentures
if Pennzoil takes certain action as described
under "Description of New Debentures--Repurchase
Rights."
Optional Redemption.........
The Company may not redeem the New Debentures
prior to August 15, 2000. Thereafter, the Company
has the option to redeem all or part of the New
Debentures at the redemption prices set forth
herein plus accrued and unpaid interest to the
date of redemption.
Ranking..................... The New Debentures will constitute unsecured
senior debt obligations of Pennzoil ranking pari
passu with all other present and future unsecured
general obligations of Pennzoil that are not
expressly subordinated to senior indebtedness.
Pennzoil currently conducts substantially all of
its operations through subsidiaries, and the
holders of the New Debentures will have a junior
position to any creditors of Pennzoil's
subsidiaries. As of March 31, 1998, the aggregate
outstanding debt of Pennzoil's subsidiaries was
approximately $63 million, and, on a pro forma
basis after giving effect to the Spin-Off, such
subsidiary debt will be zero.
Listing..................... Application will be made to list the New
Debentures for trading on the NYSE.
Proposed Trading Symbols....
PZL AO8 and PZL BO8 for the New 4.90% Debentures
and the New 4.95% Debentures, respectively.
Material Federal Income Tax
Considerations Relating to
the New Debentures.........
A holder will be required to include original
issue discount in gross income for federal income
tax purposes on a constant yield basis over the
term of the New Debentures. Original issue
discount will accrue at the interest rate at
which the New Debentures would have been issued
if they were not exchangeable for shares of
Chevron Stock. This rate will exceed the stated
interest rates on the New 4.90% Debentures and
the New 4.95% Debentures. An exchange of the New
Debentures for shares of Chevron Stock will
constitute a taxable sale or exchange of the New
Debentures. Any gain on the sale, exchange or
redemption of the New Debentures will be ordinary
interest income (rather than capital gain); any
loss generally will be ordinary loss to the
extent of the net amount of ordinary income the
holder has previously realized on the New
Debentures and capital loss as to the balance. In
the case of New Debentures retired or exchanged
for shares of Chevron Stock on the maturity date
of the New Debentures, the amount and character
of income and loss of the holder will be the same
as described above, but will be determined in
part through certain original issue discount
"adjustments." See "Material Federal Income Tax
Consequences--Treatment of New Debentures."
14
<PAGE>
COMPARISON OF OLD DEBENTURES TO NEW DEBENTURES
The following table presents a comparison of material differences between the
6 1/2% Debentures and the New 4.90% Debentures and the 4 3/4% Debentures and
the New 4.95% Debentures. Except as set forth below, the terms of the Old
Debentures and New Debentures are materially similar.
<TABLE>
<CAPTION>
6 1/2% EXCHANGE OFFER 4 3/4% EXCHANGE OFFER
---------------------------------------- -----------------------------------------
NEW 4.90% NEW 4.95%
6 1/2% DEBENTURES DEBENTURES 4 3/4% DEBENTURES DEBENTURES
----------------- ---------- ----------------- ----------
<S> <C> <C> <C> <C>
AGGREGATE PRINCIPAL
AMOUNT OUTSTANDING. $397.1 million Determined as $491.5 million Determined as
described herein described herein
(see "The Exchange (see "The Exchange
Offers--Terms of Offers--Terms of
the Exchange the Exchange
Offers") Offers")
INTEREST RATE........... 6 1/2% 4.90% 4 3/4% 4.95%
MATURITY DATE........... January 15, 2003 August 15, 2008 October 1, 2003 August 15, 2008
EXCHANGE RATE........... 23.7741 shares per Determined as 17.0032 shares per Determined as
$1,000 principal described herein $1,000 principal described herein
amount (the (see "Description amount (the (see "Description
equivalent of 42 of New Debentures-- equivalent of $58 of New Debentures--
1/16 per share) Exchange Rights") 13/16 per share) Exchange Rights")
DATE ON AND AFTER
WHICH DEBENTURES MAY BE
REDEEMED................ January 15, 1998(1) August 15, 2000 October 1, 1998(2) August 15, 2000
FORM OF DEBENTURES...... Bearer or registered Registered Bearer or registered Registered
book-entry only book-entry only
ACCRUED INTEREST UPON
EXERCISE OF EXCHANGE
RIGHTS.................. Holders who exercise Holders who exer- Holders who exercise Holders who exer-
their cise their cise
exchange rights do their exchange exchange rights do their exchange
not rights will not rights will
receive accrued and not receive accrued receive accrued and not receive accrued
unpaid and unpaid and
interest. unpaid interest, interest. unpaid interest,
except except
that, subsequent to that, subsequent to
any any
call for redemption call for redemption
by the by the
Company of the New Company of the New
4.90% 4.95%
Debentures, holders Debentures, holders
who who
exercise exchange exercise exchange
rights rights
will receive ac- will receive ac-
crued and crued and
unpaid interest unpaid interest
through through
the date of ex- the date of ex-
change. change.
</TABLE>
- -------
(1) Although Pennzoil has had the right to redeem the 6 1/2% Debentures since
January 15, 1998, Pennzoil does not intend to redeem them before
August 15, 1998, subject to a final determination by Pennzoil's Board of
Directors.
(2) Subject to a final determination by Pennzoil's Board of Directors, Pennzoil
currently expects to redeem the 4 3/4% Debentures on October 1, 1998, which
is the first date on which the Company can redeem them.
15
<PAGE>
ILLUSTRATION
The following illustrates the effect of the Exchange Offers (i) on a holder
of $1,000 principal amount of 6 1/2% Debentures, (ii) on a holder of $1,000,000
principal amount of 6 1/2% Debentures (1,000 6 1/2% Debentures, each at $1,000
principal amount), (iii) on a holder of $1,000 principal amount of 4 3/4%
Debentures, (iv) on a holder of $1,000,000 principal amount of 4 3/4%
Debentures (1,000 4 3/4% Debentures, each at $1,000 principal amount), and (v)
per share of Chevron Stock for which each series of Old Debentures are
exchangeable, assuming in each case that the respective Average Chevron Stock
Price is $84 per share and assuming the holder's tender of Old Debentures is
accepted for exchange. This chart is for illustrative purposes only. Changes in
the respective Average Chevron Stock Price will affect the illustration set
forth below. See "The Exchange Offers--Target Amounts."
<TABLE>
<CAPTION>
EITHER SERIES
OF OLD
DEBENTURES
EXCHANGE OF NEW 4.90% EXCHANGE OF NEW 4.95% PER UNDERLYING
DEBENTURES FOR OLD 6 DEBENTURES FOR OLD 4 SHARE OF
CURRENT HOLDINGS 1/2% DEBENTURES 3/4% DEBENTURES CHEVRON STOCK
- ---------------- ------------------------ ------------------------ --------------
<S> <C> <C> <C> <C> <C>
Principal amount........ $1,000 $1,000,000 $1,000 $1,000,000 N/A
Annual Cash Coupon
Payments............... $65.00 $65,000 $47.50 $47,500 N/A
Number of shares of
Chevron Stock for which
Old Debentures are
exchangeable at current
exchange rate ......... 23.7741 23,774.1 17.0032 17,003.2 N/A
<CAPTION>
NEW DEBENTURES RECEIVED
IN EXCHANGE OFFERS
- -----------------------
<S> <C> <C> <C> <C> <C>
(a) Average Chevron
Stock Price............ $84 $84 $84 $84 $84
(b) Multiple............ 103% 103% 103% 103% 103%
(c) Number of shares of
Chevron Stock for which
Old Debentures are
exchangeable at current
exchange rate.......... 23.7741 23,774.1 17.0032 17,003.2 1
Product ((a) x (b) x
(c))................... $2,056.94 $2,056,935.13 $1,471.12 $1,471,116.86 $86.52
Principal amount of New
Debentures............ $2,000.00 $2,056,000.00 $1,000.00 $1,471,000.00 N/A
Annual Cash Coupon
Payments.............. $98.00 $100,744.00 $49.50 $72,814.50 N/A
Cash in Lieu of
Issuance of Fractional
New Debentures........ $56.94 $935.13 $471.12 $116.86 N/A
- --------------------------------------------------------------------------------
<CAPTION>
AMOUNTS PER $1,000
PRINCIPAL AMOUNT OF
RESPECTIVE NEW
DEBENTURES(1)
- -------------------
<S> <C> <C> <C> <C> <C>
Exchange Rate (in shares
of Chevron Stock)(2)... 0.8230
Principal Amount of New
Debentures per share of
underlying Chevron
Stock ($86.52/0.8230).. $105.13
New exchange ratio per
$1,000 principal amount
of New Debentures (in
shares of Chevron
Stock)
($1,000/$105.13)....... 9.5123
</TABLE>
- --------
(1) Gives effect to the multiple (103%) used in determining the principal
amount of New Debentures in the Exchange Offers.
(2) The New Debentures will be exchangeable at the option of the holder at any
time prior to maturity, unless previously redeemed, for shares of Chevron
Stock owned by Pennzoil at an exchange rate of 0.8230 shares of Chevron
Stock for each share of Chevron Stock into which exchanged Old Debentures
were exchangeable as of the respective Acceptance Dates under Existing
Exchange Rights (excluding shares of Chevron Stock exchangeable for that
portion of Old Debentures for which cash is paid in lieu of the issuance of
a Fractional New Debenture), subject to adjustment in certain events. See
"Description of New Debentures--Exchange Rights."
16
<PAGE>
By effecting the Exchange Offers, certain holders of Old Debentures will be
allowed to exchange from (1) a security that has the near-term prospect of
being called into (2) a new security with (a) higher effective interest income
and principal and enhanced call protection, but also (b) fewer underlying
shares and an extended maturity. Both series of Old Debentures mature in 2003
and are redeemable by the Company in 1998, while the New Debentures mature in
2008 and are not redeemable by the Company until 2000.
The prospective increase in effective interest income and principal for
exchanging holders of Old Debentures is portrayed in the Illustration assuming
an Average Chevron Share Price of $84. In the illustration, $1,000,000
principal amount of 6 1/2% Debentures producing $65,000 in annual interest
income would be exchanged for $2,056,000 principal amount of New 4.90%
Debentures (plus $935.13 in cash in lieu of Fractional New Debentures)
producing $100,744.00 in annual interest income. Similarly, in the
illustration, $1,000,000 principal amount of 4 3/4% Debentures producing
$47,500 in annual interest income would be exchanged for $1,471,000 principal
amount of New 4.95% Debentures (plus $116.86 in cash in lieu of Fractional New
Debentures) producing $72,814.50 in annual interest income. In the same
examples (and net of cash for Fractional New Debentures), exchanging holders of
$1,000,000 principal amount of 6 1/2% Debentures currently exchangeable into
23,774 shares of Chevron Stock would receive New 4.90% Debentures exchangeable
into 19,557 shares of Chevron Stock (9.5123 shares of Chevron Stock per $1,000
principal amount of New 4.90% Debentures). Likewise, exchanging holders of
$1,000,000 principal amount of 4 3/4% Debentures currently exchangeable into
17,003 shares of Chevron Stock would receive New 4.95% Debentures exchangeable
into 13,993 shares of Chevron Stock (9.5123 shares of Chevron Stock per $1,000
principal amount of New 4.95% Debentures).
17
<PAGE>
RISK FACTORS
COMPARATIVE FEDERAL INCOME TAX CONSEQUENCES OF EXCHANGING OLD DEBENTURES FOR
NEW DEBENTURES AND EXCHANGING OLD DEBENTURES FOR CHEVRON STOCK OR CASH.
A holder generally will recognize gain, if any, upon an exchange of Old
Debentures for New Debentures, and will be liable for federal income tax upon
such gain. See "Material Federal Income Tax Consequences--Treatment of
Exchange Offers." Any gain recognized by a holder on a subsequent sale or
exchange of the New Debentures (including their redemption or exchange for
Chevron Stock or cash) will be ordinary income. See "Material Federal Income
Tax Consequences--Treatment of New Debentures."
Pennzoil currently expects to call for redemption all Old Debentures that
remain outstanding after completion of the Exchange Offers, although the final
determination of whether to make, and the timing of, such redemption of the
Old Debentures (or either series thereof) will be made by Pennzoil's Board of
Directors based upon market and other factors prevailing at the time such
determination is made. If Pennzoil calls the Old Debentures for redemption,
based upon the terms of the Old Debentures and prevailing market prices for
Chevron Stock, Pennzoil expects that substantially all holders of Old
Debentures will exercise their Existing Exchange Rights to obtain the shares
of Chevron Stock for which the Old Debentures are exchangeable (although
Pennzoil has the right to pay cash instead of delivering shares of Chevron
Stock). The federal income tax consequences of not participating in the
Exchange Offers and instead exercising the Existing Exchange Rights will
generally be substantially more favorable to a holder if the holder has
accounted for the Old Debentures for federal income tax purposes using the
same method as Pennzoil and Pennzoil elects to deliver Chevron Stock upon such
exercise rather than cash, because a holder's gain, if any, on such an
exchange of Old Debentures for Chevron Stock probably will be substantially
lower than its gain, if any, on an exchange of Old Debentures for New
Debentures, and any gain on a subsequent disposition of Chevron Stock received
in exchange for Old Debentures generally will be capital gain rather than the
ordinary income arising on a subsequent disposition of New Debentures received
in exchange for Old Debentures. See "Material Federal Income Tax
Consequences--Treatment of Exercise of Existing Exchange Rights." Moreover,
the federal income tax consequences of not participating in the Exchange
Offers and instead exercising the Existing Exchange Rights may under some
circumstances (e.g., if the holder would realize gain on a Deemed Option
Exchange and loss on a Deemed Debt Exchange) be somewhat more favorable to a
holder even if Pennzoil elects to deliver cash on such exercise.
NO SPECIAL EVENT-RISK PROTECTION
The New Debentures, like the Old Debentures, will not benefit from any
covenant or other provision that would afford holders of New Debentures
special protection in the event of a highly leveraged transaction involving
Pennzoil, except for any such protection described under "Description of New
Debentures--Limitation of Liens." This absence of such special protection is
less significant in the case of the Old Debentures, because the market price
of Chevron Stock has increased since the issuance of the Old Debentures and,
as a result, the Old Debentures are currently exchangeable for shares of
Chevron Stock at equivalent exchange prices ($42 1/16 per share for the 6 1/2%
Debentures and $58 13/16 per share for the 4 3/4% Debentures) that are less
than the current market price for Chevron Stock. (On June 26, 1998, the
reported closing price of Chevron Stock on the NYSE was $83 5/8 per share.)
The equivalent exchange price for the New Debentures will initially be in
excess of the market price for Chevron Stock and, absent an increase in such
market price, the exchange rights of holders of New Debentures would offer
less protection against a highly leveraged transaction or a change in control.
18
<PAGE>
CAPITALIZATION
The following table sets forth information with respect to the consolidated
capitalization of Pennzoil and its subsidiaries as of March 31, 1998 and the
adjusted consolidated capitalization of Pennzoil and its subsidiaries after
giving effect to (a) (i) the issuance of $762.6 million of New Debentures
(assuming $432.3 million principal amount of Old Debentures are accepted for
exchange), (ii) the redemption of the remaining Old Debentures (assuming
holders of all such remaining Old Debentures elect to exercise their Existing
Exchange Rights for Chevron Stock and Pennzoil does not elect to pay cash in
lieu of delivering Chevron Stock), (iii) the assumed sale of Chevron Stock
that would no longer be deposited with exchange agents for possible exchange
of the Old Debentures or the New Debentures and the use of the net proceeds
from such sale to reduce outstanding variable-rate indebtedness and (iv) the
issuance by Pennzoil of $150 million of Series A Cumulative Preferred Stock
("Preferred Stock") in June 1998 and the application of the net proceeds
thereof to reduce outstanding variable-rate indebtedness and (b) the Spin-Off
and related transactions, in each case as if those transactions had occurred
on March 31, 1998.
<TABLE>
<CAPTION>
MARCH 31, 1998
----------------------------------------------------------------------
PRO FORMA
ADJUSTMENTS FOR
PREFERRED STOCK PRO FORMA FOR PRO FORMA
ISSUANCE AND PREFERRED STOCK ADJUSTMENTS PRO FORMA
EXCHANGE ISSUANCE AND FOR FOR SPIN-
HISTORICAL OFFERS(A) EXCHANGE OFFERS SPIN-OFF OFF
---------- --------------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Cash and Temporary Cash
Investments............ $ 24,894 $ -- $ 24,894 $ 86,697(i) $ 111,591
========== ========= ========== =========== ==========
Short-Term Debt
Current Maturities of
Long-Term Debt....... $ 1,381 $ -- $ 1,381 $ (1,381)(j) $ --
---------- --------- ---------- ----------- ----------
Total Short-Term
Debt............... 1,381 -- 1,381 (1,381) --
---------- --------- ---------- ----------- ----------
Long-Term Debt,
excluding Current
Maturities
Notes and Debentures
due 1999-2009........ 800,000 -- 800,000 800,000
6 1/2% and 4 3/4%
Debentures due 2003.. 888,858 (888,858) -- -- --
New Debentures due
2008................. -- 762,562 (b) 762,562 -- 762,562
Variable-Rate Credit
Arrangements......... 574,673 (273,370)(c) 301,303 (301,303)(i) --
Other, including
Debenture Premiums
and Discounts........ 54,095 (22,211)(d) 31,884 (50,756)(j) (18,872)
---------- --------- ---------- ----------- ----------
Total Long-Term
Debt............... 2,317,626 (421,877) 1,895,749 (352,059) 1,543,690
Shareholders' Equity
Preferred Stock....... -- 147,000 (e) 147,000 -- 147,000
Unrealized Holding
Gain on Marketable
Securities........... 186,726 49,212 (f) 235,938 -- 235,938
Gain on Assumed
Disposition of
Chevron Stock........ -- 148,707 (g) 148,707 -- 148,707
Extraordinary Items
Related to Exchange.. -- (200,725)(h) (200,725) -- (200,725)
Other Equity.......... 955,010 -- 955,010 (714,755)(k) 240,255
---------- --------- ---------- ----------- ----------
Total Shareholders'
Equity............. 1,141,736 144,194 1,285,930 (714,755) 571,175
---------- --------- ---------- ----------- ----------
Total Capitalization.... $3,460,743 $(277,683) $3,183,060 $(1,068,195) $2,114,865
========== ========= ========== =========== ==========
</TABLE>
- --------
(a) Assumes an Average Chevron Stock Price of $84 per share.
(b) Adjustment to reflect New Debentures issued at face amount. The financial
statement carrying amount of the New Debentures will be marked to market
by Pennzoil based upon changes in the price of Chevron Stock above the
effective exchange price. Such increases or decreases in carrying value
will be charged or credited, respectively, net of tax, to Pennzoil's
income.
(c) Adjustment to reflect the application of the $131.0 million proceeds from
the assumed sale by Pennzoil of 1.56 million Chevron shares at $84 per
share and $150.0 million proceeds from the June 1998 issuance of 1,500,000
shares of Preferred Stock, less $4.7 million of New Debenture issuance
costs and $3 million of Preferred Stock issuance costs.
(d) Adjustment to reflect an assumed 2.9% discount on issuance of New
Debentures. The discount amount is calculated as the face amount of New
Debentures divided by 103% less the face amount of New Debentures.
(footnotes continued on following page)
19
<PAGE>
(e) Adjustment to reflect the issuance on June 1, 1998 of 1,500,000 shares of
Preferred Stock for $150 million, net of $3 million issuance costs.
(f) Reflects the net increase in the unrealized holding gain on marketable
securities to reflect the adjusted fair value of the remaining 7.25
million shares of Chevron Stock held by Pennzoil at an assumed $84 per
share, reduced by liquidated holding gains (i) on the shares of Chevron
Stock assumed to be delivered in exchange for unexchanged Old Debentures
under Existing Exchange Rights and (ii) on the shares of Chevron Stock
assumed to be sold. Future changes in the fair market value of the shares
of Chevron Stock held by Pennzoil will be reflected in its financial
statement carrying amount of marketable securities. Such increases or
decreases in the carrying amount will be recognized as an after-tax
adjustment to shareholders' equity. The following table reflects the
effect of the Exchange Offers on the Chevron Stock beneficially owned by
the Company:
<TABLE>
<CAPTION>
6 1/2% 4 3/4% TOTAL
------------ ------------ ------------
<S> <C> <C> <C>
CURRENT INVESTMENT IN CHEVRON
Old Debentures as of March 31, 1998. $397,138,000 $491,720,000 $888,858,000
Par amount per debenture............ $ 1,000.00 $ 1,000.00 $ 1,000.00
------------ ------------ ------------
Number of debentures outstanding.... 397,138 491,720 888,858
Approximate number of Chevron shares
per debenture...................... 23.7741 17.0032 --
------------ ------------ ------------
Total number of Chevron shares
beneficially owned by Pennzoil... 9,441,617 8,360,808 17,802,425
============ ============ ============
PROPOSED TRANSACTION
Number of Chevron shares available for sale by Pennzoil
(0.1770XTarget Amount)....................................... 1,559,616
Number of Chevron shares underlying New Debentures
(0.8230XTarget Amount)....................................... 7,254,079
------------
Target Amount at $84 per share................................ 8,813,695
Chevron shares remaining to satisfy exchange rights of holders
of Old Debentures............................................ 8,988,730
------------
Total number of Chevron shares beneficially owned by
Pennzoil................................................... 17,802,425
============
</TABLE>
(g) Adjustment to reflect the realized gain of $153.9 million on the assumed
exchange of 9.0 million shares of Chevron Stock for the remaining Old
Debentures and the realized gain of $78.5 million on the assumed
disposition of 1.56 million shares of Chevron Stock at an assumed $84 per
share, net of taxes of $83.6 million. Pennzoil's cost for the shares of
Chevron Stock for accounting purposes is $33.676 per share.
(h) Reflects the extraordinary loss on retirement of the Old Debentures, which
is calculated as the difference between the carrying amount of the Old
Debentures of $432.3 million (less related unamortized debt issue costs of
$5.6 million) and the market value (net of discount) of the New Debentures
being issued in the exchange of $740.4 million. This pretax loss of $313.6
million is then reduced by an income tax benefit of $112.9 million,
resulting in an after-tax extraordinary loss of $200.7 million.
(i) Adjustment to reflect the application of a $388.0 million repayment by
Products Group of indebtedness due to Pennzoil to temporarily eliminate
$301.3 million of variable rate indebtedness of Pennzoil, and the
application of the excess of such repayment proceeds of $86.7 million to
cash. Pennzoil's current intention is to evaluate applying proceeds from
the repayment of Products Group indebtedness to repurchase or redeem a
portion of Pennzoil's outstanding notes and debentures due 1999-2009,
which would create an extraordinary loss on extinguishment of
indebtedness. Pennzoil has not determined the principal amount or the
series of notes and debentures that would be repurchased or redeemed in
such event.
(j) Adjustment to reflect the debt of Products Group that will be eliminated
from Pennzoil at the time of the Spin-Off.
(k) Adjustment to reflect the Spin-Off of Products Group's net assets, less
the repayment by Products Group of indebtedness owed to Pennzoil.
20
<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offers.
Successful completion of the Exchange Offers will allow the Company to
release a portion of the shares of Chevron Stock that have been deposited with
exchange agents for possible exchange of Old Debentures under Existing
Exchange Rights, specifically (i) all shares underlying a Fractional New
Debenture and (ii) 0.1770 of a share of Chevron Stock for each share of
Chevron Stock underlying an Old Debenture accepted for exchange. Pennzoil
currently intends to sell such released shares of Chevron Stock for cash prior
to December 31, 1998 and use the net proceeds from such sale to reduce
outstanding variable-rate indebtedness.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The following table sets forth the Company's consolidated ratio of earnings
to combined fixed charges and preferred stock dividends for the periods shown
(a) on a historical basis and (b) on a pro forma basis after giving effect to
(i) the Exchange Offers, (ii) the issuance of the Preferred Stock and the
application of the net proceeds thereof and (iii) the Spin-Off and related
transactions (as described under "Capitalization"):
<TABLE>
<CAPTION>
PRO FORMA HISTORICAL
- --------------------------- ------------------------------------------------
THREE MONTHS THREE MONTHS
ENDED YEAR ENDED ENDED
MARCH 31, DECEMBER 31, MARCH 31, YEAR ENDED DECEMBER 31,
- ------------ ------------ ------------ ---------------------------------
1998 1997 1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
1.06 2.93 1.20 2.45 1.75 -- -- 1.99
</TABLE>
For purposes of calculating the ratio of earnings to combined fixed charges
and preferred stock dividends, "earnings" represent income from continuing
operations before interest charges and before federal and state income taxes.
"Fixed charges" represent the sum of interest charges (whether expensed or
capitalized) and the portion of rental expense representative of an interest
factor. On a pro forma basis, after giving effect to the issuance of the
Preferred Stock and the application of the net proceeds thereof and the
Exchange Offers (but without giving effect to the Spin-Off and related
transactions), the ratio of earnings to combined fixed charges and preferred
stock dividends for the three months ended March 31, 1998 and for the year
ended December 31, 1997 was 1.27 and 2.61, respectively. On an historical
basis, fixed charges exceeded earnings by approximately $481.9 million for the
year ended December 31, 1995 and approximately $514.1 million for the year
ended December 31, 1994. There was no preferred stock outstanding for any of
the historical periods shown above.
21
<PAGE>
CHEVRON CORPORATION
Chevron is a major international oil company. It provides administrative,
financial and management support for, and manages its investments in, U.S. and
foreign subsidiaries and affiliates, which engage in fully integrated
petroleum operations, chemical operations and coal mining. The company
operates in the United States and approximately 90 other countries. Pennzoil
has no affiliation with Chevron other than its stock ownership and contractual
arrangements in the ordinary course of business and therefore has no greater
access to information relating to Chevron than any other Chevron stockholder.
Appendix A to this Prospectus contains selected information concerning Chevron
taken from Chevron's Annual Report on Form 10-K for the year ended December
31, 1997, together with Chevron's "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for the year ended December 31,
1997.
Based upon information published by Chevron, at December 31, 1997, Chevron
had 653,402,530 shares of Chevron Stock issued and outstanding; Chevron Stock
is listed on the NYSE (trading symbol: CHV), as well as the Midwest; Pacific;
Vancouver; London; and Zurich, Basel, and Geneva, Switzerland, stock
exchanges. Chevron Stock is also traded on the Boston, Cincinnati, Detroit and
Philadelphia stock exchanges. On June 26, 1998, the reported closing price of
Chevron Stock on the NYSE Composite Tape was $83 5/8.
DIVIDEND AND PRICE RANGE OF CHEVRON STOCK
The following table sets forth the high and low trading prices for Chevron
Stock on the NYSE Composite Tape and dividends declared for the calendar
periods indicated as reported in published financial sources.
<TABLE>
<CAPTION>
HIGH LOW DIVIDENDS
---- --- ---------
<S> <C> <C> <C>
1996:
First Quarter............................... 58 7/8 51 0.50
Second Quarter.............................. 62 1/8 54 1/2 0.50
Third Quarter............................... 63 3/8 55 7/8 0.54
Fourth Quarter.............................. 68 3/8 60 1/4 0.54
1997:
First Quarter............................... 72 3/4 63 1/2 0.54
Second Quarter.............................. 77 1/4 61 3/4 0.58
Third Quarter............................... 89 3/16 73 1/2 0.58
Fourth Quarter.............................. 88 7/8 71 1/2 0.58
1998:
First Quarter............................... 90 3/16 67 3/4 0.61
Second Quarter (through June 26, 1998)...... 86 13/16 77 3/8 0.61
</TABLE>
22
<PAGE>
PRICE RANGE OF OLD DEBENTURES
On June 26, 1998, the closing prices for the 6 1/2% Debentures and the 4
3/4% Debentures on the NYSE Composite Tape were $190 and $142 5/8,
respectively. Because the Old Debentures may trade in small amounts and
sometimes infrequently on the NYSE, the most recently reported trading price
may or may not be indicative of the current market value.
6 1/2% DEBENTURES
The following table sets forth the high and low trading prices for the 6
1/2% Debentures on the NYSE Composite Tape for the calendar periods indicated
as reported in published financial sources.
<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C>
1996:
First Quarter.......................................... 137 120
Second Quarter......................................... 147 1/2 130 1/2
Third Quarter.......................................... 150 1/2 138
Fourth Quarter......................................... 159 147 1/2
1997:
First Quarter.......................................... 167 150 1/2
Second Quarter......................................... 176 1/2 156
Third Quarter.......................................... 201 181
Fourth Quarter......................................... 205 186
1998:
First Quarter.......................................... 175 171
Second Quarter (through June 26, 1998)................. 202 140
</TABLE>
4 3/4% DEBENTURES
The following table sets forth the high and low trading prices for the 4
3/4% Debentures on the NYSE Composite Tape for the calendar periods indicated
as reported in published financial sources.
<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C>
1996:
First Quarter.......................................... 105 1/2 100 1/2
Second Quarter......................................... 110 1/2 101 3/4
Third Quarter.......................................... 111 104
Fourth Quarter......................................... 118 110
1997:
First Quarter.......................................... 123 7/8 111 1/2
Second Quarter......................................... 130 111
Third Quarter.......................................... 146 1/2 126
Fourth Quarter......................................... 147 1/2 123 3/4
1998:
First Quarter.......................................... 148 122
Second Quarter (through June 26, 1998)................. 144 3/4 123
</TABLE>
23
<PAGE>
THE EXCHANGE OFFERS
PURPOSE AND EFFECT OF THE EXCHANGE OFFERS
The purpose of the Exchange Offers is to replace a portion of Pennzoil's
outstanding Old Debentures with the New Debentures. The Company is undertaking
the Exchange Offers to take advantage of what it believes to be favorable
conditions in the equity-linked securities markets.
The 6 1/2% Debentures are currently redeemable at Pennzoil's option at any
time, although Pennzoil does not intend to redeem the 6 1/2% Debentures before
August 15, 1998, and the 4 3/4% Debentures are redeemable at Pennzoil's option
beginning October 1, 1998. Pennzoil believes that, based upon the terms of the
Old Debentures and currently prevailing market prices for Chevron Stock,
holders of Old Debentures will be inclined to exchange the Old Debentures for
the underlying shares of Chevron Stock once the Old Debentures are subject to
redemption by Pennzoil (although Pennzoil has the right to pay cash instead of
delivering shares of Chevron Stock). If holders of all Old Debentures
exercised their right to exchange such Old Debentures for Chevron Stock (and
Pennzoil chose to deliver shares of Chevron Stock), Pennzoil would recognize a
net gain for federal income tax purposes on the shares of Chevron Stock
delivered in the exchange and incur current tax on the gain of up to
approximately $100 million. To the extent that holders of Old Debentures elect
to exchange for New Debentures instead of electing to exercise their Existing
Exchange Rights to exchange the Old Debentures for shares of Chevron Stock
(although Pennzoil has the right to pay cash instead of delivering shares of
Chevron Stock), the Exchange Offers may enable the Company to defer such
current federal income taxes. (If Pennzoil were to elect to pay cash instead
of delivering shares of Chevron Stock upon surrender of Old Debentures for
exchange, Pennzoil would not recognize a net gain for federal income tax
purposes unless and until Pennzoil sold the Chevron Stock.)
By effecting the Exchange Offers, certain holders of Old Debentures will be
allowed to exchange from (1) a security that has the near-term prospect of
being called into (2) a new security with (a) higher effective interest income
and principal, and enhanced call protection, but also (b) fewer underlying
shares and an extended maturity. In addition, the net tax loss created by the
Exchange Offers will be used to offset (at least in part) gains recognized by
Pennzoil (1) from expected exercise of Existing Exchange Rights on unexchanged
Old Debentures (although Pennzoil has the right to pay cash instead of
delivering shares of Chevron Stock) and (2) on any shares of Chevron Stock
that may be released (from deposit with exchange agents for possible exchange
of Old Debentures as a result of the Exchange Offers) and sold by Pennzoil.
Pennzoil also expects that the effects of the Exchange Offers will include a
reduction in total long-term debt of Pennzoil. See "Capitalization."
Pennzoil currently expects to call for redemption all Old Debentures that
remain outstanding after completion of the Exchange Offers, although the final
determination of whether to make, and the timing of, such redemption of the
Old Debentures (or either series thereof) will be made by Pennzoil's Board of
Directors based upon market and other factors prevailing at the time such
determination is made. If Pennzoil calls the Old Debentures for redemption,
based upon the terms of the Old Debentures and prevailing market prices for
Chevron Stock, Pennzoil expects that substantially all holders of Old
Debentures will exercise their Existing Exchange Rights to obtain the shares
of Chevron Stock for which the Old Debentures are exchangeable (although
Pennzoil has the right to pay cash instead of delivering shares of Chevron
Stock). Although Pennzoil has the right to redeem the 6 1/2% Debentures
beginning January 15, 1998, Pennzoil does not intend to call the 6 1/2%
Debentures for redemption before August 15, 1998. Pennzoil currently expects
to call the 4 3/4% Debentures for redemption on October 1, 1998, which is the
first date on which the Company can redeem them.
RECOMMENDATION OF PENNZOIL
The Board of Directors of Pennzoil has unanimously approved the Exchange
Offers. Participation in the Exchange Offers is voluntary and holders should
carefully consider whether to accept. Neither the Board of Directors of
Pennzoil nor Pennzoil makes any recommendation to holders of the Old
Debentures as to whether to tender in the Exchange Offers. The Company urges
holders of the Old Debentures to consult their financial and tax advisors on
what action to take.
24
<PAGE>
TERMS OF THE EXCHANGE OFFERS
Pennzoil is offering to issue its New Debentures in exchange for the Target
Amounts of its outstanding Old Debentures. The Target Amounts of Old
Debentures to be accepted for exchange and the principal amount of New
Debentures to be issued in the Exchange Offers will be determined as described
herein. The 6 1/2% Target Amount is the amount of 6 1/2% Debentures that are
exchangeable into between 4.76 million and 6.00 million shares of Chevron
Stock under Existing Exchange Rights. The 4 3/4% Target Amount is the amount 4
3/4% Debentures that are exchangeable into between 3.40 million and 4.29
million shares of Chevron Stock under Existing Exchange Rights. The Target
Amounts will be determined by reference to the Average Chevron Stock Price.
See "--Target Amounts." On June 26, 1998, the last reported closing price of
Chevron Stock on the NYSE Composite Tape was $83 5/8 per share. See "Chevron
Corporation--Dividend and Price Range of Chevron Stock" for recent trading
prices of Chevron Stock.
The principal amount of New 4.90% Debentures to be issued in exchange for 6
1/2% Debentures will be equal to the product of (i) 103% of the Average
Chevron Stock Price and (ii) the aggregate number of shares of Chevron Stock
for which the 6 1/2% Debentures validly tendered by a holder and accepted by
the Company for exchange are currently exchangeable as of the 6 1/2%
Acceptance Date (subject to the payment of cash in lieu of the issuance of a
Fractional New 4.90% Debenture). The principal amount of New 4.95% Debentures
to be issued in the 4 3/4% Exchange Offer will be equal to the product of (i)
103% of the Average Chevron Stock Price and (ii) the aggregate number of
shares of Chevron Stock for which the 4 3/4% Debentures validly tendered by a
holder and accepted by the Company for exchange are currently exchangeable as
of the 4 3/4% Acceptance Date (subject to the payment of cash in lieu of the
issuance of a Fractional New 4.95% Debenture).
If holders validly tender, and do not withdraw, more than the 6 1/2% Target
Amount of 6 1/2% Debentures for exchange prior to the 6 1/2% Expiration Date,
the Company will accept 6 1/2% Debentures for exchange on a pro rata basis
from among the 6 1/2% Debentures validly tendered. If holders validly tender,
and do not withdraw, more than the 4 3/4% Target Amount of 4 3/4% Debentures
for exchange prior to the 4 3/4% Expiration Date, the Company will accept 4
3/4% Debentures for exchange on a pro rata basis from among the 4 3/4%
Debentures validly tendered.
Pennzoil will issue a press release publicly announcing the Average Chevron
Stock Price, the Target Amounts and the principal amount of New Debentures to
be issued in the Exchange Offers prior to the opening of trading on the second
trading day prior to the respective Expiration Dates. Such information can
also be obtained from D. F. King & Co., Inc., the Information Agent, by
calling 1-800-735-3591 beginning on the second trading day prior to the
respective Expiration Dates.
The Company is making the Exchange Offers only to holders of Old Debentures
in registered form. Holders of Old Debentures in bearer form must first
exchange their Old Debentures in bearer form for Old Debentures in registered
form if they desire to participate in the Exchange Offers. See "The Exchange
Offers--Procedures for Tendering."
Holders of the Old Debentures do not have any appraisal or dissenters'
rights under the Delaware General Corporation Law or the Indenture in
connection with the Exchange Offers. The Company intends to conduct the
Exchange Offers in accordance with the applicable requirements of the Exchange
Act and the rules and regulations of the Commission promulgated thereunder.
The Company shall be deemed to have accepted validly tendered Old Debentures
when, as and if the Company has given oral notice (confirmed in writing) or
written notice thereof to the Exchange Agent on or after the respective
Expiration Dates. The Exchange Agent will act as agent for the tendering
holders for the purpose of the exchange of Old Debentures.
The Company will issue New Debentures only in registered form and only in
denominations of $1,000. Holders who would otherwise be entitled to receive a
New Debenture in a principal amount under $1,000 will receive a cash payment
in lieu of the issuance of a Fractional New Debenture.
25
<PAGE>
If any tendered Old Debentures are not accepted for exchange because of
proration, an invalid tender, the occurrence of certain other events set forth
herein or otherwise, any such unaccepted Old Debentures will be returned, at
the expense of Pennzoil, to the tendering holder thereof as promptly as
practicable after the respective Expiration Dates.
The Company expects to deliver notice confirming the number of New
Debentures exchanged for Old Debentures accepted in the Exchange Offers,
certificates representing portions of Old Debentures not accepted for exchange
for New Debentures in the Exchange Offers and checks in payment of the cash to
be paid in lieu of the issuance of Fractional New Debentures and accrued and
unpaid interest due on Old Debentures accepted for exchange as soon as
practicable after the respective Expiration Dates. See "--Terms of the
Exchange Offers."
Holders who tender Old Debentures in the Exchange Offers will not be
required to pay brokerage commissions or fees or, subject to the instructions
in the Letters of Transmittal, transfer taxes with respect to the exchange of
Old Debentures pursuant to the Exchange Offers. The Company will pay all of
its charges and expenses, other than certain applicable taxes, in connection
with the Exchange Offers. See "--Fees and Expenses."
TARGET AMOUNTS
The following table identifies the Target Amounts (expressed in millions of
shares of Chevron Stock into which the Old Debentures are exchangeable under
Existing Exchange Rights) given the following Average Chevron Stock Prices. If
the Average Chevron Stock Price is between two full dollar amounts set forth
in the following table, the Target Amounts will be determined by interpolating
between the corresponding Target Amounts in the following table. On June 26,
1998, the reported closing price of Chevron Stock on the NYSE Composite Tape
was $83 5/8.
<TABLE>
<CAPTION>
6 1/2% TARGET
AMOUNT CORRESPONDING
(# OF SHARES OF PRINCIPAL AMOUNT
UNDERLYING OF 6 1/2%
AVERAGE CHEVRON CHEVRON STOCK) DEBENTURES
STOCK PRICE (IN MILLIONS) (IN MILLIONS)
- --------------- --------------- ----------------
<S> <C> <C>
$76.00.......... 6.00 $252.50
77.00.......... 5.89 247.61
78.00.......... 5.77 242.90
79.00.......... 5.67 238.34
80.00.......... 5.56 233.94
81.00.......... 5.46 229.68
82.00.......... 5.36 225.56
83.00.......... 5.27 221.58
84.00.......... 5.18 217.72
85.00.......... 5.09 213.99
86.00.......... 5.00 210.37
87.00.......... 4.92 206.87
88.00.......... 4.84 203.47
89.00.......... 4.76 200.17
</TABLE>
<TABLE>
<CAPTION>
4 3/4% TARGET
AMOUNT CORRESPONDING
(# OF SHARES OF PRINCIPAL AMOUNT
UNDERLYING OF 4 3/4%
CHEVRON STOCK) DEBENTURES
AVERAGE CHEVRON STOCK PRICE (IN MILLIONS) (IN MILLIONS)
- --------------------------- --------------- ----------------
<S> <C> <C>
$76.00................................... 4.29 $252.50
77.00................................... 4.21 247.61
78.00................................... 4.13 242.90
79.00................................... 4.05 238.34
80.00................................... 3.98 233.94
81.00................................... 3.91 229.68
82.00................................... 3.84 225.56
83.00................................... 3.77 221.58
84.00................................... 3.70 217.72
85.00................................... 3.64 213.99
86.00................................... 3.58 210.37
87.00................................... 3.52 206.87
88.00................................... 3.46 203.47
89.00................................... 3.40 200.17
</TABLE>
Pennzoil will issue a press release publicly announcing the Average Chevron
Stock Price, the Target Amounts and the principal amount of New Debentures to
be issued in the Exchange Offers prior to the opening of trading on the second
trading day prior to the respective Expiration Dates. Such information can
also be obtained from D. F. King & Co., Inc., the Information Agent, by
calling 1-800-735-3591 beginning on the second trading day prior to the
respective Expiration Dates.
Pennzoil reserves the right to accept more than the Target Amounts of Old
Debentures for exchange (such higher amount will then become the "Target
Amount" for purposes of proration). If more than the Target Amount of either
series of Old Debentures is accepted for exchange, Pennzoil will extend the
respective Expiration Date for the respective Exchange Offer for a minimum of
ten business days following public announcement thereof, unless the increase
in the amount of Old Debentures accepted over the Target Amount is less than
two percent of the respective Old Debentures.
26
<PAGE>
EXPIRATION DATES; EXTENSIONS; AMENDMENTS; TERMINATION
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
Friday, July 31, 1998, unless the Company, in its sole discretion, extends the
Exchange Offers, in which case the term "4 3/4% Expiration Date" shall mean
the latest date and time to which the 4 3/4% Exchange Offer is extended and
the term "6 1/2% Expiration Date" shall mean the latest date and time to which
the 6 1/2% Exchange Offer is extended.
If the Company chooses to extend either or both of the Exchange Offers, the
Company will notify the Exchange Agent of any extension by oral notice
(confirmed in writing) or written notice and will make a public announcement
thereof prior to 9:00 a.m., New York City time, on the next business day after
each previously scheduled expiration date.
The Company expressly reserves the right, prior to the respective Expiration
Dates, to (i) withdraw or terminate either or both of the Exchange Offers and
promptly return all Old Debentures, at any time, (a) if either or both of the
Exchange Offers would result in less than $100 million in principal amount of
the respective series of New Debentures being issued or upon the failure of
any of the conditions specified in "The Exchange Offers--Procedures for
Tendering," (b) if the Average Chevron Stock Price is less than $76.00 per
share or is more than $89.00 per share or (c) upon the occurrence of any of
the other events listed in "The Exchange Offers--Conditions of the Exchange
Offers," (ii) waive any condition to the Exchange Offers and accept all the
Old Debentures previously tendered, (iii) extend the Expiration Date of either
or both of the Exchange Offers for any reason and retain all Old Debentures
tendered until the Expiration Date, subject, however, to all withdrawal rights
of holders (see "The Exchange Offers--Withdrawal of Tenders") or (iv) amend or
modify the terms of either or both of the Exchange Offers in any manner for
any reason, including (without limitation) the form of the consideration, the
formula for calculating the amount of the consideration to be paid pursuant to
the Exchange Offers or the coupon for either series of New Debentures. Any
amendment applicable to either or both of the Exchange Offers will apply to
all Old Debentures tendered pursuant to the respective Exchange Offer or the
Exchange Offers. If the Company materially changes the terms of either or both
of the Exchange Offers or if it waives a material condition of either or both
of the Exchange Offers, the Company will extend the Expiration Date of
respective Exchange Offer or the Exchange Offers. The minimum period that the
Company will extend either or both of the Exchange Offers following a material
change in the terms of either or both of the Exchange Offers or a waiver by
the Company of a material condition of either or both of the Exchange Offers,
other than a change in the principal amount of Old Debentures being sought for
exchange or in the formula for calculating the consideration offered, will
depend upon the facts and circumstances, including the relative materiality of
the change or waiver.
If one of the Exchange Offers is extended or terminated in accordance with
the foregoing conditions, the Company reserves the right to extend or
terminate the remaining Exchange Offer for any reason. With respect to a
change in the amount of the Old Debentures being sought or the formula for
calculating the consideration offered for an Exchange Offer, such Exchange
Offer will be extended for a minimum of 10 business days following public
announcement of such change. Any withdrawal or termination of the Exchange
Offers will be followed as promptly as practicable by public announcement
thereof. In the event the Company withdraws or terminates the Exchange Offers,
it will give immediate notice to the Exchange Agent, and all Old Debentures
theretofore tendered for exchange pursuant to the Exchange Offers will be
returned promptly to the tendering holders thereof. See "--Withdrawal of
Tenders."
Without limiting the manner in which the Company may choose to make public
announcement of any delay, extension, termination or amendment of the Exchange
Offers, the Company shall have no obligation to publish, advertise or
otherwise communicate any such public announcement, other than by making a
timely release to the Dow Jones News Service.
27
<PAGE>
CONDITIONS OF THE EXCHANGE OFFERS
Notwithstanding any other provisions of the Exchange Offers, Pennzoil shall
not be obligated to consummate the Exchange Offers if the Commission shall
have issued a stop order suspending the effectiveness of the Registration
Statement or shall have instituted proceedings for such purpose prior to the
respective Expiration Dates.
Pennzoil's obligation to consummate the 6 1/2% Exchange Offer is subject to
the condition that at least $100 million in principal amount of New 4.90%
Debentures will be issued. Pennzoil's obligation to consummate the 4 3/4%
Exchange Offer is subject to the condition that at least $100 million in
principal amount of New 4.95% Debentures will be issued.
Pennzoil reserves the right to terminate either or both of the Exchange
Offers prior to the respective Expiration Dates if the average Chevron Stock
Price is less than $76.00 per share or is more than $89.00 per share.
In addition, notwithstanding any other provisions of the Exchange Offers,
Pennzoil, at its option may withdraw, modify or terminate either or both of
the Exchange Offers if any material change occurs prior to the respective
Expiration Dates, which is likely to affect the Exchange Offers or the value
or market price of the Old Debentures or the New 4.90% Debentures or New 4.95%
Debentures, including if:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to either or both of the
Exchange Offers which, in the reasonable judgment of the Board of Directors
of Pennzoil, may have a material adverse effect on the contemplated
benefits of the Exchange Offers to Pennzoil;
(b) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities listed on the NYSE, (ii) a
declaration of a banking moratorium by United States, New York or Texas
authorities or (iii) a commencement of war, armed hostilities or other
international or national emergency;
(c) there shall have occurred any change or development involving a
prospective change in or affecting the business or financial affairs of
Pennzoil which, in the reasonable judgement of the Board of Directors of
Pennzoil, would or might prohibit, restrict or delay consummation of the
Exchange Offers or materially impair the contemplated benefits of the
Exchange Offers to Pennzoil; or
(d) there exists, in the reasonable judgment of the Board of Directors of
Pennzoil, any other actual or threatened legal impediment (including a
default under an agreement, indenture or other instrument or obligation to
which Pennzoil is a party or by which it is bound) to the acquisition of
the affected Old Debentures or the issuance of the New Debentures.
If any of the foregoing events shall have occurred, Pennzoil may, prior to
the respective Expiration Dates, (i) terminate either or both the Exchange
Offers and not accept for exchange any Old Debentures not previously accepted
for exchange; (ii) extend either or both of the Exchange Offers and retain all
tendered Old Debentures until the expiration of such Exchange Offers, subject,
however, to the rights of holders thereof to withdraw such Old Debentures (see
"--Withdrawal of Tenders"); or (iii) waive the unsatisfied conditions (other
than the receipt of the order of the Commission, which cannot be waived) with
respect to any or all of the Exchange Offers and accept all Old Debentures
tendered therein.
PROCEDURES FOR TENDERING
The tender for exchange of Old Debentures by a holder thereof pursuant to
one of the procedures set forth below and the acceptance thereof by the
Company will constitute a binding agreement between such holder and the
Company in accordance with the terms and subject to the conditions set forth
herein and in the applicable Letter of Transmittal. This Prospectus, together
with the Letters of Transmittal, will first be sent on or about July 1, 1998
to all holders of Old Debentures known to the Company and the Exchange Agent.
28
<PAGE>
The Company is making the Exchange Offers only to holders of Old Debentures
in registered form. If holders of Old Debentures in bearer form desire to
participate in the Exchange Offers, they must first exchange their Old
Debentures in bearer form for Old Debentures in registered form. In order to
exchange Old Debentures in bearer form for Old Debentures in registered form,
a holder must surrender the Old Debentures in bearer form at the office or
agency of the Trustee with all unmatured coupons and all matured coupons in
default thereto appertaining. Only a holder of registered Old Debentures may
tender such Old Debentures in the Exchange Offers. Each holder of Old
Debentures desiring to accept either of the Exchange Offers for all or any
portion of his or her Old Debentures must transmit a properly completed and
duly executed Letter of Transmittal, or a photocopy thereof, including any
other required documents, to the Exchange Agent prior to 5:00 p.m., New York
City time, on the respective Expiration Dates. In addition, either (i)
certificates for such Old Debentures must be received by the Exchange Agent
along with the Letter of Transmittal, (ii) a timely confirmation of a book-
entry transfer (a "Book-Entry Confirmation") of such Old Debentures, if such
procedure is available, into the Exchange Agent's account at The Depository
Trust Company ("DTC") pursuant to the procedure for book-entry transfer
described below, must be received by the Exchange Agent prior to the
respective Expiration Dates or (iii) the holder must comply with the
guaranteed delivery procedures described below. To be tendered effectively,
the Old Debentures, Letter of Transmittal and other required documents must be
received by the Exchange Agent at the address set forth below under "Exchange
Agent; Information Agent" prior to 5:00 p.m., New York City time, on the
respective Expiration Dates.
LETTERS OF TRANSMITTAL, OLD DEBENTURES AND ANY OTHER REQUIRED DOCUMENTS
SHOULD BE SENT ONLY TO THE EXCHANGE AGENT, NOT TO THE COMPANY, THE DEALER
MANAGER OR DTC.
THE METHOD OF DELIVERY OF OLD DEBENTURES AND LETTERS OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. INSTEAD OF DELIVERY BY MAIL, THE COMPANY RECOMMENDS THAT HOLDERS
USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IF SENT BY MAIL, THE COMPANY
RECOMMENDS THAT REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED AND PROPER
INSURANCE BE OBTAINED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE RESPECTIVE EXPIRATION DATES.
Any beneficial owner whose Old Debentures are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee should contact
the registered holder promptly and instruct such registered holder to tender
on such beneficial owner's behalf if such beneficial owner desires to tender
Old Debentures for exchange. If such beneficial owner wishes to tender on such
beneficial owner's own behalf, such beneficial owner must, prior to completing
and executing the applicable Letter of Transmittal (or delivering an Agent's
Message) and delivering such beneficial owner's Old Debentures, either make
appropriate arrangements to register ownership of the Old Debentures in such
beneficial owner's name or obtain a properly completed bond power from the
registered holder. The transfer of registered ownership may take considerable
time and may not be able to be completed prior to the respective Expiration
Dates.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Old Debentures tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal
or (ii) for the account of an Eligible Institution. In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, are required to be guaranteed, such guarantee must be by a financial
institution (including most banks, savings and loan associations and brokerage
houses) that is a participant in the Security Transfer Agents Medallion
Program or The New York Stock Exchange Medallion Program or the Stock Exchange
Medallion Program (any of the foregoing hereinafter referred to as an
"Eligible Institution").
If a Letter of Transmittal is signed by a person other than the registered
holder of any Old Debentures listed therein, such Old Debentures must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Old
Debentures.
29
<PAGE>
If a Letter of Transmittal or any Old Debentures or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority to so act
must be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Debentures will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and
all Old Debentures not properly tendered or any Old Debentures the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Old Debentures. The
Company's interpretation of the terms and conditions of the Exchange Offers
(including the instructions in the Letters of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Debentures must be cured within such time as
the Company shall determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of Old Debentures, neither
the Company, the Exchange Agent nor any other person shall incur any liability
for failure to give such notification. Tenders of Old Debentures will not be
deemed to have been made until such defects or irregularities have been cured
or waived. Any Old Debentures received by the Exchange Agent that the Company
determines are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holders, unless otherwise provided in a Letter of
Transmittal, as soon as practicable following the respective Expiration Dates.
BOOK-ENTRY TRANSFER
The Company understands that the Exchange Agent will make a request promptly
after the date of this Prospectus to establish an account with respect to the
Old Debentures at DTC for purposes of the Exchange Offers and, subject to the
establishment thereof, any financial institution that is a participant in
DTC's system may make book-entry delivery of Old Debentures by causing DTC to
transfer such Old Debentures into the Exchange Agent's account at DTC in
accordance with DTC's Automated Tender Offer Program ("ATOP") procedures for
such book-entry transfer.
However, the exchange for Old Debentures so tendered will only be made after
timely confirmation (a "Book-Entry Confirmation") of such book-entry transfer
of Old Debentures into the Exchange Agent's account, and timely receipt by the
Exchange Agent of an Agent's Message (as such term is defined in the next
sentence) and any other documents required by the Letters of Transmittal. The
term "Agent's Message" means a message, transmitted by DTC and received by the
Exchange Agent and forming a part of a Book-Entry Confirmation, which states
that DTC has received an express acknowledgment from a participant tendering
Old Debentures that is the subject of such Book-Entry Confirmation that such
participant has received and agrees to be bound by the terms of the Letters of
Transmittal and that the Company may enforce such agreement against such
participant.
GUARANTEED DELIVERY
If a holder desires to accept either of the Exchange Offers and time will
not permit a Letter of Transmittal or Old Debentures to reach the Exchange
Agent before the respective Expiration Dates or the procedure for book-entry
transfer cannot be completed on a timely basis, a tender may be effected if
the Exchange Agent has received at its office, prior to the respective
Expiration Dates, a letter, a telegram, or facsimile transmission from an
Eligible Institution setting forth the name and address of the tendering
holder, the name(s) in which the Old Debentures are registered and, if the Old
Debentures are held in certificated form, the certificate number of the Old
Debentures to be tendered, and stating that the tender is being made thereby
and guaranteeing that within three trading days after the date of execution of
such letter, telegram, or facsimile transmission by the Eligible Institution,
the Old Debentures, in proper form for transfer together with a properly
completed and duly executed Letter of Transmittal (and any other required
documents), or a confirmation of book-entry transfer of such Old
30
<PAGE>
Debentures into the Exchange Agent's account at DTC, will be delivered by such
Eligible Institution. Unless the Old Debentures being tendered by the above-
described method are deposited with the Exchange Agent within the time period
set forth above (accompanied or preceded by a properly completed Letter of
Transmittal and any other required documents) or a confirmation of book-entry
transfer of such Old Debentures into the Exchange Agent's account at DTC in
accordance with DTC's ATOP procedures is received, the Company may, at its
option, reject the tender. Copies of a Notice of Guaranteed Delivery which may
be used by Eligible Institutions for the purposes described in this paragraph
are available from the Exchange Agent and the Information Agent.
LETTERS OF TRANSMITTAL
The Letters of Transmittal contain, among other things, the following terms
and conditions, which are part of the Exchange Offers.
The party tendering Old Debentures for exchange (the "Transferor")
exchanges, assigns, and transfers such Old Debentures to the Company and
irrevocably constitutes and appoints the Exchange Agent as the Transferor's
agent and attorney-in-fact to cause such Old Debentures to be assigned,
transferred, and exchanged. The Transferor represents and warrants that it has
full power and authority to tender, exchange, assign, and transfer the Old
Debentures and to acquire New Debentures issuable upon the exchange of such
tendered Old Debentures, and that, when the same are accepted for exchange,
the Company will acquire good and unencumbered title to the tendered Old
Debentures, free and clear of all liens, restrictions, charges, and
encumbrances and not subject to any adverse claim. The Transferor also
warrants that it will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
exchange, assignment and transfer of tendered Old Debentures or transfer
ownership of such Old Debentures on the account books maintained by DTC. All
authority conferred by the Transferor will survive the death, bankruptcy or
incapacity of the Transferor, and every obligation of the Transferor shall be
binding upon the heirs, legal representatives, successors, assigns, executors
and administrators of such Transferor.
WITHDRAWAL OF TENDERS
Holders may withdraw their tenders of Old Debentures at any time prior to
the respective Expiration Dates.
To be effective, a written notice of withdrawal delivered by mail, hand
delivery or facsimile transmission must be timely received by the Exchange
Agent at the address set forth in a Letter of Transmittal. The method of
notification is at the risk and election of the holder. Any such notice of
withdrawal must specify (i) the Holder named in the Letter of Transmittal as
having tendered Old Debentures to be withdrawn, (ii) if Old Debentures are
held in certificated form, the certificate numbers of such Old Debentures to
be withdrawn, (iii) that such holder is withdrawing his election to have such
Old Debentures exchanged and (iv) the name of the registered holder of such
Old Debentures, and must be signed by the holder in the same manner as the
original signature on the Letter of Transmittal (including any required
signature guarantees) or be accompanied by evidence satisfactory to the
Company that the person withdrawing the tender has succeeded to the beneficial
ownership of the Old Debentures being withdrawn. The Exchange Agent will
return the properly withdrawn Old Debentures promptly following receipt of
notice of withdrawal. If Old Debentures have been tendered pursuant to the
procedure for book-entry transfer, any notice of withdrawal must specify the
name and number of the account at DTC to be credited with the withdrawn Old
Debentures and otherwise comply with DTC's procedures. All questions as to the
validity of notice of withdrawal, including time of receipt, will be
determined by the Company, and such determination will be final and binding on
all parties. Withdrawals of tenders of Old Debentures may not be rescinded and
any Old Debentures withdrawn will thereafter be deemed not validly tendered
for purposes of the Exchange Offers. Properly withdrawn Old Debentures,
however, may be retendered by following the procedures therefor described
elsewhere herein at any time prior to the respective Expiration Dates. See "--
Procedures for Tendering."
31
<PAGE>
EXCHANGE AGENT; INFORMATION AGENT
Chase Bank of Texas, National Association has been appointed as Exchange
Agent for the Exchange Offers. D.F. King & Co., Inc. has been appointed as
Information Agent for the Exchange Offers. Questions and requests for
assistance, requests for additional copies of this Prospectus or of the
Letters of Transmittal and requests for Notices of Guaranteed Delivery may be
directed to the Exchange Agent or the Information Agent addressed as follows:
The Exchange Agent:
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
By Mail By Facsimile: By Hand or Overnight Courier
(registered or certified (214) 672-5746
mail recommended)
c/o Chase Bank of Texas,
Confirm by Telephone to:
Chase Bank of Texas, National Association,
(214) 672-5678 Corporate Trust Services
1201 Main, 18th Floor
National Association,
Corporate Trust Services Dallas, Texas 75202
P.O. Box 2320 or
Dallas, Texas 75221-2320 Chase Texas Trust Company
55 Water Street, North
Building
Room 234, Windows 20 & 21
New York, New York 10041
The Information Agent:
D. F. KING & CO., INC.
CALL TOLL FREE 1-800-735-3591
77 Water Street Royex House
New York, NY 10005 Aldermanbury Square
(212) 269-5550 London, England EC2V 7HR
(Call Collect) 011-44-171-600-5005
(Call Collect)
TRADING OF NEW DEBENTURES AND OLD DEBENTURES
Application will be made to list the New Debentures for trading on the NYSE.
There can be no assurance, however, that an active public market for the New
Debentures will develop and continue after the Exchange Offers.
The Old Debentures and the Chevron Stock are listed on the NYSE. For recent
trading prices of the Old Debentures and the Chevron Stock, see "Price Range
of Old Debentures" and "Chevron Corporation--Dividend and Price Range of
Chevron Stock." See Appendix A for information regarding Chevron taken from
Chevron's Annual Report on Form 10-K for the year ended December 31, 1997 and
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, together
with Chevron's "Management's Discussion and Analysis of Financial Condition
and Results of Operations" for the quarter ended March 31, 1998.
To the extent that Old Debentures are tendered and accepted in the Exchange
Offers, the trading market for the untendered Old Debentures could be reduced
significantly, which might adversely affect the liquidity of the Old
Debentures, although the consummation of the Exchange Offers alone should not
affect the continued listing of the Old Debentures on the NYSE. Published
guidelines of the NYSE indicate that the NYSE would consider delisting an
issue of the Old Debentures if the aggregate principal amount or market value
of such issue publicly held is less than $1,000,000.
32
<PAGE>
A debt security with a small outstanding principal amount available for
trading (a smaller "float") may command a lower price than would a comparable
debt security with greater float. Therefore, the market price for untendered
Old Debentures may be affected adversely to the extent that the principal
amount of Old Debentures tendered pursuant to the Exchange Offers reduces the
float. The reduced float may also tend to make the market price of untendered
Old Debentures more volatile.
NO TRANSACTIONS OR ARRANGEMENTS
Except as described in this Prospectus, there are no contracts,
arrangements, understandings or relationships in connection with the Exchange
Offers between the Company or any of its directors or executive officers and
any person with respect to the New Debentures or the Old Debentures.
FEES AND EXPENSES; TRANSFER TAXES
The expenses of soliciting tenders of Old Debentures will be borne by the
Company. For compensation to be paid to the Dealer Manager, see "Dealer
Manager." The total expenses to be incurred by the Company in connection with
the Exchange Offers, other than fees payable to the Dealer Manager, but
including the expenses of the Dealer Manager, printing, accounting, and legal
fees, and the fees and expenses of the Exchange Agent, the Information Agent
and the Trustee are estimated to be approximately $700,000.
The Company shall pay all transfer taxes, if any, applicable to the transfer
and exchange of Old Debentures to it or its order pursuant to the Exchange
Offers. If, however, certificates representing New Debentures or Old
Debentures are not tendered or accepted for exchange, are to be delivered to,
or are to be registered or issued in the name of, any person other than the
registered holder(s) of such Old Debentures tendered, or if a transfer tax is
imposed for any reason other than the exchange of Old Debentures to the
Company or its order pursuant to the Exchange Offers, the amount of any such
transfer taxes (whether imposed on the registered holder(s) or any other
person) will be payable by the tendering holder(s). If satisfactory evidence
of payment of such taxes or exception therefrom is not submitted, the amount
of such transfer taxes will be billed directly to such tendering holder.
33
<PAGE>
DESCRIPTION OF NEW DEBENTURES
GENERAL
The New 4.90% Debentures will be a series of Pennzoil's debt securities (the
"Debt Securities") and will be issued under the Indenture dated as of December
15, 1992 (the "Indenture") between Pennzoil and Chase Bank of Texas, National
Association (formerly known as Texas Commerce Bank National Association), as
trustee (the "Trustee"), and the Third Supplemental Indenture to the Indenture
("Third Supplemental Indenture") between Pennzoil and Chase Bank of Texas,
National Association, as trustee. The New 4.95% Debentures will be a series of
Pennzoil's Debt Securities and will be issued under the Indenture and the
Fourth Supplemental Indenture to the Indenture ("Fourth Supplemental
Indenture" and, together with the Third Supplemental Indenture, the
"Supplemental Indenture") between Pennzoil and Chase Bank of Texas, National
Association, as trustee. The 6 1/2% Debentures and the 4 3/4% Debentures have
also been issued under the Indenture. The Indenture does not limit the
aggregate principal amount of securities which can be issued thereunder and
provides that securities may be issued from time to time thereunder in one or
more series, each in an aggregate principal amount authorized by Pennzoil
prior to issuance. The Indenture does not limit the amount of other unsecured
indebtedness or Debt Securities that may be issued by Pennzoil. The italicized
references below refer to the section numbers of the Indenture or the
Supplemental Indentures.
The principal amount of New 4.90% Debentures issued in exchange for 6 1/2%
Debentures will be equal to the product of (i) 103% of the Average Chevron
Stock Price and (ii) the aggregate number of shares of Chevron Stock for which
the Old Debentures validly tendered by holders and accepted by the Company for
exchange are currently exchangeable as of the 6 1/2% Acceptance Date (subject
to the payment of cash in lieu of the issuance of a Fractional New 4.90%
Debenture). The principal amount of New 4.95% Debentures to be issued in
exchange for 4 3/4% Debentures will be equal to the product of (i) 103% of the
Average Chevron Stock Price and (ii) the aggregate number of shares of Chevron
Stock for which the 4 3/4% Debentures validly tendered by holders and accepted
by the Company for exchange are currently exchangeable as of the 4 3/4%
Acceptance Date (subject to the payment of cash in lieu of the issuance of a
Fractional New 4.95% Debenture). On June 26, 1998, the reported closing price
of the Chevron Common Stock on the NYSE was $83 5/8 per share.
The Company will issue the New Debentures on the next calendar day following
the respective Acceptance Dates. The New Debentures will mature on August 15,
2008 and will bear interest from the date of issuance at the rate per annum
determined as described in the following paragraph, payable semiannually on
each February 15 and August 15, commencing February 15, 1999 to the holders of
the New Debentures at the close of business on the February 1 next preceding
such February 15 or the August 1 next preceding such August 15, as the case
may be.
The New Debentures will constitute unsecured senior debt obligations of
Pennzoil ranking pari passu with all other present and future unsecured
general obligations of Pennzoil that are not expressly subordinated to senior
indebtedness. Pennzoil currently conducts substantially all of its operations
through subsidiaries, and the holders of the New Debentures will have a junior
position to any creditors of Pennzoil's subsidiaries. As of March 31, 1998,
the aggregate outstanding debt of Pennzoil's subsidiaries was approximately
$63 million, and, on a pro forma basis after giving effect to the Spin-Off,
such subsidiary debt will be zero.
The New Debentures, like the Old Debentures, will not benefit from any
covenant or other provision that would afford holders of New Debentures
special protection in the event of a highly leveraged transaction involving
Pennzoil, except for any such protection provided by the Indenture as
described below under "--Limitation of Liens." This absence of such special
protection is less significant in the case of the Old Debentures, because the
market price of Chevron Stock has increased since the issuance of the Old
Debentures and, as a result, the Old Debentures are currently exchangeable for
shares of Chevron Stock at equivalent exchange prices ($42 1/16 per share for
the 6 1/2% Debentures and $58 13/16 per share for the 4 3/4% Debentures) that
are less than the current market price for Chevron Stock. (On June 26, 1998,
the reported closing price of Chevron Stock on the NYSE Composite Tape was $83
5/8 per share.) The equivalent exchange price for the New Debentures will
34
<PAGE>
initially be in excess of the market price for Chevron Stock and, absent an
increase in such market price, the exchange rights of holders of New
Debentures would offer less protection against a highly leveraged transaction.
FORM OF DEBENTURES
The New Debentures will be issued only in registered form.
BOOK-ENTRY ISSUANCE ONLY
Each issue of the New Debentures will be represented by one or more fully
registered global securities (collectively, the "Global Debentures"). The
Global Debentures will be deposited upon issuance with a custodian for DTC and
registered in the name of DTC or a nominee of DTC (the "Global Debenture
Registered Owner"). Except as set forth below, the Global Debentures may be
transferred, in whole and not in part, only to another nominee of DTC or to a
successor of DTC or its nominee.
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between the Participants through electronic
book-entry changes in accounts of its Participants. The Participants include
securities brokers and dealers (including the Dealer Manager), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may
beneficially own securities held by or on behalf of DTC only through the
Participants or the Indirect Participants. The ownership interest and transfer
of ownership interest of each actual purchaser of each security held by or on
behalf of DTC are recorded on the records of the Participants and Indirect
Participants.
DTC has also advised the Company that pursuant to procedures established by
it (i) upon deposit of the Global Debentures, DTC will credit the accounts of
Participants designated by the Exchange Agent with portions of the face amount
of the Global Debentures and (ii) ownership of such interests in the Global
Debentures will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect Participants (with
respect to other owners of beneficial interests in the Global Debentures). The
laws of some states require that certain persons take physical delivery in
definitive form of securities that they own. Such laws may impair the ability
to transfer beneficial interests in a Global Debentures.
Except as described below, owners of interests in the Global Debentures will
not have New Debentures registered in their names, will not receive physical
delivery of New Debentures in definitive form and will not be considered the
registered owners or holders thereof under the Indenture for any purpose. As
long as DTC, or its nominee, is the registered owner of the Global Debentures,
DTC, or its nominee, as the case may be, will be considered the sole owner and
holder of the New Debentures presented by the Global Debentures for all
purposes under the Indenture and the New Debentures.
Payment of any interest on the New Debentures registered in the name of the
Global Debentures Registered Owner will be payable by the Trustee to the
Global Debentures Registered Owner in its capacity as the registered holder
under the Indenture. Under the terms of the Indenture, the Company and the
Trustee will treat the persons in whose names the New Debentures, including
the Global Debentures, are registered as the owners thereof for the purpose of
receiving such payments and for any and all other purposes whatsoever.
(Section 203 of the Indenture). Consequently, none of the Company, the Trustee
or any agent of the Company or the Trustee has or will have any responsibility
or liability for (i) any aspect of DTC's records or any Participant's records
relating to or payments made on account of beneficial ownership interests in
the Global Debenture, or for maintaining, supervising or reviewing any of
DTC's records or any Participant's records relating to the beneficial
ownership interests in the Global Debentures or (ii) any other matter relating
to the actions and practices of DTC or any of
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<PAGE>
its Participants. DTC has advised the Company that its current practice, upon
receipt of any payment in respect of securities such as the New Debentures, is
to credit the accounts of the relevant Participants with the payment on the
payment date, in amounts proportionate to their respective holdings in face
amount of beneficial interests in the relevant security as shown on the
records of DTC, unless DTC has reason to believe it will not receive payment
on such payment date. Payments by the Participants and the Indirect
Participants to the beneficial owners of New Debentures will be governed by
standing instructions and customary practices and will be the responsibility
of the Participants or the Indirect Participants and will not be the
responsibility of DTC, the Trustee or the Company. Neither the Company nor the
Trustee will be liable for any delay by DTC or any of its Participants in
identifying the beneficial owners of the New Debentures, and the Company and
the Trustee may conclusively rely on and will be protected in relying on
instructions of the Global Debentures Registered Owner for all purposes.
The Global Debentures are exchangeable for definitive New Debentures in
registered certificated form only if (i) DTC (a) notifies the Company that it
is unwilling or unable to continue as the depositary for the Global Debenture
and the Company thereupon fails to appoint a successor depositary or (b) has
ceased to be a clearing agency registered under the Exchange Act, (ii) the
Company, at its option, notifies the Trustee in writing that it elects to
cause the issuance of the New Debentures in definitive registered certificated
form or (iii) there shall have occurred and be continuing an Event of Default
(as defined in the Indenture) or any event which after notice or lapse of time
or both would be an Event of Default with respect to the New Debentures. Upon
issuance of New Debentures in definitive registered certificated form, the
Trustee is required to register the securities in the name of, and cause the
New Debentures to be delivered to, the person or persons (or the nominee
thereof) identified as the beneficial owners as DTC shall direct.
EXCHANGE RIGHTS
A holder will have the option to exchange the New Debentures at any time
prior to maturity, unless previously redeemed, for shares of Chevron Stock
owned by Pennzoil. Subject to adjustment in certain events, the exchange rate
for the New Debentures will be 0.8230 shares of Chevron Stock for each share
of Chevron Stock into which exchanged Old Debentures were exchangeable as of
the respective Acceptance Dates under Existing Exchange Rights (excluding
shares of Chevron Stock exchangeable for that portion of Old Debentures for
which cash is paid in lieu of the issuance of a Fractional New Debenture),
subject to adjustment in certain events as set forth in the Supplemental
Indenture such as (i) a stock dividend on the Chevron Stock, (ii) a
subdivision or combination of Chevron Stock into a greater or lesser number of
shares, (iii) a reclassification of Chevron Stock, or (iv) a consolidation or
merger of Chevron where Chevron Stock is converted into other securities or
property, or a sale or transfer of all or substantially all assets of Chevron
(if holders of Chevron Stock receive other securities or property in exchange
for Chevron Stock), or a dissolution, liquidation or winding up of Chevron.
Such adjustments are designed to proportionately adjust the economic benefits
of the exchange rights to holders of New Debentures in the event of the
extraordinary circumstances described above. In the event the New Debentures
are called for redemption, the exchange rights will terminate at the close of
business on the date immediately prior to the date of redemption. (Section 201
of the Supplemental Indentures).
Prior to and in connection with the issuance of the New Debentures, Pennzoil
will deposit the number of shares of Chevron Stock deliverable in exchange for
the New Debentures with Chase Bank of Texas, National Association, who will
act as exchange agent for holders of New Debentures (the "New Debenture
Exchange Agent") on behalf of Pennzoil. Pennzoil will thereafter deposit with
the New Debenture Exchange Agent any cash and other property deliverable in
exchange for the New Debentures. Pennzoil will not be permitted to pledge,
mortgage, hypothecate or grant a security interest in, or permit any mortgage,
pledge, security interest or other lien upon, the Chevron Stock, cash and
other property deliverable in exchange for the New Debentures (collectively,
"Exchange Property"). The deposit arrangements with the New Debenture Exchange
Agent will terminate at such time as the right to exchange New Debentures with
the New Debenture Exchange Agent shall have expired pursuant to the
Supplemental Indentures.
In order to exercise the right of exchange, the holder of any New Debenture
must surrender such New Debenture to the New Debenture Exchange Agent at its
office maintained for such purpose in Dallas, Texas.
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<PAGE>
Each New Debenture to be surrendered must be accompanied by written notice to
Pennzoil and the New Debenture Exchange Agent that the holder elects to
exchange such New Debenture. Delivery of the certificates for Chevron Stock or
any other Exchange Property may be delayed at the request of Pennzoil in order
to effectuate the calculation of the adjustments of the Chevron Stock or other
Exchange Property to obtain any certificate representing securities to be
delivered, to complete any reapportionment of the Chevron Stock or other
Exchange Property which is required by the Indenture or to comply with any
applicable law. (Section 202 of the Supplemental Indentures). No fractional
shares will be delivered on any exchange of New Debentures, and, in lieu
thereof, a cash adjustment based on the market price of the Chevron Stock or
other Exchange Property will be paid, such market price to be determined as of
the date of receipt by Pennzoil of the notice of exchange relating to such New
Debentures (or, if such date is not a business day, on the business day next
preceding such date). (Section 203 of the Supplemental Indentures).
If Pennzoil has called the New Debentures for redemption, holders of New
Debentures exercising the right of exchange will receive accrued and unpaid
interest on the New Debentures through the date of exchange. If the New
Debentures have not been called for redemption, holders of New Debentures
exercising the right of exchange will not receive any accrued and unpaid
interest on the New Debentures. (Section 202 of the Supplemental Indentures).
In lieu of delivering certificates representing Chevron Stock in exchange
for any New Debentures, Pennzoil may pay to the holder surrendering such New
Debentures an amount in cash equal to the market price of the Chevron Stock or
other Exchange Property for which such New Debentures are exchangeable,
determined as of the date of receipt by Pennzoil of the notice of exchange
relating to such New Debentures (or, if such date is not a business day, on
the business day next preceding such date). Prior to so directing the New
Debenture Exchange Agent to make any such cash payment, Pennzoil shall deposit
with the New Debenture Exchange Agent the cash so payable. (Section 216 of the
Supplemental Indentures).
Pennzoil will be entitled to all cash dividends with respect to the Chevron
Stock or other Exchange Property, other than dividends paid pursuant to a plan
of liquidation or partial liquidation of Chevron, recapitalization or
restructuring of Chevron or other extraordinary cash dividends. Pennzoil will
also be entitled to all interest payments on any debt securities held for
exchange by Pennzoil which are issued in exchange for Chevron Stock or other
Exchange Property pursuant to any merger or consolidation of Chevron or in
connection with any sale of all or substantially all the assets of Chevron.
(Section 205 of the Supplemental Indentures).
If Chevron should issue any Chevron Stock in subdivision or by way of stock
dividend, the exchange rate will be proportionately increased, and, if Chevron
shall effect a combination of Chevron Stock, the exchange rate will be
proportionately reduced, subject in each case to adjustments for tax
consequences, if any. (Section 204 of the Supplemental Indentures).
If Chevron should make any distribution of cash, securities or other
property with respect to the Chevron Stock or other Exchange Property (other
than cash dividends to which Pennzoil is entitled as described above, the
distributions described in the preceding paragraph or any securities or other
property received in a merger or consolidation of Chevron or in connection
with any sale of all or substantially all the assets of Chevron as described
in the next paragraph) or if Chevron grants transferable subscription rights,
options, warrants or other similar rights to Pennzoil in respect of the
Chevron Stock or other Exchange Property, Pennzoil will cause all such
securities, other property and rights to be deposited with the applicable
Exchange Agent and will direct the applicable Exchange Agent to sell all such
securities and other property and all such rights for cash, except any such
securities or property that are convertible, without payment of any
consideration, into Chevron Stock and which rights do not expire before the
retirement of such securities or other property. Such Exchange Agent will
apply the proceeds first to the payment of any taxes incurred or deemed
incurred by Pennzoil or such Exchange Agent on such distribution or such grant
of rights and incurred or deemed incurred by Pennzoil or such Exchange Agent
on the subsequent sale of the securities or other property distributed or
rights granted. The balance of the cash proceeds will be held by such Exchange
Agent for distribution pro rata with the Chevron Stock or other Exchange
Property. In the event that a distribution or grant of cash, securities or
other property on Exchange Property shall be effected as contemplated by this
paragraph, a notice stating that such distribution or grant has
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<PAGE>
occurred and setting forth the additional cash, securities or other property
distributed on the Exchange Property shall as soon as practicable be mailed by
or on behalf of Pennzoil to the holders of New Debentures at their addresses
as they appear in the Security Register. (Section 205 of the Supplemental
Indentures).
In the case of any merger or consolidation of Chevron with or into any other
person that results in shares of Chevron Stock, as constituted prior to the
consummation of such transaction, being converted into other securities and/or
property, including cash, or any sale of all or substantially all the assets
of Chevron (if in connection with such sale or transfer holders of Chevron
Stock receive other securities and/or property, including cash, in exchange
for their shares of Chevron Stock), the holder of any New Debenture
surrendered for exchange thereafter will, subject to the following paragraph,
be entitled to receive the kind and amount of shares of stock and other
securities and property receivable upon or in connection with such transaction
by a holder of the number of shares of Chevron Stock or other Exchange
Property for which such New Debenture might have been exchanged immediately
prior to such transaction, as well as a pro rata share of any cash held for
exchange by Pennzoil in accordance with the preceding paragraph. (Section 211
of the Supplemental Indentures).
Upon the occurrence of any such merger, consolidation, sale of all or
substantially all the assets of Chevron described in the preceding paragraph
or any voluntary or involuntary dissolution, liquidation or winding up of
Chevron, or any stock dividend, subdivision, combination or reclassification
of shares of Chevron Stock or other Exchange Property, which shall be taxable
to Pennzoil or the New Debenture Exchange Agent, or upon the happening of any
other event with respect to the Chevron Stock or other Exchange Property,
which is taxable or treated as being taxable to Pennzoil or the New Debenture
Exchange Agent, the New Debenture Exchange Agent will deliver cash which it
holds for exchange (including cash received in such transaction) to Pennzoil
or to itself for payment of the taxes arising from such transaction. If the
cash held for exchange is insufficient to pay the amount of such taxes, the
New Debenture Exchange Agent will sell such of the shares of Chevron Stock or
other Exchange Property as may be necessary to pay the amount of the
insufficiency and any taxes payable by Pennzoil or the New Debenture Exchange
Agent arising from such sale. The remaining shares of Chevron Stock or other
Exchange Property will be held by the New Debenture Exchange Agent for
distribution pro rata to holders requesting exchange of their New Debentures.
(Section 215 of the Supplemental Indentures).
From time to time, Pennzoil may require the New Debenture Exchange Agent to
segregate such property as Pennzoil determines may be necessary for Pennzoil
or the New Debenture Exchange Agent to pay taxes with respect to the
transactions or events described above, subject to the determination of
taxability (and any expenses incurred in determining taxability), and such
property (or any portion thereof) shall be deliverable to holders of New
Debentures only after determination that such withholding is not necessary for
the payment of such taxes and after deducting the expenses incurred in
connection with such determination. (Section 215 of the Supplemental
Indentures).
If Chevron grants nontransferable subscription rights, options, warrants or
similar rights with respect to the Exchange Property, Pennzoil will, if
otherwise lawful, deliver such rights pro rata to the New Debenture Exchange
Agent. Pennzoil and the New Debenture Exchange Agent shall cause such rights
to be distributed to the holders of the New Debentures shown in the Security
Register. (Section 205 of the Supplemental Indentures).
Pennzoil is required to give to holders of New Debentures notice of certain
dividends on the Chevron Stock deliverable upon exchange of New Debentures,
the granting of subscription rights, options, warrants or other similar rights
to holders of Chevron Stock, any reclassification of Chevron Stock (other than
a subdivision or combination of outstanding shares of Chevron Stock), certain
mergers involving Chevron, the sale of all or substantially all of the assets
of Chevron and the dissolution, liquidation or winding up of Chevron. (Section
206 of the Supplemental Indentures).
Any cash held by the New Debenture Exchange Agent that is deliverable upon
exchange of New Debentures will be invested by the New Debenture Exchange
Agent at the direction of Pennzoil in U.S. Government Obligations with
maturity dates of twelve months or less. Any interest or gain on such
investments will be for the benefit of Pennzoil, and Pennzoil will be
responsible for any losses on such investments. To the extent New Debentures
are redeemed prior to exchange, Pennzoil will be entitled to receive from the
New Debenture Exchange Agent such number of shares of Chevron Stock, other
Exchange Property and such amount of cash, if
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<PAGE>
any, held by the New Debenture Exchange Agent for exchange as exceeds the
number of shares of Chevron Stock or other Exchange Property required to be
held by the New Debenture Exchange Agent for the exchange of all New
Debentures remaining then outstanding. (Section 205 of the Supplemental
Indentures).
In the event of a tender offer or exchange offer for any class of securities
included within the Exchange Property (i) if Pennzoil owns shares of such
class which are not subject to the Exchange Agreement, Pennzoil will cause the
New Debenture Exchange Agent to tender such shares of such class in the same
proportion that Pennzoil tenders its securities in such class which are not
subject to the Exchange Agreement and (ii) if Pennzoil does not own securities
of a class which are subject to the Exchange Agreement, Pennzoil may, at its
option and in its sole discretion, elect to cause the New Debenture Exchange
Agent to tender all or any portion or none of such class of security included
within the Exchange Property held by the New Debenture Exchange Agent. The
proceeds of the sale of any such Exchange Property pursuant to any such tender
or exchange offer will be held by the New Debenture Exchange Agent for the
benefit of holders as provided in the Supplemental Indenture. As a result of
the receipt by the New Debenture Exchange Agent of cash or other property upon
the tender or exchange of an Exchange Property, holders will not participate
in any subsequent appreciation or depreciation in the market price of such
Exchange Property tendered or exchanged upon any subsequent exchange of New
Debentures. (Section 212 of the Supplemental Indentures).
The right of a holder to exchange his New Debentures for Chevron Stock or
other Exchange Property could be adversely affected in the event of the
bankruptcy, insolvency or liquidation of Pennzoil. In such event, the Chevron
Stock or other Exchange Property could be assets of Pennzoil subject to the
claims of its general creditors.
REPURCHASE RIGHTS
The New Debenture Exchange Agent will act as agent for Pennzoil in
connection with Pennzoil's exchange obligations under the Supplemental
Indentures and will not act as escrow agents for the benefit of holders of New
Debentures. Accordingly, Pennzoil may at any time obtain from the New
Debenture Exchange Agent or otherwise authorize or direct the New Debenture
Exchange Agent to release all or a part of the Chevron Stock or other Exchange
Property. In the event that Pennzoil obtains or otherwise releases any Chevron
Stock or other Exchange Property in any manner otherwise than as contemplated
by the Supplemental Indenture, each holder of New Debentures will have the
right ("Repurchase Right"), at such holder's option, to require Pennzoil to
repurchase all of such holder's New Debentures, or a portion thereof which is
$1,000 or any integral multiple thereof, in the manner and at the price
described below. (Section 217 of the Supplemental Indentures).
Promptly (and in any event within 10 days) after Pennzoil has obtained or
released any Exchange Property in any manner otherwise than as contemplated by
the Supplemental Indentures, the New Debenture Exchange Agent will mail to all
holders of record of the New Debentures a notice thereof and the Repurchase
Right arising as a result thereof (a "Repurchase Notice"). To exercise the
Repurchase Right, a holder of New Debentures must deliver on or before the
15th day after the date of the Repurchase Notice irrevocable written notice to
the New Debenture Exchange Agent of the holder's exercise of such right,
together with the New Debentures with respect to which the right is being
exercised, duly endorsed for transfer.
On the date ("Repurchase Date") that is 30 days after the date of the
Repurchase Notice, Pennzoil will be required to repurchase all New Debentures
in respect of which the Repurchase Right has been exercised at the following
price: (i) if the date on which Pennzoil's obtaining or release of Exchange
Property in a manner not contemplated by the Supplemental Indenture first
occurs (the "Triggering Date") is before August 15, 2000, the product of (1)
120% and (2) the greater of the principal amount at maturity of such New
Debentures (plus accrued and unpaid interest, if any, to the Repurchase Date)
and the market price of the Exchange Property deliverable in exchange for such
New Debentures on the Triggering Date (or if such date is not a business day,
on the next succeeding business day); and (ii) if the Triggering Date occurs
on or after August 15, 2000, the greater of (1) the redemption price as
specified under "--Redemption Provisions" on the Triggering Date and (2) the
market price of the Exchange Property deliverable in exchange for such New
Debentures on the Triggering Date (or if such date is not a business day, on
the next succeeding business day).
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The obligation of Pennzoil to deliver Exchange Property (or cash in lieu
thereof) in exchange for New Debentures shall survive and continue to apply in
full force and effect following and notwithstanding the occurrence of any
event triggering a Repurchase Right. Failure by Pennzoil to exchange New
Debentures in accordance with the Supplemental Indentures or to repurchase New
Debentures upon exercise of a Repurchase Right will constitute an Event of
Default with respect to the New Debentures, and holders of New Debentures will
have the remedies provided for in the Indenture, including acceleration of the
indebtedness evidenced by the New Debentures, in the event of any such
failure.
The exchange obligations of Pennzoil may not be assigned or otherwise
transferred by Pennzoil except in accordance with a transfer of the
indebtedness evidenced by the New Debentures in the manner permitted by the
Indenture.
If an offer is made to repurchase New Debentures in connection with a
Repurchase Right, Pennzoil will comply with all tender offer rules, including
but not limited to Sections 13(e) and 14(e) under the Exchange Act and Rules
l3e-1 and l4e-1 thereunder, to the extent applicable to such offer.
REDEMPTION PROVISIONS
Subject to the redemption provisions described below, the Company may not
redeem the New Debentures prior to August 15, 2000. Thereafter, the Company
has the option to redeem all or part of the New Debentures, on not less than
30 nor more than 60 days' notice by mail to the holders of New Debentures at
their addresses appearing on the Security Register, at the following
redemption prices (expressed as a percentage of the principal amount at
maturity) if redeemed during the 12-month period beginning August 15 of the
following years:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2000..................................................... 104.00%
2001..................................................... 103.50%
2002..................................................... 103.00%
2003..................................................... 102.50%
2004..................................................... 102.00%
2005..................................................... 101.50%
2006..................................................... 101.00%
2007..................................................... 100.50%
</TABLE>
in each case together with accrued and unpaid interest to the redemption date;
provided, however, if any interest payment date on New Debentures is on or
prior to the redemption date, interest shall be payable to the holders of such
New Debentures, registered as such, at the close of business on the relevant
Record Dates as provided in the Indenture. There is no sinking fund applicable
to the New Debentures.
EVENTS OF DEFAULT
Unless otherwise provided with respect to any series of Debt Securities, the
following are Events of Default under the Indenture with respect to the Debt
Securities of such series issued under such Indenture (which includes the New
Debentures): (a) failure to pay principal of (or premium, if any, on) any Debt
Security of such series when due; (b) failure to pay any interest on any Debt
Security of such series when due, continued for 60 days; (c) failure to
deposit any mandatory sinking fund payment, when due, in respect of the Debt
Securities of such series, continued for 60 days; (d) failure to perform any
other covenant of Pennzoil in the Indenture (other than a covenant included in
the applicable Indenture for the benefit of a series of Debt Securities other
than such series), continued for 90 days after written notice as provided in
the applicable Indenture; (e) certain events of bankruptcy, insolvency or
reorganization; and (f) any other Event of Default as may be specified with
respect to Debt Securities of such series. (Section 501 of the Indenture). If
an Event of Default with respect to any outstanding series of Debt Securities
occurs and is continuing, either the Trustee or the holders of at least 25% in
principal amount of the outstanding Debt Securities of such series (in the
case of an Event of Default described
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in clause (a), (b), (c) or (f) above) or at least 25% in principal amount of
all outstanding Debt Securities under the Indenture (in the case of other
Events of Default) may declare the principal amount of all the Debt Securities
of the applicable series (or of all outstanding Debt Securities under the
Indenture, as the case may be) to be due and payable immediately. At any time
after a declaration of acceleration has been made, but before a judgment has
been obtained, the holders of a majority in principal amount of the
outstanding Debt Securities of such series (or of all outstanding Debt
Securities under the Indenture, as the case may be) may, under certain
circumstances, rescind and annul such acceleration. (Section 502 of the
Indenture).
The Indenture provides that the Trustee will, within 90 days after the
occurrence of a default in respect of any series of Debt Securities, give to
the holders of the Debt Securities of such series notice of all uncured and
unwaived defaults known to it; provided, however, that except in the case of a
default in the payment of the principal of (or premium, if any) or any
interest on, or any sinking fund installment with respect to, any Debt
Securities of such series, the Trustee will be protected in withholding such
notice if it in good faith determines that the withholding of such notice is
in the interest of the holders of the Debt Securities of such series; and
provided, further, that such notice shall not be given until at least 60 days
after the occurrence of a default in the performance, or breach, of any
covenant or warranty of Pennzoil under the Indenture other than for the
payment of the principal of (or premium, if any) or any interest on, or any
sinking fund installment with respect to, any Debt Securities of such series.
For the purpose of this provision, "default" with respect to Debt Securities
of any series means any event which is, or after notice or lapse of time, or
both, would become, an Event of Default with respect to the Debt Securities of
such series. (Section 602 of the Indenture).
The holders of a majority in principal amount of the outstanding Debt
Securities of any series (or, in certain cases, all outstanding Debt
Securities under the Indenture) have the right, subject to certain
limitations, to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on the Trustee with respect to the securities of such series (or of
all outstanding securities under the Indenture). (Section 512 of the
Indenture). The Indenture provides that in case an Event of Default shall
occur and be continuing, the Trustee shall exercise such of its rights and
powers under the Indenture and use the same degree of care and skill in their
exercise as a prudent man would exercise or use under the circumstances in the
conduct of his own affairs. (Section 610 of the Indenture). Subject to such
provisions, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request of any of the holders of
the securities unless they shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which might
be incurred by it in compliance with such request. (Section 603 of the
Indenture).
The holders of a majority in principal amount of the outstanding Debt
Securities of any series (or, in certain cases, all outstanding Debt
Securities under the Indenture) may on behalf of the holders of all Debt
Securities of such series (or of all outstanding Debt Securities under the
Indenture) waive any past default under the Indenture, except a default in the
payment of the principal of (or premium, if any) or interest on any Debt
Security or in respect of a provision which under the Indenture cannot be
modified or amended without the consent of the holder of each outstanding Debt
Security affected. (Section 513 of the Indenture). The holders of a majority
in principal amount of the outstanding Debt Securities affected thereby may on
behalf of the holders of all such Debt Securities waive compliance by Pennzoil
with certain restrictive provisions of the Indentures. (Section 1009 of the
Indenture).
Pennzoil is required to furnish to the Trustee annually a statement as to
the performance by Pennzoil of certain of its obligations under the Indenture
and as to any default in such performance. (Section 1008 of the Indenture).
MODIFICATION
Modifications and amendments of the Indenture may be made by Pennzoil and
the Trustee with the consent of the holders of a majority in principal amount
of the outstanding Debt Securities under the Indenture affected thereby;
provided, however, that no such modification or amendment may, without the
consent of the holder of
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each outstanding Debt Security affected thereby, (a) change the stated
maturity date of the principal of, or any installment of interest on, any Debt
Security, (b) reduce the principal amount of, or the premium (if any) or
interest on, any Debt Security, (c) change the place or currency, currencies,
or currency unit or units or payment of principal of, or premium (if any) or
interest on, any Debt Security, (d) impair the right to institute suit for the
enforcement of any payment on or with respect to any Debt Security or (e)
reduce the percentage in principal amount of outstanding securities the
consent of whose holders is required for modification or amendment of the
Indenture or for waiver of compliance with certain provisions of the Indenture
or for waiver of certain defaults. (Section 902 of the Indenture).
The Indenture provides that Pennzoil and the Trustee may, without the
consent of any holders of Debt Securities, enter into supplemental indentures
for the purposes, among other things, of adding to Pennzoil's covenants,
adding additional Events of Default, establishing the form or terms of Debt
Securities or curing ambiguities or inconsistencies in the Indenture, provided
such action to cure ambiguities or inconsistencies shall not adversely affect
the interests of the holders of the Debt Securities in any material respect.
CONSOLIDATION, MERGER AND SALE OF ASSETS
Pennzoil, without the consent of any holders of outstanding Debt Securities,
may consolidate with or merge into, or convey, transfer or lease its assets
substantially as an entirety to, any person, provided that the person formed
by such consolidation or into which Pennzoil is merged or which acquired or
leases the assets of Pennzoil substantially as an entirety is a corporation,
partnership or trust organized under the laws of any United States
jurisdiction and assumes by supplemental indenture Pennzoil's obligations on
the Debt Securities and under the Indenture, that after giving effect to the
transaction, no Event of Default, and no event which, after notice or lapse of
time or both, would become an Event of Default, shall have occurred and be
continuing, and that certain other conditions are met. Upon compliance with
these provisions by a successor person, Pennzoil will (except in the case of a
lease) be relieved of its obligations under the Indenture and the Debt
Securities. (Article Eight of the Indenture).
DISCHARGE AND DEFEASANCE
Pennzoil may terminate its obligations under the Indenture, other than its
obligation to pay the principal of (and premium, if any) and interest on the
Debt Securities of any series and certain other obligations, if it (i)
irrevocably deposits or causes to be irrevocably deposited with the Trustee as
trust funds money or U.S. Government Obligations maturing as to principal and
interest sufficient to pay the principal of, any interest on, and any
mandatory sinking funds in respect of, all outstanding Debt Securities of such
series on the stated maturity of such payments or on any redemption date and
(ii) complies with any additional conditions specified to be applicable with
respect to the covenant defeasance of Debt Securities of such series. (Section
401 of the Indenture). The terms of the New Debentures provide an additional
condition that Pennzoil will be permitted to terminate certain of its
obligations under the Indenture pursuant to the Indenture's covenant
defeasance provisions only if Pennzoil delivers to the Trustee an opinion of
counsel that covenant defeasance will not cause holders of the New Debentures
to recognize income, gain or loss for United States federal income tax
purposes. (Section 105 of the Supplemental Indentures).
The terms of any series of Debt Securities may also provide for legal
defeasance pursuant to the Indenture. In such case, if Pennzoil (i)
irrevocably deposits or causes to be irrevocably deposited money or U.S.
Government Obligations as described above, (ii) makes a request to the Trustee
to be discharged from its obligations on the Debt Securities of such series
and (iii) complies with any additional conditions specified to be applicable
with respect to legal defeasance of Debt Securities of such series, then
Pennzoil shall be deemed to have paid and discharged the entire indebtedness
on all the outstanding Debt Securities of such series and the obligations of
Pennzoil under the Indenture and the Debt Securities of such series to pay the
principal of (and premium, if any) and interest on the Debt Securities of such
series shall cease, terminate and be completely discharged, and the holders
thereof shall thereafter be entitled only to payment out of the money or U.S.
Government Obligations deposited with the Trustee as aforesaid, unless
Pennzoil's obligations are revived and
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reinstated because the Trustee is unable to apply such trust fund by reason of
any legal proceeding, order or judgment. (Sections 403 and 404 of the
Indenture). The terms of the New Debentures provide for legal defeasance.
Legal defeasance is permitted under the terms of the New Debentures only on
the additional condition that Pennzoil shall have received from, or there
shall have been published by, the United States Internal Revenue Service a
ruling to the effect that legal defeasance will not cause holders of the New
Debentures to recognize income, gain or loss for United States federal income
tax purposes. (Section 105 of the Supplemental Indentures).
Neither legal defeasance nor covenant defeasance will affect the then
existing rights of a holder of New Debentures to exchange for shares of
Chevron Stock owned by Pennzoil.
"U.S. Government Obligations" is defined in the Indenture as direct
noncallable obligations of, or noncallable obligations the payment of
principal of and interest on which is guaranteed by, the United States of
America, or to the payment of which obligations or guarantees the full faith
and credit of the United States of America is pledged, or beneficial interests
in a trust the corpus of which consists exclusively of money or such
obligations or a combination thereof.
REGISTRATION AND TRANSFER
The New Debentures may be presented for registration of transfer (with the
form of transfer endorsed thereon duly executed), at the office of the
Security Registrar or at the office of any transfer agent designated by
Pennzoil for such purpose with respect to the New Debentures, without service
charge and upon payment of any taxes and other governmental charges as
described in the Indenture. Such transfer or exchange will be effected upon
the Security Registrar or such transfer agent, as the case may be, being
satisfied with the documents of title and identity of the Person making the
request. Pennzoil has appointed the Trustee as Security Registrar. (Section
305 of the Indenture). No service charge will be made for any registration of
transfer or exchange of the Debt Securities, but Pennzoil may require payment
of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith. (Section 305 of the Indenture). Pennzoil may at any time
designate additional transfer agents with respect to any series of securities.
(Section 1002 of the Indenture).
In the event of any redemption in part, Pennzoil shall not be required to
(i) issue, register the transfer of or exchange during a period beginning at
the opening of business 15 days prior to the selection for redemption and
ending on the close of business on the day of mailing of the relevant notice
of redemption or (ii) register the transfer of or exchange any New Debentures,
or portion thereof, called for redemption, except the unredeemed portion of
any New Debentures being redeemed in part. (Section 305 of the Indenture).
PAYMENT AND PAYING AGENTS
Payment of principal of and interest on the New Debentures will be made in
the designated currency or currency unit at the office of such paying agent or
paying agents as Pennzoil may designate from time to time (the "Paying
Agents"), except that at the option of Pennzoil payment of any interest may be
made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register. Payment of any installment of
interest on the New Debentures will be made to the person in whose name such
New Debentures are registered at the close of business on the regular record
date for such interest. (Section 307 of the Indenture).
The Corporate Trust Office of the Trustee in the Borough of Manhattan, The
City of New York will be designated as a Paying Agent for Pennzoil for
payments with respect to the New Debentures. Pennzoil may at any time
designate additional Paying Agents or rescind the designation of any Paying
Agent or approve a change in the office through which any Paying Agent acts,
except that Pennzoil will be required to maintain a Paying Agent in each Place
of Payment for such series and Pennzoil will be required to maintain a Paying
Agent in the Borough of Manhattan, The City of New York for principal payments
with respect to the New Debentures. (Section 1002 of the Indenture).
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All moneys paid by Pennzoil to a Paying Agent for the payment of principal
of and any premium or interest on any security which remain unclaimed at the
end of three years after such principal, premium or interest shall have become
due and payable will (subject to applicable escheat laws) be repaid to
Pennzoil and the holder of such security or any coupon will thereafter look
only to Pennzoil for payment thereof. (Section 1003 of the Indenture).
MEETINGS
The Indenture contains provisions for convening meetings of the holders of
Debt Securities of a series. (Section 1301 of the Indenture). A meeting may be
called at any time by the Trustee, and also, upon request, by the Company or
the holders of at least 10% in principal amount of the outstanding Debt
Securities of such series, in any such case upon notice given as described
under "--Notices" below. (Section 1302 of the Indenture). Except for any
consent that must be given by the holder of each outstanding Debt Security
affected thereby, as described under "--Modification" above, any resolution
presented at a meeting or adjourned meeting at which a quorum is present may
be adopted by the affirmative vote of the holders of a majority in principal
amount of the outstanding Debt Securities of that series; provided, however,
that, except for any consent that must be given by the holder of each
outstanding Debt Security affected thereby, as described under "--
Modification" above, any resolution with respect to any request, demand,
authorization, direction, notice, consent, waiver or other action that may be
made, given or taken by the holders of a specified percentage, which is less
than a majority in principal amount of the outstanding Debt Securities of a
series, may be adopted at a meeting or adjourned meeting duly reconvened at
which a quorum is present by the affirmative vote of the holders of such
specified percentage in principal amount of the outstanding Debt Securities of
that series. Subject to the proviso set forth above, any resolution passed or
decision taken at any meeting of holders of Debt Securities of any series duly
held in accordance with the Indenture will be binding on all holders of Debt
Securities of that series and any related coupons. The quorum at any meeting
called to adopt a resolution, and at any reconvened meeting, will be Persons
holding or representing a majority in principal amount of the outstanding Debt
Securities of a series. (Section 1304 of the Indenture).
NOTICES
Notices to holders of New Debentures will be given by mail to the addresses
of such holders as they appear in the Security Register. (Section 107 of the
Indenture).
THE TRUSTEE
The Indenture contains certain limitations on the right of the Trustee, as a
creditor of Pennzoil, to obtain payment of claims in certain cases and to
realize on certain property received with respect to any such claims, as
security or otherwise. (Section 613 of the Indenture). The Trustee is
permitted to engage in other transactions, except that, if it acquires any
conflicting interest (as defined), it must eliminate such conflict or resign.
(Section 608 of the Indenture).
The Trustee has made loans to Pennzoil and its subsidiaries and affiliates
from time to time in the ordinary course of business and at prevailing
interest rates under agreements with commercial bank groups. In addition, the
Trustee serves as a depositary of funds of, and performs other services for,
Pennzoil and is trustee under one other indenture pursuant to which several
outstanding series of Pennzoil's debentures have been issued.
LIMITATION ON LIENS
The Indenture provides that, so long as any Debt Securities are outstanding,
Pennzoil will not, and will not permit any Designated Subsidiary (as defined
below) to, pledge, mortgage, hypothecate or grant a security interest in, or
permit any mortgage, pledge, security interest or other lien upon, any
property or assets owned by Pennzoil or any Designated Subsidiary to secure
any Indebtedness, without making effective provision whereby outstanding
securities shall be equally and ratably secured.
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Under the Indenture, Atlas Processing Company ("Atlas"), an indirect wholly
owned subsidiary of Pennzoil, is currently the only Subsidiary (as defined
below) of Pennzoil which is a Designated Subsidiary. Therefore, the above
restriction applies only to Pennzoil and Atlas and does not cover other
Pennzoil subsidiaries, including PEPCO, PPC or Jiffy Lube. Moreover, Atlas is
a subsidiary of PPC, and Atlas will cease to be a Designated Subsidiary upon
the effectiveness of the Spin-Off.
The Indenture contains no restriction on the disposition by Pennzoil of the
stock of a Designated Subsidiary or any other Subsidiary. Moreover, the
Indenture does not prohibit Pennzoil or any Designated Subsidiary from doing
business through any existing or new Subsidiary that is not a Designated
Subsidiary and, therefore, not subject to the limitation on liens in the
Indenture or from transferring assets or businesses to those Subsidiaries.
Under the terms of the Indenture, the above negative pledge restriction does
not apply to (a) any mortgage, pledge, security interest, lien or encumbrance
upon any property or assets created at the time of the acquisition of such
property or assets by Pennzoil or any Designated Subsidiary or within one year
after such time to secure all or a portion of the purchase price for such
property or assets; (b) any mortgage, pledge, security interest, lien or
encumbrance upon any property or assets existing thereon at the time of the
acquisition thereof by Pennzoil or any Designated Subsidiary (whether or not
the obligations secured thereby are assumed by Pennzoil or any Subsidiary);
(c) any mortgage pledge, security interest, lien or encumbrance upon any
property or assets, whenever acquired, of any corporation that becomes a
Designated Subsidiary after December 15, 1992, provided that (i) the
instrument creating such mortgage, pledge, security interest, lien or
encumbrance shall be in effect prior to the time such corporation becomes a
Designated Subsidiary and (ii) such mortgage, pledge, security interest, lien
or encumbrance shall only apply to properties or assets owned by such
corporation at the time it becomes a Designated Subsidiary or thereafter
acquired by it from sources other than Pennzoil or another Designated
Subsidiary; (d) any extension, renewal or refunding of any mortgage, pledge,
security interest, lien or encumbrance described in (a), (b) or (c) above on
substantially the same property or assets theretofore subject thereto; (e) any
mortgage, pledge, security interest, lien or encumbrance arising from or in
connection with a conveyance by Pennzoil or a Designated Subsidiary of any
production payment with respect to oil, gas, natural gas, carbon dioxide,
sulphur, helium, coal, metals, minerals, steam, timber or other natural
resources; (f) any mortgage, pledge, security interest, lien or encumbrance in
favor of Pennzoil or any Wholly Owned Subsidiary (as defined below); (g) any
mortgage, pledge, security interest, lien or encumbrance created or assumed by
Pennzoil or a Designated Subsidiary in connection with the issuance of debt
securities the interest on which is excludable from gross income of the holder
of such security pursuant to the Code for the purpose of financing, in whole
or in part, the acquisition or construction of property or assets to be used
by Pennzoil or a Subsidiary; or (h) any mortgage, pledge, security interest,
lien or encumbrance securing any Indebtedness (as defined below) in an amount
which, together with all other Indebtedness secured by a mortgage, pledge,
security interest, lien or encumbrance that is not otherwise permitted by the
foregoing provisions, does not at the time of the incurrence of the
Indebtedness so secured exceed 5% of Consolidated Net Tangible Assets, as
shown on a balance sheet as of the date of the balance sheet contained in
Pennzoil's most recent periodic report on Form 10-K or Form 10-Q filed with
the Commission prior to the date of such incurrence. For the purpose of this
provision, "security interest" will include the interest of the lessor under a
lease with a term of three years or more that should be, in accordance with
generally accepted accounting principles, recorded as a capital lease, and any
such lease of property or assets not acquired from Pennzoil or any Designated
Subsidiary in contemplation of such lease shall be treated as though the
lessee had purchased such property or assets from the lessor. (Section 1007 of
the Indenture).
The term "Indebtedness," as applied to any Person, is defined in the
Indenture as all indebtedness, whether or not represented by bonds,
debentures, notes or other securities, created or assumed by such Person for
the repayment of money borrowed, and obligations, computed in accordance with
generally accepted accounting principles, or as lessee under leases that
should be, in accordance with generally accepted accounting principles,
treated as capital leases. All Indebtedness secured by a lien upon property
owned by Pennzoil or any Subsidiary and upon which Indebtedness such Person
customarily pays interest, although such Person has not assumed or become
liable for the payment of such Indebtedness, shall be deemed to be
Indebtedness of such Person. All
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Indebtedness of others guaranteed as to payment of principal by such Person or
in effect guaranteed by such Person through a contingent agreement to purchase
such Indebtedness shall also be deemed to be Indebtedness of such Person.
Indebtedness shall not include amounts which are payable out of all or a
portion of the oil, gas, natural gas, carbon dioxide, sulphur, helium, coal,
metals, minerals, steam, timber or other natural resources produced, derived
or extracted from properties owned or developed by such Person.
"Consolidated Net Tangible Assets" is defined in the Indenture as the total
amount of assets of Pennzoil and the Designated Subsidiaries on a consolidated
basis, including the equity in Subsidiaries that are not Designated
Subsidiaries (less applicable reserves and other properly deductible items)
after deducting therefrom (i) all current liabilities (excluding any which
are, by their terms, extendable or renewable at the option of the obligor
thereon to a time more than 12 months after the time as of which the amount
thereof is being computed) and (ii) all goodwill, trade names, trademarks,
patents, unamortized debt discount and expense and other like intangible
assets.
The Indenture defines the term "Subsidiary" as a corporation more than 50%
of the outstanding voting stock of which is owned, directly or indirectly, by
Pennzoil or by one or more other Subsidiaries, or by Pennzoil and one or more
other Subsidiaries. For the purposes of this definition, "voting stock" means
stock which ordinarily has voting power for the election of directors, whether
at all times or only so long as no senior class of stock has such voting power
by reason of any contingency.
"Designated Subsidiary" is defined to include any Subsidiary which at the
time has been designated by Pennzoil as a Designated Subsidiary in an
Officers' Certificate delivered to the Trustee for such purpose, subject to
such provisions, if any, as may be contained in such Officers' Certificate
providing that upon the occurrence of a specified event or action or in such
other circumstances as is specified in such Officers' Certificate, such other
Subsidiary shall no longer be a Designated Subsidiary. Atlas is the only
Subsidiary of Pennzoil currently so designated, and Atlas will cease to be a
Designated Subsidiary upon the effectiveness of the Spin-Off.
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MATERIAL FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Baker & Botts, L.L.P., counsel to Pennzoil, the following
are the material federal income tax consequences to a holder of exchanging Old
Debentures for New Debentures in the Exchange Offers and owning and disposing
of New Debentures, of not exchanging Old Debentures for New Debentures in the
Exchange Offers and instead exchanging Old Debentures for Chevron Stock or
cash pursuant to the holder's exercise of the Existing Exchange Rights, and of
owning and disposing of Chevron Stock received in exchange for Old Debentures
or New Debentures. This opinion is based on provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), existing and proposed Treasury
regulations promulgated thereunder, and administrative and judicial
interpretations thereof, all as currently in effect and all of which are
subject to change (possibly with retroactive effect) and to differing
interpretations. Furthermore, there can be no assurance that the Internal
Revenue Service ("IRS") would not take a position contrary to those expressed
herein. This opinion deals only with holders that hold the Old Debentures, and
will hold the New Debentures and Chevron Stock, as capital assets and does not
address all aspects of federal income taxation that may be applicable to
investors in light of their particular circumstances, or to investors subject
to special treatment under federal income tax law (including, but not limited
to, life insurance companies, dealers in securities, financial institutions,
tax-exempt organizations, foreign persons, persons having a functional
currency other than the U.S. dollar, and persons holding the Old Debentures,
the New Debentures or the Chevron Stock as a position in a "straddle" or
conversion transaction, or as part of a "synthetic security" or other
integrated financial transaction). This opinion also does not address the
state, local or foreign tax consequences of an investment in the Old
Debentures, the New Debentures or the Chevron Stock. INVESTORS CONSIDERING THE
EXCHANGE OF OLD DEBENTURES IN THE EXCHANGE OFFERS ARE URGED TO CONSULT THEIR
OWN TAX ADVISORS TO DETERMINE THEIR PARTICULAR TAX CONSEQUENCES OF THE
EXCHANGE OFFERS AND THE OWNERSHIP AND DISPOSITION OF THE NEW DEBENTURES AND
THE CHEVRON STOCK UNDER FEDERAL AND APPLICABLE STATE, LOCAL AND FOREIGN TAX
LAWS, INCLUDING THE EFFECTS OF RECENT OR POSSIBLE FUTURE CHANGES IN SUCH LAWS.
TREATMENT OF EXCHANGE OFFERS
Bifurcation of Old Debentures. Pursuant to proposed Treasury regulations
outstanding at the time the Old Debentures were issued, Pennzoil has taken the
position that each Old Debenture is bifurcated for federal income tax purposes
into two separate instruments: a right to receive payments of principal and
stated interest (the "Deemed Debt Instrument") and a right to exchange the Old
Debenture for Chevron Stock (the "Deemed Option"). The IRS has announced that
it will respect any reasonable method used by a taxpayer to account for debt
instruments of that type issued at that time, including a method based upon
the proposed regulations upon which Pennzoil has relied. The discussion below
assumes that the Old Debentures are treated by the holder as bifurcated into
Deemed Debt Instruments and Deemed Options. If a holder has adopted a
different reasonable method for reporting income, gain, loss and deduction on
the Old Debentures, its tax consequences may be different than those discussed
below. Holders who have not adopted the bifurcation method of reporting with
respect to the Old Debentures should contact their tax advisors regarding the
tax consequences of the Exchange Offers.
Bifurcation of Exchange. The exchange by a holder of Old Debentures for New
Debentures will constitute two separate exchanges for federal income tax
purposes: an exchange of the Deemed Debt Instruments for a portion of the New
Debentures (the "Deemed Debt Exchange") and an exchange of the Deemed Options
for the balance of the New Debentures (the "Deemed Option Exchange"). The
amount realized by a holder upon receipt of New Debentures (which will be
equal to the "issue price" of the New Debentures, determined in the manner
discussed below at "--Treatment of New Debentures--Issue Prices") will be
allocated between the Deemed Debt Exchange and the Deemed Option Exchange in
proportion to the relative fair market values of the Deemed Debt Instruments
and the Deemed Options on the applicable Acceptance Date. The basis of the
holder in the Deemed Debt Instruments and the Deemed Options will be
determined by allocating the holder's basis in the Old Debentures between the
Deemed Debt Instruments and the Deemed Options in proportion to their
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relative fair market values at the time the holder acquired the Old
Debentures, with subsequent adjustments for any amounts of original issue
discount, market discount, premium or acquisition premium included in the
determination of the holder's income with respect to the Deemed Debt
Instruments. A holder that participates in both the 4 3/4% Exchange Offer and
the 6 1/2% Exchange Offer will have a separate Deemed Debt Exchange and Deemed
Option Exchange for each of the Exchange Offers.
The discussion below assumes that a holder has the same basis and holding
period in each of its Old Debentures exchanged pursuant to the Exchange Offer.
This may not be the case as to any holder that, for example, acquired Old
Debentures in more than one transaction. Any holders that acquired Old
Debentures in more than one transaction or otherwise do not have the same tax
basis and holding period in each of their Old Debentures should contact their
tax advisors regarding additional tax considerations applicable to them.
Deemed Debt Exchange. The tax consequences of the Deemed Debt Exchange to a
holder will depend upon whether such exchange is a "recapitalization" for
federal income tax purposes. The Deemed Debt Exchange will be a
recapitalization only if both the Deemed Debt Instruments and the New
Debentures are "securities" for federal income tax purposes. The determination
whether a debt instrument is a "security" is complex and cannot be made with
certainty because the courts have identified many factors that must be
considered in making the determination and have assigned different weights to
the various factors from case to case, producing a body of case law that is
difficult to harmonize. Baker & Botts, L.L.P., counsel to Pennzoil, has
analyzed these factors and concluded that the Deemed Debt Instruments and New
Debentures probably are securities and the Deemed Debt Exchange therefore
probably is a recapitalization.
If the Deemed Debt Exchange is a recapitalization, a holder generally will
not recognize loss, if any, on the Deemed Debt Exchange, but will recognize
gain, if any, on such exchange to the extent of the "boot" received in such
exchange. The amount of "boot" received by a holder in the Deemed Debt
Exchange will probably be equal to the excess of the portion of the issue
price of the New Debentures allocated to such exchange over the adjusted issue
price of the Deemed Debt Instruments, but a holder could reasonably adopt the
position that the amount of the boot is equal to the fair market value of the
excess of the stated principal amount of the New Debentures allocated to such
exchange over the stated principal amount of the Old Debentures. Any gain
recognized generally will be capital gain. However, any gain will be ordinary
income to the extent of the sum of any accrued market discount on the Deemed
Debt Instrument that has not previously been included in the holder's income
and, if there is an Intention to Call (as defined below), the excess of the
original issue discount on the Deemed Debt Instrument that has not previously
been included in the income of the holder (together with all prior holders)
over any acquisition premium of the holder with respect to the Deemed Debt
Instrument. Pennzoil believes it did not have an intention at the time of the
original issuance of the Deemed Debt Instruments to call them before maturity
(an "Intention to Call"), and it clearly will be treated as lacking such
intention as to Deemed Debt Instruments held by holders that have elected to
apply the original issue discount regulations issued in January 1994 to the
Deemed Debt Instruments.
If, contrary to the discussion above, the Deemed Debt Exchange is not a
recapitalization, a holder will recognize gain or loss, if any, on the
exchange. The amount of gain, if any, recognized by a holder generally will be
the same regardless of whether or not the Deemed Debt Exchange is a
recapitalization (although, as discussed in the preceding paragraph, a holder
could reasonably adopt a position under which the gain recognized in a
recapitalization is somewhat smaller). The amount of a holder's gain or loss
on the Deemed Debt Exchange generally will be relatively small in comparison
to the gain or loss on the Deemed Option Exchange, discussed below at "--
Deemed Option Exchange," since all of the gain or loss arising from changes in
the value of Chevron Stock will be attributable to the Deemed Option Exchange
(with the gain or loss on the Deemed Debt Exchange merely reflecting any
changes in prevailing interest rates and the market's perception of the
creditworthiness of Pennzoil). Any gain will be characterized as capital gain
or ordinary income in the manner discussed in the preceding paragraph, and any
loss will be characterized as capital loss. The remaining discussion herein
will assume the Deemed Debt Exchange is a recapitalization.
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Deemed Option Exchange. The Deemed Option Exchange will not be pursuant to a
"recapitalization" because a Deemed Option does not constitute a "security" of
Pennzoil under Treasury regulations, so the holder will recognize any gain or
loss on such exchange. Any gain or loss recognized will be capital gain or
loss.
Basis and Holding Period of New Debentures. The basis of a holder in New
Debentures received pursuant to either of the Exchange Offers (including the
portion of any hypothetical Fractional New Debenture allocable to the Deemed
Debt Exchange as discussed below at "--Cash in Lieu of Fractional New
Debentures") will be equal to the sum of (i) the basis of the portion of the
Old Debentures surrendered by the holder in the Deemed Debt Exchange,
increased for any gain recognized by the holder on such exchange and (ii) the
issue price (determined as discussed below at "--Treatment of New Debentures--
Issue Prices") of the portion of the New Debentures received in the Deemed
Option Exchange. The holding period of the portion of the New Debentures
received in the Deemed Option Exchange and the portion of the New Debentures
received in the Deemed Debt Exchange that are allocable to "boot" will begin
the day after the applicable Acceptance Date. The holding period of the
portion of the New Debentures received in the Deemed Debt Exchange that are
not allocable to "boot" will include the period for which the holder held the
Old Debentures, provided that if all of a holder's gain upon the Deemed Debt
Exchange is recognized, the holding period of such New Debentures probably
will begin the day after the applicable Acceptance Date.
Cash in Lieu of Fractional New Debentures. The portion of the cash received
in lieu of the issuance of a Fractional New Debenture that is allocable to the
Deemed Debt Exchange probably will be treated as if the holder had received a
Fractional New Debenture (in the amount allocable to the Deemed Debt
Exchange), then the Fractional New Debenture was redeemed by Pennzoil in
exchange for the cash. Any gain on such redemption will be interest income
taxable at ordinary income rates and any loss will be capital loss, as
discussed below at "--Treatment of New Debentures--Sale, Exchange, Redemption
or Exercise of New Debentures." The portion of the cash received in lieu of a
Fractional New Debenture that is allocable to the Deemed Option Exchange will
constitute an additional amount realized by the holder in such exchange.
Interest Paid at Exchange. The interest on the Old Debentures payable at the
time of the exchange will not be additional consideration received in the
Deemed Debt Exchange or the Deemed Option Exchange, but a payment of accrued
original issue discount on the Deemed Debt Instruments immediately before such
exchanges.
TREATMENT OF NEW DEBENTURES
Issue Prices. Pennzoil anticipates that the New Debentures will be listed
for trading on the NYSE on and after the respective Acceptance Dates, in which
case the issue prices of the New 4.90% Debentures and the New 4.95% Debentures
will be their respective fair market values on the respective Acceptance
Dates. The discussion herein assumes that the issue prices of the New 4.90%
Debentures and the New 4.95% Debentures will be determined in this manner.
Contingent Payment Regulations. The tax consequences to a holder of owning
or disposing of a New Debenture discussed below arise from the application of
certain Treasury regulations governing contingent payment debt instruments
(the "Contingent Payment Regulations") to the New Debentures. The Contingent
Payment Regulations require the application of the "noncontingent bond method"
to determine the amount, timing and character of income, gain, loss and
deduction with respect to the New Debentures. As discussed below, generally,
under the noncontingent bond method, taxable interest income will accrue on
each New Debenture under rules similar to the original issue discount rules,
at a rate equal to the "comparable yield" (as defined below) of such New
Debenture, and additional adjustments will be made to the income and deduction
of the holder with respect to such New Debenture to the extent such New
Debenture is satisfied at maturity for an amount different than the amount
indicated on the "projected payment schedule" (as defined below) for such New
Debenture or the holder's basis in such New Debenture is different than the
adjusted issue price of such New Debenture. A separate "comparable yield" and
"projected payment schedule" will be determined for each series of New
Debentures (i.e., the New 4.90% Debentures and the New 4.95% Debentures). The
Contingent Payment Regulations apply in lieu of the general rules for accrual
of interest; a holder will not have interest or original issue discount income
with respect to a New Debenture other than as described below.
49
<PAGE>
Determination of Comparable Yields. The "comparable yield" of each New
Debenture will be the yield at which Pennzoil would issue a fixed rate debt
instrument on the applicable Acceptance Date with terms and conditions
comparable to those of such New Debenture, including the level of
subordination, term, timing of payments, and general market conditions (but
without the right to exchange the New Debenture for Chevron Stock). The
"comparable yield" of each series of New Debentures will be determined on the
applicable Acceptance Date and will exceed the stated rate of interest on such
series.
Accrual of Interest at Comparable Yield. Under the noncontingent bond
method, a holder, whether such holder uses the cash or the accrual method of
tax accounting, will be required to include as ordinary interest income the
sum of the "daily portions" of interest on each New Debenture for all days
during the taxable year that the holder owns such New Debenture. As a result,
a holder of a New Debenture that employs the cash method of accounting will be
required to include amounts in respect of interest accruing on such New
Debenture in taxable income each year, whether or not the current receipt of
cash from such New Debenture is sufficient to pay any resulting tax.
The daily portions of interest on a New Debenture are determined by
allocating to each day in any accrual period a ratable portion of the interest
allocable to that accrual period. The amount of interest on a New Debenture
allocable to each accrual period is determined by multiplying the "adjusted
issue price" (as defined below) of the New Debenture at the beginning of the
accrual period by the comparable yield of the New Debenture (appropriately
adjusted to reflect the length of the accrual period). The "adjusted issue
price" of a New Debenture at the beginning of any accrual period generally
will be the sum of its issue price (determined as discussed above at "--Issue
Prices") and the amount of interest allocable to all prior accrual periods,
less the amount of any stated interest payments made in all prior accrual
periods. Since the comparable yield of each New Debenture will exceed the
stated interest rate of such New Debenture, interest income with respect to
each New Debenture will exceed the amount of stated interest payable on such
New Debenture.
Projected Payment Schedules. The "projected payment schedule" for a series
of New Debentures is a schedule that will be created on the applicable
Acceptance Date and will include all stated payments of interest on a New
Debenture in such series and an amount for the value of the exchangeability
feature on the Maturity Date that produces a yield on such New Debenture equal
to the comparable yield of such New Debenture. If, on the Maturity Date, a New
Debenture is retired or is exchanged for Chevron Stock pursuant to the
exercise of the holder's option, any excess of the amount actually paid on the
Maturity Date over the amount listed on the projected payment schedule
applicable to such New Debenture for payment on the Maturity Date will be a
"positive adjustment" and any excess of the amount listed on such projected
payment schedule over the amount paid will be a "negative adjustment." See "--
Effect of Positive and Negative Adjustments."
Differences Between Basis and Adjusted Issue Price. A holder whose initial
basis in a New Debenture (determined as discussed above at "--Treatment of
Exchange Offers--Basis and Holding Period of New Debentures") is different
from the adjusted issue price of such New Debenture must make appropriate
"positive" and "negative" adjustments to its income and deductions with
respect to such New Debenture. At the time the holder acquires a New
Debenture, the holder must allocate any difference between its basis in the
New Debenture and the adjusted issue price of the New Debenture among either
the remaining payments due on the projected payment schedule applicable to
such New Debenture or the remaining accruals of interest at the comparable
yield of such New Debenture in a reasonable manner. It will be reasonable for
a holder to allocate any such difference pro rata to all remaining accruals of
interest on a New Debenture at the applicable comparable yield, provided that,
after taking into account this allocation, the yield on the New Debenture
would not be less than the applicable Federal rate applicable to the New
Debenture (determined as if it were a new debt instrument issued on the
purchase date and due on the Maturity Date). Adjustments allocated to either
an interest accrual or the projected payments are taken into account at the
time the corresponding interest is accrued or payment is made. If the holder's
basis is greater than the adjusted issue price of the New Debenture, the
excess is treated as a "negative adjustment", and if the holder's basis is
less than the adjusted issue price, the difference is treated as a "positive
adjustment". See "--Effect of Positive and Negative Adjustments."
50
<PAGE>
Effect of Positive and Negative Adjustments. Positive and negative
adjustments with respect to a New Debenture for a taxable year are netted. A
net positive adjustment is treated as additional interest income to the
holder. A net negative adjustment first reduces the amount of interest accrued
by the holder on the New Debenture for the taxable year, as described above at
"--Accrual of Interest at Comparable Yield," then the remainder is ordinary
loss to the extent the holder's total interest inclusions with respect to the
New Debenture exceed the total amount of net negative adjustments treated as
ordinary losses for prior years. Any excess net negative adjustment is carried
forward as a negative adjustment to the following year, except that any excess
net negative adjustment on the Maturity Date or in the year in which the
holder disposes of the New Debenture reduces the holder's amount realized on
the redemption, sale or exchange. Any negative and positive adjustments of the
kind described above at "--Differences Between Basis and Adjusted Issue Price"
made by a holder of a New Debenture in respect of any difference between its
basis and the adjusted issue price of such New Debenture on the date of
acquisition decrease or increase, respectively, the holder's basis in such New
Debenture.
Sale, Exchange or Redemption of New Debentures. When a holder sells,
exchanges or otherwise disposes of a New Debenture, including the redemption
or retirement of the New Debenture by Pennzoil or the exercise by the holder
of its option to exchange the New Debenture for Chevron Stock (a
"disposition"), the holder's gain (or loss) on such disposition will equal the
difference between the amount realized by the holder for the New Debenture and
the holder's tax basis in the New Debenture. Upon an exercise by the holder
prior to the Maturity Date of its right to exchange the New Debenture for
Chevron Stock, the amount realized by the holder will be equal to the fair
market value of any Chevron Stock (or the amount of cash received in lieu of
Chevron Stock) received by such holder, plus any cash received in lieu of
fractional shares, adjusted for any "adjustments" required under the
principles described above at "--Effect of Positive and Negative Adjustments."
In the case of a retirement on the Maturity Date or an exercise by the holder
on the Maturity Date of its right to exchange the New Debenture for Chevron
Stock, the amount realized will be the amount listed in the applicable
projected payment schedule for payment on the Maturity Date, as discussed
about at "--Projected Payment Schedules," adjusted for any "adjustments"
required under the principles described above at "--Projected Payment
Schedules" and "--Effect of Positive and Negative Adjustments." A holder's tax
basis in a New Debenture will be its initial basis, determined as described
above at "--Treatment of Exchange Offers--Basis and Holding Period of New
Debentures," increased for interest accrued in prior accrual periods as
described above at "--Accrual of Interest at Comparable Yield," decreased by
the amount of the payments of stated interest made on the New Debenture in
prior accrual periods and further adjusted as described above at "--
Effect of Positive and Negative Adjustments." Any gain realized by a holder on
a disposition will be treated as ordinary interest income. Any loss realized
by a holder on a disposition will be treated as ordinary loss to the extent
the holder's interest inclusions with respect to the New Debenture up to the
date of disposition exceed the total net negative adjustments previously
treated by the holder as ordinary loss. Any loss recognized in excess of such
amount generally will be treated as a capital loss. If a holder receives
Chevron Stock in a disposition, such holder will have a basis in that stock
equal to the stock's fair market value on the date of the disposition.
Additionally, the holder's holding period in the Chevron Stock will begin the
day after the disposition.
Pennzoil's Determination Binding. Pennzoil's determination of the comparable
yields and projected payment schedules will be binding on holders. Information
regarding the comparable yields and the projected payment schedules can be
obtained from the Corporate Secretary of Pennzoil at the address or telephone
number set forth under "Incorporation of Certain Documents By Reference" any
time after the tenth business day after the respective Acceptance Dates.
The "comparable yields" and the "projected payment schedules" are used to
determine accruals of interest for tax purposes only and are not assurances by
Pennzoil with respect to the actual yields of, or payments to be made in
respect of, the New Debentures. The "comparable yields" and the "projected
payment schedules" do not necessarily represent Pennzoil's expectations
regarding such yields or the amounts of such payments.
TREATMENT OF EXERCISE OF EXISTING EXCHANGE RIGHTS
Pennzoil currently expects to call for redemption all Old Debentures that
remain outstanding after the completion of the Exchange Offers, although the
final determination of whether to make, and the timing of, such
51
<PAGE>
redemption of the Old Debentures (or either series thereof) will be made by
Pennzoil's Board of Directors based upon market and other factors prevailing
at the time such determination is made. See "The Exchange Offers--Purpose and
Effect of the Exchange Offers." If Pennzoil calls the Old Debentures for
redemption, based upon the terms of the Old Debentures and prevailing market
prices for Chevron Stock, Pennzoil expects that substantially all holders of
Old Debentures will exercise their Existing Exchange Rights to obtain the
shares of Chevron Stock for which the Old Debentures are exchangeable
(although Pennzoil has the right to pay cash instead of delivering shares of
Chevron Stock). The following is a discussion of the federal income tax
consequences of the exercise of Existing Exchange Rights by a holder who did
not elect to exchange its Old Debentures for New Debentures pursuant to the
Exchange Offers.
Exchange of Old Debentures for Chevron Stock. If a holder exercises a Deemed
Option and exchanges an Old Debenture for Chevron Stock, such exchange
probably will be treated for federal income tax purposes as a taxable sale of
the Deemed Debt Instrument for its then fair market value and an exercise of
the Deemed Option at an exercise price equal to the then fair market value of
the Deemed Debt Instrument. Such a "sale" of a Deemed Debt Instrument will
generally result in recognized gain or loss to the holder equal to the
difference between the fair market value of the Deemed Debt Instrument and the
holder's tax basis in the Deemed Debt Instrument as of the time of the
exchange. However, the conclusions stated above are in some respects
uncertain, and it is possible that the exchange would instead be treated as an
exchange of the Deemed Debt Instrument for the Chevron Stock, upon which the
holder would recognize gain or loss equal to the difference between the fair
market value of the Chevron Stock and the holder's tax basis in the Old
Debenture as of the time of the exchange. Any gain or loss on the exchange
generally will be capital gain or loss. However, any gain will be ordinary
income to the extent of the sum of any accrued market discount on the Deemed
Debt Instrument that has not previously been included in the holder's income
and, if there is an Intention to Call, the excess of the original issue
discount on the Deemed Debt Instrument that has not previously been included
in the income of the holder (together with all prior holders) over any
acquisition premium of the holder with respect to the Deemed Debt Instrument.
The holder's tax basis in the Chevron Stock received in the exchange
(including any fractional share for which it receives cash) probably will
equal the sum of the tax basis in the Deemed Option and the fair market value
of the surrendered Deemed Debt Instrument. However, if the holder's gain or
loss on the exchange is measured by reference to the fair market value of the
Chevron Stock, the holder's basis in the Chevron Stock will be equal to such
fair market value. The receipt of cash in lieu of a fractional share of
Chevron Stock will be treated as a taxable sale of such fractional share of
Chevron Stock, resulting generally in gain or loss equal to the difference
between the cash received and the holder's allocable basis in such fractional
share of Chevron Stock. A holder's holding period for Chevron Stock received
upon an exercise of a Deemed Option will commence the day after the Deemed
Option is exercised.
Exchange of Old Debentures for Cash. If a holder exercises a Deemed Option
and Pennzoil elects to pay the holder cash in lieu of Chevron Stock, the
holder will be required to calculate its gain or loss separately for the
Deemed Debt Instrument and the Deemed Option. In making such calculation, the
cash received must be allocated between such Deemed Debt Instrument and such
Deemed Option in proportion to their relative fair market values as of the
time of the exchange. Gain or loss with respect to each Deemed Debt Instrument
or Deemed Option will equal the difference between the amount of cash that is
allocated to such Deemed Debt Instrument or Deemed Option and the holder's tax
basis in such Deemed Debt Instrument or Deemed Option. Any gain or loss on the
exchange generally will be capital gain or loss. However, any gain will be
ordinary income to the extent of the sum of any accrued market discount on the
Deemed Debt Instrument that has not previously been included in the holder's
income and, if there is an Intention to Call, the excess of the original issue
discount on the Deemed Debt Instrument that has not previously been included
in the income of the holder (together with all prior holders) over any
acquisition premium of the holder with respect to the Deemed Debt Instrument.
TREATMENT OF CHEVRON STOCK
Distributions on Chevron Stock. The gross amount of any distribution made by
Chevron to a holder with respect to the Chevron Stock generally will be
includible in the income of a holder as a dividend taxable as
52
<PAGE>
ordinary income to the extent that such distribution is paid out of Chevron's
current or accumulated earnings and profits as determined under federal income
tax principles. Subject to certain limitations, corporations holding Chevron
Stock that receive dividends thereon generally will be eligible for a
dividends-received deduction equal to 70% of the dividends received. If the
amount of any distribution exceeds Chevron's current and accumulated earnings
and profits as so computed, such excess first will be treated as a tax-free
return of capital to the extent of the holder's tax basis in its Chevron
Stock, and thereafter as gain from the sale or exchange of property.
Dispositions of Chevron Stock. A holder generally will recognize capital
gain or loss for federal income tax purposes on the sale or disposition of
Chevron Stock in an amount equal to the difference between the amount realized
on the sale or other disposition and the holder's tax basis in the Chevron
Stock. Any such gain or loss will be capital gain or loss.
BACKUP WITHHOLDING AND INFORMATION REPORTING
A holder may be subject to information reporting and to backup withholding
at a rate of 31 percent with respect to payments made on an Old Debenture, a
New Debenture or Chevron Stock, or the cash proceeds of the sale, exchange,
redemption or other disposition of an Old Debenture, a New Debenture or
Chevron Stock, unless such holder provides proof of an applicable exemption or
a correct taxpayer identification number, and otherwise complies with
applicable requirements of the information reporting and backup withholding
rules.
Certain holders may receive Forms 1099-OID reporting interest accruals on a
New Debenture. Those forms may not, however, reflect the effects of any
positive or negative adjustments resulting from differences between the
holder's basis in a New Debenture and the adjusted issue price of the New
Debenture. Holders are urged to consult their tax advisors as to whether, and
how, such adjustments should be made to the amounts reported on any Form 1099-
OID.
DEALER MANAGER
PaineWebber Incorporated, as Dealer Manager, has agreed to solicit exchanges
of Old Debentures. The Company will pay the Dealer Manager a fee of $500,000
($250,000 of which has already been paid and $250,000 of which will be payable
as of the commencement of the Exchange Offers), plus $0.39 per share of
Chevron Stock into which exchanged Old Debentures were exchangeable as of the
respective Acceptance Dates under Existing Exchange Rights. Additional
solicitation may be made by telecopier, by telephone, or in person by officers
and regular employees of the Company and its affiliates. No additional
compensation will be paid to any such officers and employees who engage in
soliciting tenders.
Pennzoil has agreed to indemnify the Dealer Manager against certain
liabilities, including civil liabilities under the Securities Act of 1933, as
amended (the "Securities Act"), and the Exchange Act, and contribute to
payment that the Dealer Manager may be required to make in respect thereof.
The Dealer Manager engages in transactions with, and from time to time has
performed services for, the Company.
LEGAL MATTERS
Certain legal matters in connection with the New Debentures offered hereby
will be passed upon for Pennzoil by Baker & Botts, L.L.P., Houston, Texas.
53
<PAGE>
EXPERTS
The consolidated financial statements of Pennzoil and its subsidiaries
incorporated by reference in this Registration Statement to the extent and for
the periods indicated in their report have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are incorporated by reference herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
report.
The summary report of Ryder Scott Company Petroleum Engineers included as
Exhibit 99(a) to Pennzoil's Annual Report on Form 10-K for the year ended
December 31, 1997 and the estimates from the reports of that firm appearing
under the caption "Oil and Gas--Oil and Gas Reserves" in Item 1 of such Annual
Report and under "Oil and Gas Information" included in the Supplemental
Financial and Statistical Information contained in such Annual Report are
incorporated by reference herein on the authority of said firm as experts in
giving such reports.
AVAILABLE INFORMATION
Pennzoil is subject to the informational requirements of the Exchange Act,
and in accordance therewith files reports, proxy statements and other
information with the Commission, which can be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Judiciary Plaza, Room 1024, Washington, D.C. 20549; and at regional
offices of the Commission at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511 and at Suite 1300, Seven World Trade
Center, New York, New York 10048. Copies of such material can be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549 at prescribed rates. The Commission
maintains a web site (http://www.sec.gov.) that contains reports, proxy and
information statements and other information filed electronically by Pennzoil
with the Commission through its Electronic Data Gathering, Analysis and
Retrieval (EDGAR) System. In addition, Pennzoil's common stock and the Old
Debentures are listed on the NYSE, and application will be made to list the
New Debentures for trading on the NYSE. Material filed by Pennzoil can be
inspected at the offices of the NYSE, 20 Broad Street, New York, New York
10005 and the Pacific Stock Exchange, 301 Pine Street, San Francisco,
California 94104.
Pennzoil has filed with the Commission a Registration Statement under the
Securities Act with respect to the securities offered hereby. This Prospectus
does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information with respect to
Pennzoil and such securities, reference is made to such Registration Statement
and to the exhibits thereto.
54
<PAGE>
APPENDIX A
SELECTED INFORMATION CONCERNING CHEVRON
Appendix A contains selected information concerning Chevron Corporation
("Chevron") taken from Chevron's Annual Report on Form 10-K for the year ended
December 31, 1997 and from Chevron's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998, together with Chevron's "Management's Discussion
and Analysis of Financial Condition and Results of Operations" for the quarter
ended March 31, 1998.
Chevron is subject to the information requirements in the Exchange Act, and
in accordance therewith files reports, proxy statements and other information
with the Commission, to which reference is made for detailed financial and
other information regarding Chevron. Such reports, proxy statements and other
information can be inspected and copied at the Commission's offices referred
to on page 54 of the Prospectus or can be inspected and copied at the NYSE, 20
Broad Street, New York, New York 10005, on which Chevron Stock is listed. A
holder can also find information regarding Chevron at the Commission's offices
and on the Commission's website at (http: //www.sec.gov). The Commission does
not approve or disapprove or pass upon the accuracy or the adequacy of
reports, proxy statements or other information filed with it. Although
Pennzoil has no reason to believe the information concerning Chevron included
therein is not reliable, Pennzoil has not verified either its accuracy or its
completeness. Neither Pennzoil nor the Dealer Manager warrants that there have
not occurred events not yet publicly disclosed by Chevron which would affect
either the accuracy or the completeness of the information concerning Chevron
included therein. Pennzoil has no affiliation with Chevron other than its
stock ownership and contractual arrangements in the ordinary course of
business and therefore has no greater access to information relating to
Chevron than any other Chevron stockholder. Pennzoil does not intend to
furnish to holders of New Debentures subsequent information with respect to
Chevron.
A-1
<PAGE>
- --------------------------------------------------------------------------------
REPRODUCED FROM CHEVRON CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 1997 AND QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED
MARCH 31, 1998.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
-------------- ---------------------------------------
1998 1997 1997 1996 1995 1994 1993
------ ------- ------- ------- ------- ------- -------
(EXPRESSED IN MILLIONS EXCEPT PER SHARE AMOUNT)
<S> <C> <C> <C> <C> <C> <C> <C>
Sales and other
operating revenues..... $7,464 $10,794 $40,583 $42,782 $36,310 $35,130 $36,191
Equity in net income of
affiliated companies... 151 178 688 767 553 440 440
Other income............ 38 121 679 344 219 284 451
------ ------- ------- ------- ------- ------- -------
Total Revenues.......... 7,653 11,093 41,950 43,893 37,082 35,854 37,082
Costs, Other Deductions
and Income Taxes....... 7,153 10,262 38,594 41,286 36,152 34,161 35,817
------ ------- ------- ------- ------- ------- -------
Net Income (Loss)....... $ 500 $ 831 $ 3,256 $ 2,607 $ 930 $ 1,693 $ 1,265
====== ======= ======= ======= ======= ======= =======
Net Income (Loss) Per
Share of Common Stock.. $ .77 $ 1.27 $ 4.97 $ 3.99 $ 1.43 $ 2.60 $ 1.94
====== ======= ======= ======= ======= ======= =======
Cash Dividends Per Share
of Common Stock........ $ .61 $ .54 $ 2.28 $ 2.08 $ 1.93 $ 1.85 $ 1.75
</TABLE>
A-2
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FIRST QUARTER 1998 COMPARED WITH FIRST QUARTER 1997
Overview and Outlook
Net income for the 1998 first quarter was $500 million ($.76 per share--
diluted, $.77 per share--basic), a decrease of 40 percent from $831 million
($1.27 per share--diluted and basic) earned in the first quarter of 1997.
Special items benefited 1998 first quarter earnings $64 million compared with
benefits of $27 million in last year's first quarter.
This year's earnings were adversely affected by several major factors:
significantly lower crude oil prices, lower natural gas prices, foreign
currency losses and major scheduled maintenance at two of the company's
largest U.S. refineries. In addition, despite lower feedstock costs, sales
margins were squeezed by lower U.S. refined product prices resulting from an
abundance of supply. However, international downstream earnings increased
compared with the first quarter 1997, primarily in the company's Caltex and
international shipping operations.
Chevron's worldwide exploration and production (upstream) earnings suffered
appreciably from the decline in crude oil and natural gas prices since last
year's first quarter. These lower prices were the primary drivers for the
decline in earnings. The company's average U.S. crude oil realization per
barrel in the first quarter 1998 fell 37 percent compared with the 1997 first
quarter, while average U. S. natural gas realization declined 25 percent.
However, on the positive side, international liquids production continues to
grow. During the first quarter of 1998, net international liquids production
was up 2 percent from the first quarter of last year, including a record level
of liquids production from the five-year-old Tengizchevroil (TCO) joint
venture in Kazakhstan.
The interplay of rising supply and the declining rate of demand growth has
driven the crude price steadily downward. On the demand side, Asia's currency
crisis has slowed oil demand growth in that region and a globally mild winter
caused consumers in the northern hemisphere to require less oil and gas to
heat homes, offices and other buildings. Meanwhile, as the pace of demand
growth has dropped, worldwide oil supply has been increasing. New and improved
technologies have made oil and gas easier to find and produce.
Crude oil prices have remained "soft" into the 1998 second quarter, despite
the agreement by oil producing countries to cut production. During the first
four months of 1998, the spot price for West Texas Intermediate (WTI), an
industry benchmark light crude, averaged $15.78 per barrel representing a 28
percent decline from the corresponding 1997 period.
Chevron is aware that some countries in which it produces may be considering
crude oil production cuts, but the company believes the net effect of any host
country directed changes will be insignificant to its overall production
levels. However, any host country directed reductions or limits may have an
adverse effect on the level of new production from current and future
development projects.
The company continues to monitor the crude oil market closely, but has not
made any substantive changes to its operations or capital spending plans and
expects to move forward with attractive investment opportunities.
Chevron and its affiliates continue to review and analyze their operations
and may close, sell, exchange, acquire or restructure assets to achieve
operational or strategic benefits to improve competitiveness and
profitability. In addition, Chevron receives claims from, and submits claims
to, customers, trading partners, contractors and suppliers. The amounts of
these claims, individually and in the aggregate, may be significant and
require lengthy periods to resolve. These activities may result in significant
losses or gains to income in future periods.
- -------------------------------------------------------------------------------
REPRODUCED FROM CHEVRON CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE
QUARTER ENDED MARCH 31, 1998.
A-3
<PAGE>
Current Developments
In spite of the low crude prices in the first quarter 1998, the company has
been active in all areas of its business. Some of the operational highlights
since the beginning of 1998 were:
The company announced the discovery of the Viosca Knoll Carbonate Trend in
the Gulf of Mexico offshore Mississippi. This is the first offshore U. S. Gulf
natural gas reserves to originate from Lower Cretaceous pay sands. This
carbonate trend is contiguous to and lies south of the giant Chevron-operated
Norphlet natural gas trend and other offshore production, possibly permitting
the tie-in of production from the new trend into existing infrastructure. The
company has made five new field discoveries in this trend since 1994, four
within the last 18 months. Chevron is the operator and holds the dominant
interest in 71 leases in this trend. The Viosca Knoll Block 68 discovery well,
drilled in June 1997, began production in April 1998 and is the first of the
five discovery wells in the trend that will begin production.
In the first quarter of 1998, Chevron signed two new exploration and
production-sharing agreements in Qatar and Bahrain. The onshore concession in
Qatar covers 10,900 square-kilometers and lies to the east of the Dukhan oil
field and south of the North Dome gas field. For Bahrain, the offshore
concession of three blocks covers approximately 5,900 square kilometers.
The company announced two crude oil discoveries in the Haute Mer deepwater
permit area offshore Congo, suspected to be on-trend with Chevron's two 1997
giant discoveries in Block 14 offshore Angola in the Cabinda Concession.
Chevron holds a 30 percent interest in each of these two discoveries.
Initial liquids production began from two new fields in Nigeria this year.
Production began at the offshore Opolo Field in the Niger delta in February.
The field is currently producing at an average of 24,000 barrels of crude oil
per day and is expected to remain at about that level for the remainder of
1998. In April, Chevron announced that production had begun at the onshore
Gbokoda Field, its first "zero-flare" oil field project in Nigeria. Gbokoda
gas, produced in association with the crude oil, will be processed for
commercial use at the Escravos Gas Project. Crude oil production from the
Gbokoda Field is expected to increase to over 40,000 barrels per day by the
end of 1998. Gbokoda and Opolo are the first two of four Chevron-operated
fields in Nigeria scheduled to begin production in 1998.
Chevron and Sasol, a South African fuels and petrochemicals company, plan to
pool resources to begin the design and engineering of a 20,000 barrel per day
gas-to-liquids plant adjacent to Chevron's Escravos Gas Project facilities in
Nigeria. Processed gas from the Escravos Gas Project will feed the proposed
gas-to-liquids plant for the conversion of natural gas to synthetic crude oil,
which will be processed further into high-quality diesel and naphtha products.
In Papua New Guinea, production began at the Moran Field in February and the
Gobe Field in March of this year. Production from the Gobe development is
expected to surpass 50,000 barrels per day by mid-1998. The extended well test
at the Moran Field will produce oil at a rate of 10,000 barrels per day.
The company plans to reconstruct an existing section of pipeline across the
Republic of Georgia to provide a pipeline transportation outlet to the
Georgian Black Sea port of Batumi for crude oil from the Tengiz Field in
Kazakhstan. The company is also evaluating the feasibility of building a new
pipeline to connect existing pipelines in the Azerbaijan-Georgia corridor.
Currently, pipeline exports of Tengiz crude are limited by quota restrictions
for access to Russian pipeline capacity. Alternative modes of transportation,
such as rail and barges, are used to maximize crude oil production.
Chevron and Texaco plan to establish a joint venture of their global marine
and industrial fuels and marine lubricant businesses, which will operate in
over 100 countries worldwide. The new company will be owned 69% by Texaco and
31% by Chevron and will market fuel oil to marine and industrial users and
marine lubes and greases in approximately 450 ports.
- -------------------------------------------------------------------------------
REPRODUCED FROM CHEVRON CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE
QUARTER ENDED MARCH 31, 1998.
A-4
<PAGE>
Chevron has significant production and development projects under way in
West Africa. Its share of combined production from Nigeria, Angola, Republic
of Congo and Democratic Republic of Congo is currently more than 310,000
barrels per day. While the company's producing operations in Nigeria and other
African countries have been generally unaffected by the civil unrest,
political uncertainty and economic conditions in this area, the company
continues to closely monitor developments.
Chevron's partner in Nigeria, the government-owned Nigerian National
Petroleum Corporation (NNPC) is currently reviewing funding levels for joint
ventures for 1998 and is currently making payments at 1997's rate.
Insufficient funding from NNPC could delay some of the company's development
projects in Nigeria.
Year 2000 compliance assessments of the company's information systems,
software and embedded technology continue. The company is also investigating
the compliance efforts of suppliers, contractors, and trading partners with
whom Chevron does business. The total amount of costs to be incurred to
address the Year 2000 issue cannot be reliably estimated at this time.
Review of Operations
Excluding special items, first quarter 1998 operating earnings were $436
million compared with 1997 first quarter operating earnings of $804 million in
the 1997 quarter. In the 1998 first quarter, favorable prior-year tax
adjustments of $125 million were partially offset by deferred tax effects of
$56 million from an exchange of international exploration and production
properties and net environmental remediation provisions of $5 million in the
company's U.S. refining, marketing and transportation (downstream) operations.
The net benefit from special items in the 1997 period included gains of $49
million from the sale of certain U.S. producing properties, which were
partially offset by environmental remediation and other provisions of $22
million.
Total revenues for the first quarter of 1998 were $7.7 billion, down 31
percent from $11.1 billion in last year's first quarter, primarily due to
lower prices for crude oil, natural gas and refined products. However,
approximately 25 percent of the decrease was attributable to the company's
fourth quarter 1997 exit from the U.K. refining and marketing business and the
sale of its interest in a U.K. chemicals affiliate.
The company continues to focus on costs during this period of low crude oil
prices. Ongoing operating expenses declined to $5.52 per barrel, down 41 cents
from the year-ago quarter and about 3 percent from the full year 1997, helping
to mitigate the effect of declining prices on operating results.
Return on capital employed, excluding special items, declined to 12.7
percent for the 12 months ended March 31, 1998, from 13.5 percent in the
similar period last year.
Due primarily to lower earnings, taxes on income for the first quarter of
1998 were $299 million compared with $628 million in last year's first
quarter. The effective tax rate decreased to 37.4 percent from 43.1 percent in
the 1997 first quarter. The primary reasons for the decrease were favorable
prior-period tax adjustments partially offset by the tax effects of an
exchange of international upstream properties and higher international taxes
caused by a shift in the earnings mix from lower effective tax-rate countries
to higher effective tax-rate countries.
Foreign currency effects reduced net income in the first quarter of both
years: $46 million in 1998 and $18 million in 1997. The increase in losses
between years reflect higher foreign currency losses from the company's and
Caltex's operations in Australia, Thailand and the Philippines. Earnings for
both years include significant foreign currency losses from Caltex's Korean
operations.
- -------------------------------------------------------------------------------
REPRODUCED FROM CHEVRON CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE
QUARTER ENDED MARCH 31, 1998.
A-5
<PAGE>
The following tables detail Chevron's after-tax earnings by major operating
area and selected operating data.
EARNINGS BY MAJOR OPERATING AREA
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED
MARCH 31,
---------
1998 1997
---- ----
MILLIONS
OF
DOLLARS
<S> <C> <C>
Exploration and Production
United States...................................................... $106 $361
International...................................................... 99 347
---- ----
Total Exploration and Production................................. 205 708
---- ----
Refining, Marketing and Transportation
United States...................................................... 45 70
International...................................................... 101 56
---- ----
Total Refining, Marketing and Transportation..................... 146 126
---- ----
Total Petroleum Operations....................................... 351 834
Chemicals............................................................ 63 63
Coal and Other Minerals.............................................. 11 15
Corporate and Other.................................................. 75 (81)
---- ----
Net Income........................................................... $500 $831
==== ====
</TABLE>
- -------------------------------------------------------------------------------
REPRODUCED FROM CHEVRON CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE
QUARTER ENDED MARCH 31, 1998.
A-6
<PAGE>
SELECTED OPERATING DATA (1) (2)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
-------------
1998 1997
------ ------
<S> <C> <C>
U.S. Exploration and Production
Net Crude Oil and Natural Gas Liquids Production (MBPD)........ 336 347
Net Natural Gas Production (MMCFPD)............................ 1,808 1,927
Sales of Natural Gas (MMCFPD).................................. 3,497 3,767
Sales of Natural Gas Liquids (MBPD) (3)........................ 141 143
Revenue from Net Production
Crude Oil ($/Bbl.)........................................... $12.49 $19.86
Natural Gas ($/MCF).......................................... $ 2.09 $ 2.77
International Exploration and Production
Net Crude Oil and Natural Gas Liquids Production (MBPD)........ 746 729
Net Natural Gas Production (MMCFPD)............................ 644 617
Sales of Natural Gas (MMCFPD).................................. 1,329 786
Sales of Natural Gas Liquids (MBPD)............................ 56 53
Revenue from Liftings
Liquids ($/Bbl.)............................................. $12.99 $20.02
Natural Gas ($/MCF).......................................... $ 1.96 $ 2.28
Other Produced Volumes (MBPD) (4).............................. 90 80
U.S. Refining, Marketing and Transportation
Sales of Gasoline (MBPD)....................................... 599 585
Sales of Other Refined Products (MBPD)......................... 534 585
Refinery Input (MBPD).......................................... 757 846
Average Refined Product Sales Price ($/Bbl.)................... $23.68 $30.40
International Refining, Marketing and Transportation
Sales of Refined Products (MBPD)............................... 809 912
Refinery Input (MBPD).......................................... 491 573
Chemical Sales and Other Operating Revenues (5)
United States.................................................. $ 681 $ 752
International.................................................. 145 134
Worldwide.................................................... $ 826 $ 886
</TABLE>
- --------
(1) Includes equity in affiliates.
(2) MBPD=thousand barrels per day; MMCFPD=million cubic feet per day;
Bbl.=barrel; MCF=thousand cubic feet.
(3) 1997 restated to conform to 1998 presentation.
(4) Total field production under the Boscan operating service agreement in
Venezuela.
(5) Millions of dollars. Includes sales to other Chevron companies.
Worldwide exploration and production net earnings were $205 million in the
first quarter of 1998, down significantly from $708 million in the 1997 first
quarter when crude oil and natural gas prices were substantially higher. U.S.
exploration and production net earnings were $106 million, down from $361
million in the 1997 first quarter. There were no special items in the first
quarter 1998; however, 1997 results included special gains of $49 million from
the sales of two producing properties and charges of $6 million for
environmental
- -------------------------------------------------------------------------------
REPRODUCED FROM CHEVRON CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE
QUARTER ENDED MARCH 31, 1998.
A-7
<PAGE>
remediation provisions. Excluding the 1997 special items, current quarter
earnings were about one-third of the $318 million earned in last year's first
quarter. Significantly lower crude oil and natural gas prices and lower
production volumes accounted for the decline in 1998 operating earnings.
The company's average 1998 U. S. crude oil and natural gas realizations
declined by 37 percent and 25 percent, respectively, compared with the first
quarter 1997. Average U. S. crude oil realizations of $12.49 per barrel were
down $7.37 from the 1997 first quarter. Average U. S. natural gas realizations
of $2.09 per thousand cubic feet were 68 cents lower than in the first quarter
of last year.
Net U. S. liquids production decreased to 336,000 barrels per day from
347,000 barrels per day in the prior-year first quarter. Net U. S. natural gas
production of 1.8 billion cubic feet per day declined from 1.9 billion cubic
feet per day compared with the 1997 first quarter. The declines in the
production of liquids and natural gas were primarily attributable to property
sales, 1998 weather-related shut-ins of liquids production in California and
normal field declines.
International exploration and production net earnings were $99 million, down
from $347 million in the 1997 first quarter. Net earnings for the 1998 quarter
included a loss of $56 million from deferred tax effects of an exchange of
certain U. K. North Sea producing properties for properties in the Norwegian
North Sea. Excluding the effect of this special item, 1998 operating earnings
of $155 million decreased by $192 million compared with last year's quarter.
The decline in operating earnings reflected lower crude oil prices, partially
offset by higher liftings when compared with the year-ago quarter.
Net international liquids production increased 17,000 barrels per day to
746,000 barrels per day, mostly due to increased production in Canada,
Indonesia, Australia and West Africa. These increases were partially offset by
declines in Europe and Papua New Guinea. Natural gas production increased 4
percent to 644 million cubic feet per day, reflecting higher production in
Indonesia and Nigeria that was partially offset by lower volumes in Canada and
Kazakhstan.
Foreign currency losses in the first quarter 1998 were $15 million compared
with gains of $5 million in the 1997 quarter. The changes were primarily in
the company's Australian and U.K. operations.
Worldwide refining and marketing and transportation had net earnings of $146
million in the first quarter of 1998, up 16 percent from $126 million in last
year's first quarter. U.S. refining, marketing and transportation net earnings
in 1998 were $45 million compared with $70 million in the first quarter 1997.
After excluding net special charges of $5 million for environmental
remediation and $8 million for litigation matters from the 1998 and 1997
results, respectively, operating earnings were $50 million, a decline of 36
percent from the $78 million reported in last year's first quarter.
U.S. refined product sales margins decreased in the 1998 first quarter, as
the deterioration in sales realizations outpaced the decline in feedstock
costs. While significant, the unfavorable effects of refinery downtime for
scheduled maintenance were comparable in the 1998 and 1997 periods. The
average refined product sales price in the 1998 quarter was $23.68 per barrel,
down 22 percent from $30.40 per barrel in last year's first quarter.
Total refined product sales volumes were 1.13 million barrels per day, down
3 percent from the comparable quarter last year. Most refined products sales
volumes decreased except for gasoline sales, which increased 2 percent to
599,000 barrels per day, and jet fuel sales, which increased by about 3
percent.
International refining, marketing and transportation net earnings were $101
million, up from $56 million reported for the first quarter of 1997. In the
Caltex areas of operations, earnings increased significantly, especially in
Korea and Japan, as the fall in crude oil prices resulted in improved refined
product sales margins. The company's international shipping results improved
as freight rates rose.
- -------------------------------------------------------------------------------
REPRODUCED FROM CHEVRON CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE
QUARTER ENDED MARCH 31, 1998.
A-8
<PAGE>
Sales volumes declined by 11 percent in the first quarter of 1998, due
primarily to the effect of the company's exit from the U.K. refining and
marketing business in the fourth quarter of 1997. For the remaining
operations, a 2 percent increase in Caltex's sales volumes more than offset
sales volume declines by the company's other international downstream
businesses.
Foreign currency losses in the 1998 first quarter were $31 million compared
with losses of $29 million in 1997. In 1998, increased foreign currency losses
in Caltex's Thailand, Philippine and Australian operations were nearly offset
by the absence of U.K. currency losses following the company's exit from the
U.K. downstream business in late 1997.
Chemicals net earnings were $63 million in the 1998 quarter, the same as
earned in last year's first quarter. Higher sales volumes and improved sales
margins for additives were offset primarily by lower earnings from equity
affiliates. The latter was a result of the sale of the company's interest in a
U.K. chemicals affiliate in the fourth quarter of 1997.
Coal and other minerals net earnings declined by $4 million in the first
quarter 1998 to $11 million. Higher operating expenses at one of the company's
mines offset higher overall sales of coal and additional earnings from equity
affiliates.
Corporate and other includes interest expense, interest income on cash and
marketable securities, corporate cost centers and real estate and insurance
operations. These activities provided net earnings of $75 million in the first
quarter 1998, compared with net charges of $81 million in the comparable
prior-year quarter. After excluding a favorable prior-year tax adjustment of
$125 million in 1998 and a special charge of $8 million for environmental
remediation in 1997, net charges declined to $50 million in 1998 from $73
million in 1997. The decline in net charges was due primarily to recoveries of
certain prior-year claims and lower costs of variable components of employee
compensation plans.
Liquidity and Capital Resources
Cash and cash equivalents totaled $1.265 billion at March 31, 1998, up $250
million from year-end 1997. In addition to cash from operations, an increase
in short-term debt, primarily commercial paper, was required to fund the
company's capital expenditures and dividend payments to stockholders.
Total debt and capital lease obligations were $7.069 billion at March 31,
1998, up about $1 billion from $6.068 billion at year-end 1997. The increase
was primarily from a net increase in short-term commercial paper outstanding,
partially offset by the scheduled non-cash retirement in January of $60
million in 8.11 percent ESOP debt.
Although the company benefits from lower interest rates available on short-
term debt, the large amount of short-term debt has kept Chevron's ratio of
current assets to current liabilities at relatively low levels. The current
ratio was .98 at March 31, 1998, compared with 1.01 at year-end 1997. The
company's short-term debt, consisting primarily of commercial paper and the
current portion of long-term debt, totaled $5.432 billion at March 31, 1998.
This amount excludes $2.725 billion that was reclassified as long-term since
the company has both the intent and ability, as evidenced by revolving credit
agreements, to refinance it on a long-term basis. In the third quarter of
1997, the company decreased the amount of committed credit facilities from
$4.425 billion to $4.05 billion, but increased the portion with termination
dates beyond one year from $1.8 billion to $2.725 billion. The company's
practice has been to refinance its commercial paper continually, maintaining
levels it believes to be appropriate to provide adequate funding for ongoing
operations and capital spending.
The company's debt ratio (total debt to total debt plus equity) was 28.8
percent at March 31, 1998, up from 25.8 percent at year-end 1997, as a result
of the increase in the issuance of commercial paper. The company continually
monitors its spending levels, market conditions and related interest rates to
maintain what it perceives to be reasonable debt levels.
- -------------------------------------------------------------------------------
REPRODUCED FROM CHEVRON CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE
QUARTER ENDED MARCH 31, 1998.
A-9
<PAGE>
In December 1997, Chevron's Board of Directors approved the repurchase of up
to $2 billion of its outstanding common stock, providing shares for use in its
employee stock option programs. In the first quarter of 1998 the company
purchased an additional 2.8 million shares at a cost of about $200 million. To
date, the company has purchased 4 million shares at a cost of about $300
million under the repurchase program.
Worldwide capital and exploratory expenditures for the first quarter of
1998, including the company's share of affiliates' expenditures, totaled $972
million, 3 percent more than the $941 million spent in the 1997 first quarter.
Expenditures for exploration and production activities represented 72 percent
of total spending in the 1998 first quarter, up 4 percent from the comparable
1997 period. Expenditures for international exploration and production
projects were $422 million, or 43 percent of total expenditures, reflecting
the company's continued emphasis on increasing international oil and gas
production. Total capital and exploratory spending for the year 1998 is
forecast to be a record $6.3 billion, a 14 percent increase from record 1997
spending levels.
The company continues to evaluate its capital spending plans. Should the low
crude oil and natural gas price environment become more severe and prolonged,
the company has the ability to modify its planned expenditures accordingly. In
many of the countries where the company has upstream operations, host
countries are partners in the ventures and provide a share of the funds for
exploration and production projects. The ability of these host countries and
other joint venture partners to fund their share of expenditures may affect
the level of 1998 spending and the new projects the company seeks to initiate.
- -------------------------------------------------------------------------------
REPRODUCED FROM CHEVRON CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE
QUARTER ENDED MARCH 31, 1998.
A-10
<PAGE>
APPENDIX B
DESCRIPTION OF OLD 6 1/2% DEBENTURES
Capitalized terms defined in this Appendix B are used as defined only in this
Appendix B.
GENERAL
The 6 1/2% exchangeable senior debentures due 2003 (the "6 1/2% Debentures")
are an issue of Pennzoil's Debt Securities (the "Securities") issued under the
Indenture dated as of December 15, 1992 (the "Indenture") between Pennzoil
Company (the "Company" or "Pennzoil") and Chase Bank of Texas, National
Association (formerly known as Texas Commerce Bank National Association), as
trustee (the "Trustee"). The italicized references below refer to the section
numbers of the First Supplemental Indenture dated as of January 13, 1993 to
the Indenture ("First Supplemental Indenture") between Pennzoil and Chase Bank
of Texas, National Association, as trustee.
The 6 1/2% Debentures will mature on January 15, 2003 and will each bear
interest from January 13, 1993 at 6 1/2% per annum, payable semiannually on
each January 15 and July 15, commencing July 15, 1993 (i) to the holders of
the Registered 6 1/2% Debentures at the close of business on the December 31
next preceding such January 15 or the June 30 next preceding such July 15, as
the case may be, and (ii) to the holders of the Bearer 6 1/2% Debentures upon
presentation of the appropriate coupon appertaining thereto on each January 15
and July 15, commencing July 15, 1993. The aggregate principal amount of the 6
1/2% Debentures outstanding is $397.1 million.
The 6 1/2% Debentures constitute unsecured senior debt obligations of
Pennzoil ranking pari passu with all other present and future unsecured
general obligations of Pennzoil that are not expressly subordinated to senior
indebtedness.
FORM OF 6 1/2% DEBENTURES
The 6 1/2% Debentures are issued as both Registered 6 1/2% Debentures and
Bearer 6 1/2% Debentures. The Registered 6 1/2% Debentures are in definitive
form without coupons. The Bearer 6 1/2% Debentures are in denominations of
$5,000, with coupons attached.
The Paying Agent for the Bearer 6 1/2% Debentures is Chemical Bank London.
EXCHANGE RIGHTS
The 6 1/2% Debentures (or portions thereof in integral multiples of $1,000)
are exchangeable for shares of common stock ("Chevron Stock") of Chevron
Corporation ("Chevron") Chevron Stock at any time and from time to time prior
to maturity at an exchange rate of $42 1/16 share (equivalent to an exchange
rate of 23.7741 shares of Chevron Stock per $1,000 principal amount of 6 1/2%
Debentures), subject to adjustment under the circumstances described below. In
the event the 6 1/2% Debentures are called for redemption, the exchange rights
will terminate at the close of business on the date immediately prior to the
date of redemption. (Section 201)
Pennzoil has deposited the number of shares of Chevron Stock deliverable in
exchange for (i) the Registered 6 1/2% Debentures with Chase Bank of Texas,
National Association (formerly known as Texas Commerce Bank National
Association), who is the exchange agent for holders of Registered 6 1/2%
Debentures (the "Domestic Exchange Agent") on behalf of Pennzoil and (ii) the
Bearer 6 1/2% Debentures with Chemical Bank London, who is the exchange agent
for holders of Bearer 6 1/2% Debentures (the "Foreign Exchange Agent") on
behalf of Pennzoil. Each of the Domestic Exchange Agent and the Foreign
Exchange Agent are referred to individually herein as an "Exchange Agent" and
collectively as the "Exchange Agents." Pennzoil will deposit with the Domestic
Exchange Agent and the Foreign Exchange Agent any cash and other property
deliverable in exchange for the Registered 6 1/2% Debentures and the Bearer 6
1/2% Debentures, respectively. Pennzoil will not be
B-1
<PAGE>
permitted to pledge, mortgage, hypothecate or grant a security interest in, or
permit any mortgage, pledge, security interest or other lien upon, the Chevron
Stock, cash and other property deliverable in exchange for the 6 1/2%
Debentures (collectively, "Exchange Property"). The deposit arrangements with
each Exchange Agent will terminate at such time as the right to exchange 6
1/2% Debentures with such Exchange Agent shall have expired pursuant to the
First Supplemental Indenture.
In order to exercise the right of exchange, the holder of any Registered 6
1/2% Debenture must surrender such 6 1/2% Debenture to the Domestic Exchange
Agent at its office maintained for such purpose in Houston, Texas and the
holder of a Bearer 6 1/2% Debenture must surrender such 6 1/2% Debenture to
the Foreign Exchange Agent at its office maintained for such purpose in
London, England. Each 6 1/2% Debenture to be surrendered must be accompanied
by written notice to Pennzoil and the applicable Exchange Agent that the
holder elects to exchange such Debenture. Delivery of the certificates for
Chevron Stock or any other Exchange Property may be delayed at the request of
Pennzoil in order to effectuate the calculation of the adjustments of the
Chevron Stock or other Exchange Property to obtain any certificate
representing securities to be delivered, to complete any reapportionment of
the Chevron Stock or other Exchange Property which is required by the
Indenture or to comply with any applicable law. (Section 202). No fractional
shares will be delivered on any exchange of 6 1/2% Debentures and in lieu
thereof a cash adjustment based on the market price of the Chevron Stock or
other Exchange Property will be paid. (Section 203)
In lieu of delivering certificates representing Chevron Stock in exchange
for any 6 1/2% Debentures, Pennzoil may pay to the holder surrendering such 6
1/2% Debentures an amount in cash equal to the market price of the Chevron
Stock or other Exchange Property for which such 6 1/2% Debentures are
exchangeable, determined as of the date of receipt by Pennzoil of the notice
of exchange relating to such 6 1/2% Debentures (or, if such date is not a
business day, on the business day next preceding such date). Prior to so
directing an Exchange Agent to make any such cash payment, Pennzoil shall
deposit with such Exchange Agent the cash so payable. (Section 216)
Upon an exchange of Exchange Property (or cash in lieu thereof) for a
Debenture, a holder will not receive any cash payment representing accrued
original issue discount for United States federal income tax purposes ("Tax
OID"). The delivery of the Exchange Property (or cash in lieu thereof) to a
holder in exchange for a holder's 6 1/2% Debenture will be deemed to satisfy
Pennzoil's obligation to pay the principal amount of the 6 1/2% Debenture
including the Tax OID attributable to the period from the date of issue to the
date of such exchange with respect to such Debenture. Thus, the accrued Tax
OID is deemed to be paid rather than canceled, extinguished or forfeited. As a
result, the exchange rate is not adjusted for accrued Tax OID. (Section 202)
Pennzoil is entitled to all cash dividends with respect to the Chevron Stock
or other Exchange Property, other than dividends paid pursuant to a plan of
liquidation or partial liquidation of Chevron, recapitalization or
restructuring of Chevron or other extraordinary cash dividends. Pennzoil will
also be entitled to all interest payments on any debt securities held for
exchange by Pennzoil which are issued in exchange for Chevron Stock or other
Exchange Property pursuant to any merger or consolidation of Chevron or in
connection with any sale of all or substantially all the assets of Chevron.
(Section 205)
If Chevron should issue any Chevron Stock in subdivision or by way of stock
dividend, the exchange rate will be proportionately increased, and if Chevron
shall effect a combination of Chevron Stock, the exchange rate will be
proportionately reduced, subject in each case to adjustments for tax
consequences, if any. (Section 204)
If Chevron should make any distribution of cash, securities or other
property with respect to the Chevron Stock or other Exchange Property (other
than cash dividends to which Pennzoil is entitled as described above, the
distributions described in the preceding paragraph or any securities or other
property received in a merger or consolidation of Chevron or in connection
with any sale of all or substantially all the assets of Chevron as described
in the next paragraph) or if Chevron grants transferable subscription rights,
options, warrants or other similar rights to Pennzoil in respect of the
Chevron Stock or other Exchange Property, Pennzoil will cause all such
securities, other property and rights to be deposited with the applicable
Exchange Agent and will direct the applicable Exchange Agent to sell all such
securities and other property and all such rights for cash, except any
B-2
<PAGE>
such securities or property that are convertible, without payment of any
consideration, into Chevron Stock and which rights do not expire before the
retirement of such securities or other property. Such Exchange Agent will
apply the proceeds first to the payment of any taxes incurred or deemed
incurred by Pennzoil or such Exchange Agent on such distribution or such grant
of rights and incurred or deemed incurred by Pennzoil or such Exchange Agent
on the subsequent sale of the securities or other property distributed or
rights granted. The balance of the cash proceeds will be held by such Exchange
Agent for distribution pro rata with the Chevron Stock or other Exchange
Property. In the event that a distribution or grant of cash, securities or
other property on Exchange Property shall be effected as contemplated by this
paragraph, a notice stating that such distribution or grant has occurred and
setting forth the additional cash, securities or other property distributed on
the Exchange Property shall as soon as practicable be mailed by or on behalf
of Pennzoil to the holders of Registered 6 1/2% Debentures at their addresses
as they appear in the Security Register and shall be published at least twice
in a daily newspaper in the cities of New York and London or other capital
city in Western Europe. (Section 205)
In the case of any merger or consolidation of Chevron with or into any other
person which results in shares of Chevron Stock, as constituted prior to the
consummation of such transaction, being converted into other securities and/or
property, including cash, or any sale of all or substantially all the assets
of Chevron (if in connection with such sale or transfer holders of Chevron
Stock receive other securities and/or property, including cash, in exchange
for their shares of Chevron Stock), the holder of any 6 1/2% Debenture
surrendered for exchange thereafter will, subject to the following paragraph,
be entitled to receive the kind and amount of shares of stock and other
securities and property receivable upon or in connection with such transaction
by a holder of the number of shares of Chevron Stock or other Exchange
Property for which such 6 1/2% Debenture might have been exchanged immediately
prior to such transaction, as well as a pro rata share of any cash held for
exchange by Pennzoil in accordance with the preceding paragraph. (Section 211)
Upon the occurrence of any such merger, consolidation, sale of all or
substantially all the assets of Chevron described in the preceding paragraph
or any voluntary or involuntary dissolution, liquidation or winding up of
Chevron, or any stock dividend, subdivision, combination or reclassification
of shares of Chevron Stock or other Exchange Property, which shall be taxable
to Pennzoil or either Exchange Agent, or upon the happening of any other event
with respect to the Chevron Stock or other Exchange Property, which is taxable
or treated as being taxable to Pennzoil or either Exchange Agent, the
applicable Exchange Agent will deliver cash which it holds for exchange
(including cash received in such transaction) to Pennzoil or to itself for
payment of the taxes arising from such transaction. If the cash held for
exchange is insufficient to pay the amount of such taxes, such Exchange Agent
will sell such of the shares of Chevron Stock or other Exchange Property as
may be necessary to pay the amount of the insufficiency and any taxes payable
by Pennzoil or such Exchange Agent arising from such sale. The remaining
shares of Chevron Stock or other Exchange Property will be held by such
Exchange Agent for distributions pro rata to holders requesting exchange of
their 6 1/2% Debentures. (Section 215)
From time to time, Pennzoil may require the Exchange Agents to segregate
such property as Pennzoil determines may be necessary for Pennzoil or the
Exchange Agents to pay taxes with respect to the transactions or events
described above, subject to the determination of taxability (and any expenses
incurred in determining taxability), and such property (or any portion
thereof) shall be deliverable to holders of 6 1/2% Debentures only after
determination that such withholding is not necessary for the payment of such
taxes and after deducting the expenses incurred in connection with such
determination. (Section 215)
If Chevron grants nontransferable subscription rights, options, warrants or
similar rights with respect to the Exchange Property, Pennzoil will, if
otherwise lawful, deliver such rights pro rata to the Exchange Agents.
Pennzoil and the Domestic Exchange Agent shall cause such rights to be
distributed to the holders of the Registered 6 1/2% Debentures shown in the
Security Register and Pennzoil shall make available to holders of Bearer 6
1/2% Debentures a notice published at least twice in a daily newspaper in the
cities of New York and London or other capital city in Western Europe, which
notice shall state that such rights will be delivered to such holder upon such
holder's furnishing satisfactory proof to Pennzoil of such holder's status as
a holder of Bearer Securities. (Section 205)
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Pennzoil is required to give to holders of 6 1/2% Debentures notice of
certain dividends on the Chevron Stock deliverable upon exchange of 6 1/2%
Debentures, the granting of subscription rights, options, warrants or other
similar rights to holders of Chevron Stock, any reclassification of Chevron
Stock (other than a subdivision or combination of outstanding shares of
Chevron Stock), certain mergers involving Chevron, the sale of all or
substantially all of the assets of Chevron and the dissolution, liquidation or
winding up of Chevron. (Section 206)
Any cash held by an Exchange Agent that is deliverable upon exchange of 6
1/2% Debentures will be invested by such Exchange Agent at the direction of
Pennzoil in U.S. Government Obligations with maturity dates of twelve months
or less. Any interest or gain on such investments will be for the benefit of
Pennzoil and Pennzoil will be responsible for any losses on such investments.
To the extent 6 1/2% Debentures are redeemed prior to exchange, Pennzoil will
be entitled to receive from the applicable Exchange Agent such number of
shares of Chevron Stock, other Exchange Property and such amount of cash, if
any, held by such Exchange Agent for exchange as exceeds the number of shares
of Chevron Stock or other Exchange Property required to be held by such
Exchange Agent for the exchange of all 6 1/2% Debentures remaining then
outstanding. (Section 205)
"U.S. Government Obligations" is defined in each Indenture as direct non-
callable obligations of, or non-callable obligations the payment of principal
of and interest on which is guaranteed by, the United States of America, or
the payment of which obligations or guarantees the full faith and credit of
the United States of America is pledged, or beneficial interests in a trust
the corpus of which consists exclusively of money or such obligations or a
combination thereof.
In the event of a tender offer or exchange offer for any class of securities
included within the Exchange Property (i) if Pennzoil owns shares of such
class which are not subject to the Exchange Agreement, Pennzoil will cause
each Exchange Agent to tender such shares of such class in the same proportion
that Pennzoil tenders its securities in such class which are not subject to
the Exchange Agreement, and (ii) if Pennzoil does not own securities of a
class which are subject to the Exchange Agreement, Pennzoil may, at its option
and in its sole discretion, elect to cause either or both Exchange Agents to
tender all or any portion or none of such class of security included within
the Exchange Property held by such Exchange Agent or Exchange Agents. The
proceeds of the sale of any such Exchange Property pursuant to any such tender
or exchange offer will be held by each Exchange Agent for the benefit of
holders as provided in the First Supplemental Indenture. As a result of the
receipt by an Exchange Agent of cash or other property upon the tender or
exchange of an Exchange Property, holders will not participate in any
subsequent appreciation or depreciation in the market price of such Exchange
Property tendered or exchanged upon any subsequent exchange of 6 1/2%
Debentures. (Section 212)
The right of a holder to exchange his 6 1/2% Debentures for Chevron Stock or
other Exchange Property could be adversely affected in the event of the
bankruptcy, insolvency or liquidation of Pennzoil. In such event, the Chevron
Stock or other Exchange Property could be assets of Pennzoil subject to the
claims of its general creditors.
REPURCHASE RIGHTS
The Exchange Agents will act as agents for Pennzoil in connection with
Pennzoil's exchange obligations under the First Supplemental Indenture and
will not act as escrow agents for the benefit of holders of 6 1/2% Debentures.
Accordingly, Pennzoil may at any time obtain from either or both of the
Exchange Agents or otherwise authorize or direct either or both of the
Exchange Agents to release all or a part of the Chevron Stock or other
Exchange Property. In the event that Pennzoil obtains or otherwise releases
any Chevron Stock or other Exchange Property in any manner otherwise than as
contemplated by the First Supplemental Indenture, each holder of 6 1/2%
Debentures will have the right ("Repurchase Right"), at such holder's option,
to require Pennzoil to repurchase all of such holder's 6 1/2% Debentures, or a
portion thereof which is $1,000 or any integral multiple thereof, in the
manner and at the price described below. (Section 217)
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Promptly (and in any event within 10 days) after Pennzoil has obtained or
released any Exchange Property in any manner otherwise than as contemplated by
the First Supplemental Indenture, the Domestic Exchange Agent will mail to all
holders of record of the 6 1/2% Debentures a notice thereof and the Repurchase
Right arising as a result thereof (a "Repurchase Notice") and the Foreign
Exchange Agent will cause a copy of the Repurchase Notice to be published at
least twice in a daily newspaper in the cities of New York and London or other
capital city in Western Europe. To exercise the Repurchase Right, a holder of
6 1/2% Debentures must deliver on or before the 15th day after the date of the
Repurchase Notice irrevocable written notice to the applicable Exchange Agent
of the holder's exercise of such right, together with the 6 1/2% Debentures
with respect to which the right is being exercised, duly endorsed for
transfer.
On the date ("Repurchase Date") that is 30 days after the date of the
Repurchase Notice, Pennzoil will be required to repurchase all 6 1/2%
Debentures in respect of which the Repurchase Right has been exercised at the
following price: (i) if the date on which Pennzoil's obtaining or release of
Exchange Property in a manner not contemplated by the First Supplemental
Indenture first occurs (the "Triggering Date") is before January 15, 1998, the
product of (1) 120% and (2) the greater of the principal amount at maturity of
such 6 1/2% Debentures (plus accrued and unpaid interest, if any, to the
Repurchase Date) and the market price of the Exchange Property deliverable in
exchange for such 6 1/2% Debentures on the Triggering Date (or if such date is
not a business day, on the next succeeding business day); and (ii) if the
Triggering Date occurs on or after January 15, 1998, the greater of (1) the
redemption price as specified under "Redemption Provisions" on the Triggering
Date and (2) the market price of the Exchange Property deliverable in exchange
for such 6 1/2% Debentures on the Triggering Date (or if such date is not a
business day, on the next succeeding business day).
The obligation of Pennzoil to deliver Exchange Property (or cash in lieu
thereof) in exchange for 6 1/2% Debentures shall survive and continue to apply
in full force and effect following and notwithstanding the occurrence of any
event triggering a Repurchase Right. Failure by Pennzoil to exchange 6 1/2%
Debentures in accordance with the First Supplemental Indenture or to
repurchase either Registered 6 1/2% Debentures or Bearer 6 1/2% Debentures
upon exercise of a Repurchase Right will constitute an Event of Default with
respect to the 6 1/2% Debentures, and holders of 6 1/2% Debentures will have
the remedies provided for in the Indenture, including acceleration of the
indebtedness evidenced by the 6 1/2% Debentures, in the event of any such
failure.
The exchange obligations of Pennzoil may not be assigned or otherwise
transferred by Pennzoil except to the extent Pennzoil may, without the consent
of any holders of outstanding Securities, consolidate with or merge into, or
convey, transfer or lease its assets substantially as an entirety to, any
person, provided that the person formed by such consolidation or into which
Pennzoil is merged or which acquires or leases the assets of Pennzoil
substantially as an entirety is a corporation, partnership or trust organized
under the laws of any United States jurisdiction and assumes by supplemental
indenture Pennzoil's obligation on the Securities and under the Indentures,
that after giving effect to the transaction, no Event of Default, and no event
which, after notice or lapse of time or both, would become an Event of
Default, shall have happened and be continuing, and that certain other
conditions are met. Upon compliance with these provisions by a successor
person, Pennzoil will (except in the case of a lease) be relieved of its
obligations under the Indenture and the Securities (Article Eight).
If an offer is made to repurchase 6 1/2% Debentures in connection with a
Repurchase Right, Pennzoil will comply with all tender offer rules, including
but not limited to Sections 13(e) and 14(e) under the Exchange Act and Rules
l3e-1 and 14e-1 thereunder, to the extent applicable to such offer.
REDEMPTION PROVISIONS
Subject to the redemption provisions described below, the 6 1/2% Debentures
will not be redeemable prior to January 15, 1998. Thereafter, the 6 1/2%
Debentures may be redeemed at the option of Pennzoil, in whole or from time to
time in part, (i) on not less than 30 nor more than 60 days' notice by mail to
the holders of Registered 6 1/2% Debentures at their addresses appearing on
the Security Register and (ii) by publication for the holders of Bearer 6 1/2%
Debentures at least twice in a daily newspaper in the cities of New York and
London or other capital city of Western Europe, one of which publications is
not later than 30 days prior to the redemption date
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and one of which publications is not earlier than 60 days prior to the
redemption date, at the following redemption prices (expressed as a percentage
of the principal amount at maturity) if redeemed during the 12-month period
beginning January 15 of the following years:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
1998................................... 103.25%
1999................................... 102.60%
2000................................... 101.90%
2001................................... 101.30%
2002................................... 100.65%
</TABLE>
in each case together with accrued interest to the redemption date; provided,
however, that installments of interest on Bearer 6 1/2% Debentures whose
stated maturity is on or prior to the redemption date shall be payable only at
an office or agency located outside the United States (except as otherwise
provided in Section 1002 of the Indenture) and, only upon presentation and
surrender of coupons for such interest; and provided, further, that
installments of interest on Registered 6 1/2% Debentures whose stated maturity
is on or prior to the redemption date shall be payable to the holders of such
6 1/2% Debentures, registered as such at the close of business on the relevant
Record Dates. There is no sinking fund applicable to the 6 1/2% Debentures.
The 6 1/2% Debentures may also be redeemed at the option of Pennzoil, in
whole but not in part at any time, upon notice as described below, at a
redemption price equal to the principal amount thereof, together with accrued
and unpaid interest to the date fixed for redemption, if (i) Pennzoil shall
determine that, as a result of any change in, or amendment to, the laws (or
any regulations or rulings promulgated thereunder) of the United States or any
political subdivision or taxing authority thereof or therein affecting
taxation, or any change in official position regarding the application,
enforcement or interpretation of such laws, regulations or rulings (including
a holding by a court of competent jurisdiction), which change, amendment,
application, enforcement or interpretation becomes effective on or after the
date of this Prospectus Supplement, Pennzoil must pay or would become
obligated to pay any additional amounts ("Additional Amounts") with respect to
the 6 1/2% Debentures as described below under "Certain United States Federal
Income Tax Consequences--Payment of Additional Amounts" or (ii) any action
shall have been taken by a taxing authority (including but not limited to a
ruling or announcement of the Internal Revenue Service ("IRS") or other taxing
authority, whether or not officially published) or a court of competent
jurisdiction in the United States or any political subdivision or taxing
authority thereof or therein, including any of those actions specified in (i)
above (whether or not, in the case of an action taken by a taxing authority,
such action was taken or brought with respect to Pennzoil) or any change,
amendment, application, enforcement or interpretation shall be officially
proposed, in any case on or after the date of the prospectus supplement for
these 6 1/2% Debentures, as a result of which there is a substantial
possibility that Pennzoil will be obligated to pay Additional Amounts and, in
either case described in clause (i) or (ii), such obligation to pay Additional
Amounts cannot be avoided by the use of reasonable measures available to
Pennzoil; provided, however, that (i) no notice of redemption may be given
earlier than 90 days prior to the earliest date on which Pennzoil would be
obligated to pay such Additional Amounts were a payment in respect of the 6
1/2% Debentures then due, and (ii) at the time such notice of redemption is
given, such obligation to pay such Additional Amounts remains in effect. Prior
to the publication of any notice of redemption of the 6 1/2% Debentures
pursuant to the foregoing, Pennzoil shall deliver to the Trustee an opinion of
independent legal counsel to Pennzoil stating that Pennzoil is entitled to
effect such redemption, together with a certificate setting forth facts
showing that the conditions precedent to the right of Pennzoil so to redeem
have occurred.
If Pennzoil shall determine, based upon an opinion of an independent legal
counsel to Pennzoil, that any payment made outside the United States by
Pennzoil or any of its paying agents of the full amount of the next scheduled
payment of principal of or interest due in respect of any Bearer 6 1/2%
Debenture or coupon appertaining thereto would, under any present or future
laws or regulations of the United States affecting taxation
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or otherwise, be subject to any certification, information, documentation or
other reporting requirement of any kind the effect of which requirement is the
disclosure to Pennzoil, any paying agent or any governmental authority of the
nationality, residence or identity (as distinguished from status as a United
States Alien (as defined below)) of a beneficial owner of such Bearer 6 1/2%
Debenture or coupon who is a United States Alien (other than such a
requirement which (a) would not be applicable to a payment if made (i)
directly to the beneficial owner or (ii) to a custodian, nominee or other
agent of the beneficial owner, (b) can be satisfied by such a custodian,
nominee or other agent certifying to the effect that such beneficial owner is
a United States Alien, provided, however, that in each case referred to in
clause (a) (ii) and (b) payment by such custodian, nominee or agent to such
beneficial owner is not otherwise subject to any such requirement (other than
a requirement which is imposed on a custodian, nominee or other agent
described in clause (e) of this sentence), (c) is applicable only to a
collection or payment by a custodian, nominee or other agent of the beneficial
owner to or for such beneficial owner, (d) would not be applicable to such a
payment made by any other paying agent of Pennzoil outside the United States
or (e) is applicable to a payment to or by a custodian, nominee or other agent
of the beneficial owner because such custodian, nominee or agent is a United
States person (within the meaning of the United States Internal Revenue Code
of 1986, as amended (the "Code")), a controlled foreign corporation for United
States tax purposes, a foreign person 50% or more of whose gross income for
certain periods is effectively connected with a United States trade or
business, or otherwise related to the United States), Pennzoil shall redeem
the Bearer 6 1/2% Debentures (but not the Registered 6 1/2% Debentures), in
whole but not in part at any time, at a redemption price equal to the
principal amount thereof, together with accrued and unpaid interest and any
Additional Amounts with respect thereto, on the date fixed for redemption,
less applicable withholding taxes, such redemption to take place on such date,
not later than one year after the publication of notice of such determination,
as Pennzoil shall determine by notice to the Trustee at least 60 days before
the redemption date unless shorter notice is acceptable to the Trustee.
Pennzoil shall make such determination as soon as practicable and give prompt
notice thereof in accordance with Section 1104 of the Indenture, stating in
that notice the effective date of such certification, information,
documentation or reporting requirements and the date on which the redemption
shall occur. Notwithstanding the foregoing, Pennzoil shall not so redeem the 6
1/2% Debentures if, on the basis of any subsequent event, it is determined, in
the manner set forth above, 30 days or more prior to the date fixed for
redemption, that no such payment would be subject to any such requirement, in
which case Pennzoil shall give prompt notice of such determination. Except as
otherwise provided in the Indenture, notices to holders of Bearer Securities
will be given by publication at least twice in a daily newspaper in The City
of New York and London or other capital city in Western Europe and in such
other city or cities as may be specified in the Securities. Notices to holders
of Registered Securities will be given by mail to the addresses of such
holders as they appear in the Security Register. (Section 107) Any earlier
redemption notice shall then be deemed revoked and of no further effect.
Notwithstanding the provisions of the immediately preceding paragraph, if
and so long as each certification, information, documentation or other
reporting requirement referred to therein would be fully satisfied by payment
of withholding tax, backup withholding tax or similar charge, Pennzoil may
elect, prior to publication of the notice of determination referred to in the
second sentence of the immediately preceding paragraph, to have the provisions
of this paragraph apply in lieu of the provisions of that paragraph. In such
event, Pennzoil will pay as Additional Amounts such amounts as may be
necessary so that every net payment made following the effective date of such
requirement outside the United States by Pennzoil or any of its paying agents
of principal of, premium, if any, and interest on any Bearer 6 1/2% Debenture
or any coupon to a holder who is a United States Alien (but without any
requirement with regard to disclosure of the nationality, residence or
identity of such holder), after deduction or withholding for or on account of
such withholding tax, backup withholding tax or similar charge (other than a
withholding tax, backup withholding tax or similar charge which would not be
applicable in the circumstances referred to in the second parenthetical clause
of the first sentence of the immediately preceding paragraph), will not be
less than the amount provided for in such Bearer 6 1/2% Debenture or such
coupon to be then due and payable. If Pennzoil elects to pay such Additional
Amounts and so long as it is obligated to pay the same, Pennzoil may
subsequently redeem the Bearer 6 1/2% Debentures (but not the Registered 6
1/2% Debentures), in whole but not in part at any time, at a redemption price
equal, to the principal amount thereof, together with accrued and unpaid
interest to the date fixed for redemption. If Pennzoil elects to
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pay Additional Amounts pursuant to this paragraph and the condition specified
in the first sentence of this paragraph should no longer be satisfied, then
Pennzoil shall promptly redeem the Bearer 6 1/2% Debentures (but not the
Registered 6 1/2% Debentures) in whole but not in part.
DISCHARGE AND DEFEASANCE
The terms of the 6 1/2% Debentures provide that Pennzoil will be permitted
to terminate certain of its obligations under the Indenture pursuant to the
Indenture's covenant defeasance provisions only if Pennzoil delivers to the
Trustee an opinion of counsel that covenant defeasance will not cause holders
of the 6 1/2% Debentures to recognize income, gain or loss for United States
federal income tax purposes.
Pennzoil may terminate its obligations under the Indenture, other than its
obligation to pay the principal of (and premium, if any) and interest on the
Securities of any series and certain other obligations, if it (i) irrevocably
deposits or causes to be irrevocably deposited with the Trustee as trust funds
money or U.S. Government Obligations maturing as to principal and interest
sufficient to pay the principal of, any interest on, and any mandatory sinking
funds in respect of, all outstanding Securities of such series on the stated
maturity of such payments or on any redemption date and (ii) complies with any
additional conditions specified to be applicable with respect to the covenant
defeasance of Securities of such series. (Section 401)
The terms of the 6 1/2% Debentures also provide to legal defeasance. Legal
defeasance is permitted only if Pennzoil shall have received from, or there
shall have been published by, the United States Internal Revenue Service a
ruling to the effect that legal defeasance will not cause holders of the 6
1/2% Debentures to recognize income, gain or loss for United States federal
income tax purposes. In such case, if Pennzoil (i) irrevocably deposits or
causes to be irrevocably deposited money or U.S. Government Obligations as
described above, (ii) makes a request to the Trustee to be discharged from its
obligations on the Securities of such series and (iii) complies with any
additional conditions specified to be applicable with respect to legal
defeasance of Securities of such series, then Pennzoil shall be deemed to have
paid and discharged the entire indebtedness on all the outstanding Securities
of such series and the obligations of Pennzoil under the applicable Indenture
and the Securities of such series to pay the principal of (and premium, if
any) and interest on the Securities of such series shall cease, terminate and
be completely discharged, and the holders thereof shall thereafter be entitled
only to payment out of the money or U.S. Government Obligations deposited with
the Trustee as aforesaid, unless Pennzoil's obligations are revived and
reinstated because the Trustee is unable to apply such trust fund by reason of
any legal proceeding, order or judgment. (Sections 403 and 404)
PAYMENT OF ADDITIONAL AMOUNTS
Pennzoil will, subject to certain exceptions and limitations set forth
below, pay as additional interest such Additional Amounts to the holder of any
6 1/2% Debenture who is a United States Alien (as defined below) as may be
necessary in order that every net payment by Pennzoil or any of its paying
agents of principal of, premium, if any, and interest on each 6 1/2% Debenture
and any other amounts payable with respect to each Debenture, after deduction
or withholding for or on account of any present or future tax, assessment or
governmental charge imposed by the United States (or any political subdivision
or taxing authority thereof or therein) upon or as a result of such payment,
will not be less than the amount provided for in such 6 1/2% Debenture to be
then due and payable. However, Pennzoil will not be required to make any
payment of Additional Amounts for or on account of any one or more of the
following:
(a) any tax, assessment or other governmental charge which would not have
been so imposed but for (i) the existence of any present or former
connection between such holder (or a fiduciary, settlor, beneficiary,
member or shareholder of, or possessor of a power over, such holder, if
such holder is an estate, a trust, a partnership or a corporation) and the
United States, including, without limitation, such holder (or such
fiduciary, settlor, beneficiary, member, shareholder or possessor) being or
having been a citizen or resident thereof or treated as a resident thereof,
or being or having been present therein, or being or having been engaged in
a trade or business therein, or having or having had a permanent
establishment therein or (ii) the
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presentation of a 4 3/4% Debenture or any coupon appertaining thereto for
payment on a date more than 10 days after the date on which such payment
becomes due and payable or the date on which payment thereof is duly
provided for, whichever occurs later;
(b) any estate, inheritance, gift, sales, transfer, wealth, personal
property or any similar tax, assessment or other governmental charge;
(c) any tax, assessment or other governmental charge which is payable
otherwise than by deduction or withholding from payments of principal of or
interest on the 6 1/2% Debentures;
(d) any tax, assessment or other governmental charge imposed by reason of
such holder's past or present status (i) as a personal holding company or a
foreign personal holding company with respect to United States federal
income taxation, (ii) as a corporation which accumulates earnings to avoid
United States federal income tax, (iii) as a controlled foreign corporation
for United States tax purposes that is related to Pennzoil through stock
ownership, (iv) as the owner, actually or constructively, of 10 percent or
more of the total combined voting power of all classes of stock of Pennzoil
entitled to vote or (v) as a private foundation or other tax-exempt
organization;
(e) any tax, assessment or other governmental charge imposed by reason of
such holder's failure to comply with any certification, identification or
other reporting requirements concerning its nationality, residence,
identity or connection with the United States if such compliance is
required to establish entitlement to exemption from such tax, assessment or
other governmental charge; or
(f) any tax, assessment or other governmental charge which would not have
been imposed but for the fact that a 6 1/2% Debenture constitutes a "United
States real property interest," as defined in Section 897(c) (1) of the
Code with respect to the beneficial owner of such a 4 3/4% Debenture;
nor shall Additional Amounts be paid with respect to any payment of principal
of, premium, if any, or interest on a 6 1/2% Debenture or any other amount
payable with respect to a Debenture to any United States Alien holder who is a
fiduciary or partnership or other than the sole beneficial owner of any such
payment to the extent a beneficiary or settlor with respect to such fiduciary
or a member of such partnership or a beneficial owner would not have been
entitled to the Additional Amounts had such beneficiary, settlor, member or
beneficial owner been the holder of the Debenture. (Section 106)
The term "United States Alien" means any person who, for United States
federal income tax purposes, is as to the United States (i) a foreign
corporation, (ii) a foreign partnership one or more of the members of which
is, as to the United States, a foreign corporation, a nonresident alien
individual or a nonresident alien fiduciary of a foreign estate or trust,
(iii) a nonresident alien individual or (iv) a nonresident alien fiduciary of
a foreign estate or trust.
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APPENDIX C
DESCRIPTION OF OLD 4 3/4% DEBENTURES
Capitalized terms defined in this Appendix C are used as defined only in this
Appendix C.
GENERAL
The 4 3/4% exchangeable senior debentures due 2003 (the "4 3/4% Debentures")
are an issue of Pennzoil's Debt Securities (the "Securities") issued under the
Indenture dated as of December 15, 1992 (the "Indenture") between Pennzoil and
Chase Bank of Texas, National Association (formerly known as Texas Commerce
Bank National Association), as trustee (the "Trustee"). The italicized
references below refer to the section numbers of the Second Supplemental
Indenture to be dated as of October 12, 1993 to the Indenture ("Second
Supplemental Indenture") between Pennzoil and Chase Bank of Texas, National
Association, as trustee.
The 4 3/4% Debentures will mature on October 1, 2003 and will each bear
interest from October 12, 1993 at 4 3/4% per annum, payable semiannually on
each April 1 and October 1, commencing April 1, 1994 (i) to the holders of the
Registered 4 3/4% Debentures at the close of business on the March 15 next
preceding such April 1 or the September 15 next preceding such October 1, as
the case may be, and (ii) to the holders of the Bearer 4 3/4% Debentures upon
presentation of the appropriate coupon appertaining thereto on each April 1
and October 1, commencing April 1, 1994. The aggregate principal amount of the
4 3/4% Debentures outstanding is $491.8 million.
The 4 3/4% Debentures constitute unsecured senior debt obligations of
Pennzoil ranking pari passu with all other present and future unsecured
general obligations of Pennzoil that are not expressly subordinated to senior
indebtedness.
FORM OF 4 3/4% DEBENTURES
The 4 3/4% Debentures are issued as both Registered 4 3/4% Debentures and
Bearer 4 3/4% Debentures. The Registered 4 3/4% Debentures are in definitive
form without coupons. The Bearer 4 3/4% Debentures are in denominations of
$5,000, with coupons attached.
The Paying Agent for the Bearer 4 3/4% Debentures is Chemical Bank London.
EXCHANGE RIGHTS
The 4 3/4% Debentures (or portions thereof in integral multiples of $1,000)
are exchangeable for Chevron Stock at any time and from time to time prior to
maturity at an exchange rate of $58 13/16 per share (equivalent to an exchange
rate of 17.0032 shares of Chevron Stock per $1,000 principal amount of 4 3/4%
Debentures), subject to adjustment under the circumstances described below. In
the event the 4 3/4% Debentures are called for redemption, the exchange rights
will terminate at the close of business on the date immediately prior to the
date of redemption. (Section 201)
Pennzoil has deposited the number of shares of Chevron Stock deliverable in
exchange for (i) the Registered 4 3/4% Debentures with Chase Bank of Texas,
National Association (formerly known as Texas Commerce Bank National
Association), who will act as exchange agent for holders of Registered 4 3/4%
Debentures (the "Domestic Exchange Agent") on behalf of Pennzoil and (h) the
Bearer 4 3/4% Debentures with Chemical Bank London, who will act as exchange
agent for holders of Bearer 4 3/4% Debentures (the "Foreign Exchange Agent")
on behalf of Pennzoil. Each of the Domestic Exchange Agent and the Foreign
Exchange Agent are referred to individually herein as an "Exchange Agent" and
collectively as the "Exchange Agents." Pennzoil will deposit with the Domestic
Exchange Agent and the Foreign Exchange Agent any cash and other property
deliverable in exchange for the Registered 4 3/4% Debentures and the Bearer 4
3/4% Debentures, respectively. Pennzoil will not be permitted to pledge,
mortgage, hypothecate or grant a security interest in, or permit any
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mortgage, pledge, security interest or other lien upon, the Chevron Stock,
cash and other property deliverable in exchange for the 4 3/4% Debentures
(collectively, "Exchange Property"). The deposit arrangements with each
Exchange Agent will terminate at such time as the right to exchange 4 3/4%
Debentures with such Exchange Agent shall have expired pursuant to the Second
Supplemental Indenture.
In order to exercise the right of exchange, the holder of any Registered 4
3/4% Debenture must surrender such 4 3/4% Debenture to the Domestic Exchange
Agent at its office maintained for such purpose in Houston, Texas and the
holder of a Bearer 4 3/4% Debenture must surrender such 4 3/4% Debenture to
the Foreign Exchange Agent at its office maintained for such purpose in
London, England. Each 4 3/4% Debenture to be surrendered must be accompanied
by written notice to Pennzoil and the applicable Exchange Agent that the
holder elects to exchange such Debenture. Delivery of the certificates for
Chevron Stock or any other Exchange Property may be delayed at the request of
Pennzoil in order to effectuate the calculation of the adjustments of the
Chevron Stock or other Exchange Property to obtain any certificate
representing securities to be delivered, to complete any reapportionment of
the Chevron Stock or other Exchange Property which is required by the
Indenture or to comply with any applicable law. (Section 202) No fractional
shares will be delivered on any exchange of 4 3/4% Debentures, and in lieu
thereof a cash adjustment based on the market price of the Chevron Stock or
other Exchange Property will be paid. (Section 203)
In lieu of delivering certificates representing Chevron Stock in exchange
for any 4 3/4% Debentures, Pennzoil may pay to the holder surrendering such 4
3/4% Debentures an amount in cash equal to the market price of the Chevron
Stock or other Exchange Property for which such 4 3/4% Debentures are
exchangeable, determined as of the date of receipt by Pennzoil of the notice
of exchange relating to such 4 3/4% Debentures (or, if such date is not a
business day, on the business day next preceding such date). Prior to so
directing an Exchange Agent to make any such cash payment, Pennzoil shall
deposit with such Exchange Agent the cash so payable. (Section 216)
Upon an exchange of Exchange Property (or cash in lieu thereof) for a
Debenture, a holder will not receive any cash payment representing accrued
original issue discount for United States federal income tax purposes ("Tax
OID"). The delivery of the Exchange Property (or cash in lieu thereof) to a
holder in exchange for a holder's 4 3/4% Debenture will be deemed to satisfy
Pennzoil's obligation to pay the principal amount of the 4 3/4% Debenture
including the Tax OID attributable to the period from the date of issue to the
date of such exchange with respect to such Debenture. Thus, the accrued Tax
OID is deemed to be paid rather than canceled, extinguished or forfeited. As a
result, the exchange rate is not adjusted for accrued Tax OID. (Section 202)
Pennzoil is entitled to all cash dividends with respect to the Chevron Stock
or other Exchange Property, other than dividends paid pursuant to a plan of
liquidation or partial liquidation of Chevron, recapitalization or
restructuring of Chevron or other extraordinary cash dividends. Pennzoil will
also be entitled to all interest payments on any debt securities held for
exchange by Pennzoil which are issued in exchange for Chevron Stock or other
Exchange Property pursuant to any merger or consolidation of Chevron or in
connection with any sale of all or substantially all the assets of Chevron.
(Section 205)
If Chevron should issue any Chevron Stock in subdivision or by way of stock
dividend, the exchange rate will be proportionately increased, and if Chevron
shall effect a combination of Chevron Stock, the exchange rate will be
proportionately reduced, subject in each case to adjustments for tax
consequences, if any. (Section 204)
If Chevron should make any distribution of cash, securities or other
property with respect to the Chevron Stock or other Exchange Property (other
than cash dividends to which Pennzoil is entitled as described above, the
distributions described in the preceding paragraph or any securities or other
property received in a merger or consolidation of Chevron or in connection
with any sale of all or substantially all the assets of Chevron as described
in the next paragraph) or if Chevron grants transferable subscription rights,
options, warrants or other similar rights to Pennzoil in respect of the
Chevron Stock or other Exchange Property, Pennzoil will cause all such
securities, other property and rights to be deposited with the applicable
Exchange Agent and will direct the applicable Exchange Agent to sell all such
securities and other property and all such rights for cash, except any such
securities or property that are convertible, without payment of any
consideration, into Chevron Stock and
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which rights do not expire before the retirement of such securities or other
property. Such Exchange Agent will apply the proceeds first to the payment of
any taxes incurred or deemed incurred by Pennzoil or such Exchange Agent on
such distribution or such grant of rights and incurred or deemed incurred by
Pennzoil or such Exchange Agent on the subsequent sale of the securities or
other property distributed or rights granted. The balance of the cash proceeds
will be held by such Exchange Agent for distribution pro rata with the Chevron
Stock or other Exchange Property. In the event that a distribution or grant of
cash, securities or other property on Exchange Property shall be effected as
contemplated by this paragraph, a notice stating that such distribution or
grant has occurred and setting forth the additional cash, securities or other
property distributed on the Exchange Property shall as soon as practicable be
mailed by or on behalf of Pennzoil to the holders of Registered 4 3/4%
Debentures at their addresses as they appear in the Security Register and
shall be published at least twice in a daily newspaper in the cities of New
York and London or other capital city in Western Europe. (Section 205)
In the case of any merger or consolidation of Chevron with or into any other
person which results in shares of Chevron Stock, as constituted prior to the
consummation of such transaction, being converted into other securities and/or
property, including cash, or any sale of all or substantially all the assets
of Chevron (if in connection with such sale or transfer holders of Chevron
Stock receive other securities and/or property, including cash, in exchange
for their shares of Chevron Stock), the holder of any 4 3/4% Debenture
surrendered for exchange thereafter will, subject to the following paragraph,
be entitled to receive the kind and amount of shares of stock and other
securities and property receivable upon or in connection with such transaction
by a holder of the number of shares of Chevron Stock or other Exchange
Property for which such 4 3/4% Debenture might have been exchanged immediately
prior to such transaction, as well as a pro rata share of any cash held for
exchange by Pennzoil in accordance with the preceding paragraph. (Section 211)
Upon the occurrence of any such merger, consolidation, sale of all or
substantially all the assets of Chevron described in the preceding paragraph
or any voluntary or involuntary dissolution, liquidation or winding up of
Chevron, or any stock dividend, subdivision, combination or reclassification
of shares of Chevron Stock or other Exchange Property, which shall be taxable
to Pennzoil or either Exchange Agent, or upon the happening of any other event
with respect to the Chevron Stock or other Exchange Property, which is taxable
or treated as being taxable to Pennzoil or either Exchange Agent, the
applicable Exchange Agent will deliver cash which it holds for exchange
(including cash received in such transaction) to Pennzoil or to itself for
payment of the taxes arising from such transaction. If the cash held for
exchange is insufficient to pay the amount of such taxes, such Exchange Agent
will sell such of the shares of Chevron Stock or other Exchange Property as
may be necessary to pay the amount of the insufficiency and any taxes payable
by Pennzoil or such Exchange Agent arising from such sale. The remaining
shares of Chevron Stock or other Exchange Property will be held by such
Exchange Agent for distribution pro rata to holders requesting exchange of
their 4 3/4% Debentures. (Section 215)
From time to time, Pennzoil may require the Exchange Agents to segregate
such property as Pennzoil determines may be necessary for Pennzoil or the
Exchange Agents to pay taxes with respect to the transactions or events
described above, subject to the determination of taxability (and any expenses
incurred in determining taxability), and such property (or any portion
thereof) shall be deliverable to holders of 4 3/4% Debentures only after
determination that such withholding is not necessary for the payment of such
taxes and after deducting the expenses incurred in connection with such
determination. (Section 215)
If Chevron grants nontransferable subscription rights, options, warrants or
similar rights with respect to the Exchange Property, Pennzoil will, if
otherwise lawful, deliver such rights pro rata to the Exchange Agents.
Pennzoil and the Domestic Exchange Agent shall cause such rights to be
distributed to the holders of the Registered 4 3/4% Debentures shown in the
Security Register and Pennzoil shall make available to holders of Bearer 4
3/4% Debentures a notice published at least twice in a daily newspaper in the
cities of New York and London or other capital city in Western Europe, which
notice shall state that such rights will be delivered to such holder upon such
holder's furnishing satisfactory proof to Pennzoil of such holder's status as
a holder of Bearer Securities. (Section 205)
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Pennzoil is required to give to holders of 4 3/4% Debentures notice of
certain dividends on the Chevron Stock deliverable upon exchange of 4 3/4%
Debentures, the granting of subscription rights, options, warrants or other
similar rights to holders of Chevron Stock, any reclassification of Chevron
Stock (other than a subdivision or combination of outstanding shares of
Chevron Stock), certain mergers involving Chevron, the sale of all or
substantially all of the assets of Chevron and the dissolution, liquidation or
winding up of Chevron. (Section 206)
Any cash held by an Exchange Agent that is deliverable upon exchange of 4
3/4% Debentures will be invested by such Exchange Agent at the direction of
Pennzoil in U.S. Government Obligations with maturity dates of twelve months
or less. Any interest or gain on such investments will be for the benefit of
Pennzoil, and Pennzoil will be responsible for any losses on such investments.
To the extent 4 3/4% Debentures are redeemed prior to exchange, Pennzoil will
be entitled to receive from the applicable Exchange Agent such number of
shares of Chevron Stock, other Exchange Property and such amount of cash, if
any, held by such Exchange Agent for exchange as exceeds the number of shares
of Chevron Stock or other Exchange Property required to be held by such
Exchange Agent for the exchange of all 4 3/4% Debentures remaining then
outstanding. (Section 205)
"U.S. Government Obligations" is defined in each Indenture as direct non-
callable obligations of, or non-callable obligations the payment of principal
of and interest on which is guaranteed by, the United States of America, or
the payment of which obligations or guarantees the full faith and credit of
the United States of America is pledged, or beneficial interests in a trust
the corpus of which consists exclusively of money or such obligations or a
combination thereof.
In the event of a tender offer or exchange offer for any class of securities
included within the Exchange Property (i) if Pennzoil owns shares of such
class which are not subject to the Exchange Agreement, Pennzoil will cause
each Exchange Agent to tender such shares of such class in the same proportion
that Pennzoil tenders its securities in such class which are not subject to
the Exchange Agreement and (ii) if Pennzoil does not own securities of a class
which are subject to the Exchange Agreement, Pennzoil may, at its option and
in its sole discretion, elect to cause either or both Exchange Agents to
tender all or any portion or none of such class of security included within
the Exchange Property held by such Exchange Agent or Exchange Agents. The
proceeds of the sale of any such Exchange Property pursuant to any such tender
or exchange offer will be held by each Exchange Agent for the benefit of
holders as provided in the Second Supplemental Indenture. As a result of the
receipt by an Exchange Agent of cash or other property upon the tender or
exchange of an Exchange Property, holders will not participate in any
subsequent appreciation or depreciation in the market price of such Exchange
Property tendered or exchanged upon any subsequent exchange of 4 3/4%
Debentures. (Section 212)
The right of a holder to exchange his 4 3/4% Debentures for Chevron Stock or
other Exchange Property could be adversely affected in the event of the
bankruptcy, insolvency or liquidation of Pennzoil. In such event, the Chevron
Stock or other Exchange Property could be assets of Pennzoil subject to the
claims of its general creditors.
REPURCHASE RIGHTS
The Exchange Agents will act as agents for Pennzoil in connection with
Pennzoil's exchange obligations under the Second Supplemental Indenture and
will not act as escrow agents for the benefit of holders of 4 3/4% Debentures.
Accordingly, Pennzoil may at any time obtain from either or both of the
Exchange Agents or otherwise authorize or direct either or both of the
Exchange Agents to release all or a part of the Chevron Stock or other
Exchange Property. In the event that Pennzoil obtains or otherwise releases
any Chevron Stock or other Exchange Property in any manner otherwise than as
contemplated by the Second Supplemental Indenture, each holder of 4 3/4%
Debentures will have the right ("Repurchase Right"), at such holder's option,
to require Pennzoil to repurchase all of such holder's 4 3/4% Debentures, or a
portion thereof which is $1,000 or any integral multiple thereof, in the
manner and at the price described below. (Section 217)
Promptly (and in any event within 10 days) after Pennzoil has obtained or
released any Exchange Property in any manner otherwise than as contemplated by
the Second Supplemental Indenture, the Domestic Exchange
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Agent will mail to all holders of record of the 4 3/4% Debentures a notice
thereof and the Repurchase Right arising as a result thereof (a "Repurchase
Notice") and the Foreign Exchange Agent will cause a copy of the Repurchase
Notice to be published at least twice in a daily newspaper in the cities of
New York and London or other capital city in Western Europe. To exercise the
Repurchase Right, a holder of 4 3/4% Debentures must deliver on or before the
15th day after the date of the Repurchase Notice irrevocable written notice to
the applicable Exchange Agent of the holder's exercise of such right, together
with the 4 3/4% Debentures with respect to which the right is being exercised,
duly endorsed for transfer.
On the date ("Repurchase Date") that is 30 days after the date of the
Repurchase Notice, Pennzoil will be required to repurchase all 4 3/4%
Debentures in respect of which the Repurchase Right has been exercised at the
following price: (i) if the date on which Pennzoil's obtaining or release of
Exchange Property in a manner not contemplated by the Second Supplemental
Indenture first occurs (the "Triggering Date") is before October 1, 1998, the
product of (1) 120% and (2) the greater of the principal amount at maturity of
such 4 3/4% Debentures (plus accrued and unpaid interest, if any, to the
Repurchase Date) and the market price of the Exchange Property deliverable in
exchange for such 4 3/4% Debentures on the Triggering Date (or if such date is
not a business day, on the next succeeding business day); and (ii) if the
Triggering Date occurs on or after October 1, 1998, the greater of (1) the
redemption price as specified under "Redemption Provisions" on the Triggering
Date and (2) the market price of the Exchange Property deliverable in exchange
for such 4 3/4% Debentures on the Triggering Date (or if such date is not a
business day, on the next succeeding business day).
The obligation of Pennzoil to deliver Exchange Property (or cash in lieu
thereof) in exchange for 4 3/4% Debentures shall survive and continue to apply
in full force and effect following and notwithstanding the occurrence of any
event triggering a Repurchase Right. Failure by Pennzoil to exchange 4 3/4%
Debentures in accordance with the Second Supplemental Indenture or to
repurchase either Registered 4 3/4% Debentures or Bearer 4 3/4% Debentures
upon exercise of a Repurchase Right will constitute an Event of Default with
respect to the 4 3/4% Debentures, and holders of 4 3/4% Debentures will have
the remedies provided for in the Indenture, including acceleration of the
indebtedness evidenced by the 4 3/4% Debentures, in the event of any such
failure.
The exchange obligations of Pennzoil may not be assigned or otherwise
transferred by Pennzoil except to the extent Pennzoil may, without the consent
of any holders of outstanding Securities, consolidate with or merge into, or
convey, transfer or lease its assets substantially as an entirety to, any
person, provided that the person formed by such consolidation or into which
Pennzoil is merged or which acquires or leases the assets of Pennzoil
substantially as an entirety is a corporation, partnership or trust organized
under the laws of any United States jurisdiction and assumes by supplemental
indenture Pennzoil's obligation on the Securities and under the Indentures,
that after giving effect to the transaction, no Event of Default, and no event
which, after notice or lapse of time or both, would become an Event of
Default, shall have happened and be continuing, and that certain other
conditions are met. Upon compliance with these provisions by a successor
person, Pennzoil will (except in the case of a lease) be relieved of its
obligations under the Indenture and the Securities (Article Eight)
If an offer is made to repurchase 4 3/4% Debentures in connection with a
Repurchase Right, Pennzoil will comply with all tender offer rules, including,
but not limited to, Sections 13 (e) and 14 (e) under the Exchange Act and
Rules l3e-1 and l4e-1 thereunder, to the extent applicable to such offer.
REDEMPTION PROVISIONS
Subject to the redemption Provisions described below, the 4 3/4% Debentures
will not be redeemable prior to October 1, 1998. Thereafter, the 4 3/4%
Debentures may be redeemed at the option of Pennzoil, in whole or from time to
time in part, (i) on not less than 30 nor more than 60 days' notice by mail to
the holders of Registered 4 3/4% Debentures at their addresses appearing on
the Security Register and (ii) by publication for the holders of Bearer 4 3/4%
Debentures at least twice in a daily newspaper in the cities of New York and
London or other capital city of Western Europe, one of which publications is
not later than 30 days prior to the redemption date
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and one of which publications is not earlier than 60 days prior to the
redemption date, at the following redemption prices (expressed as a percentage
of the principal amount at maturity) if redeemed during the 12-month period
beginning October 1 of the following years:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
1998................................... 102.375%
1999................................... 101.900%
2000................................... 101.420%
2001................................... 100.950%
2002................................... 100.475%
</TABLE>
in each case together with accrued interest to the redemption date; provided,
however, that installments of interest on Bearer 4 3/4% Debentures whose
stated maturity is on or prior to the redemption date shall be payable only at
an office or agency located outside the United States (except as otherwise
provided in Section 1002 of the Indenture) and, only upon presentation and
surrender of coupons for such interest; and provided, further, that
installments of interest on Registered 4 3/4% Debentures whose stated maturity
is on or prior to the redemption date shall be payable to the holders of such
4 3/4% Debentures, registered as such at the close of business on the relevant
Record Dates. There is no sinking fund applicable to the 4 3/4% Debentures.
The 4 3/4% Debentures may also be redeemed at the option of Pennzoil, in
whole but not in part at any time, upon notice as described below, at a
redemption price equal to the principal amount thereof, together with accrued
and unpaid interest to the date fixed for redemption, if (i) Pennzoil shall
determine that, as a result of any change in, or amendment to, the laws (or
any regulations or rulings promulgated thereunder) of the United States or any
political subdivision or taxing authority thereof or therein affecting
taxation, or any change in official position regarding the application,
enforcement or interpretation of such laws, regulations or rulings (including
a holding by a court of competent jurisdiction), which change, amendment,
application, enforcement or interpretation becomes effective on or after the
date of this Prospectus Supplement, Pennzoil must pay or would become
obligated to pay any additional amounts ("Additional Amounts") with respect to
the 4 3/4% Debentures as described below under "--Payment of Additional
Amounts" or (ii) any action shall have been taken by a taxing authority
(including, but not limited to, a ruling or announcement of the IRS or other
taxing authority, whether or not officially published) or a court of competent
jurisdiction in the United States or any political subdivision or taxing
authority thereof or therein, including any of those actions specified in (i)
above (whether or not, in the case of an action taken by a taxing authority,
such action was taken or brought with respect to Pennzoil) or any change,
amendment, application, enforcement or interpretation shall be officially
proposed, in any case on or after the date of the prospectus supplement for
these 4 3/4% Debentures, as a result of which there is a substantial
possibility that Pennzoil will be obligated to pay Additional Amounts and, in
either case described in clause (i) or (ii), such obligation to pay Additional
Amounts cannot be avoided by the use of reasonable measures available to
Pennzoil; provided, however, that (i) no notice of redemption may be given
earlier than 90 days prior to the earliest date on which Pennzoil would be
obligated to pay such Additional Amounts, were a payment in respect of the 4
3/4% Debentures then due, and (ii) at the time such notice of redemption is
given, such obligation to pay such Additional Amounts remains in effect. Prior
to the publication of any notice of redemption of the 4 3/4% Debentures
pursuant to the foregoing, Pennzoil shall deliver to the Trustee an opinion of
independent legal counsel to Pennzoil stating that Pennzoil is entitled to
effect such redemption, together with a certificate setting forth facts
showing that the conditions precedent to the right of Pennzoil so to redeem
have occurred.
If Pennzoil shall determine, based upon an opinion of an independent legal
counsel to Pennzoil, that any payment made outside the United States by
Pennzoil or any of its paying agents of the full amount of the next scheduled
payment of principal of or interest due in respect of any Bearer 4 3/4%
Debenture or coupon appertaining thereto would, under any present or future
laws or regulations of the United States affecting taxation
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or otherwise, be subject to any certification, information, documentation or
other reporting requirement of any kind the effect of which requirement is the
disclosure to Pennzoil, any paying agent or any governmental authority of the
nationality, residence or identity (as distinguished from status as a United
States Alien (as defined below)) of a beneficial owner of such Bearer 4 3/4%
Debenture or coupon who is a United States Alien (other than such a
requirement which (a) would not be applicable to a payment if made (i)
directly to the beneficial owner or (ii) to a custodian, nominee or other
agent of the beneficial owner, (b) can be satisfied by such a custodian,
nominee or other agent certifying to the effect that such beneficial owner is
a United States Alien; provided, however, that in each case referred to in
clause (a) (ii) and (b), payment by such custodian, nominee or agent to such
beneficial owner is not otherwise subject to any such requirement (other than
a requirement which is imposed on a custodian, nominee or other agent
described in clause (e) of this sentence), (c) is applicable only to a
collection or payment by a custodian, nominee or other agent of the beneficial
owner to or for such beneficial owner, (d) would not be applicable to such a
payment made by any other paying agent of Pennzoil outside the United States
or (e) is applicable to a payment to or by a custodian, nominee or other agent
of the beneficial owner because such custodian, nominee or agent is a United
States person (within the meaning of the United States Internal Revenue Code
of 1986, as amended (the "Code")), a controlled foreign corporation for United
States tax purposes, a foreign person 50% or more of whose gross income for
certain periods is effectively connected with a United States trade or
business, or otherwise related to the United States), Pennzoil shall redeem
the Bearer 4 3/4% Debentures (but not the Registered 4 3/4% Debentures), in
whole but not in part at any time, at a redemption price equal to the
principal amount thereof, together with accrued and unpaid interest and any
Additional Amounts with respect thereto, on the date fixed for redemption,
less applicable withholding taxes, such redemption to take place on such date,
not later than one year after the publication of notice of such determination,
as Pennzoil shall determine by notice to the Trustee at least 60 days before
the redemption date unless shorter notice is acceptable to the Trustee.
Pennzoil shall make such determination as soon as practicable and give prompt
notice thereof in accordance with Section 1104 of the Indenture, stating in
that notice the effective date of such certification, information,
documentation or reporting requirements and the date on which the redemption
shall occur. Notwithstanding the foregoing, Pennzoil shall not so redeem the 4
3/4% Debentures if, on the basis of any subsequent event, it is determined, in
the manner set forth above, 30 days or more prior to the date fixed for
redemption, that no such payment would be subject to any such requirement, in
which case Pennzoil shall give prompt notice of such determination. Except as
otherwise provided in the Indenture, notices to holders of Bearer Securities
will be given by publication at least twice in a daily newspaper in The City
of New York and London or other capital city in Western Europe and in such
other city or cities as may be specified in the Securities. Notices to holders
of Registered Securities will be given by mail to the addresses of such
holders as they appear in the Security Register. (Section 107) Any earlier
redemption notice shall then be deemed revoked and of no further effect.
Notwithstanding the provisions of the immediately preceding paragraph, if
and so long as each certification, information, documentation or other
reporting requirement referred to therein would be fully satisfied by payment
of withholding tax, backup withholding tax or similar charge, Pennzoil may
elect, prior to publication of the notice of determination referred to in the
second sentence of the immediately preceding paragraph, to have the provisions
of this paragraph apply in lieu of the provisions of that paragraph. In such
event, Pennzoil will pay as Additional Amounts such amounts as may be
necessary so that every net payment made following the effective date of such
requirement outside the United States by Pennzoil or any of its paying agents
of principal of, premium, if any, and interest on any Bearer 4 3/4% Debenture
or any coupon to a holder who is a United States Alien (but without any
requirement with regard to disclosure of the nationality, residence or
identity of such holder), after deduction or withholding for or on account of
such withholding tax, backup withholding tax or similar charge (other than a
withholding tax, backup withholding tax or similar charge which would not be
applicable in the circumstances referred to in the second parenthetical clause
of the first sentence of the immediately preceding paragraph), will not be
less than the amount provided for in such Bearer 4 3/4% Debenture or such
coupon to be then due and payable. If Pennzoil elects to pay such Additional
Amounts and so long as it is obligated to pay the same, Pennzoil may
subsequently redeem the Bearer 4 3/4% Debentures (but not the Registered 4
3/4% Debentures), in whole but not in part at any time, at a redemption price
equal to the principal amount thereof, together with accrued and unpaid
interest to the date fixed for redemption. If Pennzoil elects to
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pay Additional Amounts pursuant to this paragraph and the condition specified
in the first sentence of this paragraph should no longer be satisfied, then
Pennzoil shall promptly redeem the Bearer 4 3/4% Debentures (but not the
Registered 4 3/4% Debentures) in whole but not in part.
DISCHARGE AND DEFEASANCE
The terms of the 4 3/4% Debentures provide that Pennzoil will be permitted
to terminate certain of its obligations under the Indenture pursuant to the
Indenture's covenant defeasance provisions only if Pennzoil delivers to the
Trustee an opinion of counsel that covenant defeasance will not cause holders
of the 4 3/4% Debentures to recognize income, gain or loss for United States
federal income tax purposes.
Pennzoil may terminate its obligations under the Indenture, other than its
obligation to pay the principal of (and premium, if any) and interest on the
Securities of any series and certain other obligations, if it (i) irrevocably
deposits or causes to be irrevocably deposited with the Trustee as trust funds
money or U.S. Government Obligations maturing as to principal and interest
sufficient to pay the principal of, any interest on, and any mandatory sinking
funds in respect of, all outstanding Securities of such series on the stated
maturity of such payments or on any redemption date and (ii) complies with any
additional conditions specified to be applicable with respect to the covenant
defeasance of Securities of such series. (Section 401)
The terms of the 4 3/4% Debentures also provide for legal defeasance. Legal
defeasance is permitted only if Pennzoil shall have received from, or there
shall have been published by, the IRS a ruling to the effect that legal
defeasance will not cause holders of the 4 3/4% Debentures to recognize
income, gain or loss for United States federal income tax purposes. In such
case, if Pennzoil (i) irrevocably deposits or causes to be irrevocably
deposited money or U.S. Government Obligations as described above, (ii) makes
a request to the Trustee to be discharged from its obligations on the
Securities of such series and (iii) complies with any additional conditions
specified to be applicable with respect to legal defeasance of Securities of
such series, then Pennzoil shall be deemed to have paid and discharged the
entire indebtedness on all the outstanding Securities of such series and the
obligations of Pennzoil under the applicable Indenture and the Securities of
such series to pay the principal of (and premium, if any) and interest on the
Securities of such series shall cease, terminate and be completely discharged,
and the holders thereof shall thereafter be entitled only to payment out of
the money or U.S. Government Obligations deposited with the Trustee as
aforesaid, unless Pennzoil's obligations are revived and reinstated because
the Trustee is unable to apply such trust fund by reason of any legal
proceeding, order or judgment. (Sections 403 and 404)
PAYMENT OF ADDITIONAL AMOUNTS
Pennzoil will, subject to certain exceptions and limitations set forth
below, pay as additional interest such Additional Amounts to the holder of any
4 3/4% Debenture who is a United States Alien (as defined below) as may be
necessary in order that every net payment by Pennzoil or any of its paying
agents of principal of, premium, if any, and interest on each 4 3/4% Debenture
and any other amounts payable with respect to each Debenture, after deduction
or withholding for or on account of any present or future tax, assessment or
governmental charge imposed by the United States (or any political subdivision
or taxing authority thereof or therein) upon or as a result of such payment,
will not be less than the amount provided for in such 4 3/4% Debenture to be
then due and payable. However, Pennzoil will not be required to make any
payment of Additional Amounts for or on account of any one or more of the
following:
(a) any tax, assessment or other governmental charge which would not have
been so imposed but for (i) the existence of any present or former
connection between such holder (or a fiduciary, settlor, beneficiary,
member or shareholder of, or possessor of a power over, such holder, if
such holder is an estate, a trust, a partnership or a corporation) and the
United States, including, without limitation, such holder (or such
fiduciary, settlor, beneficiary, member, shareholder or possessor) being or
having been a citizen or resident thereof or treated as a resident thereof,
or being or having been present therein, or being or having been engaged in
a trade or business therein, or having or having had a permanent
establishment therein or (ii) the
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<PAGE>
presentation of a 4 3/4% Debenture or any coupon appertaining thereto for
payment on a date more than 10 days after the date on which such payment
becomes due and payable or the date on which payment thereof is duly
provided for, whichever occurs later;
(b) any estate, inheritance, gift, sales, transfer, wealth, personal
property or any similar tax, assessment or other governmental charge;
(c) any tax, assessment or other governmental charge which is payable
otherwise than by deduction or withholding from payments of principal of or
interest on the 4 3/4% Debentures;
(d) any tax, assessment or other governmental charge imposed by reason of
such holder's past or present status (i) as a personal holding company or a
foreign personal holding company with respect to United States federal
income taxation, (ii) as a corporation which accumulates earnings to avoid
United States federal income tax, (iii) as a controlled foreign corporation
for United States tax purposes that is related to Pennzoil through stock
ownership, (iv) as the owner, actually or constructively, of 10 percent or
more of the total combined voting power of all classes of stock of Pennzoil
entitled to vote or (v) as a private foundation or other tax-exempt
organization;
(e) any tax, assessment or other governmental charge imposed by reason of
such holder's failure to comply with any certification, identification or
other reporting requirements concerning its nationality, residence,
identity or connection with the United States if such compliance is
required to establish entitlement to exemption from such tax, assessment or
other governmental charge; or
(f) any tax, assessment or other governmental charge which would not have
been imposed but for the fact that a 4 3/4% Debenture constitutes a "United
States real property interest," as defined in Section 897(c) (1) of the
Code with respect to the beneficial owner of such a 4 3/4% Debenture;
nor shall Additional Amounts be paid with respect to any payment of principal
of, premium, if any, or interest on a 4 3/4% Debenture or any other amount
payable with respect to a Debenture to any United States Alien holder who is a
fiduciary or partnership or other than the sole beneficial owner of any such
payment to the extent a beneficiary or settlor with respect to such fiduciary
or a member of such partnership or a beneficial owner would not have been
entitled to the Additional Amounts had such beneficiary, settlor, member or
beneficial owner been the holder of the Debenture. (Section 106)
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<PAGE>
[LOGO OF PENNZOIL CORP. APPEARS HERE]
The Exchange Agent:
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
By Mail By Facsimile: By Hand or Overnight
(registered or certified (214) 672-5746 Courier
mail recommended)
Confirm by Telephone to: c/o Chase Bank of Texas,
Chase Bank of Texas, (214) 672-5678 National Association,
National Association, Corporate Trust Services
Corporate Trust Services
1201 Main, 18th Floor
P.O. Box 2320 Dallas, Texas 75202
Dallas, Texas 75221-2320 or
Chase Texas Trust Company
55 Water Street, North
Building
Room 234, Windows 20 & 21
New York, New York 10041
Any questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at the telephone numbers and addresses listed
below. Requests for additional copies of the Exchange Offers, the Letters of
Transmittal or other Exchange Offers materials may be directed to the
Information Agent, and such copies will be furnished promptly at the Company's
expense. Holders of Old Debentures may also contact their local broker, dealer,
commercial bank or trust company for assistance concerning the Exchange Offers.
The Information Agent:
D. F. KING & CO., INC.
TOLL FREE 1-800-735-3591
77 Water Street Royex House
New York, NY 10005 Aldermanbury Square
(212) 269-5550 London, England EC2V 7HR
(Call Collect) 011-44-171-600-5005
(Call Collect)
The Dealer Manager:
PAINEWEBBER INCORPORATED
1285 Avenue of the Americas
New York, New York 10019
Telephone: (800) 595-8360 (toll-free)
<PAGE>
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Article VII of the By-Laws of Pennzoil, as amended, provides for
indemnification of officers, directors, agents and employees of Pennzoil to
the extent authorized by applicable law, including, but not limited to, the
Delaware General Corporation Law ("DGCL"). Pursuant to Section 145 of the
DGCL, a corporation generally has the power to indemnify its present and
former directors, officers, employees and agents against expenses and
liabilities incurred by them in connection with any suit to which they are, or
are threatened to be made, a party by reason of their serving in such
positions so long as they acted in good faith and in a manner they reasonably
believed to be in, or not opposed to, the best interests of the corporation,
and with respect to any criminal action, they had no reasonable cause to
believe their conduct was unlawful. With respect to suits by or in the right
of a corporation, however, indemnification is generally limited to attorneys'
fees and other expenses and is not available if such person is adjudged to be
liable to the corporation unless the court determines that indemnification is
appropriate. In addition, a corporation has the power to purchase and maintain
insurance for such persons. The statute also expressly provides that the power
to indemnify authorized thereby is not exclusive of any rights granted under
any bylaw, agreement, vote of stockholders or disinterested directors, or
otherwise.
Article EIGHTH of Pennzoil's Restated Certificate of Incorporation
eliminates in certain circumstances the monetary liability of directors of
Pennzoil for a breach of their fiduciary duty as directors. These provisions
do not eliminate the liability of a director (i) for a breach of the
director's duty of loyalty to the corporation or its stockholders; (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
knowing violation of law; (iii) under Section 174 of the DGCL (relating to the
declaration of dividends and purchase or redemption of shares in violation of
the DGCL); or (iv) for transactions from which the director derived an
improper personal benefit.
The above discussion of Pennzoil's Restated Certificate of Incorporation and
By-Laws and of Section 145 of the DGCL is not intended to be exhaustive and is
respectively qualified in its entirety by such Restated Certificate of
Incorporation, By-Laws and statute.
Directors and executive officers of Pennzoil have entered into
indemnification agreements with Pennzoil that provide indemnification similar
to that provided by Pennzoil's By-Laws.
ITEM 22. UNDERTAKINGS
(a) Pennzoil hereby undertakes to respond to requests for information that
is incorporated by reference into the prospectus pursuant to Items 4, 10(b),
11 or 13 of this Form, within one business day of receipt of such request, and
to send the incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed subsequent to
the effective date of the Registration Statement through the date of
responding to the request.
(b) Pennzoil hereby undertakes to supply by means of a post-effective
amendment all information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and included in the
Registration Statement when it became effective.
(c) Pennzoil hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is
incorporated by reference in the Registration Statement shall be deemed to be
a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrants pursuant to the provisions described under Item 20 above, or
II-1
<PAGE>
otherwise, the registrants have each been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrants of expenses incurred or paid by a director, officer or controlling
person of the registrants in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrants will, unless
in the opinion of their counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by them is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(e) Pennzoil hereby undertakes to file, during any period in which offers or
sales are being made, a post-effective amendment to this Registration
Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate price
set forth in the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the registration statement.
II-2
<PAGE>
ITEM 21--EXHIBITS
<TABLE>
<C> <S>
1.1 Dealer Manager Agreement
*3.1 Restated Certificate of Incorporation of Pennzoil Company, as amended
through May 10, 1996 (Pennzoil 10-Q (March 31, 1997) SEC File No. 1-
05591 Exhibit 3)
*3.2 By-laws of Pennzoil Company, as amended through March 12, 1998
(Pennzoil 8-K (March 12, 1998) SEC File No. 1-05591 Exhibit 1)
*4.1 Indenture dated as of December 15, 1992 between Pennzoil Company and
Chase Bank of Texas, National Association, Trustee (Pennzoil Company
10-K (1992), SEC File No.1-5591, Exhibit 4(o))
4.2 Form of Third and Fourth Supplemental Indenture between Pennzoil and
Chase Bank of Texas, National Association, Trustee
4.3 Form of Exchange Agent Agreements Between Pennzoil Company and Chase
Bank of Texas, National Association
5.1 Opinion of Baker & Botts, L.L.P.
8.1 Opinion of Baker & Botts, L.L.P. regarding certain tax matters
*12.1 Computation of Ratio of Earnings to Fixed Charges for the years ended
December 31, 1997, 1996, 1995, 1994 and 1993 (Pennzoil Company 10-K
(1997), SEC File No. 1-5591, Exhibit 12)
*12.2 Computation of Ratio of Earnings to Fixed Changes for the three months
ended March 31, 1998 and 1997 (Pennzoil Company 10-Q (March 31, 1998),
SEC File No. 1-5591, Exhibit 12)
12.3 Computation of Ratio of Earnings to Fixed Charges--Pro Forma for the
three months ended March 31, 1998 and 1997
23.1 Consent of Arthur Andersen LLP
**23.2 Consent of Ryder Scott Company Petroleum Engineers
**24 Powers of attorney
**25 Form T-1 Statement of Eligibility of Trustee under the Trust Indenture
Act of 1939, as amended, of Chase Bank of Texas, National Association
99.1 Form of Letter of Transmittal for 6 1/2% Exchange Offer
99.2 Form of Letter of Transmittal for 4 3/4% Exchange Offer
99.3 Form of Notice of Guaranteed Delivery
99.4 Form of Letter to Registered Holders and Depository Trust Company
Participants
99.5 Form of Letter to Clients
</TABLE>
- --------
* Incorporated by reference
** Previously filed
II-3
<PAGE>
SIGNATURES
The Registrant. Pursuant to the requirements of the Securities Act, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
the State of Texas, on June 30, 1998.
PENNZOIL COMPANY
/s/ James L. Pate
By:__________________________________
(James L. Pate,
Chairman of the Board and
Chief Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ James L. Pate Principal Executive Officer June 30, 1998
____________________________________ and Director
(James L. Pate,
Chairman of the Board and Chief
Executive Officer)
/s/ David P. Alderson, II Principal Financial and June 30, 1998
____________________________________ Accounting Officer
(David P. Alderson, II,
Group Vice President--Finance
and Accounting)
Howard H. Baker, Jr.*
W. L. Lyons Brown, Jr.*
Ernest H. Cockrell*
Harry H. Cullen* Directors of Pennzoil
Alfonso Fanjul*
Berdon Lawrence*
Brent Scowcroft*
Gerald B. Smith*
Cyril Wagner, Jr.*
*By: /s/ David P. Alderson, II June 30, 1998
____________________________________
(David P. Alderson, II,
Attorney-in-Fact)
</TABLE>
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<PAGE>
EXHIBIT 1.1
DEALER-MANAGER AGREEMENT
July 1, 1998
PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
Ladies and Gentlemen:
This agreement (the "Agreement") will confirm the understanding between
Pennzoil Company, a Delaware corporation, and its subsidiaries (collectively,
the "Company") and PaineWebber Incorporated ("PaineWebber") pursuant to which
the Company has retained PaineWebber to act as its exclusive dealer manager,
on the terms and subject to the conditions set forth herein, in connection
with the proposed offer by the Company to acquire, a portion of the Company's
4 3/4% Exchangeable Senior Debentures due 2003 and 6 1/2% Exchangeable Senior
Debentures due 2003 (together being the "Securities") and the issuance by the
Company of newly issued 4.95% Exchangeable Senior Debentures due 2008 and
4.90% Exchangeable Senior Debentures due 2008 (the "New Debentures"), with
principal amounts to be determined as set forth in the Prospectus referred to
below. The New Debentures will be two series of the Company's debt securities
and will be issued under the Indenture dated as of December 15, 1992 and the
Third Supplemental Indenture and Fourth Supplemental Indenture thereto (the
"Supplemental Indentures"), both between the Company and Chase Bank of Texas,
N.A (formerly known as Texas Commerce Bank, N.A.) (the "Trustee"). The
transactions, which are intended to result in the partial acquisition of the
Securities by or on behalf of the Company as proposed to be accomplished
through an exchange of Securities by the Company, are referred to herein as
the "Exchange Offers." The making of the Exchange Offers, the exchange of
Securities pursuant thereto, and all related incidental acts and transactions
are hereinafter referred to collectively as the "Exchange Offers
Transactions." The following sets forth the agreement between the Company and
PaineWebber:
Section 1. Appointment as Dealer Manager.
The Company hereby appoints PaineWebber on an exclusive basis to act as
financial advisor with respect to the Exchange Offers Transactions and as sole
dealer manager for the Exchange Offers, and hereby authorizes PaineWebber to
act as such in connection therewith. PaineWebber agrees to perform those
services as dealer manager with respect to the Exchange Offers as are
customarily performed by PaineWebber in connection with tender offers of a
like nature, including (but not limited to) providing certain advice to the
Company regarding the terms and timing of the Exchange Offers and using its
best efforts to solicit tenders of Securities pursuant to the Exchange Offers
and in communicating with other brokers, dealers, commercial banks and trust
companies (collectively, "Dealers"). In soliciting or obtaining tenders, (i)
PaineWebber, as dealer manager, shall act as an independent contractor with
duties solely to the Company and shall not be deemed to be acting as the agent
of the Company other than pursuant to this Agreement or as the agent of any
Dealer, (ii) the Company will not pay any person any commission or other
remuneration, directly or indirectly, for the solicitation of the Exchange
Offers (other than PaineWebber) and (iii) no Dealer shall be deemed to be
acting as the agent of PaineWebber; provided, however, that the Company hereby
authorizes PaineWebber, and/or one or more registered brokers or dealers
chosen by PaineWebber, to act as the Company's agent in making the Exchange
Offers to residents of any jurisdiction in which such agent designation may be
necessary to comply with applicable law. Nothing in this Agreement shall
constitute PaineWebber as a partner or joint venturer with the Company or any
of its subsidiaries. It is understood that PaineWebber is being engaged
hereunder solely to provide the services described above on behalf of the
Company, and that PaineWebber is not acting as an agent or fiduciary of, and
shall have no duties or liability to, the equity holders of the Company or any
other third party in connection with its engagement hereunder, all of which
are hereby expressly waived. On the basis of the representations and
warranties and agreements of the Company contained herein and subject to and
in accordance with the terms and conditions hereof and of the Exchange Offers,
PaineWebber agrees to act in such capacity.
<PAGE>
Section 2. Exchange Offer Materials.
Prior to the commencement of the Exchange Offers, the Company agrees to
furnish PaineWebber, at the Company's expense, with as many copies as
PaineWebber may reasonably request of (i) each of the documents that is filed
with the Securities and Exchange Commission (the "Commission"), including each
registration statement, preliminary and final prospectus filed with the
Commission (such final prospectus included in such registration statement as
amended at the time it becomes effective is herein called the "Prospectus,"
except that, if the prospectus first filed by the Company pursuant to Rule
424(b) of the rules and regulations of the Commission shall differ from the
Prospectus, the term "Prospectus" shall also include the prospectus first
filed pursuant to Rule 424(b)), in connection with the Exchange Offers, (ii)
each offering circular, sales memorandum, term sheet, proposed agreement,
invitation to negotiate, private placement memorandum, solicitation statement,
disclosure document, or other explanatory statement, or other report, filing,
document, release or communication mailed, delivered, published, or filed by
or on behalf of the Company in connection with the Exchange Offers, (iii) each
document required to be filed with the Commission pursuant to the provisions
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
pertaining to the Company during the term of this Agreement and (iv) each
appendix, attachment, modification, amendment or supplement to any of the
foregoing and all related documents, including but not limited to each related
letter of transmittal (each of (i), (ii), (iii) and (iv), an "Exchange Offer
Document" and, collectively, the "Exchange Offer Documents"). At the
commencement of the Exchange Offers, the Company shall cause timely to be
delivered to each registered holder of any Securities legally or contractually
entitled thereto, each Exchange Offer Document and any other offering
materials prepared expressly for use by holders of Securities tendering,
voting, or otherwise participating in the Exchange Offers, together with a
return envelope. Thereafter, to the extent practicable, until the expiration
of the Exchange Offers, the Company shall use its best efforts to cause copies
of such materials and a return envelope to be mailed to each person who
becomes a holder of any Securities.
The Company agrees that, at a reasonable time prior to using any material in
connection with the Exchange Offers or filing any such material with the
Commission or any other federal or state agency, commission or
instrumentality, the Company will submit copies of such material to
PaineWebber and will consult with PaineWebber and give reasonable
consideration to its comments, if any, with respect thereto. In connection
with the Exchange Offers, if the Company (a) uses or permits the use of, or
files with the Commission or any other governmental or regulatory agency,
authority or instrumentality, any Exchange Offer Document that (i) has not
been submitted to PaineWebber on a timely basis for PaineWebber's comments or
(ii) has been so submitted and with respect to which PaineWebber reasonably
objects or (b) shall have breached any of its representations, warranties,
agreements, or covenants herein, then PaineWebber shall be entitled to
withdraw as a dealer manager in connection with the Exchange Offers, without
any liability or penalty to PaineWebber or any other Indemnified Person (as
defined in paragraph 6 hereof) for such withdrawal and without loss of any
right to indemnification or contribution provided in this Agreement or to the
payment of all fees and expenses payable hereunder that have accrued to the
date of such withdrawal. In the event of any such withdrawal, for the purpose
of determining the fees payable to PaineWebber pursuant to this Agreement,
PaineWebber shall remain entitled to receive the payment of all fees and
expenses payable under this Agreement that have accrued to the date of any
such withdrawal. The Company recognizes and confirms that, in connection with
the Exchange Offers, PaineWebber will be using and relying upon (i)
information (both written and oral), documents (including the Exchange Offer
Documents) and data furnished by the Company to PaineWebber, and (ii)
information available from filings made by the Company pursuant to the
Exchange Act which have been approved for such use by the Company
(collectively the "Information"). The Company further recognizes that
PaineWebber does not assume responsibility for the accuracy or completeness of
the Information and will not undertake to independently verify its accuracy or
completeness.
The Company agrees that any reference to PaineWebber or any affiliate of
PaineWebber in any Exchange Offer Document, or any release or written
communication, is subject to PaineWebber's prior approval. If PaineWebber
resigns prior to the dissemination of any Exchange Offer Document or any
release or communication, no reference shall be made therein to PaineWebber.
2
<PAGE>
Section 3. Compensation.
The Company will pay PaineWebber for services to be rendered by PaineWebber
hereunder as set forth in the compensation provisions of the agreement dated
August 1, 1997, between Pennzoil Company and PaineWebber (the "Prior
Agreement"), the first amendment thereto dated December 19, 1997 (the "First
Amendment") and the second amendment thereto dated June 24, 1998 (the "Second
Amendment"), which compensation provisions are incorporated as if restated
herein in full and shall remain as a part of this Agreement notwithstanding
any termination, amendment or purported invalidity of the Prior Agreement,
First Amendment or Second Amendment.
Section 4. Expenses; Reimbursement Thereof.
The Company will pay or cause to be paid (i) all fees and expenses relating
to the preparation, printing, filing, mailing and publishing of all documents
pertaining to the Exchange Offers; (ii) all fees and expenses of any
depositary, information agent or other agents, attorneys and other persons
retained by the Company in connection with the Exchange Offers; (iii) all
fees, if any, payable to Dealers (including PaineWebber) as reimbursement for
their customary mailing and handling expenses in forwarding materials related
to the Exchange Offers to their customers; (iv) all advertising charges; and
(v) all other fees and expenses incurred in connection with or relating to the
Exchange Offers. In addition, the Company agrees to reimburse PaineWebber and
its affiliates, promptly upon request, for all out-of-pocket expenses,
including (without limiting the foregoing) the fees, costs and expenses of
PaineWebber's legal counsel, incurred in connection with the Exchange Offers
Transactions.
Section 5. Limitation on Liability.
Neither PaineWebber nor any affiliate thereof shall have any liability to
the Company or any affiliate thereof for any losses, claims, damages,
liabilities or expenses ("Liabilities") arising from any act or omission on
the part of any Dealer, or from PaineWebber's acts or omissions in performing
its obligations hereunder or otherwise in connection with the Exchange Offers
Transactions, except to the extent that such Liabilities are finally and
judicially determined by a court of competent jurisdiction to have resulted
primarily from PaineWebber's willful misconduct or gross negligence.
Section 6. Indemnification and Contribution.
The Company hereby agrees (i) to indemnify and hold harmless PaineWebber,
its affiliated companies, and each of PaineWebber's and such affiliated
companies' respective officers, directors, agents, employees and controlling
persons (within the meaning of Section 20 of the Exchange Act and Section 15
of the Securities Act of 1933, as amended (the "Securities Act")) (each of the
foregoing, including PaineWebber, being hereafter sometimes called an
"Indemnified Person"), to the fullest extent permitted by law from and against
any and all Liabilities, actions (including shareholder derivative actions),
proceedings, investigations (whether formal or informal) or inquiries, or
threats thereof, based on or arising out of (1) any untrue statement or
alleged untrue statement of any material fact in any Exchange Offer Document,
(2) any omission or alleged omission of any material fact required to be
stated in any Exchange Offer Document or necessary to make the statement made
in any Exchange Offer Document, in light of the circumstances under which it
was made, not misleading, (3) any withdrawal, termination or cancellation of
any one or more of the Exchange Offers Transactions for any reason whatsoever,
(4) any tender, purchase, exchange or other acquisition by the Company or any
affiliate thereof of Securities (including, without limiting the foregoing,
any purchase prior to the date hereof as to which PaineWebber acted as broker
or dealer), (5) any violation by or conflict of the Exchange Offers or any of
the Exchange Offers Transactions of or with any law, rule, regulation, order,
award, judgment, determination, writ, injunction or decree of any United
States federal, state, local or foreign court or governmental authority, (6)
any breach by the Company of any representation or warranty or any failure to
comply with any of the agreements contained herein or any agreement relating
to the Exchange Offers or the Exchange Offers Transactions, or (7) the
Exchange Offers, the Exchange Offers Transactions or PaineWebber's engagement
hereunder, and (ii) in connection with the foregoing obligations, to reimburse
each Indemnified Person for all expenses (including fees, disbursements and
other charges of counsel) as they are incurred by such Indemnified Person in
connection with investigating, preparing to defend or defending any such
action (including actions brought by the Company or
3
<PAGE>
the Company's equity holders or derivative actions brought by any person
claiming through the Company or in the Company's name), proceeding,
investigation or inquiry, or threat thereof, whether or not any such action,
proceeding, investigation or inquiry is actually or formally commenced or any
such Indemnified Person is a party thereto or subject thereof. Notwithstanding
the foregoing, the Company shall not be obligated to indemnify any such
Indemnified Person under this Section 6 with respect to any Liability, and
amounts paid in reimbursement of expenses under this Section 6 shall be
refunded, to the extent, but only to the extent, that is finally and
judicially determined (i) that such Liability resulted primarily from an
untrue statement of any material fact in any Exchange Offer Document or any
omission to state any material fact required to be stated in any Exchange
Offer Documents, or necessary to make the statements made therein, in light of
the circumstances under which they were made, not misleading, if, in any such
case, such statement or omission was made in such Exchange Offer Documents in
reliance upon and in conformity with written information prepared by and
relating to PaineWebber and furnished to the Company in writing by PaineWebber
or (ii) in the case of Liabilities against which Indemnified Persons are
indemnified solely under clause (i)(7) of the preceding sentence, that such
Liability resulted primarily from the willful misconduct or gross negligence
of such Indemnified Person. If multiple claims are brought against any
Indemnified Person in an arbitration or other proceeding and at least one such
claim is based upon, relates to or arises out of PaineWebber's services
hereunder or any Indemnified Person's role thereunder, the Company agrees that
any award, judgment and other liabilities resulting therefrom shall be deemed
conclusively to be based on, relate to or arise out of PaineWebber's services
hereunder or any Indemnified Person's role thereunder, except to the extent
that such award or judgment expressly states that the award or judgment, or
any portion thereof, is based solely upon, relates to or arises out of other
matters for which indemnification is not available hereunder.
PaineWebber agrees to indemnify and hold harmless the Company, its director,
trustees and officers who sign the Registration Statement (as defined in
Section 7(v) below), and each person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act to the same extent as the indemnity from the Company to
PaineWebber contained herein, but only with reference to information relating
to PaineWebber furnished to the Company in writing by PaineWebber expressly
for use in the Registration Statement, any preliminary prospectus, the
Prospectus, any other Exchange Offer Document or any amendment or supplement
thereto. The Company acknowledges that the only information relating to
PaineWebber furnished to the Company in writing by PaineWebber expressly for
use in the Registration Statement, any preliminary prospectus, the Prospectus,
any other Exchange Offers Documents or any amendment or supplement thereto is
PaineWebber's name and information provided under the caption "Dealer
Manager".
If any litigation, proceeding or investigation is instituted or threatened
against any Indemnified Person in respect of which indemnity may be sought
against the Company pursuant to this Section 6, such indemnified person shall
promptly notify the Company thereof, in writing, but the omission to so notify
the Company shall not relieve the Company from any obligation or liability
under this Section 6, unless, and only to the extent that, such omission to so
notify results in the loss of substantive rights or defenses. If any such
litigation or proceeding shall be brought against any Indemnified Person, the
Company shall be entitled to participate in such litigation or proceeding,
and, after written notice from the Company to such Indemnified Person, to
assume the defense of such litigation or proceeding with counsel of the
Company's choice at its expense; provided, however, that such counsel shall be
satisfactory to the Indemnified Person. Notwithstanding the election of the
Company to assume the defense of such litigation or proceeding, such
Indemnified Person shall have the right to employ separate counsel at the
expense of such Indemnified Person and to control its own defense of such
litigation or proceeding.
The Company shall bear the fees and disbursements of separate counsel only
if (i) the Company and such Indemnified Person shall have mutually agreed to
the retention of such counsel, (ii) there may be legal defenses available to
such Indemnified Person or to other Indemnified Persons that are different
from or additional to those available to the Company or (iii) a conflict or
potential conflict otherwise exists between such Indemnified Person and the
Company that would make such separate representation advisable; provided,
however, that the Company shall not under any circumstances be liable
hereunder for the expenses of more than one firm of attorneys in any
jurisdiction in any one legal action or group of related legal actions. In the
case of any such separate firm for PaineWebber and such partners, directors,
officers and control persons of PaineWebber or its affiliates, such firm
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shall be designated in writing by PaineWebber. In the case of any such
separate firm for the Company, and such directors, officers, trustees and
control persons of the Company, such firm shall be designated in writing by
the Company. The Company agrees that it will not, without the prior written
consent of PaineWebber, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action or proceeding relating to
the Exchange Offers Transactions or PaineWebber's engagement hereunder
(whether or not any Indemnified Person is a party thereto) unless such
settlement, compromise or consent includes an unconditional release of
PaineWebber and each other Indemnified Person from all liability arising or
that may arise out of such claim, action or proceeding. The Company shall not
be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the Company agrees to indemnify the Indemnified Person from and
against any Liabilities by reason of such settlement or judgment.
If the indemnification provided for in this Section 6 is held by a court of
competent jurisdiction to be unavailable to any Indemnified Person in respect
of any Liabilities referred to herein (other than as a consequence of a final
judicial determination as set forth in the second sentence of the first
paragraph of this Section 6), then the Company in lieu of indemnifying such
Indemnified Person, shall contribute to the amount paid or payable by such
Indemnified Person as a result of such Liabilities in such proportion as is
appropriate to reflect the relative benefits received by the Company on the
one hand and by such Indemnified Person on the other from the Exchange Offers
Transactions. If the allocation provided in the preceding sentence is not
permitted by applicable law, or as a consequence of a final judicial
determination as set forth in the second sentence of the first paragraph of
this Section 6, then the Company agrees to contribute to the amount paid or
payable by such Indemnified Person as a result of such Liabilities in such
proportion as is appropriate to reflect not only the relative benefits
referred to in the preceding sentence, but also the relative fault of the
Company on the one hand and of such Indemnified Person on the other in
connection with the statements or omissions or other actions relating to or in
connection with the Exchange Offers Transactions or PaineWebber's engagement
hereunder that resulted in such Liabilities. Notwithstanding the foregoing, in
no event shall the aggregate amount contributed by the Indemnified Persons
taking into account the contribution of Company as described above exceed the
amount of fees actually paid to PaineWebber by Company pursuant to this
Agreement in connection with the Exchange Offers Transactions. The relative
benefits received by the Company on the one hand and PaineWebber on the other
shall be deemed to be in the same proportion as (i) the aggregate value of the
maximum number of Securities offered to be exchanged pursuant to the Exchange
Offers bears to (ii) the fees paid to PaineWebber pursuant to this Agreement.
The relative fault of the Company on the one hand and of PaineWebber on the
other shall be determined by reference to, among other things, whether any
untrue or alleged untrue statement of, or any omission or alleged omission to
state, a material fact relates to information supplied by the Company or by
PaineWebber and by reference to the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The foregoing indemnification and contribution agreement shall be in
addition to any rights that any Indemnified Person may have at common law, by
separate agreement or otherwise.
Section 7. Representations, Warranties and Covenants.
The Company represents and warrants to, and covenants with, PaineWebber
that:
(i) The Company is a corporation duly organized and validly existing in
good standing under the laws of the jurisdiction of its incorporation.
(ii) The Company has taken all necessary corporate action to authorize
the Exchange Offers.
(iii) This Agreement has been duly authorized, executed and delivered by,
and is a legal, valid and binding agreement of, the Company and is
enforceable against Company in accordance with its terms.
(iv) The Exchange Offers Transactions comply and will comply in all
material respects with all applicable requirements of law, the corporate
laws of the state in which the Company is incorporated and any applicable
state "blue sky" laws.
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(v) When the registration statement filed in connection with the Exchange
Offers (the "Registration Statement") becomes effective and at all times
subsequent thereto up to and including the date on which the Company
commences the Exchange Offers (the "Commencement Date"), the initial
termination dates of each of the respective Exchange Offers (the "Effective
Dates of Exchange"), which shall be July 31, 1998 and, if either or both of
the Exchange Offers are extended in accordance with their terms, such
subsequent expiration dates of the Exchange Offers (the "Further Effective
Dates of Exchange"), (a) the Registration Statement and Prospectus, and any
amendments or supplements thereto, and the other Exchange Offer Documents,
and any supplements thereto, will contain all statements that are required
to be stated in accordance with the Securities Act, the Exchange Act and
the Trust Indenture Act of 1939, as amended (together with the rules and
regulations thereunder, the "Trust Indenture Act") and will in all material
respects conform to the requirements of the Securities Act, the Exchange
Act and the Trust Indenture Act, (b) the Registration Statement and any
amendment or supplement thereto at their respective effective dates will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and (c) the Prospectus and the other
Exchange Offer Documents, together with any supplement thereto, will not
contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; except that this
representation and warranty does not apply to statements or omissions made
in reliance upon and in conformity with information relating to
PaineWebber, furnished in writing to the Company in connection with the
Registration Statement or Prospectus and the other Exchange Offer Documents
or any amendment or supplement thereto by PaineWebber expressly for use in
the Registration Statement or Prospectus or such other Exchange Offer
Documents or to statements or omissions in that part of the Registration
Statement which shall constitute the Statement of Eligibility and
Qualification under the Trust Indenture Act (Form T-1) of the Trustee.
(vi) The consolidated financial statements included and incorporated by
reference in the Registration Statement and Prospectus present fairly the
consolidated financial position of the Company and its consolidated
subsidiaries as at the dates indicated and the consolidated results of
their operations for the periods specified and have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis during the periods involved, except as indicated therein,
and the supporting schedules incorporated by reference in the Registration
Statement present fairly the information required to be stated therein.
(vii) The issuance and delivery of the New Debentures, the execution and
delivery of this Agreement and the Supplemental Indentures, the
consummation of the transactions herein and therein contemplated, and
compliance with the terms hereof and thereof do not and will not conflict
with, or result in a breach of, any of the terms or provisions of, or
constitute a default under, (a) the Certificate of Incorporation or By-
Laws, as amended, of the Company or any of its subsidiaries; (b) any
material indenture, mortgage, or other agreement or instrument to which the
Company or any of its subsidiaries is a party or by which any of their
respective properties are bound; or (c) any applicable law, rule,
regulation, judgment, order or decree of any government, governmental
instrumentality or court, domestic or foreign, having jurisdiction over the
Company or any of its subsidiaries or any of their respective properties
other than, in the case of clauses (b) and (c) any such contravention,
violation, conflict, breach, or default that individually or in the
aggregate would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole, or on the ability of the Company to perform
its obligations hereunder or thereunder and commence and consummate the
Exchange Offers; and no consent, approval, authorization or order of any
government, governmental instrumentality or court, domestic or foreign, is
required for the valid authorization, issuance and delivery of the New
Debentures, the valid authorization, execution, delivery and performance by
the Company of this Agreement and the Supplemental Indentures or the
consummation by the Company of the transactions contemplated by this
Agreement and the Supplemental Indentures, except such as are required
under the Securities Act, the Exchange Act, the Trust Indenture Act and the
securities or Blue Sky laws of the various states.
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(viii) The Supplemental Indentures have been duly authorized by the
Company and, when duly executed and delivered by the Company, will
constitute a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as the enforcement
thereof may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws affecting enforcement
of creditors' rights generally and (ii) general principles of equity
(regardless of whether enforceability is considered in a proceeding at law
or in equity) and will have been duly qualified under the Trust Indenture
Act.
(ix) The New Debentures to be issued pursuant to the Supplemental
Indentures have been duly authorized, and when duly executed by the Company
and authenticated by the Trustee pursuant to the provisions of the
Supplemental Indentures and delivered in accordance with the terms of the
Exchange Offers, will be duly issued and will constitute valid and binding
obligations of the Company, the holders thereof will be entitled to the
benefits of the Supplemental Indentures, except as the enforcement thereof
may be limited by (i) bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer or other similar laws affecting enforcement of
creditors' rights generally and (ii) general principles of equity
(regardless of whether enforceability is considered in a proceeding at law
or in equity).
(x) The New Debentures and the Supplemental Indentures conform in all
material respects to the descriptions thereof in the Prospectus.
(xi) The Exchange Offer Documents have been or will be prepared and
approved by, and are the sole responsibility of, the Company, and the
Company authorizes PaineWebber to use the Exchange Offer Documents in
connection with Exchange Offers Transactions. PaineWebber agrees that it
shall not use any materials in connection with the exchange for New
Debentures other than the Exchange Offer Documents and such other
materials, if any, as the Company may approve (except for materials only
for PaineWebber's own internal use that are derived by PaineWebber only
from the Exchange Offer Documents or from filings made by the Company
pursuant to the Exchange Act), and will provide no oral information that is
not contained in, or consistent with, the Exchange Offer Documents or the
Information.
(xii) The Company has no knowledge of any legal or governmental
proceeding that has been instituted or threatened against the Company which
is required to be described in the Registration Statement or the Prospectus
and is not so described and which seek to enjoin the Exchange Offers or
that otherwise would affect the making of the Exchange Offers or the
consummation of the transactions contemplated thereby.
(xiii) Except as described in or contemplated by the Prospectus, there
has not been any material adverse change in, or any adverse development
that materially affects, the business, properties, financial condition or
results of operations of the Company taken as a whole from the dates of
which information is given in the Prospectus.
(xiv) Neither the Company nor any affiliate thereof shall publicly
disclose or refer to any opinion or advice rendered by PaineWebber to the
Company without PaineWebber's prior written consent.
(xv) The Company is the beneficial owner of 17,798,547 shares of common
stock of Chevron Corporation free and clear of all liens, security
interests, pledges, charges, encumbrances, defects, shareholders'
agreements, voting trusts, equities or claims of any nature whatsoever.
Section 8. Certain Events.
The Company will advise PaineWebber promptly of (i) the occurrence of any
event that might reasonably cause the Company to withdraw, rescind or
terminate the Exchange Offers, or that might reasonably permit the Company to
exercise any right not to purchase Securities tendered pursuant to the
Exchange Offers or to consummate the transactions contemplated in the
Prospectus, (ii) any material information relating to the Exchange Offers,
including, without limitation, any proposal or requirement to make, amend or
supplement any filing required by the Exchange Act, (iii) the issuance of any
comment or order or the taking of any other action
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by the Commission or any Other Agency concerning the Exchange Offers, and (iv)
any other information relating to the Exchange Offers or the transactions
contemplated in the Prospectus that PaineWebber may from time to time
reasonably request.
Section 9. Securityholder Information.
The Company has furnished or shall use its best efforts to furnish to
PaineWebber, or cause the transfer agent or registrars for the Securities to
furnish to PaineWebber, as soon as practicable after the date hereof (if not
previously furnished) to the extent the same is available to the Company, with
any cards or lists showing the names and addresses of, and the number of
Securities held by, the holders of Securities as of a recent date and will
endeavor to cause PaineWebber to be advised from day to day during the period
of the Exchange Offers as to any transfers of record of the Securities known
to the Company. Except as otherwise provided herein, PaineWebber agree to use
such information only in connection with the Exchange Offers.
The Company has appointed Chase Bank of Texas, N.A. to serve as Exchange
Agent and Depositary in connection with the Exchange Offers and has instructed
the Exchange Agent and Depositary to advise PaineWebber daily as to such
matters as PaineWebber may reasonably request.
Section 10. Termination.
This Agreement shall terminate upon the earlier to occur of (i) thirty days
after the latter of the Further Effective Dates of Exchange or (ii) the date
on which the Company terminates or withdraws both of the Exchange Offers or
the last of the Exchange Offers to be pending for any reason (the earlier to
occur of clauses (i) and (ii) being referred to as the "Termination Date").
The agreements contained in Sections 3, 4, 5 and 6 and the representations
and warranties contained in Sections 2 and 7 shall remain operative and in
full force regardless of (i) any failure to commence, or the withdrawal,
termination or consummation of, the Exchange Offers, (ii) any investigation
made by or on behalf of any Indemnified Person, (iii) any withdrawal by
PaineWebber as dealer manager for the Exchange Offers pursuant to Section 2 or
otherwise or (iv) any termination of this Agreement.
Section 11. Miscellaneous.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York applicable to agreements made and to be
performed entirely in such state.
The Company, by its execution of this Agreement, hereby consents to the
jurisdiction of the courts of, and consents to be sued in any court in, the
County of New York of the State of New York or in the United States District
Court for the Southern District of New York in any action or proceeding
brought by PaineWebber or any other Indemnified Person under this Agreement.
Service of process on the Company may be effected by mailing process, by
registered mail, return receipt requested, to the Company at the address set
forth above, with a copy to David P. Alderson, II.
The Company and PaineWebber each hereby irrevocably waive any right they may
have to a trial by jury in respect of any claim based upon or arising out of
this Agreement or the transactions contemplated hereby.
Simultaneously with the execution and delivery of this Agreement, the
Company shall deliver to PaineWebber the opinion of Baker & Botts, L.L.P.,
counsel for the Company, in the form attached hereto as Exhibit A. Upon the
Effective Dates of Exchange, whichever is applicable, the Company shall
deliver to PaineWebber the opinion of Baker & Botts, L.L.P., counsel for the
Company, in the form attached hereto as Exhibit B.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto, and the respective successors and permitted assigns of each, and shall
inure to the benefit of the parties hereto and the other Indemnified Persons,
and the respective successors and permitted assigns of the foregoing.
If any provision of this Agreement shall be determined to be invalid or
unenforceable in any respect, such determination shall not affect such
provision in any other respect or any other provision of this Agreement, which
shall remain in full force and effect. This Agreement may not be amended or
otherwise modified or waived except by an instrument in writing signed by both
PaineWebber and the Company.
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This Agreement may be executed in counterparts, each of which shall be
deemed an original but all of which together shall be considered a single
instrument.
The Prior Agreement dated August 1, 1997, the First Amendment and the Second
Amendment between PaineWebber and the Company shall remain operative and in
full force. Except as set forth in the preceding sentence, this Agreement sets
forth our entire agreement with PaineWebber with respect to the subject matter
hereof, and supersedes any prior agreements or understandings (whether written
or oral) between PaineWebber and the Company with respect thereto.
Please confirm that the foregoing is in accordance with your understanding
by signing and returning to us the enclosed copy of this letter.
Very truly yours,
PENNZOIL COMPANY
/s/ Bruce K. Misamore
By: _________________________________
Bruce K. Misamore
Vice President and Treasurer
Accepted and Agreed to as of
the date first written above:
PAINEWEBBER INCORPORATED
/s/ Roberts W. Brokaw III
By: _________________________________
Roberts W. Brokaw III
Managing Director
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EXHIBIT 4.2
================================================================================
PENNZOIL COMPANY
AND
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
As Trustee
Third Supplemental Indenture
Providing for
4.90% Exchangeable Senior Debentures Due August 15, 2008
Dated as of _______________, 1998
Supplementing Indenture dated as of December 15, 1992
================================================================================
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THIRD SUPPLEMENTAL INDENTURE, dated as of _______________, 1998
("Third Supplemental Indenture") between PENNZOIL COMPANY, a corporation
organized and existing under the laws of the State of Delaware (hereinafter
called the "Company"), and CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, a national
banking association, incorporated and existing under the laws of the United
States of America (formerly known as Texas Commerce Bank National Association),
having its principal corporate trust office in the City of Houston, Texas
(hereinafter called the "Trustee").
WHEREAS, the Company has executed and delivered its Indenture dated as
of December 15, 1992 (hereinafter called the "Indenture"), to provide for the
issue of one or more series of debt securities of the Company; and
WHEREAS, Section 901 of the Indenture authorizes the Company and the
Trustee to enter into supplemental indentures to establish the form or terms of
securities of any series as permitted by sections 201 and 301 of the Indenture;
and
WHEREAS, to so provide for the establishment of such a series, the
Company has authorized the execution of this Third Supplemental Indenture to the
Indenture and has requested the Trustee to execute the Third Supplemental
Indenture; and
WHEREAS, all conditions and requirements necessary to make this Third
Supple mental Indenture a valid, binding and legal instrument have been done
and performed and the execution and delivery hereof have been in all respects
duly authorized, including the delivery to the Trustee of the Opinion of Counsel
referenced in Section 903 of the Indenture;
NOW, THEREFORE, THIS THIRD SUPPLEMENTAL INDENTURE WITNESSETH that the
Company and the Trustee hereby covenant, declare and agree as follows:
ARTICLE ONE
101. Third Series of Debentures.
There shall be a series of Securities (capitalized terms used herein
and not otherwise defined have the meanings given to such terms in the
Indenture) designated "4.90% Exchangeable Senior Debentures Due August 15, 2008"
(herein sometimes referred to as "Debentures"), and the form thereof, which
shall be established by Board Resolution, shall contain suitable provisions with
respect to the matters hereinafter in this Section 101 specified. Debentures
shall mature on and bear interest and be limited in aggregate principal amount
as to each maturity as set forth below:
Aggregate Interest
Principal Rate
Amount Maturity Per Annum
- --------- --------------- ----------
$___________ August 15, 2008 4.90%
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Debentures shall be issued as Registered Debentures in denominations of U.S.
$1,000 or integral multiples thereof; interest on Debentures shall be payable
semiannually on February 15 and August 15 of each year, commencing February 15,
1999. The Place of Payment with respect to the Debentures is
______________________________, 80 Broad Street, 4th Floor, New York, New York
10004, and Chase Bank of Texas, National Association, 600 Travis Street, 8th
Floor, Houston, Texas 77002.
102. Exchange or Transfer.
Upon any exchange or transfer of Debentures, the Company may make a
charge therefor sufficient to reimburse it for any tax or taxes or other
governmental charge, as provided in Section 305 of the Indenture, but the
Company hereby waives any right to make a charge in addition thereto for any
exchange or transfer of Debentures.
103. Redemption.
(a) The Debentures shall be subject to redemption upon not less than
30 nor more than 60 days' prior notice as provided in Sections 107 and 1104 of
the Indenture at any time on or after August 15, 2000, in whole or from time to
time in part, at the option of the Company, at the following redemption prices
(expressed as a percentage of the principal amount at maturity) if redeemed
during the 12-month period beginning August 15 of the following years:
Redemption
Year Price
---- -----
2000
2001
2002
2003
2004
2005
2006
2007
in each case together with accrued interest to the redemption date, provided,
however, that, if any interest payment date on the Debentures is on or prior to
the Redemption Date, such interest shall be payable to the Holders of such
Debentures, registered as such, at the close of business on the relevant Regular
Record Dates according to their terms and the provisions of Section 307 of the
Indenture.
(b) Notice of intention to redeem the Debentures in whole or in part
shall be given in accordance with Section 1104 of the Indenture.
104. Sinking Fund.
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The Debentures shall not be entitled to the benefits of any sinking
fund provisions.
105. Tax Matters.
(a) Subject to Section 105(c) hereof, in addition to the conditions
set forth in Section 401 of the Indenture, the right of the Company to satisfy
the Indenture to the extent set forth in Section 401 of the Indenture shall be
subject to the condition that the Company has delivered to the Trustee an
Opinion of Counsel (as defined in the Indenture) that the satisfaction and
discharge pursuant to Section 401 of the Indenture will not cause the Holders of
the Debentures to recognize income, gain or loss for United States federal
income tax purposes.
(b) Subject to Section 105(c) hereof, in addition to the conditions
set forth in Section 403 of the Indenture, the right of the Company to satisfy
the Indenture with respect to the Debentures to the extent set forth in Section
403 of the Indenture shall be subject to the conditions that the Company shall
have received from, or there shall have been published by, the United States
Internal Revenue Service a ruling to the effect that the satisfaction and
discharge to the extent set forth in Section 403 of the Indenture will not cause
the Holders of the Debentures to recognize income, gain or loss for United
States federal income tax purposes.
(c) Notwithstanding the satisfaction and discharge of the Indenture or
with respect to the Debentures pursuant to Sections 105(a) and (b) hereof, the
obligations of the Company under Article Two hereof shall survive until the
Debentures are no longer Outstanding.
106. Issuance of Debentures.
Upon the delivery of this Third Supplemental Indenture, Debentures in
the aggregate principal amount of $_________ shall be issued and be Outstanding
as provided in the Indenture.
107. Global Debentures.
The provisions of paragraphs (a), (b), (c) and (d) below shall apply
only to Global Debentures:
(a) Each Global Debenture authenticated under the Indenture and this
Third Supplemental Indenture shall be registered in the name of the Depository
designated for such Global Debenture or a nominee thereof and delivered to such
Depository or a nominee thereof or custodian therefor, and each such Global
Debenture shall constitute a single Debenture for all purposes of this Third
Supplemental Indenture.
(b) Notwithstanding any other provision in the Indenture or this Third
Supplemental Indenture, no Global Debenture may be exchanged in whole or in part
for Debentures registered, and no transfer of a Global Debenture in whole or in
part may be registered, in the name of any Person other than the Depositary for
such Global Debenture or a nominee thereof unless (A) such Depositary (i) has
notified the Company that it is unwilling or unable to continue as
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Depositary for such Global Debenture and the Company thereupon fails to appoint
a successor depositary or (ii) has ceased to be a clearing agency registered
under the Exchange Act, (B) there shall have occurred and be continuing an Event
of Default or any event which after notice or lapse of time or both would be an
Event of Default with respect to the Debentures or (C) the Company in its sole
discretion determines that such Global Debenture shall be so exchangeable or
transferable.
(c) Subject to Section 107(b), upon issuance of Debentures in
definitive registered certificated form, the Trustee shall register the
Debentures in the name of, and cause the Debentures to be delivered to, the
Person or Persons (or the nominee thereof) identified as the beneficial owners
as the Depositary shall direct.
(d) Every Debenture authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Global Debenture or any portion
thereof, whether pursuant to this Section, Section 304 or 306 of the Indenture
or otherwise, shall be authenticated and delivered in the form of, and shall be,
a Global Debenture, unless such Debenture is registered in the name of a Person
other than the Depositary for such Global Debenture or a nominee thereof.
108. Form of Legend for Global Debentures.
Every Global Debenture authenticated and delivered hereunder shall
bear a legend in substantially the following form:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO PENNZOIL COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN EXCHANGE FOR THIS
CERTIFICATE OR ANY PORTION HEREOF IS REGISTERED IN THE NAME OF CEDE & CO. (OR IN
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON OTHER THAN THE DEPOSITORY TRUST COMPANY OR A
NOMINEE THEREOF IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.
THIS DEBENTURE IS A GLOBAL DEBENTURE WITHIN THE MEANING OF THE THIRD
SUPPLEMENTAL INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF
A DEPOSITARY OR A NOMINEE THEREOF. THIS DEBENTURE MAY NOT BE EXCHANGED IN WHOLE
OR IN PART FOR A DEBENTURE REGISTERED, AND NO TRANSFER OF THIS DEBENTURE IN
WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH
DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED
IN THE THIRD SUPPLEMENTAL INDENTURE.
109. Depositary. The Depositary with respect to any Global Debenture
authenticated under the Indenture and this Third Supplemental Indenture shall be
The Depository
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Trust Company or such other clearing agency registered under the Exchange Act
that is designated by the Company to act as Depositary with respect to
Debentures issued in the form of one or more Global Debentures.
ARTICLE TWO
201. Right of Exchange.
Subject to and upon compliance with the provisions of this Section
201, at the option of the Holder thereof, beginning _______________, 1998, any
Debenture or any portion of the principal amount thereof which is $1,000 or an
integral multiple of $1,000, may (unless the Company shall have elected,
pursuant to Section 216 hereof, to pay to the Holder an amount in cash equal to
the value of the Exchange Property, in which case the provisions of Section 216
hereof shall be followed), at any time on or before the close of business on
August 15, 2008, or in the case of Debentures or portions thereof called for
redemption in accordance with Section 1101 of the Indenture, on or before the
close of business on the Business Day next preceding the Redemption Date, be
exchanged for fully paid and nonassessable shares (calculated as to each
exchange to the nearest 1/10,000 of a share) of Chevron Common Stock (as defined
in Section 219 hereof) (or such other securities, property or cash as shall be
added to such Chevron Common Stock or as such Chevron Common Stock shall have
been changed into pursuant to this Article Two) at the Exchange Rate (as defined
below) hereinafter provided.
The rate at which shares of Chevron Common Stock shall be deliverable
upon exchange (herein called the "Exchange Rate") shall be initially 0.823
shares of Chevron Common Stock for each $1,000 principal amount of Debentures
exchanged. The Exchange Rate shall be subject to adjustment as provided in
Sections 204, 205, 211 and 215 hereof.
202. Method of Exchange.
In order to exercise the right of exchange, the Holder shall surrender
such Debenture to the Exchange Agent (as defined in Section 219 hereof) for
exchange by delivering such Debenture to, or mailing such Debenture by
registered mail, postage prepaid, addressed to the Exchange Agent at the office
or agency of the Company, maintained for that purpose pursuant to Section 1002
of the Indenture, accompanied in each case by written notice to the Company and
the Exchange Agent that the Holder elects to exchange such Debenture, or, if
less than the entire principal amount of such Debenture is to be exchanged, the
portion thereof to be exchanged.
The notices in the above paragraph shall also state the name or names
(with address) in which the certificate or certificates for shares of Chevron
Common Stock or, to the extent applicable, other Exchange Property which shall
be issuable on such exchange shall be issued. Debentures surrendered for
exchange shall be accompanied (if so required by the Company or the Exchange
Agent) by proper assignments thereof to the Company.
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If the Company does not elect to deliver cash in lieu of Chevron
Common Stock or other Exchange Property pursuant to Section 216 hereof, as
promptly as practicable after the proper surrender of such Debenture for
exchange as aforesaid (subject however to the following paragraph of this
Section 202 and Section 216 hereof) and in accordance with the procedures set
forth in the Exchange Agreement (as defined in Section 219 hereof), the Company
shall or shall cause the Exchange Agent to deliver to such Holder, or on his
written order a certificate or certificates for the number of whole shares of
Chevron Common Stock and/or any other Exchange Property deliverable upon
exchange of such Debenture (or specified portion thereof). In addition,
provision shall be made for any fraction of a share as provided in Section 203
hereof and any payment of interest as provided by the following paragraph. Such
exchange shall be deemed to have been effected immediately prior to the close of
business on the date on which such Debenture shall have been properly
surrendered for exchange as aforesaid, which shall be the date on which such
Debenture and notice and any such required payment and assignment shall be
received by the Exchange Agent, and at such time the rights of the Holder of
such Debenture as a Debenture holder shall cease and the Person or Persons in
whose name or names any certificate or certificates for shares of Chevron Common
Stock or other Exchange Property shall be deliverable upon such exchange shall,
as between such Person or Persons and the Company, be deemed to have become the
Holder or Holders of record of the shares or other property represented thereby.
Upon any exchange of a Debenture pursuant to this Article Two (i) if
the Debenture to be exchanged has been called for redemption by the Company, the
Holder shall receive accrued interest thereon through the date an exchange under
this Section 202 is deemed effective and (ii) if the Debenture to be exchanged
has not been called for redemption by the Company, the Holder shall not receive
any payment of accrued and unpaid interest.
Delivery of such certificate or certificates and of any check for any
cash or other Exchange Property may be delayed for a reasonable period of time
at the request of the Company in order to effectuate the calculations of the
adjustments pursuant to this Article Two, to obtain any certificate representing
securities to be delivered, to complete any reapportionment of the shares of
Chevron Common Stock or other Exchange Property apportioned thereto which is
required by this Article Two or to comply with any applicable law. If, between
the date an exchange under this Section 202 is deemed effected and the date of
delivery of the applicable security or securities, such security or securities
shall cease to have any or certain rights, or a record date or effective date of
a transaction to which Section 204, 205 or 211 hereof applies shall occur, the
Person entitled to receive such security or securities shall be entitled only to
receive such security or securities as so modified and any dividends or proceeds
received thereon on or after the date such exchange is deemed effected and none
of the Company, the Trustee and the Exchange Agent shall be otherwise liable
with respect to the modification of such security or securities, from the date
such exchange is deemed effected and the date of such delivery.
Except as otherwise expressly provided in this Article Two, no payment
or adjustment shall be made upon any exchange on account of any interest accrued
on the Debentures surrendered for exchange or on account of any dividends on the
Chevron Common Stock or other Exchange Property delivered upon such exchange;
provided, however that interest accrued on any
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Debentures surrendered for exchange on or after any Regular Record Date and
before any Interest Payment Date relating thereto shall be paid to, as
applicable, the Holder of record as of such record date.
In the case of any Debenture which is exchanged in part only, upon
such exchange the Company shall execute and the Trustee shall authenticate and
deliver to the Holder thereof, at the expense of the Company, a Debenture or
Debentures of authorized denominations in principal amount equal to the
unexchanged portion of such Debenture.
203. Fractional Interests.
No fractional shares of Chevron Common Stock (or any form of
fractional interest in any other security or property which is part of the
Exchange Property) shall be delivered upon exchanges of Debentures. If more
than one Debenture shall be surrendered for exchange at one time by the same
Holder, the number of whole shares (or other integral units of such other
securities or property), which shall be delivered upon exchange shall be
computed by the Company on the basis of the aggregate principal amount of the
Debentures (or specified portions thereof to the extent permitted hereby) so
surrendered. Instead of any fractional share (or other fractional unit) which
would otherwise be deliverable upon exchange of any Debenture or Debentures (or
specified portions thereof), the Exchange Agent on behalf of the Company shall
pay, on the date the exchange is deemed to be effected, a cash adjustment in
respect of such fractional interest in an amount equal to the same fraction of
the Market Price (as defined in Section 219 hereof) per share of the Chevron
Common Stock (or per unit of such other security or property) on the Business
Day next preceding the date the exchange is deemed to be effected. The Company
shall authorize the Exchange Agent to obtain the funds necessary or anticipated
by the Exchange Agent to be necessary, for payment of such fractional interests
by the sale of shares of Chevron Common Stock (or other securities or property
which are part of the Exchange Property) held by the Exchange Agent, provided
that after such sale the number of shares of Chevron Common Stock (and of such
other securities or property) held by the Exchange Agent shall be sufficient to
permit the exchange of all Outstanding Debentures for Chevron Common Stock (and
any other Exchange Property), on the basis of the Exchange Rate then in effect,
in accordance with the provisions of this Article Two. The Company agrees to
furnish or cause to be furnished to the Exchange Agent any additional funds
required to permit such cash payments with respect to fractional interests.
204. Adjustment of Exchange Rate.
(a) In the event Chevron (as defined in Section 219 hereof) shall (i)
pay a dividend on Chevron Common Stock in shares of Chevron Common Stock, (ii)
subdivide the outstanding shares of Chevron Common Stock into a greater number
of shares of Chevron Common Stock, (iii) combine outstanding shares of Chevron
Common Stock into a smaller number of shares of Chevron Common Stock, or (iv)
issue, by reclassification of shares of Chevron Common Stock, any shares of its
common stock (which in any such case shall apply to the shares of Chevron Common
Stock held by the Exchange Agent under the Exchange Agreement), the Exchange
Rate in effect immediately prior thereto shall be proportionately adjusted so
that the Holder of any
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Debentures thereafter surrendered for exchange shall be entitled (subject to
Sections 215 and 216 hereof) to receive the number and kind of shares of Chevron
Common Stock which such Holder would have owned or have been entitled to receive
after the happening of any of the events described above, had such Debentures
been exchanged immediately prior to the record date (or if there is no record
date, the effective date) of such event. Such adjustments shall be made
whenever any of the events listed above shall occur and shall become effective
as of immediately after the close of business on the record date in the case of
a stock dividend and shall become effective as of immediately after the close of
business on the effective date in the case of a subdivision or combination or
reclassification. Any Holder surrendering any Debentures for exchange after
such record date or such effective date, as the case may be, shall be entitled
to receive shares of Chevron Common Stock at the Exchange Rate as so adjusted
pursuant to this Section 204(a) (subject to Sections 215 and 216 hereof) and any
other Exchange Property apportioned thereto.
(b) Notwithstanding the foregoing provisions, no adjustment in the
Exchange Rate shall be required unless such adjustment would require an increase
or decrease in such Exchange Rate of more than 1%, provided, however, that any
adjustments which by reason of this paragraph (b) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
(c) All calculations under this Section 204 shall be made to the
nearest 1/10,000 of a share.
(d) Whenever the Exchange Rate is adjusted as herein provided, the
Company shall determine the adjusted Exchange Rate in accordance with this
Section 204 and shall prepare an Officer's Certificate setting forth such
adjusted Exchange Rate and any cash or other property apportioned to the Chevron
Common Stock and showing in detail the facts upon which such adjustment is
based. Such certificate shall be conclusive evidence of the correctness of such
adjustment. Such certificate shall forthwith be filed with the Exchange Agent
and the Trustee, who may rely on such Officer's Certificate as conclusive
evidence of the correctness of the adjustment. A notice stating that the
Exchange Rate has been adjusted and setting forth the adjusted Exchange Rate and
any cash or other property apportioned to the Chevron Common Stock shall, as
soon as practicable, be mailed by or on behalf of the Company to the Holders of
Debentures at their last addresses as they shall appear upon the Security
Register.
205. Exchange Agreement.
(a) Simultaneously with the execution and delivery of this Indenture
Supplement, the Company is entering into the Exchange Agreement with Chase Bank
of Texas, National Association, a national banking association, incorporated and
existing under the laws of the United States of America, as Exchange Agent,
pursuant to which the Company is depositing with the Exchange Agent __________
shares of Chevron Common Stock, which in the aggregate shall initially
constitute the Exchange Property. The Exchange Agent shall be the exchange
agent for the exchange of Debentures for Chevron Common Stock and other Exchange
Property, if any, hereunder. The Company shall deposit with the Exchange Agent
from time to time such additional
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number of shares of Chevron Common Stock not already held by the Exchange Agent
as the Holders of all Outstanding Debentures shall from time to time be
entitled to receive from the Exchange Agent pursuant to this Article Two upon
exchange thereof.
(b) All cash received by the Exchange Agent as herein provided will be
invested upon written request of the Company by the Exchange Agent from time to
time as so requested by the Company pursuant to the Exchange Agreement. The
Company shall be entitled to all cash dividends paid on the Exchange Property
held by the Exchange Agent except to the extent that such dividends are paid
pursuant to a plan of liquidation or partial liquidation or a recapitalization
or restructuring or other extraordinary cash dividends, and to all interest
payments on any debt securities included in the Exchange Property which Holders
of Debentures may be entitled to receive on exchange hereunder; provided, that
if the Exchange Agent shall receive any such cash dividends or interest to which
the Company is entitled pursuant hereto, the Exchange Agent shall not be
required to transfer to the Company any such dividends or interest to which the
Company is entitled pursuant hereto until receipt of an Officers' Certificate to
the effect that the Company is entitled to such dividends or interest pursuant
hereto. The Company shall also be entitled to any interest or gain on
investments made by the Exchange Agent pursuant to Section 11 of the Exchange
Agreement, which shall be paid to the Company on demand as provided in the
Exchange Agreement. Any loss on such investments shall be for the account of
the Company and the amount thereof shall be reimbursed to the Exchange Agent by
the Company. The Exchange Agent shall hold and apply as hereinafter provided
all other dividends paid on the Exchange Property held by the Exchange Agent
under the Exchange Agreement.
(c) In case there shall be, at any time while any Debentures are
Outstanding, any distribution of cash, securities or other property on Exchange
Property (other than (i) cash dividends to which the Company is entitled and
interest paid on debt securities, as specified in paragraph (b) of this Section
205, (ii) dividends, subdivisions, combinations and reclassifications for which
an adjustment in the Exchange Rate is made pursuant to Section 204 hereof and
(iii) securities or other property received in a transaction to which Section
211 hereof applies) or in case there shall be granted with respect to any
Exchange Property, any transferable subscription rights, options, warrants or
other similar transferable rights, the Company shall, as soon as reasonably
practicable after its receipt thereof, notify the Exchange Agent of such receipt
and promptly, and in any event within five business days of the receipt thereof,
deposit with the Exchange Agent all such securities and other property,
including any transferable rights, pursuant to the Exchange Agreement, and
concurrently with such deposit, shall (except as provided in the succeeding
paragraph) instruct the Exchange Agent to sell all securities and other property
so received by way of distribution and all rights for cash so distributed in
such manner as the Company shall instruct in writing and shall apply the
proceeds from the sale thereof as hereinafter provided. To the extent that the
Company shall, within 10 days of its notification to the Exchange Agent of the
Company's receipt of such cash, securities or other property, including any
transferrable rights, furnish the Exchange Agent with an Opinion of Counsel to
the effect that such distribution or grant or the sale of the securities or
other property received on such distribution or the rights received by such
grant is taxable to the Company or the Exchange Agent and an Officers'
Certificate as to the amount of federal, state and local tax payable by the
Company and the Exchange Agent as a result of such distribution or grant and
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estimated to be payable as a result of such sale (computed by the Company at the
highest marginal tax rates applicable to such transaction or transactions), the
Exchange Agent shall pay to, or to the order of the Company, in the case of
taxes payable by the Company, or itself, in the case of taxes payable by it,
from the cash received in such distribution, if any, or cash apportioned to
Chevron Common Stock hereunder or from the net cash proceeds received from such
sale, the amount of such tax as so computed by the Company. In the case of
taxes estimated to be payable as a result of such sale, the Company shall
deliver an Officers' Certificate within 10 days after completion of such sale
stating the actual taxes payable as so computed and appropriate adjustment of
such payments shall thereupon be made. The remaining portion of such cash
received, if any, and net cash proceeds shall be apportioned equally among the
Exchange Property for which outstanding Debentures are exchangeable as of
immediately after the close of business on the record date for. the distribution
or grant to which this paragraph (c) applies, or, if there is no such record
date, the effective date of such distribution or grant. Any Holder surrendering
any Debentures after such record date, or such effective date, as the case may
be, shall be entitled to receive, in addition to the Exchange Property for which
such Debentures are exchangeable and any cash theretofore apportioned hereunder,
the amount of cash so apportioned to such shares of Chevron Common Stock.
Notwithstanding the foregoing, however, in the event of any such
distribution of securities or other property, including transferable rights,
which is convertible, without payment of consideration, into Exchange Property,
and which right of conversion does not expire before the retirement of such
securities or other property, the Company shall, after any sale required for
payment of any taxes owed by the Company, or the Exchange Agent, as provided in
the preceding paragraph, instruct the Exchange Agent to retain and hold all such
securities and other property as additional Exchange Property for apportionment
equally among other Exchange Property for which Debentures are exchangeable as
of immediately after the close of business on the record date for the
distribution or grant to which this Section 205 applies, or, if there is no such
record date, the effective date of such distribution or grant; provided,
however, that if the amount of cash deliverable to the holders of such
securities or other property, including transferable rights, for each unit of
such securities or other property upon the retirement thereof is less than the
average of the high and low reported public sales prices for each such unit for
the seven Business Days preceding the date 15 Business Days prior to the date of
their retirement the Exchange Agent shall sell all such securities and other
property prior to the third Business Day prior to the date of their retirement
and, after the payment, from the net proceeds received from such sale by the
Exchange Agent, of any taxes incurred by the Exchange Agent or the Company in
connection with such sale, the remaining cash proceeds of such sale shall be
apportioned equally among the Exchange Property for which Outstanding
Debentures are exchangeable as of the Business Day following the day such sale
is concluded.
In the event that a distribution or grant of cash, securities or other
property on Exchange Property shall be effected as contemplated by the two
immediately preceding paragraphs, a notice stating that such distribution or
grant has occurred and setting forth the additional cash, securities or other
property on the Exchange Property shall as soon as practicable be mailed by or
on behalf of the Company to the Holders of Debentures at their last addresses as
they appear upon the Security Register.
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In case there shall be, at any time while any Debentures are
outstanding, any distribution or grant to holders of Chevron Common Stock (or
other Exchange Property), including the Company (with respect to any Exchange
Property held by the Exchange Agent), of any nontransferable subscription
rights, options, warrants or other similar nontransferable rights that shall, by
the terms of such rights, permit the Company to distribute such rights to the
Holders of Debentures, then the Company and the Exchange Agent shall cause such
rights to be distributed to the Holders of record of Debentures shown on the
Security Register as of immediately after the close of business on the record
date (and if there is no record date, the close of business on the effective
date) for such distribution or grant; provided, however, that if the Company
shall furnish the Exchange Agent with an Opinion of Counsel to the effect that
such distribution or grant, or such distribution by the Company or the Exchange
Agent to Holders of Debentures, is taxable to the Company or the Exchange Agent
and an Officer's Certificate as to the amount of federal, state and local tax
payable by the Company and the Exchange Agent as a result of such distribution
or grant, the Exchange Agent shall to the extent legally permissible sell for
cash in such manner as the Company shall instruct in writing such of the rights
as shall be sufficient to provide to the Company and the Exchange Agent a cash
payment equal to the amount of taxes payable by the Company and the Exchange
Agent, respectively, arising from such distribution or grant (as computed by the
Company at the highest marginal tax rates applicable to such transaction or
transactions and any sale of such rights or, if such sale is not permissible or
the proceeds thereof are not sufficient, the Exchange Agent shall cause an
amount of cash held for exchange by the Exchange Agent (if any) and, if such
cash is not sufficient for the applicable tax payments, an amount of Exchange
Property, to be segregated for the benefit of or delivered to the Company. The
remaining Exchange Property held by the Exchange Agent shall be proportionately
adjusted so as to be apportioned equally to the Debentures outstanding as of
immediately after the close of business on the record date for the distribution
or grant to which this paragraph applies, or, if there is no such record date,
immediately after the close of business on the effective date of such
distribution or grant. Any Holder surrendering any Debentures after such record
date, or such effective date, as the case may be, shall be entitled to receive
any Exchange Property apportioned thereto as so adjusted pursuant to this
paragraph.
(d) In the event of any reduction of the principal amount of
Debentures Outstanding (other than as a result of surrender for exchange for
Exchange Property pursuant to this Article Two), as evidenced by the delivery to
the Trustee by the Company of Debentures for cancellation, the Company shall be
entitled to the kind and amount of Exchange Property as shall at the time be in
excess of the kind and amount of Exchange Property which would be required for
the exchange of all Debentures then Outstanding for the Exchange Property on the
basis of the then Exchange Rate and the other terms and provisions of this
Article Two and the Exchange Agreement. Upon expiration of the right to
surrender Debentures for exchange pursuant to this Article Two and the Exchange
Agreement and when all other obligations of the Company shall have been
satisfied under this Article Two and the Exchange Agreement, the Company's
obligation to exchange Debentures for Exchange Property shall be terminated.
(e) The Exchange Agent shall not make any distribution of Exchange
Property to the Company prior to the receipt by the Exchange Agent from the
Company of an Officers'
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Certificate to the effect that no Event of Default exists hereunder and no event
or condition which with notice or lapse of time or both would become such an
Event of Default and which states in detail the basis asserted by the Company
for such distribution.
(f) The Company shall be entitled to any net income or gain resulting
from investments of cash made by the Exchange Agent pursuant to the Exchange
Agreement and shall reimburse the Exchange Agent for any losses realized in
respect of such investments.
(g) The Company shall have the full and unqualified right and power to
exercise any rights to vote, or to give consents or take any other action in
respect of, the Chevron Common Stock or any other securities included in the
Exchange Property at any time held by the Exchange Agent, and the Exchange Agent
shall have no duty to exercise any such rights. The Company shall not be liable
to any Holder as a result of any vote, or failure to vote, consent or failure to
consent, or any other act or failure to act taken by the Company in respect of
the Chevron Common Stock or any other securities included in the Exchange
Property.
(h) The obligations, covenants and agreements contained in the
Exchange Agreement shall not constitute obligations, covenants or agreements
contained in the Indenture, this Third Supplemental Indenture or any of the
Debentures and neither the failure by the Company to observe any obligation,
covenant or agreement contained in the Exchange Agreement (unless such
obligation, covenant or agreement shall also be contained in this Third
Supplemental Indenture) nor the failure of the Exchange Agent to fulfill any
obligations, agreements or covenants set forth therein shall constitute (with or
without the giving of notice, the passage of time or both) an Event of Default;
provided, however, that nothing in this paragraph shall impair the right of a
Holder to receive the Exchange Property apportioned to such Holder's Debentures
in exchange for such Debentures in accordance with the terms and conditions of
this Article Two, and nothing in this paragraph shall impair the rights and
remedies of the Trustee and the Holders under Article Five of the Indenture with
respect to a failure by the Company to observe its express agreements and
covenants to cause the exchange of Debentures actually surrendered for exchange
pursuant to this Article Two for Exchange Property apportioned thereto in
accordance with the terms and conditions of this Article Two.
206. Company to Give Notice of Certain Events.
If at any time:
(a) Chevron shall declare a dividend (or any other distribution) on
the Chevron Common Stock which the Exchange Agent would be required to apply for
the benefit of the Holders of the Debentures in accordance with Section 205
hereof; or
(b) Chevron shall authorize the granting of subscription rights,
options, warrants or other similar rights to holders of Chevron Common Stock; or
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(c) there shall occur any reclassification of Chevron Common Stock
(other than a subdivision or combination of outstanding shares of Chevron Common
Stock) or any consolidation or merger to which Chevron is a party and for which
approval of any stockholders of Chevron is required, or the sale or transfer of
all or substantially all of the assets of Chevron; or
(d) there shall occur the voluntary or involuntary dissolution,
liquidation or winding up of Chevron;
then the Company shall as promptly as practicable cause to be filed at the
office or agency maintained pursuant to Section 1002 of the Indenture and cause
to be mailed to the Holders of Debentures at their last addresses as they shall
appear upon the Security Register a notice stating (x) the date, if known by the
Company, on which a record is to be taken for the purpose of such dividend,
distribution or grant of rights, or, if a record is not to be taken, the date as
of which the holders of Chevron Common Stock of record to be entitled to such
dividend or distribution or grant of rights are to be determined, or (y) the
date, if known by the Company, on which such reclassification, merger,
consolidation, sale, transfer, dissolution, liquidation or winding up is
expected to become effective, and the date as of which it is expected that
holders of Chevron Common Stock of record shall be entitled to exchange their
shares of Chevron Common Stock for securities or other property deliverable upon
such reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up.
207. Covenants by the Company.
So long as any Debentures shall be Outstanding and exchangeable for
Chevron Common Stock or other Exchange Property pursuant to this Article Two,
the Company shall (i) preserve unimpaired the right of each Holder of
Debentures, upon exchange thereof, to receive shares of Chevron Common Stock or
other Exchange Property as such Holder shall from time to time be entitled to
receive in accordance with the provisions of this Article Two, and (ii) not
pledge, mortgage, hypothecate or grant a security interest in, or permit any
mortgage, pledge, security interest or other lien upon, the Exchange Property.
208. Transfer Taxes.
The Company will pay any and all taxes that may be payable in respect
of the transfer and delivery of shares of Chevron Common Stock (or other
securities included in the Exchange Property) pursuant hereto, other than
income, capital gains and similar taxes imposed on any Holder by reason of
exchange of Debentures for Exchange Property; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the delivery, upon an exchange of Debentures, of shares
of Chevron Common Stock (or other securities included in the Exchange Property)
in a name other than that in which the Debentures so exchanged were registered,
and no such transfer shall be made unless and until the Person requesting such
transfer has paid to the Company or the Exchange Agent the amount of any such
tax, or has established to the satisfaction of the Company and the Exchange
Agent that such tax has been paid.
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209. Fully Paid Shares.
The Company warrants and covenants that all shares of Chevron Common
Stock delivered upon the exchange of Debentures will be fully paid and
nonassessable and that each Holder of Debentures who receives shares of Chevron
Common Stock or other Exchange Property in exchange for his Debentures pursuant
to this Article Two will receive valid and marketable title to such Exchange
Property, free and clear of all claims, liens and encumbrances (other than those
that may be created or suffered to exist by such Holder). Except as provided in
Section 208 hereof, the Company will pay all taxes, liens and charges with
respect to the delivery of Exchange Property in exchange for Debentures
hereunder.
210. Cancellation of Debentures.
All Debentures delivered for exchange shall be delivered by the
Exchange Agent to the Trustee and be canceled by the Trustee, and the Trustee
shall dispose of the same as provided in Section 309 of the Indenture.
211. Merger of Chevron
In case of any consolidation or merger of Chevron with or into any
other Person that results in shares of Chevron Common Stock, as constituted
prior to the consummation of such transaction, being converted into other
securities and/or property (including cash), or in case of any sale or transfer
of all or substantially all of the assets of Chevron (if in connection with such
sale or transfer holders of Chevron Common Stock receive other securities and/or
property including cash, in exchange for their shares of Chevron Common Stock),
or of any voluntary or involuntary dissolution, liquidation or winding-up of
Chevron, the Company shall execute and deliver to the Trustee a supplemental
indenture, and to the Exchange Agent a supplement to the Exchange Agreement,
each providing that the Holder of each Debenture then Outstanding shall have the
right thereafter (subject to Sections 215 and 216 hereof) to exchange such
Debenture (i) for the kind and amount of securities and other property
receivable upon such consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up by a holder of the number of shares of Chevron Common
Stock for which such Debenture was exchangeable immediately prior to such
consolidation, merger, sale, transfer, dissolution, liquidation or winding up
and (ii) the kind and amount of securities (other than Chevron Common Stock) and
other Exchange Property for which such Debenture was exchangeable immediately
prior to such consolidation, merger, sale, transfer, dissolution, liquidation or
winding up. Such supplemental indenture shall provide for adjustments and
rights to receive and retain dividends or their equivalents, which shall be as
nearly equivalent as may be practicable to the adjustments and rights to receive
and retain dividends or their equivalents provided for in this Article Two. The
above provisions of this Section 211 shall similarly apply to any successive
consolidation, merger, sale, transfers, dissolution, liquidation or winding-up.
Notice of such supplemental indenture shall as soon as practicable be
filed with the Exchange Agent and mailed by or on behalf of the Company to the
Holders of Debentures at their last addresses as they shall appear on the
Security Register.
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The Trustee shall not be under any responsibility to determine the
correctness of any provisions contained in any such supplemental indenture
relating either to the kind or amount of shares of stock or securities or
property or cash receivable by the Debenture holders upon the exchange of their
Debentures as herein provided after any such consolidation, merger, sale,
transfer, dissolution, liquidation or winding up or to any adjustment to be made
with respect thereto.
212. Certain Tender or Exchange Offers for Exchange Property.
In the event of a tender offer or exchange offer for any class of
securities included within the Exchange Property (i) if the Company owns shares
of such class which are not subject to the Exchange Agreement, the Company will
cause the Exchange Agent to tender such shares of such class in the same
proportion that the Company tenders its securities in such class which are not
subject to the Exchange Agreement, and (ii) if the Company does not own
securities of a class which are subject to the Exchange Agreement, the Company
may, at its option and in its sole discretion, elect to cause the Exchange Agent
to tender all or any portion or none of such class of security included within
the Exchange Property held by the Exchange Agent. The proceeds of the sale of
any such Exchange Property pursuant to any such tender or exchange offer will be
held by the Exchange Agent for the benefit of Holders as provided in this Third
Supplemental Indenture.
213. Obligations of Trustee and Exchange Agent.
Subject to the provisions of Section 601 of the Indenture, neither the
Trustee nor the Exchange Agent shall at any time be under any duty or
responsibility to any Holder of Debentures to determine whether any facts exist
which may require any adjustment of the Exchange Rate, or with respect to the
nature or extent of any such adjustment when made, or with respect to the method
employed, or herein or in any supplemental indenture provided to be employed, in
making the same. Neither the Trustee nor the Exchange Agent shall be accountable
with respect to the validity or value (or the kind or amount) of any Exchange
Property which may at any time be issued or delivered upon the exchange of any
Debenture or the market conditions existing at the time of sale of any Exchange
Property; and neither the Trustee nor the Exchange Agent makes any
representation with respect thereto. Neither the Trustee nor the Exchange Agent
shall be responsible, for any failure of the Company to transfer or deliver any
Exchange Property or certificates or other evidence thereof to the Exchange
Agent as provided herein, or subject to the provisions of Section 601 of the
Indenture and the obligations assumed under the Exchange Agreement, to comply
with any of the covenants of the Company contained in this Article Two.
214. Exchange Arrangements in Case of Redemption.
In connection with any redemption of Debentures, the Company may
arrange for the purchase and exchange of Exchange Property of all or any part of
such Debentures by an arrangement with one or more investment bankers or other
purchasers to purchase such Debentures by paying to the Holders thereof, or to
the Trustee in trust for such Holders, on or before the close of business on the
Business Day next preceding the Redemption Date, an amount not less than the
applicable Redemption Price of the Debentures to be purchased, plus interest
accrued to the
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Redemption Date. Notwithstanding anything to the contrary contained in Article
Eleven of the Indenture, the obligation of the Company to pay the Redemption
Price of such Debentures, plus interest accrued to the Redemption Date, shall be
satisfied and discharged to the extent such amount is so paid by such
purchasers. Any Debentures to be purchased pursuant to such agreement which are
not presented for redemption or not duly surrendered for exchange by the Holders
thereof shall be deemed acquired by such purchasers from the Holders and
surrendered by such purchasers for exchange, all as of immediately prior to the
close of business on the Business Day next preceding the Redemption Date,
subject to payment of the above amount as aforesaid. Notwithstanding anything
to the contrary contained in this Article Two, in the event that any Debentures
subject to such agreement are surrendered for exchange (other than by the
purchasers) by the close of business on the Business Day next preceding the
Redemption Date, the amounts so paid to the Trustee in trust for the Holders of
the Debentures so surrendered for exchange shall be returned to such purchasers.
215. Tax Adjustments in Exchange Rate.
If an event shall occur which causes the Exchange Rate to be subject
to adjustment pursuant to Section 204 hereof, or a merger, consolidation or sale
or transfer of assets or of any voluntary or involuntary dissolution,
liquidation or winding up of Chevron shall occur requiring a supplemental
indenture under Section 211 hereof, and if, within ten days after the effective
date of such transaction, the Company shall furnish the Exchange Agent with an
Opinion of Counsel to the effect that such transaction is taxable to the Company
or the Exchange Agent and an Officers' Certificate as to the amount of federal,
state and local tax payable by the Company or the Exchange Agent as a result of
such transaction (computed by the Company at the marginal tax rate applicable to
such transaction), the Exchange Agent shall pay to, or to the order of, the
Company, in the case of taxes payable by the Company, or itself, in the case of
taxes payable by it, the cash held by it and apportioned or to be apportioned to
the Exchange Property for which Outstanding Debentures are exchangeable, up to
the amount of such taxes. In the event that the cash held by the Exchange Agent
and so apportioned or to be apportioned is insufficient to pay to the Company or
the Exchange Agent the amount of such taxes, the Exchange Agent shall, as soon
as reasonably practicable and to the extent legally permissible, sell in
accordance with written instructions received by the Company, or if no such
instructions are received, as determined by the Exchange Agent, such Exchange
Property (including any securities or other property included therein) as may be
necessary to pay, from the proceeds thereof after payment of any taxes by the
Company or the Exchange Agent on such sale, the amount of any such
insufficiency. The Exchange Agent shall notify the Company and the Trustee of
any such sale and the Exchange Property sold. Following payment of all
necessary amounts to the Company or the Exchange Agent, such Exchange Property
held by the Exchange Agent and any cash apportioned thereto shall be
proportionately adjusted so as to be apportioned equally to the Debentures
Outstanding as of immediately after the close of business on the record date or
the effective date for the transaction to which this Section 215 applies (as
shall be specified in Section 204 or 211 hereof, whichever is applicable). Any
Holder surrendering any Debentures after such record date, or such effective
date, as the case may be, shall be, entitled to receive the Exchange Property
and any cash apportioned thereto as so adjusted pursuant to this paragraph. If
this Section 215 shall apply to a transaction and the sale by the Company of the
consideration receivable therein shall not be legally permissible and the amount
of cash apportioned to the
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<PAGE>
Exchange Property shall not be sufficient to pay all taxes payable by the
Company or the Exchange Agent which arise from such transaction, the Company may
direct the Exchange Agent to segregate for the benefit of the Company or the
Exchange Agent (as the case may be) or deliver to the Company or the Exchange
Agent (as the case may be) an amount of Exchange Property theretofore held by
the Exchange Agent for exchange of Debentures having a Market Value equal to the
unsatisfied portion of the tax payable by the Company or the Exchange Agent (as
the case may be) with respect to such transaction including any tax payable upon
the delivery or sale thereof in order to satisfy the aforementioned tax, and the
Exchange Property shall thereafter be solely for the account of the Company or
the Exchange Agent (as the case may be) and Holders of Debentures shall have no
rights thereto.
In the event that an Opinion of Counsel given pursuant to this Third
Supplemental Indenture concludes that whether taxes are payable by the Company
or the Exchange Agent is uncertain under the then state of the law or facts or
both, the Company shall have the option of requesting the Exchange Agent to
segregate the amount of funds that would be payable (or securities or other
property in lieu thereof), if such taxes were deemed payable, together with the
amount estimated in good faith to be the reasonable costs and expenses
(including attorneys' fees) of obtaining a determination as set forth below.
The Holders shall have no rights to such funds or securities or other property,
which shall be held by the Exchange Agent for the Company (or itself, as the
case may be), the Exchange Property and any cash apportioned thereto deliverable
upon exchange of Debentures pursuant to this Article Two shall be reapportioned
as though such segregated amounts had been paid to the Company or the Exchange
Agent for such taxes, and any Holder surrendering any Debenture after the record
or effective date of the applicable transaction giving rise to an adjustment
pursuant to this Section 215 shall be entitled to receive only such Exchange
Property and any cash apportioned thereto upon exchange of Debentures pursuant
to this Article Two as so reapportioned. The Company shall thereupon in good
faith seek an appropriate determination from the appropriate agencies and, if
judged necessary by the Company in good faith, from appropriate courts, as to
whether taxes are so payable. If an appropriate determination is made that such
taxes are so payable, then the Exchange Agent shall immediately pay the funds or
deliver the securities or other property so segregated to the Company (or, if
taxes are payable by the Exchange Agent, retain such funds or securities or
other property for itself), and if an appropriate determination is made that
such taxes are not payable or an amount of tax is payable which is less than the
amount of funds or property so segregated, then the Exchange Agent, after paying
to the Company (or itself, as the case may be) out of such funds or securities
or other property the reasonable expenses and costs (including attorneys' fees)
of obtaining such determination (and any taxes so payable), shall apportion such
remaining funds or securities or other property which had been so segregated
among the Exchange Property and cash apportioned thereto as of immediately after
the close of business on the record date or the effective date of such
transaction giving rise to an adjustment pursuant to Section 204 or 211 hereof,
whichever is applicable. If any Debenture has been exchanged on or after such
record date or such effective date, as the case may be, and before a
determination is made that no taxes are payable or an amount of tax is payable
which is less than the amount of funds or securities or other property so
segregated, the Company to the extent not previously delivered, shall deliver
such Exchange Property and any cash apportioned thereto as
18
<PAGE>
reapportioned following such determination, to the person to which and in the
manner in which the other proceeds of the exchange of such Debenture were
delivered.
216. Cash Equivalent.
Notwithstanding any other provisions in this Article Two, in lieu of
delivering certificates representing shares of Chevron Common Stock or other
Exchange Property in exchange for Debentures surrendered in accordance with
Section 202 hereof, the Company may, at the Company's option, pay to the Holder
surrendering such Debentures an amount in cash equal to the value of the
Exchange Property for which such Debentures are exchangeable (based on the
Market Price on the date of receipt by the Company of the notice of exchange
delivered by such Holder pursuant to Section 202 hereof). Prior to so directing
the Exchange Agent to make any such cash payment, the Company shall deposit with
the Exchange Agent the cash so payable.
217. Repurchase Rights.
In the event that the Company obtains or otherwise releases any
Chevron Common Stock or other Exchange Property in any manner otherwise than as
contemplated by Section 218 hereof, each Holder will have the right ("Repurchase
Right"), at such Holder's option, to require the Company to repurchase all of
such Holder's Debentures, or a portion thereof which is $1,000 or any integral
multiple thereof, in the manner and at the price described below.
Promptly (and in any event within 10 days) after the Company has
obtained or released any Chevron Common Stock or any other Exchange Property in
any manner otherwise than as contemplated by Section 218 hereof, the Exchange
Agent will mail to all Holders of record of the Debentures a notice thereof and
the Repurchase Right arising as a result thereof (a "Repurchase Notice"). To
exercise the Repurchase Right, a Holder of Debentures must deliver on or before
the fifteenth day after the date of the Repurchase Notice irrevocable written
notice to the Exchange Agent of the Holder's exercise of such right, together
with the Debentures with respect to which the right is being exercised, duly
endorsed for transfer.
On the date ("Repurchase Date") that is 30 days after the date of the
Repurchase Notice, the Company will be required to repurchase all Debentures in
respect of which the Repurchase Right has been exercised at the following price:
(i) if the date on which the Company's obtaining or release of Exchange Property
in a manner not contemplated by Section 218 hereof first occurs (the "Triggering
Date") is before August 15, 2000, the product of (a) 120% and (b) the greater of
the principal amount of such Debentures (plus accrued and unpaid interest, if
any, to the Repurchase Date) and the Market Price of the Exchange Property
deliverable in exchange for such Debentures on the Triggering Date (or if such
date is not a Business Day, on the next succeeding Business Day); and (h) if the
Triggering Date occurs on or after August 15, 2000, the greater of (a) the
redemption price specified in Section 103 hereof on the Triggering Date and (b)
the Market Price of the Exchange Property deliverable in exchange for such
Debentures on the Triggering Date (or if such date is not a Business Day, on the
next succeeding Business Day).
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The obligation of the Company to deliver Exchange Property (or cash in
lieu thereof) in exchange for Debentures shall survive and continue to apply in
full force and effect following and notwithstanding the occurrence of any event
triggering a Repurchase Right. Failure by the Company to exchange Debentures in
accordance with this Third Supplemental Indenture or to repurchase Debentures
upon valid exercise of a Repurchase Right will constitute an Event of Default
with respect to the Debentures pursuant to Section 501(7) of the Indenture, and
Holders of Debentures will have the remedies provided for in the Indenture,
including acceleration of the indebtedness evidenced by the Debentures, in the
event of any such failure.
If an offer is made to repurchase Debentures in connection with a
Repurchase Right, the Company will comply with all tender offer rules, including
but not limited to Sections 13(e) and 14(e) under the Exchange Act and Rules
13e-1 and 14e-1 thereunder, to the extent applicable to such offer.
218. Withdrawals of Exchange Property. The Company shall be entitled,
out of the Exchange Property held by the Exchange Agent, to such kind and
quantity of Exchange Property and such amount of any cash (the investments
contemplated by Section 205 hereof being deemed for these purposes to be cash
and to be valued at their outstanding principal balance) and other Exchange
Property as shall be in excess of the quantity of Exchange Property held by the
Exchange Agent that would be deliverable by the Exchange Agent upon the exchange
of all Debentures then outstanding, and such excess shall be held by the
Exchange Agent for the account of the Company and, upon delivery of the
Officers' Certificate provided for in the following sentence, released to the
Company upon demand. Upon demand of any withdrawal of Exchange Property from the
Exchange Agent, the Company shall deliver to the Trustee an Officers'
Certificate (and a copy thereof to the Exchange Agent) which shall state (i) the
principal amount of Debentures then outstanding and the kind and amount of
Exchange Property required for delivery to the Holders thereof upon exchange,
(ii) that the withdrawal of the kind and amount of Exchange Property referred to
in such demand is permitted by the provisions of this Third Supplemental
Indenture and (iii) that the Exchange Property so to be withdrawn would not be
deliverable upon exchange of all Debentures then outstanding. In delivering such
certificate, the Company may rely on information furnished to it by the Exchange
Agent as to the kind and amount of Exchange Property held by it and the kind and
amount thereof previously delivered to Holders of Debentures.
219. Certain Definitions. All terms used but not defined in this
Third Supplemental Indenture that are defined in the Indenture shall have the
meanings specified in the Indenture unless the context otherwise requires. As
used in this Third Supplemental Indenture, the following terms shall have the
following meanings:
"Chevron" means Chevron Corporation, a Delaware corporation.
"Chevron Common Stock" means the common stock of Chevron of the class
authorized and designated as common stock, par value $3.00 per share, as such
common stock may be changed or reclassified from time to time.
20
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934 and any
successor statute thereto, in each case as amended from time to time.
"Exchange Agent" means Chase Bank of Texas, National Association,
Exchange Agent under the Exchange Agreement, until a successor Exchange Agent
shall have become such pursuant to the provisions of Section 16 of the Exchange
Agreement, and thereafter "Exchange Agent" shall mean such successor Exchange
Agent thereunder and from time to time any subsequent successor pursuant to such
provisions.
"Exchange Agreement" means the Exchange Agent Agreement entered into
pursuant to the provisions of Section 205 hereof, as the same may be
supplemented and amended from time to time.
"Exchange Property" means initially the aggregate of the ____________
shares of Chevron Common Stock delivered to the Exchange Agent by the Company
pursuant to the Exchange Agreement simultaneously with the execution and
delivery of this Third Supplemental Indenture, and thereafter means the
securities, cash and other property, if any, which at the time are deliverable
upon surrender of the Debentures for exchange in accordance with Article Two of
this Third Supplemental Indenture.
"Global Debenture" means a Debenture that evidences all or part of the
Debentures and bears the legend set forth in Section 108 hereof.
"Market Price" means, when used with respect to any security as of any
date, (i) if such security is not then listed or admitted to trading on any
national securities exchange registered under the Exchange Act, the average of
the high bid and low asked prices in the over-the-counter market on such date as
reported by the National Association of Securities Dealers Automated Quotation
System or (ii) if such security is then listed or admitted to trading on any
such national securities exchange, the last reported sales price regular way on
such date or, in case no such reported sale takes place on such date, the
average of the reported closing bid and asked prices regular way on such date,
in each case on the principal national securities exchange on which such
security is then listed or admitted to trading, or (iii) if such prices are not
available on such date, the market value of such security on such date
determined in such manner as shall be satisfactory to the Exchange Agent, which
shall be entitled to rely for such purposes on the advice of any firm of
investment bankers or security dealers having familiarity with such security.
"Market Price" means, when used with respect to any property (other than any
security) as of any date, the market value of such property on such date
determined in such manner as shall be satisfactory to the Exchange Agent, which
shall be entitled to rely for such purposes on the advice of any firm of
investment bankers having familiarity with such property.
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<PAGE>
ARTICLE THREE
301. Acceptance of Trust.
The Trustee accepts the trust hereby created and agrees to perform the
same upon the terms and conditions herein and in the Indenture set forth.
302. Trustee Not Responsible for Validity, Due Execution or Recitals.
The Trustee shall not be responsible in any manner whatsoever for or
in respect of the validity or sufficiency of this Third Supplemental Indenture
or the due execution thereof by the Company or for or in respect of the recitals
herein contained, all such recitals being made by the Company solely.
303. Counterparts.
This Third Supplemental Indenture may be executed in several
counterparts, each of which shall be an original and all of which together shall
constitute but one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, PENNZOIL COMPANY, party hereto of the first part,
has caused its corporate name to be hereunto affixed, and this instrument to be
signed and sealed by a Group Vice President, for and on its behalf, in the [City
of New York, New York] and CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, party
hereto of the second part, has caused its corporate name to be hereunto affixed,
and this instrument to be signed and sealed by a Vice President, for and on its
behalf, in the [City of New York], all as of the _____ day of _____________,
1998.
PENNZOIL COMPANY
[Corporate Seal] By:
--------------------------------------------
David P. Alderson, II
Group Vice President - Finance and Accounting
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
As Trustee
[Corporate Seal] By:
--------------------------------------------
[Name]
[Title]
STATE OF NEW YORK (S)
(S)
COUNTY OF NEW YORK (S)
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared David P. Alderson, II, Group Vice President of Pennzoil
Company, known to me to be the person whose name is subscribed to the foregoing
instrument, and acknowledged to me that he executed the same for the purposes
therein expressed, in the capacity therein set forth and as the act and deed of
said association.
GIVEN UNDER MY HAND AND SEAL of office, this the _____ day of
_____________, 1998.
--------------------------------------------
[NOTARIAL SEAL] Notary Public
23
<PAGE>
STATE OF NEW YORK (S)
(S)
COUNTY OF NEW YORK (S)
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared _____________ of Chase Bank of Texas, National Association,
known to me to be the person whose name is subscribed to the foregoing
instrument, and acknowledged to me that he executed the same for the purposes
therein expressed, in the capacity therein set forth and as the act and deed of
said association.
GIVEN UNDER MY HAND AND SEAL of office, this the _____ day of
_____________, 1998.
[NOTARIAL SEAL]
--------------------------------------------
Notary Public
24
<PAGE>
================================================================================
PENNZOIL COMPANY
AND
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
As Trustee
Fourth Supplemental Indenture
Providing for
4.95% Exchangeable Senior Debentures Due August 15, 2008
Dated as of _______________, 1998
Supplementing Indenture dated as of December 15, 1992
================================================================================
<PAGE>
FOURTH SUPPLEMENTAL INDENTURE, dated as of _______________, 1998
("Fourth Supplemental Indenture") between PENNZOIL COMPANY, a corporation
organized and existing under the laws of the State of Delaware (hereinafter
called the "Company"), and CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, a national
banking association, incorporated and existing under the laws of the United
States of America (formerly known as Texas Commerce Bank National Association),
having its principal corporate trust office in the City of Houston, Texas
(hereinafter called the "Trustee").
WHEREAS, the Company has executed and delivered its Indenture dated as
of December 15, 1992 (hereinafter called the "Indenture"), to provide for the
issue of one or more series of debt securities of the Company; and
WHEREAS, Section 901 of the Indenture authorizes the Company and the
Trustee to enter into supplemental indentures to establish the form or terms of
securities of any series as permitted by sections 201 and 301 of the Indenture;
and
WHEREAS, to so provide for the establishment of such a series, the
Company has authorized the execution of this Fourth Supplemental Indenture to
the Indenture and has requested the Trustee to execute the Fourth Supplemental
Indenture; and
WHEREAS, all conditions and requirements necessary to make this Fourth
Supplemental Indenture a valid, binding and legal instrument have been done and
performed and the execution and delivery hereof have been in all respects duly
authorized, including the delivery to the Trustee of the Opinion of Counsel
referenced in Section 903 of the Indenture;
NOW, THEREFORE, THIS FOURTH SUPPLEMENTAL INDENTURE WITNESSETH that the
Company and the Trustee hereby covenant, declare and agree as follows:
ARTICLE ONE
101. Fourth Series of Debentures.
There shall be a series of Securities (capitalized terms used herein
and not otherwise defined have the meanings given to such terms in the
Indenture) designated "4.95% Exchangeable Senior Debentures Due August 15, 2008"
(herein sometimes referred to as "Debentures"), and the form thereof, which
shall be established by Board Resolution, shall contain suitable provisions with
respect to the matters hereinafter in this Section 101 specified. Debentures
shall mature on and bear interest and be limited in aggregate principal amount
as to each maturity as set forth below:
Aggregate Interest
Principal Rate
Amount Maturity Per Annum
- --------- --------------- ----------
$___________ August 15, 2008 4.95%
<PAGE>
Debentures shall be issued as Registered Debentures in denominations of U.S.
$1,000 or integral multiples thereof; interest on Debentures shall be payable
semiannually on February 15 and August 15 of each year, commencing February 15,
1999. The Place of Payment with respect to the Debentures is
______________________________, 80 Broad Street, 4th Floor, New York, New York
10004, and Chase Bank of Texas, National Association, 600 Travis Street, 8th
Floor, Houston, Texas 77002.
102. Exchange or Transfer.
Upon any exchange or transfer of Debentures, the Company may make a
charge therefor sufficient to reimburse it for any tax or taxes or other
governmental charge, as provided in Section 305 of the Indenture, but the
Company hereby waives any right to make a charge in addition thereto for any
exchange or transfer of Debentures.
103. Redemption.
(a) The Debentures shall be subject to redemption upon not less than
30 nor more than 60 days' prior notice as provided in Sections 107 and 1104 of
the Indenture at any time on or after August 15, 2000, in whole or from time to
time in part, at the option of the Company, at the following redemption prices
(expressed as a percentage of the principal amount at maturity) if redeemed
during the 12-month period beginning August 15 of the following years:
Redemption
Year Price
---- -----
2000
2001
2002
2003
2004
2005
2006
2007
in each case together with accrued interest to the redemption date, provided,
however, that, if any interest payment date on the Debentures is on or prior to
the Redemption Date, such interest shall be payable to the Holders of such
Debentures, registered as such, at the close of business on the relevant Regular
Record Dates according to their terms and the provisions of Section 307 of the
Indenture.
(b) Notice of intention to redeem the Debentures in whole or in part
shall be given in accordance with Section 1104 of the Indenture.
104. Sinking Fund.
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<PAGE>
The Debentures shall not be entitled to the benefits of any sinking
fund provisions.
105. Tax Matters.
(a) Subject to Section 105(c) hereof, in addition to the conditions
set forth in Section 401 of the Indenture, the right of the Company to satisfy
the Indenture to the extent set forth in Section 401 of the Indenture shall be
subject to the condition that the Company has delivered to the Trustee an
Opinion of Counsel (as defined in the Indenture) that the satisfaction and
discharge pursuant to Section 401 of the Indenture will not cause the Holders of
the Debentures to recognize income, gain or loss for United States federal
income tax purposes.
(b) Subject to Section 105(c) hereof, in addition to the conditions
set forth in Section 403 of the Indenture, the right of the Company to satisfy
the Indenture with respect to the Debentures to the extent set forth in Section
403 of the Indenture shall be subject to the conditions that the Company shall
have received from, or there shall have been published by, the United States
Internal Revenue Service a ruling to the effect that the satisfaction and
discharge to the extent set forth in Section 403 of the Indenture will not cause
the Holders of the Debentures to recognize income, gain or loss for United
States federal income tax purposes.
(c) Notwithstanding the satisfaction and discharge of the Indenture or
with respect to the Debentures pursuant to Sections 105(a) and (b) hereof, the
obligations of the Company under Article Two hereof shall survive until the
Debentures are no longer Outstanding.
106. Issuance of Debentures.
Upon the delivery of this Fourth Supplemental Indenture, Debentures in
the aggregate principal amount of $_________ shall be issued and be Outstanding
as provided in the Indenture.
107. Global Debentures.
The provisions of paragraphs (a), (b), (c) and (d) below shall apply
only to Global Debentures:
(a) Each Global Debenture authenticated under the Indenture and this
Fourth Supplemental Indenture shall be registered in the name of the Depository
designated for such Global Debenture or a nominee thereof and delivered to such
Depository or a nominee thereof or custodian therefor, and each such Global
Debenture shall constitute a single Debenture for all purposes of this Fourth
Supplemental Indenture.
(b) Notwithstanding any other provision in the Indenture or this
Fourth Supplemental Indenture, no Global Debenture may be exchanged in whole or
in part for Debentures registered, and no transfer of a Global Debenture in
whole or in part may be registered, in the name of any Person other than the
Depositary for such Global Debenture or a nominee thereof unless (A) such
Depositary (i) has notified the Company that it is unwilling or unable to
continue as
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<PAGE>
Depositary for such Global Debenture and the Company thereupon fails to appoint
a successor depositary or (ii) has ceased to be a clearing agency registered
under the Exchange Act, (B) there shall have occurred and be continuing an Event
of Default or any event which after notice or lapse of time or both would be an
Event of Default with respect to the Debentures or (C) the Company in its sole
discretion determines that such Global Debenture shall be so exchangeable or
transferable.
(c) Subject to Section 107(b), upon issuance of Debentures in
definitive registered certificated form, the Trustee shall register the
Debentures in the name of, and cause the Debentures to be delivered to, the
Person or Persons (or the nominee thereof) identified as the beneficial owners
as the Depositary shall direct.
(d) Every Debenture authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Global Debenture or any portion
thereof, whether pursuant to this Section, Section 304 or 306 of the Indenture
or otherwise, shall be authenticated and delivered in the form of, and shall be,
a Global Debenture, unless such Debenture is registered in the name of a Person
other than the Depositary for such Global Debenture or a nominee thereof.
108. Form of Legend for Global Debentures.
Every Global Debenture authenticated and delivered hereunder shall
bear a legend in substantially the following form:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO PENNZOIL COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN EXCHANGE FOR THIS
CERTIFICATE OR ANY PORTION HEREOF IS REGISTERED IN THE NAME OF CEDE & CO. (OR IN
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON OTHER THAN THE DEPOSITORY TRUST COMPANY OR A
NOMINEE THEREOF IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.
THIS DEBENTURE IS A GLOBAL DEBENTURE WITHIN THE MEANING OF THE FOURTH
SUPPLEMENTAL INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF
A DEPOSITARY OR A NOMINEE THEREOF. THIS DEBENTURE MAY NOT BE EXCHANGED IN WHOLE
OR IN PART FOR A DEBENTURE REGISTERED, AND NO TRANSFER OF THIS DEBENTURE IN
WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH
DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED
IN THE FOURTH SUPPLEMENTAL INDENTURE.
109. Debenture authenticated under the Indenture and this Fourth
Supplemental Indenture shall be The Depository
5
<PAGE>
Trust Company or such other clearing agency registered under the Exchange Act
that is designated by the Company to act as Depositary with respect to
Debentures issued in the form of one or more Global Debentures.
ARTICLE TWO
201. Right of Exchange.
Subject to and upon compliance with the provisions of this Section
201, at the option of the Holder thereof, beginning _______________, 1998, any
Debenture or any portion of the principal amount thereof which is $1,000 or an
integral multiple of $1,000, may (unless the Company shall have elected,
pursuant to Section 216 hereof, to pay to the Holder an amount in cash equal to
the value of the Exchange Property, in which case the provisions of Section 216
hereof shall be followed), at any time on or before the close of business on
August 15, 2008, or in the case of Debentures or portions thereof called for
redemption in accordance with Section 1101 of the Indenture, on or before the
close of business on the Business Day next preceding the Redemption Date, be
exchanged for fully paid and nonassessable shares (calculated as to each
exchange to the nearest 1/10,000 of a share) of Chevron Common Stock (as defined
in Section 219 hereof) (or such other securities, property or cash as shall be
added to such Chevron Common Stock or as such Chevron Common Stock shall have
been changed into pursuant to this Article Two) at the Exchange Rate (as defined
below) hereinafter provided.
The rate at which shares of Chevron Common Stock shall be deliverable
upon exchange (herein called the "Exchange Rate") shall be initially 0.823
shares of Chevron Common Stock for each $1,000 principal amount of Debentures
exchanged. The Exchange Rate shall be subject to adjustment as provided in
Sections 204, 205, 211 and 215 hereof.
202. Method of Exchange.
In order to exercise the right of exchange, the Holder shall surrender
such Debenture to the Exchange Agent (as defined in Section 219 hereof) for
exchange by delivering such Debenture to, or mailing such Debenture by
registered mail, postage prepaid, addressed to the Exchange Agent at the office
or agency of the Company, maintained for that purpose pursuant to Section 1002
of the Indenture, accompanied in each case by written notice to the Company and
the Exchange Agent that the Holder elects to exchange such Debenture, or, if
less than the entire principal amount of such Debenture is to be exchanged, the
portion thereof to be exchanged.
The notices in the above paragraph shall also state the name or names
(with address) in which the certificate or certificates for shares of Chevron
Common Stock or, to the extent applicable, other Exchange Property which shall
be issuable on such exchange shall be issued. Debentures surrendered for
exchange shall be accompanied (if so required by the Company or the Exchange
Agent) by proper assignments thereof to the Company.
6
<PAGE>
If the Company does not elect to deliver cash in lieu of Chevron
Common Stock or other Exchange Property pursuant to Section 216 hereof, as
promptly as practicable after the proper surrender of such Debenture for
exchange as aforesaid (subject however to the following paragraph of this
Section 202 and Section 216 hereof) and in accordance with the procedures set
forth in the Exchange Agreement (as defined in Section 219 hereof), the Company
shall or shall cause the Exchange Agent to deliver to such Holder, or on his
written order a certificate or certificates for the number of whole shares of
Chevron Common Stock and/or any other Exchange Property deliverable upon
exchange of such Debenture (or specified portion thereof). In addition,
provision shall be made for any fraction of a share as provided in Section 203
hereof and any payment of interest as provided by the following paragraph. Such
exchange shall be deemed to have been effected immediately prior to the close of
business on the date on which such Debenture shall have been properly
surrendered for exchange as aforesaid, which shall be the date on which such
Debenture and notice and any such required payment and assignment shall be
received by the Exchange Agent, and at such time the rights of the Holder of
such Debenture as a Debenture holder shall cease and the Person or Persons in
whose name or names any certificate or certificates for shares of Chevron Common
Stock or other Exchange Property shall be deliverable upon such exchange shall,
as between such Person or Persons and the Company, be deemed to have become the
Holder or Holders of record of the shares or other property represented thereby.
Upon any exchange of a Debenture pursuant to this Article Two (i) if
the Debenture to be exchanged has been called for redemption by the Company, the
Holder shall receive accrued interest thereon through the date an exchange under
this Section 202 is deemed effective and (ii) if the Debenture to be exchanged
has not been called for redemption by the Company, the Holder shall not receive
any payment of accrued and unpaid interest.
Delivery of such certificate or certificates and of any check for any
cash or other Exchange Property may be delayed for a reasonable period of time
at the request of the Company in order to effectuate the calculations of the
adjustments pursuant to this Article Two, to obtain any certificate representing
securities to be delivered, to complete any reapportionment of the shares of
Chevron Common Stock or other Exchange Property apportioned thereto which is
required by this Article Two or to comply with any applicable law. If, between
the date an exchange under this Section 202 is deemed effected and the date of
delivery of the applicable security or securities, such security or securities
shall cease to have any or certain rights, or a record date or effective date of
a transaction to which Section 204, 205 or 211 hereof applies shall occur, the
Person entitled to receive such security or securities shall be entitled only to
receive such security or securities as so modified and any dividends or proceeds
received thereon on or after the date such exchange is deemed effected and none
of the Company, the Trustee and the Exchange Agent shall be otherwise liable
with respect to the modification of such security or securities, from the date
such exchange is deemed effected and the date of such delivery.
Except as otherwise expressly provided in this Article Two, no payment
or adjustment shall be made upon any exchange on account of any interest accrued
on the Debentures surrendered for exchange or on account of any dividends on the
Chevron Common Stock or other Exchange Property delivered upon such exchange;
provided, however that interest accrued on any
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Debentures surrendered for exchange on or after any Regular Record Date and
before any Interest Payment Date relating thereto shall be paid to, as
applicable, the Holder of record as of such record date.
In the case of any Debenture which is exchanged in part only, upon
such exchange the Company shall execute and the Trustee shall authenticate and
deliver to the Holder thereof, at the expense of the Company, a Debenture or
Debentures of authorized denominations in principal amount equal to the
unexchanged portion of such Debenture.
203. Fractional Interests.
No fractional shares of Chevron Common Stock (or any form of
fractional interest in any other security or property which is part of the
Exchange Property) shall be delivered upon exchanges of Debentures. If more
than one Debenture shall be surrendered for exchange at one time by the same
Holder, the number of whole shares (or other integral units of such other
securities or property), which shall be delivered upon exchange shall be
computed by the Company on the basis of the aggregate principal amount of the
Debentures (or specified portions thereof to the extent permitted hereby) so
surrendered. Instead of any fractional share (or other fractional unit) which
would otherwise be deliverable upon exchange of any Debenture or Debentures (or
specified portions thereof), the Exchange Agent on behalf of the Company shall
pay, on the date the exchange is deemed to be effected, a cash adjustment in
respect of such fractional interest in an amount equal to the same fraction of
the Market Price (as defined in Section 219 hereof) per share of the Chevron
Common Stock (or per unit of such other security or property) on the Business
Day next preceding the date the exchange is deemed to be effected. The Company
shall authorize the Exchange Agent to obtain the funds necessary or anticipated
by the Exchange Agent to be necessary, for payment of such fractional interests
by the sale of shares of Chevron Common Stock (or other securities or property
which are part of the Exchange Property) held by the Exchange Agent, provided
that after such sale the number of shares of Chevron Common Stock (and of such
other securities or property) held by the Exchange Agent shall be sufficient to
permit the exchange of all Outstanding Debentures for Chevron Common Stock (and
any other Exchange Property), on the basis of the Exchange Rate then in effect,
in accordance with the provisions of this Article Two. The Company agrees to
furnish or cause to be furnished to the Exchange Agent any additional funds
required to permit such cash payments with respect to fractional interests.
204. Adjustment of Exchange Rate.
(a) In the event Chevron (as defined in Section 219 hereof) shall (i)
pay a dividend on Chevron Common Stock in shares of Chevron Common Stock, (ii)
subdivide the outstanding shares of Chevron Common Stock into a greater number
of shares of Chevron Common Stock, (iii) combine outstanding shares of Chevron
Common Stock into a smaller number of shares of Chevron Common Stock, or (iv)
issue, by reclassification of shares of Chevron Common Stock, any shares of its
common stock (which in any such case shall apply to the shares of Chevron Common
Stock held by the Exchange Agent under the Exchange Agreement), the Exchange
Rate in effect immediately prior thereto shall be proportionately adjusted so
that the Holder of any
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Debentures thereafter surrendered for exchange shall be entitled (subject to
Sections 215 and 216 hereof) to receive the number and kind of shares of Chevron
Common Stock which such Holder would have owned or have been entitled to receive
after the happening of any of the events described above, had such Debentures
been exchanged immediately prior to the record date (or if there is no record
date, the effective date) of such event. Such adjustments shall be made
whenever any of the events listed above shall occur and shall become effective
as of immediately after the close of business on the record date in the case of
a stock dividend and shall become effective as of immediately after the close of
business on the effective date in the case of a subdivision or combination or
reclassification. Any Holder surrendering any Debentures for exchange after
such record date or such effective date, as the case may be, shall be entitled
to receive shares of Chevron Common Stock at the Exchange Rate as so adjusted
pursuant to this Section 204(a) (subject to Sections 215 and 216 hereof) and any
other Exchange Property apportioned thereto.
(b) Notwithstanding the foregoing provisions, no adjustment in the
Exchange Rate shall be required unless such adjustment would require an increase
or decrease in such Exchange Rate of more than 1%, provided, however, that any
adjustments which by reason of this paragraph (b) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
(c) All calculations under this Section 204 shall be made to the
nearest 1/10,000 of a share.
(d) Whenever the Exchange Rate is adjusted as herein provided, the
Company shall determine the adjusted Exchange Rate in accordance with this
Section 204 and shall prepare an Officer's Certificate setting forth such
adjusted Exchange Rate and any cash or other property apportioned to the Chevron
Common Stock and showing in detail the facts upon which such adjustment is
based. Such certificate shall be conclusive evidence of the correctness of such
adjustment. Such certificate shall forthwith be filed with the Exchange Agent
and the Trustee, who may rely on such Officer's Certificate as conclusive
evidence of the correctness of the adjustment. A notice stating that the
Exchange Rate has been adjusted and setting forth the adjusted Exchange Rate and
any cash or other property apportioned to the Chevron Common Stock shall, as
soon as practicable, be mailed by or on behalf of the Company to the Holders of
Debentures at their last addresses as they shall appear upon the Security
Register.
205. Exchange Agreement.
(a) Simultaneously with the execution and delivery of this Indenture
Supplement, the Company is entering into the Exchange Agreement with Chase Bank
of Texas, National Association, a national banking association, incorporated and
existing under the laws of the United States of America, as Exchange Agent,
pursuant to which the Company is depositing with the Exchange Agent __________
shares of Chevron Common Stock, which in the aggregate shall initially
constitute the Exchange Property. The Exchange Agent shall be the exchange
agent for the exchange of Debentures for Chevron Common Stock and other Exchange
Property, if any, hereunder. The Company shall deposit with the Exchange Agent
from time to time such additional
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number of shares of Chevron Common Stock not already held by the Exchange Agent
as the Holders of all Outstanding Debentures shall from time to time be
entitled to receive from the Exchange Agent pursuant to this Article Two upon
exchange thereof.
(b) All cash received by the Exchange Agent as herein provided will be
invested upon written request of the Company by the Exchange Agent from time to
time as so requested by the Company pursuant to the Exchange Agreement. The
Company shall be entitled to all cash dividends paid on the Exchange Property
held by the Exchange Agent except to the extent that such dividends are paid
pursuant to a plan of liquidation or partial liquidation or a recapitalization
or restructuring or other extraordinary cash dividends, and to all interest
payments on any debt securities included in the Exchange Property which Holders
of Debentures may be entitled to receive on exchange hereunder; provided, that
if the Exchange Agent shall receive any such cash dividends or interest to which
the Company is entitled pursuant hereto, the Exchange Agent shall not be
required to transfer to the Company any such dividends or interest to which the
Company is entitled pursuant hereto until receipt of an Officers' Certificate to
the effect that the Company is entitled to such dividends or interest pursuant
hereto. The Company shall also be entitled to any interest or gain on
investments made by the Exchange Agent pursuant to Section 11 of the Exchange
Agreement, which shall be paid to the Company on demand as provided in the
Exchange Agreement. Any loss on such investments shall be for the account of
the Company and the amount thereof shall be reimbursed to the Exchange Agent by
the Company. The Exchange Agent shall hold and apply as hereinafter provided
all other dividends paid on the Exchange Property held by the Exchange Agent
under the Exchange Agreement.
(c) In case there shall be, at any time while any Debentures are
Outstanding, any distribution of cash, securities or other property on Exchange
Property (other than (i) cash dividends to which the Company is entitled and
interest paid on debt securities, as specified in paragraph (b) of this Section
205, (ii) dividends, subdivisions, combinations and reclassifications for which
an adjustment in the Exchange Rate is made pursuant to Section 204 hereof and
(iii) securities or other property received in a transaction to which Section
211 hereof applies) or in case there shall be granted with respect to any
Exchange Property, any transferable subscription rights, options, warrants or
other similar transferable rights, the Company shall, as soon as reasonably
practicable after its receipt thereof, notify the Exchange Agent of such receipt
and promptly, and in any event within five business days of the receipt thereof,
deposit with the Exchange Agent all such securities and other property,
including any transferable rights, pursuant to the Exchange Agreement, and
concurrently with such deposit, shall (except as provided in the succeeding
paragraph) instruct the Exchange Agent to sell all securities and other property
so received by way of distribution and all rights for cash so distributed in
such manner as the Company shall instruct in writing and shall apply the
proceeds from the sale thereof as hereinafter provided. To the extent that the
Company shall, within 10 days of its notification to the Exchange Agent of the
Company's receipt of such cash, securities or other property, including any
transferrable rights, furnish the Exchange Agent with an Opinion of Counsel to
the effect that such distribution or grant or the sale of the securities or
other property received on such distribution or the rights received by such
grant is taxable to the Company or the Exchange Agent and an Officers'
Certificate as to the amount of federal, state and local tax payable by the
Company and the Exchange Agent as a result of such distribution or grant and
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estimated to be payable as a result of such sale (computed by the Company at the
highest marginal tax rates applicable to such transaction or transactions), the
Exchange Agent shall pay to, or to the order of the Company, in the case of
taxes payable by the Company, or itself, in the case of taxes payable by it,
from the cash received in such distribution, if any, or cash apportioned to
Chevron Common Stock hereunder or from the net cash proceeds received from such
sale, the amount of such tax as so computed by the Company. In the case of
taxes estimated to be payable as a result of such sale, the Company shall
deliver an Officers' Certificate within 10 days after completion of such sale
stating the actual taxes payable as so computed and appropriate adjustment of
such payments shall thereupon be made. The remaining portion of such cash
received, if any, and net cash proceeds shall be apportioned equally among the
Exchange Property for which outstanding Debentures are exchangeable as of
immediately after the close of business on the record date for. the distribution
or grant to which this paragraph (c) applies, or, if there is no such record
date, the effective date of such distribution or grant. Any Holder surrendering
any Debentures after such record date, or such effective date, as the case may
be, shall be entitled to receive, in addition to the Exchange Property for which
such Debentures are exchangeable and any cash theretofore apportioned hereunder,
the amount of cash so apportioned to such shares of Chevron Common Stock.
Notwithstanding the foregoing, however, in the event of any such
distribution of securities or other property, including transferable rights,
which is convertible, without payment of consideration, into Exchange Property,
and which right of conversion does not expire before the retirement of such
securities or other property, the Company shall, after any sale required for
payment of any taxes owed by the Company, or the Exchange Agent, as provided in
the preceding paragraph, instruct the Exchange Agent to retain and hold all such
securities and other property as additional Exchange Property for apportionment
equally among other Exchange Property for which Debentures are exchangeable as
of immediately after the close of business on the record date for the
distribution or grant to which this Section 205 applies, or, if there is no such
record date, the effective date of such distribution or grant; provided,
however, that if the amount of cash deliverable to the holders of such
securities or other property, including transferable rights, for each unit of
such securities or other property upon the retirement thereof is less than the
average of the high and low reported public sales prices for each such unit for
the seven Business Days preceding the date 15 Business Days prior to the date of
their retirement the Exchange Agent shall sell all such securities and other
property prior to the third Business Day prior to the date of their retirement
and, after the payment, from the net proceeds received from such sale by the
Exchange Agent, of any taxes incurred by the Exchange Agent or the Company in
connection with such sale, the remaining cash proceeds of such sale shall be
apportioned equally among the Exchange Property for which Outstanding
Debentures are exchangeable as of the Business Day following the day such sale
is concluded.
In the event that a distribution or grant of cash, securities or other
property on Exchange Property shall be effected as contemplated by the two
immediately preceding paragraphs, a notice stating that such distribution or
grant has occurred and setting forth the additional cash, securities or other
property on the Exchange Property shall as soon as practicable be mailed by or
on behalf of the Company to the Holders of Debentures at their last addresses as
they appear upon the Security Register.
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In case there shall be, at any time while any Debentures are
outstanding, any distribution or grant to holders of Chevron Common Stock (or
other Exchange Property), including the Company (with respect to any Exchange
Property held by the Exchange Agent), of any nontransferable subscription
rights, options, warrants or other similar nontransferable rights that shall, by
the terms of such rights, permit the Company to distribute such rights to the
Holders of Debentures, then the Company and the Exchange Agent shall cause such
rights to be distributed to the Holders of record of Debentures shown on the
Security Register as of immediately after the close of business on the record
date (and if there is no record date, the close of business on the effective
date) for such distribution or grant; provided, however, that if the Company
shall furnish the Exchange Agent with an Opinion of Counsel to the effect that
such distribution or grant, or such distribution by the Company or the Exchange
Agent to Holders of Debentures, is taxable to the Company or the Exchange Agent
and an Officer's Certificate as to the amount of federal, state and local tax
payable by the Company and the Exchange Agent as a result of such distribution
or grant, the Exchange Agent shall to the extent legally permissible sell for
cash in such manner as the Company shall instruct in writing such of the rights
as shall be sufficient to provide to the Company and the Exchange Agent a cash
payment equal to the amount of taxes payable by the Company and the Exchange
Agent, respectively, arising from such distribution or grant (as computed by the
Company at the highest marginal tax rates applicable to such transaction or
transactions and any sale of such rights or, if such sale is not permissible or
the proceeds thereof are not sufficient, the Exchange Agent shall cause an
amount of cash held for exchange by the Exchange Agent (if any) and, if such
cash is not sufficient for the applicable tax payments, an amount of Exchange
Property, to be segregated for the benefit of or delivered to the Company. The
remaining Exchange Property held by the Exchange Agent shall be proportionately
adjusted so as to be apportioned equally to the Debentures outstanding as of
immediately after the close of business on the record date for the distribution
or grant to which this paragraph applies, or, if there is no such record date,
immediately after the close of business on the effective date of such
distribution or grant. Any Holder surrendering any Debentures after such record
date, or such effective date, as the case may be, shall be entitled to receive
any Exchange Property apportioned thereto as so adjusted pursuant to this
paragraph.
(d) In the event of any reduction of the principal amount of
Debentures Outstanding (other than as a result of surrender for exchange for
Exchange Property pursuant to this Article Two), as evidenced by the delivery to
the Trustee by the Company of Debentures for cancellation, the Company shall be
entitled to the kind and amount of Exchange Property as shall at the time be in
excess of the kind and amount of Exchange Property which would be required for
the exchange of all Debentures then Outstanding for the Exchange Property on the
basis of the then Exchange Rate and the other terms and provisions of this
Article Two and the Exchange Agreement. Upon expiration of the right to
surrender Debentures for exchange pursuant to this Article Two and the Exchange
Agreement and when all other obligations of the Company shall have been
satisfied under this Article Two and the Exchange Agreement, the Company's
obligation to exchange Debentures for Exchange Property shall be terminated.
(e) The Exchange Agent shall not make any distribution of Exchange
Property to the Company prior to the receipt by the Exchange Agent from the
Company of an Officers'
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Certificate to the effect that no Event of Default exists hereunder and no event
or condition which with notice or lapse of time or both would become such an
Event of Default and which states in detail the basis asserted by the Company
for such distribution.
(f) The Company shall be entitled to any net income or gain resulting
from investments of cash made by the Exchange Agent pursuant to the Exchange
Agreement and shall reimburse the Exchange Agent for any losses realized in
respect of such investments.
(g) The Company shall have the full and unqualified right and power to
exercise any rights to vote, or to give consents or take any other action in
respect of, the Chevron Common Stock or any other securities included in the
Exchange Property at any time held by the Exchange Agent, and the Exchange Agent
shall have no duty to exercise any such rights. The Company shall not be liable
to any Holder as a result of any vote, or failure to vote, consent or failure to
consent, or any other act or failure to act taken by the Company in respect of
the Chevron Common Stock or any other securities included in the Exchange
Property.
(h) The obligations, covenants and agreements contained in the
Exchange Agreement shall not constitute obligations, covenants or agreements
contained in the Indenture, this Fourth Supplemental Indenture or any of the
Debentures and neither the failure by the Company to observe any obligation,
covenant or agreement contained in the Exchange Agreement (unless such
obligation, covenant or agreement shall also be contained in this Fourth
Supplemental Indenture) nor the failure of the Exchange Agent to fulfill any
obligations, agreements or covenants set forth therein shall constitute (with or
without the giving of notice, the passage of time or both) an Event of Default;
provided, however, that nothing in this paragraph shall impair the right of a
Holder to receive the Exchange Property apportioned to such Holder's Debentures
in exchange for such Debentures in accordance with the terms and conditions of
this Article Two, and nothing in this paragraph shall impair the rights and
remedies of the Trustee and the Holders under Article Five of the Indenture with
respect to a failure by the Company to observe its express agreements and
covenants to cause the exchange of Debentures actually surrendered for exchange
pursuant to this Article Two for Exchange Property apportioned thereto in
accordance with the terms and conditions of this Article Two.
206. Company to Give Notice of Certain Events.
If at any time:
(a) Chevron shall declare a dividend (or any other distribution) on
the Chevron Common Stock which the Exchange Agent would be required to apply for
the benefit of the Holders of the Debentures in accordance with Section 205
hereof; or
(b) Chevron shall authorize the granting of subscription rights,
options, warrants or other similar rights to holders of Chevron Common Stock; or
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(c) there shall occur any reclassification of Chevron Common Stock
(other than a subdivision or combination of outstanding shares of Chevron Common
Stock) or any consolidation or merger to which Chevron is a party and for which
approval of any stockholders of Chevron is required, or the sale or transfer of
all or substantially all of the assets of Chevron; or
(d) there shall occur the voluntary or involuntary dissolution,
liquidation or winding up of Chevron;
then the Company shall as promptly as practicable cause to be filed at the
office or agency maintained pursuant to Section 1002 of the Indenture and cause
to be mailed to the Holders of Debentures at their last addresses as they shall
appear upon the Security Register a notice stating (x) the date, if known by the
Company, on which a record is to be taken for the purpose of such dividend,
distribution or grant of rights, or, if a record is not to be taken, the date as
of which the holders of Chevron Common Stock of record to be entitled to such
dividend or distribution or grant of rights are to be determined, or (y) the
date, if known by the Company, on which such reclassification, merger,
consolidation, sale, transfer, dissolution, liquidation or winding up is
expected to become effective, and the date as of which it is expected that
holders of Chevron Common Stock of record shall be entitled to exchange their
shares of Chevron Common Stock for securities or other property deliverable upon
such reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up.
207. Covenants by the Company.
So long as any Debentures shall be Outstanding and exchangeable for
Chevron Common Stock or other Exchange Property pursuant to this Article Two,
the Company shall (i) preserve unimpaired the right of each Holder of
Debentures, upon exchange thereof, to receive shares of Chevron Common Stock or
other Exchange Property as such Holder shall from time to time be entitled to
receive in accordance with the provisions of this Article Two, and (ii) not
pledge, mortgage, hypothecate or grant a security interest in, or permit any
mortgage, pledge, security interest or other lien upon, the Exchange Property.
208. Transfer Taxes.
The Company will pay any and all taxes that may be payable in respect
of the transfer and delivery of shares of Chevron Common Stock (or other
securities included in the Exchange Property) pursuant hereto, other than
income, capital gains and similar taxes imposed on any Holder by reason of
exchange of Debentures for Exchange Property; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the delivery, upon an exchange of Debentures, of shares
of Chevron Common Stock (or other securities included in the Exchange Property)
in a name other than that in which the Debentures so exchanged were registered,
and no such transfer shall be made unless and until the Person requesting such
transfer has paid to the Company or the Exchange Agent the amount of any such
tax, or has established to the satisfaction of the Company and the Exchange
Agent that such tax has been paid.
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209. Fully Paid Shares.
The Company warrants and covenants that all shares of Chevron Common
Stock delivered upon the exchange of Debentures will be fully paid and
nonassessable and that each Holder of Debentures who receives shares of Chevron
Common Stock or other Exchange Property in exchange for his Debentures pursuant
to this Article Two will receive valid and marketable title to such Exchange
Property, free and clear of all claims, liens and encumbrances (other than those
that may be created or suffered to exist by such Holder). Except as provided in
Section 208 hereof, the Company will pay all taxes, liens and charges with
respect to the delivery of Exchange Property in exchange for Debentures
hereunder.
210. Cancellation of Debentures.
All Debentures delivered for exchange shall be delivered by the
Exchange Agent to the Trustee and be canceled by the Trustee, and the Trustee
shall dispose of the same as provided in Section 309 of the Indenture.
211. Merger of Chevron
In case of any consolidation or merger of Chevron with or into any
other Person that results in shares of Chevron Common Stock, as constituted
prior to the consummation of such transaction, being converted into other
securities and/or property (including cash), or in case of any sale or transfer
of all or substantially all of the assets of Chevron (if in connection with such
sale or transfer holders of Chevron Common Stock receive other securities and/or
property including cash, in exchange for their shares of Chevron Common Stock),
or of any voluntary or involuntary dissolution, liquidation or winding-up of
Chevron, the Company shall execute and deliver to the Trustee a supplemental
indenture, and to the Exchange Agent a supplement to the Exchange Agreement,
each providing that the Holder of each Debenture then Outstanding shall have the
right thereafter (subject to Sections 215 and 216 hereof) to exchange such
Debenture (i) for the kind and amount of securities and other property
receivable upon such consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up by a holder of the number of shares of Chevron Common
Stock for which such Debenture was exchangeable immediately prior to such
consolidation, merger, sale, transfer, dissolution, liquidation or winding up
and (ii) the kind and amount of securities (other than Chevron Common Stock) and
other Exchange Property for which such Debenture was exchangeable immediately
prior to such consolidation, merger, sale, transfer, dissolution, liquidation or
winding up. Such supplemental indenture shall provide for adjustments and
rights to receive and retain dividends or their equivalents, which shall be as
nearly equivalent as may be practicable to the adjustments and rights to receive
and retain dividends or their equivalents provided for in this Article Two. The
above provisions of this Section 211 shall similarly apply to any successive
consolidation, merger, sale, transfers, dissolution, liquidation or winding-up.
Notice of such supplemental indenture shall as soon as practicable be
filed with the Exchange Agent and mailed by or on behalf of the Company to the
Holders of Debentures at their last addresses as they shall appear on the
Security Register.
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The Trustee shall not be under any responsibility to determine the
correctness of any provisions contained in any such supplemental indenture
relating either to the kind or amount of shares of stock or securities or
property or cash receivable by the Debenture holders upon the exchange of their
Debentures as herein provided after any such consolidation, merger, sale,
transfer, dissolution, liquidation or winding up or to any adjustment to be made
with respect thereto.
212. Certain Tender or Exchange Offers for Exchange Property.
In the event of a tender offer or exchange offer for any class of
securities included within the Exchange Property (i) if the Company owns shares
of such class which are not subject to the Exchange Agreement, the Company will
cause the Exchange Agent to tender such shares of such class in the same
proportion that the Company tenders its securities in such class which are not
subject to the Exchange Agreement, and (ii) if the Company does not own
securities of a class which are subject to the Exchange Agreement, the Company
may, at its option and in its sole discretion, elect to cause the Exchange Agent
to tender all or any portion or none of such class of security included within
the Exchange Property held by the Exchange Agent. The proceeds of the sale of
any such Exchange Property pursuant to any such tender or exchange offer will be
held by the Exchange Agent for the benefit of Holders as provided in this Fourth
Supplemental Indenture.
213. Obligations of Trustee and Exchange Agent.
Subject to the provisions of Section 601 of the Indenture, neither the
Trustee nor the Exchange Agent shall at any time be under any duty or
responsibility to any Holder of Debentures to determine whether any facts exist
which may require any adjustment of the Exchange Rate, or with respect to the
nature or extent of any such adjustment when made, or with respect to the method
employed, or herein or in any supplemental indenture provided to be employed, in
making the same. Neither the Trustee nor the Exchange Agent shall be accountable
with respect to the validity or value (or the kind or amount) of any Exchange
Property which may at any time be issued or delivered upon the exchange of any
Debenture or the market conditions existing at the time of sale of any Exchange
Property; and neither the Trustee nor the Exchange Agent makes any
representation with respect thereto. Neither the Trustee nor the Exchange Agent
shall be responsible, for any failure of the Company to transfer or deliver any
Exchange Property or certificates or other evidence thereof to the Exchange
Agent as provided herein, or subject to the provisions of Section 601 of the
Indenture and the obligations assumed under the Exchange Agreement, to comply
with any of the covenants of the Company contained in this Article Two.
214. Exchange Arrangements in Case of Redemption.
In connection with any redemption of Debentures, the Company may
arrange for the purchase and exchange of Exchange Property of all or any part of
such Debentures by an arrangement with one or more investment bankers or other
purchasers to purchase such Debentures by paying to the Holders thereof, or to
the Trustee in trust for such Holders, on or before the close of business on the
Business Day next preceding the Redemption Date, an amount not less than the
applicable Redemption Price of the Debentures to be purchased, plus interest
accrued to the
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Redemption Date. Notwithstanding anything to the contrary contained in Article
Eleven of the Indenture, the obligation of the Company to pay the Redemption
Price of such Debentures, plus interest accrued to the Redemption Date, shall be
satisfied and discharged to the extent such amount is so paid by such
purchasers. Any Debentures to be purchased pursuant to such agreement which are
not presented for redemption or not duly surrendered for exchange by the Holders
thereof shall be deemed acquired by such purchasers from the Holders and
surrendered by such purchasers for exchange, all as of immediately prior to the
close of business on the Business Day next preceding the Redemption Date,
subject to payment of the above amount as aforesaid. Notwithstanding anything
to the contrary contained in this Article Two, in the event that any Debentures
subject to such agreement are surrendered for exchange (other than by the
purchasers) by the close of business on the Business Day next preceding the
Redemption Date, the amounts so paid to the Trustee in trust for the Holders of
the Debentures so surrendered for exchange shall be returned to such purchasers.
215. Tax Adjustments in Exchange Rate.
If an event shall occur which causes the Exchange Rate to be subject
to adjustment pursuant to Section 204 hereof, or a merger, consolidation or sale
or transfer of assets or of any voluntary or involuntary dissolution,
liquidation or winding up of Chevron shall occur requiring a supplemental
indenture under Section 211 hereof, and if, within ten days after the effective
date of such transaction, the Company shall furnish the Exchange Agent with an
Opinion of Counsel to the effect that such transaction is taxable to the Company
or the Exchange Agent and an Officers' Certificate as to the amount of federal,
state and local tax payable by the Company or the Exchange Agent as a result of
such transaction (computed by the Company at the marginal tax rate applicable to
such transaction), the Exchange Agent shall pay to, or to the order of, the
Company, in the case of taxes payable by the Company, or itself, in the case of
taxes payable by it, the cash held by it and apportioned or to be apportioned to
the Exchange Property for which Outstanding Debentures are exchangeable, up to
the amount of such taxes. In the event that the cash held by the Exchange Agent
and so apportioned or to be apportioned is insufficient to pay to the Company or
the Exchange Agent the amount of such taxes, the Exchange Agent shall, as soon
as reasonably practicable and to the extent legally permissible, sell in
accordance with written instructions received by the Company, or if no such
instructions are received, as determined by the Exchange Agent, such Exchange
Property (including any securities or other property included therein) as may be
necessary to pay, from the proceeds thereof after payment of any taxes by the
Company or the Exchange Agent on such sale, the amount of any such
insufficiency. The Exchange Agent shall notify the Company and the Trustee of
any such sale and the Exchange Property sold. Following payment of all
necessary amounts to the Company or the Exchange Agent, such Exchange Property
held by the Exchange Agent and any cash apportioned thereto shall be
proportionately adjusted so as to be apportioned equally to the Debentures
Outstanding as of immediately after the close of business on the record date or
the effective date for the transaction to which this Section 215 applies (as
shall be specified in Section 204 or 211 hereof, whichever is applicable). Any
Holder surrendering any Debentures after such record date, or such effective
date, as the case may be, shall be, entitled to receive the Exchange Property
and any cash apportioned thereto as so adjusted pursuant to this paragraph. If
this Section 215 shall apply to a transaction and the sale by the Company of the
consideration receivable therein shall not be legally permissible and the amount
of cash apportioned to the
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Exchange Property shall not be sufficient to pay all taxes payable by the
Company or the Exchange Agent which arise from such transaction, the Company may
direct the Exchange Agent to segregate for the benefit of the Company or the
Exchange Agent (as the case may be) or deliver to the Company or the Exchange
Agent (as the case may be) an amount of Exchange Property theretofore held by
the Exchange Agent for exchange of Debentures having a Market Value equal to the
unsatisfied portion of the tax payable by the Company or the Exchange Agent (as
the case may be) with respect to such transaction including any tax payable upon
the delivery or sale thereof in order to satisfy the aforementioned tax, and the
Exchange Property shall thereafter be solely for the account of the Company or
the Exchange Agent (as the case may be) and Holders of Debentures shall have no
rights thereto.
In the event that an Opinion of Counsel given pursuant to this Fourth
Supplemental Indenture concludes that whether taxes are payable by the Company
or the Exchange Agent is uncertain under the then state of the law or facts or
both, the Company shall have the option of requesting the Exchange Agent to
segregate the amount of funds that would be payable (or securities or other
property in lieu thereof), if such taxes were deemed payable, together with the
amount estimated in good faith to be the reasonable costs and expenses
(including attorneys' fees) of obtaining a determination as set forth below.
The Holders shall have no rights to such funds or securities or other property,
which shall be held by the Exchange Agent for the Company (or itself, as the
case may be), the Exchange Property and any cash apportioned thereto deliverable
upon exchange of Debentures pursuant to this Article Two shall be reapportioned
as though such segregated amounts had been paid to the Company or the Exchange
Agent for such taxes, and any Holder surrendering any Debenture after the record
or effective date of the applicable transaction giving rise to an adjustment
pursuant to this Section 215 shall be entitled to receive only such Exchange
Property and any cash apportioned thereto upon exchange of Debentures pursuant
to this Article Two as so reapportioned. The Company shall thereupon in good
faith seek an appropriate determination from the appropriate agencies and, if
judged necessary by the Company in good faith, from appropriate courts, as to
whether taxes are so payable. If an appropriate determination is made that such
taxes are so payable, then the Exchange Agent shall immediately pay the funds or
deliver the securities or other property so segregated to the Company (or, if
taxes are payable by the Exchange Agent, retain such funds or securities or
other property for itself), and if an appropriate determination is made that
such taxes are not payable or an amount of tax is payable which is less than the
amount of funds or property so segregated, then the Exchange Agent, after paying
to the Company (or itself, as the case may be) out of such funds or securities
or other property the reasonable expenses and costs (including attorneys' fees)
of obtaining such determination (and any taxes so payable), shall apportion such
remaining funds or securities or other property which had been so segregated
among the Exchange Property and cash apportioned thereto as of immediately after
the close of business on the record date or the effective date of such
transaction giving rise to an adjustment pursuant to Section 204 or 211 hereof,
whichever is applicable. If any Debenture has been exchanged on or after such
record date or such effective date, as the case may be, and before a
determination is made that no taxes are payable or an amount of tax is payable
which is less than the amount of funds or securities or other property so
segregated, the Company to the extent not previously delivered, shall deliver
such Exchange Property and any cash apportioned thereto as
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reapportioned following such determination, to the person to which and in the
manner in which the other proceeds of the exchange of such Debenture were
delivered.
216. Cash Equivalent.
Notwithstanding any other provisions in this Article Two, in lieu of
delivering certificates representing shares of Chevron Common Stock or other
Exchange Property in exchange for Debentures surrendered in accordance with
Section 202 hereof, the Company may, at the Company's option, pay to the Holder
surrendering such Debentures an amount in cash equal to the value of the
Exchange Property for which such Debentures are exchangeable (based on the
Market Price on the date of receipt by the Company of the notice of exchange
delivered by such Holder pursuant to Section 202 hereof). Prior to so directing
the Exchange Agent to make any such cash payment, the Company shall deposit with
the Exchange Agent the cash so payable.
217. Repurchase Rights.
In the event that the Company obtains or otherwise releases any
Chevron Common Stock or other Exchange Property in any manner otherwise than as
contemplated by Section 218 hereof, each Holder will have the right ("Repurchase
Right"), at such Holder's option, to require the Company to repurchase all of
such Holder's Debentures, or a portion thereof which is $1,000 or any integral
multiple thereof, in the manner and at the price described below.
Promptly (and in any event within 10 days) after the Company has
obtained or released any Chevron Common Stock or any other Exchange Property in
any manner otherwise than as contemplated by Section 218 hereof, the Exchange
Agent will mail to all Holders of record of the Debentures a notice thereof and
the Repurchase Right arising as a result thereof (a "Repurchase Notice"). To
exercise the Repurchase Right, a Holder of Debentures must deliver on or before
the fifteenth day after the date of the Repurchase Notice irrevocable written
notice to the Exchange Agent of the Holder's exercise of such right, together
with the Debentures with respect to which the right is being exercised, duly
endorsed for transfer.
On the date ("Repurchase Date") that is 30 days after the date of the
Repurchase Notice, the Company will be required to repurchase all Debentures in
respect of which the Repurchase Right has been exercised at the following price:
(i) if the date on which the Company's obtaining or release of Exchange Property
in a manner not contemplated by Section 218 hereof first occurs (the "Triggering
Date") is before August 15, 2000, the product of (a) 120% and (b) the greater of
the principal amount of such Debentures (plus accrued and unpaid interest, if
any, to the Repurchase Date) and the Market Price of the Exchange Property
deliverable in exchange for such Debentures on the Triggering Date (or if such
date is not a Business Day, on the next succeeding Business Day); and (h) if the
Triggering Date occurs on or after August 15, 2000, the greater of (a) the
redemption price specified in Section 103 hereof on the Triggering Date and (b)
the Market Price of the Exchange Property deliverable in exchange for such
Debentures on the Triggering Date (or if such date is not a Business Day, on the
next succeeding Business Day).
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The obligation of the Company to deliver Exchange Property (or cash in
lieu thereof) in exchange for Debentures shall survive and continue to apply in
full force and effect following and notwithstanding the occurrence of any event
triggering a Repurchase Right. Failure by the Company to exchange Debentures in
accordance with this Fourth Supplemental Indenture or to repurchase Debentures
upon valid exercise of a Repurchase Right will constitute an Event of Default
with respect to the Debentures pursuant to Section 501(7) of the Indenture, and
Holders of Debentures will have the remedies provided for in the Indenture,
including acceleration of the indebtedness evidenced by the Debentures, in the
event of any such failure.
If an offer is made to repurchase Debentures in connection with a
Repurchase Right, the Company will comply with all tender offer rules, including
but not limited to Sections 13(e) and 14(e) under the Exchange Act and Rules
13e-1 and 14e-1 thereunder, to the extent applicable to such offer.
218. Withdrawals of Exchange Property. The Company shall be entitled,
out of the Exchange Property held by the Exchange Agent, to such kind and
quantity of Exchange Property and such amount of any cash (the investments
contemplated by Section 205 hereof being deemed for these purposes to be cash
and to be valued at their outstanding principal balance) and other Exchange
Property as shall be in excess of the quantity of Exchange Property held by the
Exchange Agent that would be deliverable by the Exchange Agent upon the exchange
of all Debentures then outstanding, and such excess shall be held by the
Exchange Agent for the account of the Company and, upon delivery of the
Officers' Certificate provided for in the following sentence, released to the
Company upon demand. Upon demand of any withdrawal of Exchange Property from the
Exchange Agent, the Company shall deliver to the Trustee an Officers'
Certificate (and a copy thereof to the Exchange Agent) which shall state (i) the
principal amount of Debentures then outstanding and the kind and amount of
Exchange Property required for delivery to the Holders thereof upon exchange,
(ii) that the withdrawal of the kind and amount of Exchange Property referred to
in such demand is permitted by the provisions of this Fourth Supplemental
Indenture and (iii) that the Exchange Property so to be withdrawn would not be
deliverable upon exchange of all Debentures then outstanding. In delivering such
certificate, the Company may rely on information furnished to it by the Exchange
Agent as to the kind and amount of Exchange Property held by it and the kind and
amount thereof previously delivered to Holders of Debentures.
219. Certain Definitions. All terms used but not defined in this
Fourth Supplemental Indenture that are defined in the Indenture shall have the
meanings specified in the Indenture unless the context otherwise requires. As
used in this Fourth Supplemental Indenture, the following terms shall have the
following meanings:
"Chevron" means Chevron Corporation, a Delaware corporation.
"Chevron Common Stock" means the common stock of Chevron of the class
authorized and designated as common stock, par value $3.00 per share, as such
common stock may be changed or reclassified from time to time.
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"Exchange Act" means the Securities Exchange Act of 1934 and any
successor statute thereto, in each case as amended from time to time.
"Exchange Agent" means Chase Bank of Texas, National Association,
Exchange Agent under the Exchange Agreement, until a successor Exchange Agent
shall have become such pursuant to the provisions of Section 16 of the Exchange
Agreement, and thereafter "Exchange Agent" shall mean such successor Exchange
Agent thereunder and from time to time any subsequent successor pursuant to such
provisions.
"Exchange Agreement" means the Exchange Agent Agreement entered into
pursuant to the provisions of Section 205 hereof, as the same may be
supplemented and amended from time to time.
"Exchange Property" means initially the aggregate of the ____________
shares of Chevron Common Stock delivered to the Exchange Agent by the Company
pursuant to the Exchange Agreement simultaneously with the execution and
delivery of this Fourth Supplemental Indenture, and thereafter means the
securities, cash and other property, if any, which at the time are deliverable
upon surrender of the Debentures for exchange in accordance with Article Two of
this Fourth Supplemental Indenture.
"Global Debenture" means a Debenture that evidences all or part of the
Debentures and bears the legend set forth in Section 108 hereof.
"Market Price" means, when used with respect to any security as of any
date, (i) if such security is not then listed or admitted to trading on any
national securities exchange registered under the Exchange Act, the average of
the high bid and low asked prices in the over-the-counter market on such date as
reported by the National Association of Securities Dealers Automated Quotation
System or (ii) if such security is then listed or admitted to trading on any
such national securities exchange, the last reported sales price regular way on
such date or, in case no such reported sale takes place on such date, the
average of the reported closing bid and asked prices regular way on such date,
in each case on the principal national securities exchange on which such
security is then listed or admitted to trading, or (iii) if such prices are not
available on such date, the market value of such security on such date
determined in such manner as shall be satisfactory to the Exchange Agent, which
shall be entitled to rely for such purposes on the advice of any firm of
investment bankers or security dealers having familiarity with such security.
"Market Price" means, when used with respect to any property (other than any
security) as of any date, the market value of such property on such date
determined in such manner as shall be satisfactory to the Exchange Agent, which
shall be entitled to rely for such purposes on the advice of any firm of
investment bankers having familiarity with such property.
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ARTICLE THREE
301. Acceptance of Trust.
The Trustee accepts the trust hereby created and agrees to perform the
same upon the terms and conditions herein and in the Indenture set forth.
302. Trustee Not Responsible for Validity, Due Execution or Recitals.
The Trustee shall not be responsible in any manner whatsoever for or
in respect of the validity or sufficiency of this Fourth Supplemental Indenture
or the due execution thereof by the Company or for or in respect of the recitals
herein contained, all such recitals being made by the Company solely.
303. Counterparts.
This Fourth Supplemental Indenture may be executed in several
counterparts, each of which shall be an original and all of which together shall
constitute but one and the same instrument.
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IN WITNESS WHEREOF, PENNZOIL COMPANY, party hereto of the first part,
has caused its corporate name to be hereunto affixed, and this instrument to be
signed and sealed by a Group Vice President, for and on its behalf, in the [City
of New York, New York] and CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, party
hereto of the second part, has caused its corporate name to be hereunto affixed,
and this instrument to be signed and sealed by a Vice President, for and on its
behalf, in the [City of New York], all as of the _____ day of _____________,
1998.
PENNZOIL COMPANY
[Corporate Seal] By:
---------------------------------------------
David P. Alderson, II
Group Vice President - Finance and Accounting
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
As Trustee
[Corporate Seal] By:
---------------------------------------------
[Name]
[Title]
STATE OF NEW YORK (S)
(S)
COUNTY OF NEW YORK (S)
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared David P. Alderson, II, Group Vice President of Pennzoil
Company, known to me to be the person whose name is subscribed to the foregoing
instrument, and acknowledged to me that he executed the same for the purposes
therein expressed, in the capacity therein set forth and as the act and deed of
said association.
GIVEN UNDER MY HAND AND SEAL of office, this the _____ day of
_____________, 1998.
---------------------------------------------
[NOTARIAL SEAL] Notary Public
23
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STATE OF NEW YORK (S)
(S)
COUNTY OF NEW YORK (S)
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared _____________ of Chase Bank of Texas, National Association,
known to me to be the person whose name is subscribed to the foregoing
instrument, and acknowledged to me that he executed the same for the purposes
therein expressed, in the capacity therein set forth and as the act and deed of
said association.
GIVEN UNDER MY HAND AND SEAL of office, this the _____ day of
_____________, 1998.
[NOTARIAL SEAL]
---------------------------------------------
Notary Public
<PAGE>
EXHIBIT 4.3
EXCHANGE AGENT AGREEMENT
THIS EXCHANGE AGENT AGREEMENT dated as of __________________, 1998 is
entered into among Pennzoil Company, a Delaware corporation (the "Company"), and
Chase Bank of Texas, National Association, as Exchange Agent for Holders of
Debentures (the "Exchange Agent").
WITNESSETH THAT:
WHEREAS, the Company has executed and delivered an Indenture dated as
of December 15, 1992 (the "Indenture") and a Third Supplemental Indenture dated
as of ________________, 1998 (the "Supplemental Indenture"), in each case to
Chase Bank of Texas, National Association, as trustee (in such capacity, the
"Trustee"); and
WHEREAS, under and pursuant to the Indenture and the Supplemental
Indenture the Company may issue up to $___________ aggregate principal amount of
4.90% exchangeable senior debentures due August 15, 2008 (the "Debentures"),
issuable in registered form, and
WHEREAS, pursuant and subject to the terms of the Debentures and the
Supplemental Indenture, each $1,000 principal amount of Debentures is
exchangeable at the option of the Holder thereof for a number of shares of the
common stock, par value $3.00 per share, of Chevron Corporation, a Delaware
corporation ("Chevron"), at the Exchange Rate (as defined in the Supplemental
Indenture) as provided in the Supplemental Indenture;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and in order to set forth the terms upon which the
Chevron Common Stock deposited with the Exchange Agent by the Company for
delivery upon exchange of the Debentures and all other property held by the
Exchange Agent hereunder shall be held and dealt with by the Exchange Agent and
its successors, the Company and the Exchange Agent hereby agree as follows:
SECTION 1. Definitions. All terms used but not defined in this
Agreement that are defined in the Supplemental Indenture or the Indenture shall
have the meanings specified in the Supplemental Indenture or the Indenture
unless the context otherwise requires. As used in this Agreement, the following
terms shall have the following meanings:
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"Cash Dividend" means a dividend on Chevron Common Stock paid in cash
(other than a dividend paid pursuant to a plan of liquidation or partial
liquidation of Chevron or a recapitalization or restructuring of Chevron or
other extraordinary cash dividend of Chevron).
"Chevron Common Stock" means the common stock of Chevron of the class
authorized and designated as common stock, par value $3.00 per share, as such
common stock may be changed or reclassified from time to time.
"Exchange Property" means initially the __________ shares of Chevron
Common Stock delivered to the Exchange Agent by the Company pursuant to this
Exchange Agreement simultaneously with the execution and delivery of the
Supplemental Indenture, and thereafter means the securities, cash and other
property, if any, which at the time are deliverable upon surrender of the
Debentures for exchange in accordance with Article Two of the Supplemental
Indenture.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, a Vice Chairman of the Board, the President or a Vice President and
by the Treasurer, the Controller, the Secretary or an Assistant Treasurer,
Assistant Controller or Assistant Secretary of the applicable entity. Each
certificate with respect to compliance with a condition or covenant provided for
in this Agreement shall include (i) a statement that the person making such
certificate has read such covenant or condition; (ii) a brief statement as to
the nature and scope of the examination or investigation upon which the
statements contained in such certificate are based; (iii) a statement that, in
the opinion of such person, such person has made such examination or
investigation as is necessary to enable such person to express an informed
opinion as to whether or not such covenant or condition has been complied with;
and (iv) a statement as to whether or not, in the opinion of such person, such
covenant or condition has been complied with.
"Opinion of Counsel" means an opinion in writing, signed by legal
counsel, who shall be satisfactory to the Exchange Agent and who may be an
employee of or counsel to the Company.
"Stock Record Date" means the record date for determining the holders
of Chevron Common Stock, or any other securities included within the Exchange
Property, entitled to notice of, and to vote on, a matter to be voted upon by
holders of such securities.
SECTION 2. Deposit. The Company will from time to time (i) cause The
Depository Trust Company to make the appropriate book-entry transfers, and/or
(ii) deliver to the Exchange Agent to be held by the Exchange Agent hereunder a
certificate or certificates, registered in the name of the Company or its
nominee and endorsed in blank or accompanied by stock powers endorsed in blank,
in each case representing such number of shares of Chevron Common Stock and such
other Exchange Property, if any, not already held by the Exchange Agent as the
Holders of outstanding Debentures shall from time to time be entitled to receive
upon exchange thereof as provided in the Supplemental Indenture. The Exchange
Agent will
2
<PAGE>
acknowledge in writing receipt of such certificate or certificates and such
other Exchange Property, if any.
SECTION 3. Record Owner. The record owner of the Exchange Property
shall be the Company or its nominee; provided, however, that if at any time in
the judgment of the Exchange Agent it shall be necessary or desirable for the
purpose of facilitating the present or future exchange of Debentures pursuant to
Article Two of the Supplemental Indenture, the Exchange Agent may register the
Exchange Property or any part thereof in its name, as the Exchange Agent, or in
the name of its nominee; provided further that if any Exchange Property shall be
registered in the name of the Exchange Agent, or its nominee, the Exchange Agent
shall cause any Cash Dividends which the Company is entitled to receive and
retain under Article Two of the Supplemental Indenture to be paid or delivered
to the Company, and except as expressly permitted by this Agreement or required
by the Supplemental Indenture, no action may be taken by the Exchange Agent with
respect to the Exchange Property without the prior written consent of the
Company.
SECTION 4. Representations and Warranties of the Company. The
Company represents and warrants that it has and will have full legal right,
power and authority to transfer and deliver the Exchange Property in the manner
provided in this Agreement and the Supplemental Indenture.
SECTION 5. Covenants of the Exchange Agent. The Exchange Agent
covenants and agrees that it will perform all of the undertakings, duties and
obligations described in the Supplemental Indenture as the undertakings, duties
or obligations of the Exchange Agent. The Exchange Agent covenants and agrees
that the Exchange Property received by it pursuant to this Agreement shall be
held for and applied only in conformity with the purposes and upon the terms and
conditions set forth in this Agreement.
SECTION 6. Voting. With respect to each matter that is voted upon by
securities included within the Exchange Property, the Company shall be entitled
to cast all votes to which the securities included within the Exchange Property
are entitled, or to execute any written consent with respect thereto, so long as
such securities included within the Exchange Property, on the Stock Record Date,
shall not have been registered in the name of a holder other than the Company or
the Exchange Agent or a nominee of either of them.
If the Exchange Agent or its nominee is the record owner of any
securities included within the Exchange Property as of the Stock Record Date,
the Exchange Agent shall from time to time deliver, or cause to be delivered, to
the Company such proxies, duly executed and in the form required by applicable
law, as may be necessary or appropriate to permit the Company to vote on each
matter submitted to the holder of the securities included within the Exchange
Property so deposited.
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<PAGE>
SECTION 7. Exchanges and Adjustment of the Chevron Common Stock and
the Cash Apportioned Thereto. (a) The Company will notify the Exchange Agent in
an Officers' Certificate of any adjustment of the Exchange Rate or the Exchange
Property or of the cash apportioned thereto pursuant to the Supplemental
Indenture which is deliverable upon exchange of a Debenture. The Company will,
upon request, notify the Exchange Agent in writing of the amount of cash
adjustments to be paid upon exchanges in lieu of fractional shares.
(b) Subject to the terms and conditions of this Agreement and the
Supplemental Indenture, upon proper surrender to the Exchange Agent of any
Debenture (or any portion of the principal amount thereof in the amount of
$1,000 or integral multiples) for exchange by the Holder thereof in accordance
with the terms thereof and of the Supplemental Indenture, the Exchange Agent
shall promptly accept the same for exchange, subject to subsection (c) of this
Section, and upon such acceptance promptly (unless the Company shall have
elected, pursuant to Section 216 of the Supplemental Indenture, to pay to the
Holder an amount in cash equal to the value of the Exchange Property, in which
case the provisions of Section 216 of the Supplemental Indenture shall be
followed): (i) present a certificate or certificates representing at least the
number of whole securities included within the Exchange Property which the
Holder of such Debenture shall be entitled to receive, in accordance with the
terms thereof and the Supplemental Indenture, to the transfer agent or agents
for the Exchange Property and deliver or cause to be delivered, to or on the
order of the Holder of such Debenture (or portion thereof), a certificate or
certificates representing such number of whole securities included within the
Exchange Property, together with a check in payment of any cash adjustment in
lieu of fractional shares or units computed by the Company in accordance with
the Supplemental Indenture and such additional cash or property as may have been
apportioned under the Supplemental Indenture to the Exchange Property which the
Holder or Holders of such Debenture (or portion thereof) shall be entitled to
receive in accordance with the terms thereof and of the Supplemental Indenture,
(ii) deliver to the Trustee the Debenture so exchanged, and (iii) if only a
portion of said Debenture is exchanged, obtain from the Trustee and deliver to
or on the order of the Holder of the Debenture surrendered for exchange a new
Debenture or Debentures for the principal amount thereof not exchanged.
(c) If the Company shall deliver an Officers' Certificate to the
effect that, in connection with a specific exchange or a category of exchanges
or all exchanges by the Exchange Agent, the transfer and delivery of any
Exchange Property upon the exchange of any Debenture would (in the opinion of
counsel for the Company) violate any applicable law (including, without
limitation, the Securities Act of 1933, as amended, the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, or any successors thereto), then
the Exchange Agent shall not, and shall not be required to, accept such
Debenture for exchange or effect the exchange of such Debenture and shall so
notify the Holder surrendering such Debenture; provided, however, that the
provisions of this subsection (c) shall not relieve the Company of any of its
obligations under the Indenture.
4
<PAGE>
SECTION 8. Covenants of the Company. The Company hereby authorizes
the Exchange Agent to apply to any transfer agent of the Exchange Property for
any division of share certificates which may be required in connection with
exchanges of Debentures. The Company covenants and agrees to pay (i) any and
all documentary, stamp, transfer or other similar taxes that may be payable to
the United States of America or any state thereof or political subdivision
thereof in respect of the deposit of Exchange Property hereunder or the
delivery of Exchange Property upon exchange of Debentures; (ii) any income or
other taxes incurred by the Exchange Agent as a result of its acting in its
capacity as such under this Agreement (except for any such taxes incurred by
reason of the payment or accrual of its own fees); and (iii) all reasonable fees
or charges of the Exchange Agent (including reasonable fees and expenses of its
agents and counsel) in connection with or arising out of this Agreement or any
exchange of Debentures in accordance with the terms hereof. The Company further
covenants and agrees to deposit with the Exchange Agent from time to time (i)
cash in an amount equal to the amount necessary to make payments in lieu of
fractional securities included within the Exchange Property (after the Exchange
Agent shall have applied to such payments any other monies held by the Exchange
Agent and not needed for the exchange of Debentures) and (ii) cash in an amount
equal to any losses on investments made pursuant to Section 11 of this Agreement
to the extent necessary to maintain on deposit with the Exchange Agent funds
(investment securities held pursuant to such Section being valued as funds at
the outstanding principal balance thereof) equal from time to time to the
aggregate amount of cash apportioned to all Exchange Property at each such time
deliverable upon exchange by the Exchange Agent of all Debentures then
outstanding. Notwithstanding the foregoing provisions of this Section, the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the delivery of Exchange Property in a name other than
that in which the Debentures so exchanged were registered, and no such transfer
or delivery shall be made unless and until the person requesting such transfer
has paid to the Company the amount of any such tax or has established, to the
satisfaction of the Company, that such tax has been paid.
SECTION 9. Withdrawals of Exchange Property. The Company may demand
(which demand must be in writing), at its election, that the Exchange Agent
release to the Company any Exchange Property held by the Exchange Agent. Upon
receipt of such written demand, the Exchange Agent shall, as promptly as
possible, forthwith deliver to the Company the kind and amount of Exchange
Property requested to be withdrawn as specified in such written demand.
SECTION 10. Cash Dividends. The Company shall be entitled to all
Cash Dividends, other than Cash Dividends after an exchange of Debentures or
Exchange Property has been deemed effected under Section 202 of the Supplemental
Indenture.
SECTION 11. Investments. All money apportioned to Exchange Property
pursuant to the Supplemental Indenture and this Agreement or otherwise held
pursuant to this Agreement shall be invested by the Exchange Agent from time to
time in accordance with the written instructions of the Company in U.S.
Government Obligations (as defined in the Indenture)
5
<PAGE>
with maturity dates of twelve months or less. Any interest or gain on such
investments shall be for the sole account of the Company and shall be paid over
to the Company by the Exchange Agent on demand by the Company. Any loss on such
investments shall be for the account of the Company. The Company shall have the
option either to furnish to the Exchange Agent all money payable to Holders upon
any exchange of Debentures or to require the Exchange Agent to sell investment
securities in an amount necessary to permit the Exchange Agent to make such
payments.
SECTION 12. Merger, etc., of the Company. (a) Nothing contained in
this Agreement, the Indenture, the Supplemental Indenture or any of the
Debentures shall prevent any merger, liquidation or consolidation of the Company
with or into another corporation or corporations, or successive consolidations
or mergers in which the Company or its successor or successors shall be a party
or parties, or any sale or other conveyance of all or substantially all the
property of the Company to another corporation; provided, however, and the
Company hereby covenants and agrees, that upon any such merger, liquidation,
consolidation or merger in which the Company is not the continuing corporation,
the rights and obligations of the Company under this Agreement shall be
expressly assumed, by a supplemental agreement satisfactory in form to the
Exchange Agent, executed and delivered to the Exchange Agent by the corporation
formed by such consolidation, or into which the Company shall have merged, or to
which the assets of the Company shall have been distributed in liquidation, or
which shall have acquired such property.
(b) In the case of any consolidation, merger, sale or conveyance of or
by the Company referred to in subsection (a) hereof, and upon the execution and
delivery to the Exchange Agent of the supplemental agreement referred to therein
by the successor or acquiring corporation and the delivery to the Exchange Agent
of an Officers' Certificate and an Opinion of Counsel stating that such
transaction complies with this Section, such successor or acquiring corporation
shall succeed to the rights and obligations of and be substituted for the
Company under this Agreement, with the same effect as if such corporation had
been named herein as the Company, and in the event of any such sale or
conveyance, the Company (which term shall for this purpose mean the corporation
named as the "Company" in the first paragraph of this Agreement or any successor
corporation which shall theretofore have become such in the manner described in
this Section) shall be discharged from all obligations and covenants under this
Agreement and may (but need not) be dissolved and liquidated.
(c) The Exchange Agent may rely on an Officers' Certificate and an
Opinion of Counsel as conclusive evidence that any such consolidation, merger,
sale or conveyance of or by the Company complies with the provisions of this
Section 12.
SECTION 13. Reliance on Information Supplied. The Exchange Agent may
rely on the contents of any Officers' Certificate furnished hereunder and, in
delivering any such certificate, the Company may rely on information furnished
to the Company by the Exchange Agent as to the quantity and identity of Exchange
Property held by the Exchange Agents and the
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quantity and identity of Exchange Property delivered to Holders of Debentures
upon exchange thereof and on published information as of no earlier than the end
of the preceding year as to matters concerning Exchange Property and Chevron.
The Exchange Agent will furnish on request to the Company such information as to
the Exchange Agent's holdings hereunder and as to the Exchange Property
delivered to Holders of Debentures on exchange.
SECTION 14. Expenses and Indemnification of the Exchange Agent. The
Company covenants and agrees to pay to the Exchange Agent from time to time, and
the Exchange Agent shall be entitled to, reasonable compensation, and the
Company will pay or reimburse the Exchange Agent upon its request for all
reasonable expenses, disbursements and advances incurred or made by the Exchange
Agent in connection with any of the provisions of this Agreement (including the
reasonable compensation and the expenses and disbursements of its counsel,
dealers engaged pursuant to Section 22 hereof and of all persons not regularly
in its employ) except any such expense, disbursement or advance as may arise
from its gross negligence or willful misconduct. The Company also covenants to
indemnify the Exchange Agent for, and to hold it harmless against, any loss,
liability or expense incurred without gross negligence or willful misconduct on
the part of the Exchange Agent and arising out of or in connection with its
duties under this Agreement including the costs and expenses of defending itself
against any claim of liability in the premises. The obligations of the Company
pursuant to this Section 14 will survive the resignation or removal of the
Exchange Agent and the termination of this Agreement.
Promptly after receipt by the Exchange Agent of notice of the
commencement of any action, the Exchange Agent shall, if a claim in respect
thereof is to be made against the Company under the preceding paragraph, notify
the Company in writing of the commencement thereof. In case any such action
shall be brought against the Exchange Agent, it shall notify the Company of the
commencement thereof.
SECTION 15. Resignation and Removal of the Exchange Agent. (a) The
Exchange Agent may at any time resign by giving written notice of such
resignation to the Company and by mailing notice thereof to the Holders of
Debentures at their addresses as they shall appear on the Security Register (as
defined in the Indenture). Upon such resignation, a successor Exchange Agent
shall be appointed in any manner provided in the Indenture for the appointment
of a successor Trustee thereunder. If at any time the Exchange Agent resigns
hereunder, it shall also resign in its capacity as Trustee under the Indenture.
The Exchange Agent may be removed as Exchange Agent hereunder in any manner
provided in the Indenture for the removal of the Trustee thereunder.
(b) Any resignation or removal of the Exchange Agent and any
appointment of a successor Exchange Agent pursuant to any of the provisions of
the Indenture shall become effective upon acceptance of appointment by the
successor as provided in Section 16 hereof. In the event of any resignation of
the Exchange Agent, the Company shall appoint a successor Exchange Agent.
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SECTION 16. Acceptance by Successor Exchange Agent. Any successor
Exchange Agent appointed as provided above shall execute, acknowledge and
deliver to the Company and to its predecessor Exchange Agent an instrument
accepting such appointment hereunder, and thereupon the resignation or removal
of the predecessor Exchange Agent shall become effective and such successor
Exchange Agent, without any further act, deed or conveyance shall become vested
with all the right, title and interest of its predecessor to all property held
hereunder, and all other rights, powers, duties and obligations of such
predecessor Exchange Agent hereunder; but nevertheless such predecessor Exchange
Agent shall forthwith deliver to such successor Exchange Agent physical
possession of the certificates evidencing the Chevron Common Stock deposited
hereunder and of all other Exchange Property, and such predecessor Exchange
Agent shall, on the written request of the Company or such successor Exchange
Agent and upon payment of any amounts then due it pursuant to the provisions of
Section 8 and 15 hereof, execute and deliver to such successor Exchange Agent an
instrument transferring to such successor Exchange Agent all right, title and
interest hereunder in and to the Chevron Common Stock deposited hereunder and
the other Exchange Property, and all other rights and powers of such predecessor
Exchange Agent hereunder. The Company shall give written notice of (i) the
identity and address of any successor Exchange Agent or (ii) an effective
resignation or removal of the Exchange Agent pursuant to the last sentence of
Section 15(b) hereof, by mailing notice thereof to the Holders of Debentures at
their addresses as they shall appear on the Security Register (as defined in the
Indenture).
SECTION 17. Succession by Merger, etc. Any Person into which the
Exchange Agent may be merged or converted or with which it may be consolidated,
or any Person resulting from any merger, conversion or consolidation to which
the Exchange Agent shall be a party, or any corporation succeeding to the
business of the Exchange Agent, shall be the successor of the Exchange Agent
hereunder without the execution or filing of any paper or any further act on the
part of any of the parties hereto; provided, however, that such corporation
shall be eligible under Section 18 hereof and shall comply with Section 16
hereof.
SECTION 18. Eligibility of Exchange Agent. The Exchange Agent
hereunder shall at all times be the Trustee under the Indenture. In case at any
time the Exchange Agent shall cease to be eligible in accordance with the
provisions of this Section, the Exchange Agent shall resign immediately in the
manner and with the effect specified in Section 15.
SECTION 19. Amendments. (a) The Company and the Exchange Agent may
by mutual accord enter into supplemental agreements, all without the consent of
the Holders of any of the Debentures, notwithstanding the further provisions of
this Section 19 (i) to cure any ambiguity or correct or otherwise amend any
provision contained herein which may be defective or inconsistent with any other
provision contained herein or in the Indenture, the Supplemental Indenture or
any additional supplemental indenture; or (ii) to evidence the succession of
another corporation to the Company or the Exchange Agent, or successive
successions and the assumption by such successor corporation of the covenants,
agreements and obligations of the Company or the Exchange Agent pursuant to
Section 12 hereof as applicable; or (iii) to make such other
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provisions in regard to matters or questions arising under this Agreement which
shall not adversely affect the interests of the Holders of the Debentures in any
material respect.
(b) With the consent of the Holders of not less than a majority in
aggregate principal amount at maturity of the Debentures at the time
outstanding, the Company and the Exchange Agent may from time to time and at any
time enter into an amendment or amendments hereof for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of any amendment hereof or of modifying in any manner the
rights of the Holders of the Debentures hereunder or revoking any or all of the
powers of the Exchange Agent under this Agreement; provided, however, that
without the consent of the Holder of each Debenture so affected no such
amendment or modification or revocation shall (i) affect adversely the right to
exchange any Debenture for Exchange Property at the rate and upon the terms set
forth in the Indenture Supplement or (ii) reduce the aforesaid percentage of
Debentures the Holders of which are required to consent to any such amendment or
modification or revocation.
(c) This Agreement may be amended or supplemented without the consent
of Chevron.
(d) The Exchange Agent shall be entitled to receive and rely on an
Officer's Certificate to the effect that any amendment is authorized or
permitted by this Section 19.
SECTION 20. Termination of Agreement. This Agreement shall terminate
when the rights of all Holders under the Supplemental Indenture to surrender
Debentures for exchange pursuant to Article Two of the Supplemental Indenture
shall have expired or been terminated, which termination or expiration shall be
evidenced by an Officers' Certificate of the Company to that effect, and all
other obligations of the Company hereunder shall have been satisfied. Upon
termination of this Agreement, any Exchange Property remaining in the hands of
either Exchange Agent hereunder shall be delivered to the Company, free and
clear of any and all interests of the Exchange Agent, the Trustee and the
Holders of the Debentures, or any of them.
SECTION 21. Rights and Duties of the Exchange Agent. (a) The
Exchange Agent in performing its duties as such pursuant to this Agreement is
not acting as a fiduciary for the Company or the Holders. The Exchange Agent
shall be obligated to perform only such duties as are herein specifically set
forth and no duties or obligations shall be implied against the Exchange Agent.
The Exchange Agent shall not be liable for any action taken, omitted or suffered
by it in good faith and believed by it to be authorized or within the discretion
or rights or powers conferred upon it by this Agreement, and may conclusively
rely and shall be protected in acting or refraining from acting in reliance upon
an Opinion of Counsel or upon any certificate, request or other document
reasonably believed by it to be genuine and to have been signed or presented by
the proper party or parties. Without limiting the generality of the foregoing,
it is expressly agreed that the Exchange Agent shall not be responsible for any
governmental approvals which may be required in connection with the issuance or
delivery of Exchange Property and further that
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the Exchange Agent shall be entitled to rely upon an Opinion of Counsel. The
Exchange Agent shall not be required to take any action hereunder which, in the
opinion of its counsel, will be contrary to law. The Exchange Agent shall not
be responsible for any failure of the Company to comply with any covenants of
the Company contained in this Agreement or the Indenture or Supplemental
Indenture.
(b) The Exchange Agent shall not be under any duty to give the
Exchange Property held by it hereunder any greater degree of care than it gives
its own similar property. The Exchange Agent shall in no event be liable for any
loss incurred in connection with any investment of money in accordance with
Section 11 hereof or in connection with any sale of Exchange Property pursuant
to Section 9 hereof, including without limitation any liability for any delays
(not resulting from its gross negligence or willful misconduct) in making such
investment or sale.
SECTION 22. Use of Dealer by Domestic Exchange Agent. The Company
and the Exchange Agent agree that the Exchange Agent shall use a registered
securities dealer in effecting exchanges of the Chevron Common Stock or any
other Exchange Property that is a security.
SECTION 23. No Lien Created Hereby. Nothing in this Agreement, the
Indenture, the Supplemental Indenture or any of the Debentures shall grant, and
the Exchange Agent shall not assert, any lien, pledge or mortgage on or of the
Exchange Property as security for any indebtedness for money borrowed.
SECTION 24. Benefits of Agreement. Nothing in this Agreement or the
Debentures, express or implied, shall give or be construed to give any person,
firm or corporation, other than the parties hereto, the Holders of Debentures as
such and the Trustee as such Holders' representative, any legal or equitable
right, remedy or claim under any covenant, condition or provisions contained in
this Agreement being for the sole benefit of the parties hereto, the Holders of
the Debentures as such and the Trustee as such Holders' representative.
SECTION 25. Headings. The headings contained in this Agreement are
for convenience of reference only and shall have no effect on the interpretation
or operation of this Agreement.
SECTION 26. Choice of Law. This Agreement shall be construed in
accordance with the law of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by duly authorized officers as of the day and year first above
written.
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PENNZOIL COMPANY
By:
-------------------------------------------
David P. Alderson, II
Group Vice President - Finance and Accounting
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
By:
-------------------------------------------
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EXCHANGE AGENT AGREEMENT
THIS EXCHANGE AGENT AGREEMENT dated as of __________________, 1998 is
entered into among Pennzoil Company, a Delaware corporation (the "Company"), and
Chase Bank of Texas, National Association, as Exchange Agent for Holders of
Debentures (the "Exchange Agent").
WITNESSETH THAT:
WHEREAS, the Company has executed and delivered an Indenture dated as
of December 15, 1992 (the "Indenture") and a Fourth Supplemental Indenture dated
as of ________________, 1998 (the "Supplemental Indenture"), in each case to
Chase Bank of Texas, National Association, as trustee (in such capacity, the
"Trustee"); and
WHEREAS, under and pursuant to the Indenture and the Supplemental
Indenture the Company may issue up to $___________ aggregate principal amount of
4.95% exchangeable senior debentures due August 15, 2008 (the "Debentures"),
issuable in registered form, and
WHEREAS, pursuant and subject to the terms of the Debentures and the
Supplemental Indenture, each $1,000 principal amount of Debentures is
exchangeable at the option of the Holder thereof for a number of shares of the
common stock, par value $3.00 per share, of Chevron Corporation, a Delaware
corporation ("Chevron"), at the Exchange Rate (as defined in the Supplemental
Indenture) as provided in the Supplemental Indenture;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and in order to set forth the terms upon which the
Chevron Common Stock deposited with the Exchange Agent by the Company for
delivery upon exchange of the Debentures and all other property held by the
Exchange Agent hereunder shall be held and dealt with by the Exchange Agent and
its successors, the Company and the Exchange Agent hereby agree as follows:
SECTION 1. Definitions. All terms used but not defined in this
Agreement that are defined in the Supplemental Indenture or the Indenture shall
have the meanings specified in the Supplemental Indenture or the Indenture
unless the context otherwise requires. As used in this Agreement, the following
terms shall have the following meanings:
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"Cash Dividend" means a dividend on Chevron Common Stock paid in cash
(other than a dividend paid pursuant to a plan of liquidation or partial
liquidation of Chevron or a recapitalization or restructuring of Chevron or
other extraordinary cash dividend of Chevron).
"Chevron Common Stock" means the common stock of Chevron of the class
authorized and designated as common stock, par value $3.00 per share, as such
common stock may be changed or reclassified from time to time.
"Exchange Property" means initially the __________ shares of Chevron
Common Stock delivered to the Exchange Agent by the Company pursuant to this
Exchange Agreement simultaneously with the execution and delivery of the
Supplemental Indenture, and thereafter means the securities, cash and other
property, if any, which at the time are deliverable upon surrender of the
Debentures for exchange in accordance with Article Two of the Supplemental
Indenture.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, a Vice Chairman of the Board, the President or a Vice President, and
by the Treasurer, the Controller, the Secretary or an Assistant Treasurer,
Assistant Controller or Assistant Secretary of the applicable entity. Each
certificate with respect to compliance with a condition or covenant provided for
in this Agreement shall include (i) a statement that the person making such
certificate has read such covenant or condition; (ii) a brief statement as to
the nature and scope of the examination or investigation upon which the
statements contained in such certificate are based; (iii) a statement that, in
the opinion of such person, such person has made such examination or
investigation as is necessary to enable such person to express an informed
opinion as to whether or not such covenant or condition has been complied with;
and (iv) a statement as to whether or not, in the opinion of such person, such
covenant or condition has been complied with.
"Opinion of Counsel" means an opinion in writing, signed by legal
counsel, who shall be satisfactory to the Exchange Agent and who may be an
employee of or counsel to the Company.
"Stock Record Date" means the record date for determining the holders
of Chevron Common Stock, or any other securities included within the Exchange
Property, entitled to notice of, and to vote on, a matter to be voted upon by
holders of such securities.
SECTION 2. Deposit. The Company will from time to time (i) cause The
Depository Trust Company to make the appropriate book-entry transfers, and/or
(ii) deliver to the Exchange Agent to be held by the Exchange Agent hereunder a
certificate or certificates, registered in the name of the Company or its
nominee and endorsed in blank or accompanied by stock powers endorsed in blank,
in each case representing such number of shares of Chevron Common Stock and such
other Exchange Property, if any, not already held by the Exchange Agent as the
Holders of outstanding Debentures shall from time to time be entitled to receive
upon exchange thereof as provided in the Supplemental Indenture. The Exchange
Agent will
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acknowledge in writing receipt of such certificate or certificates and such
other Exchange Property, if any.
SECTION 3. Record Owner. The record owner of the Exchange Property
shall be the Company or its nominee; provided, however, that if at any time in
the judgment of the Exchange Agent it shall be necessary or desirable for the
purpose of facilitating the present or future exchange of Debentures pursuant to
Article Two of the Supplemental Indenture, the Exchange Agent may register the
Exchange Property or any part thereof in its name, as the Exchange Agent, or in
the name of its nominee; provided further that if any Exchange Property shall be
registered in the name of the Exchange Agent, or its nominee, the Exchange Agent
shall cause any Cash Dividends which the Company is entitled to receive and
retain under Article Two of the Supplemental Indenture to be paid or delivered
to the Company, and except as expressly permitted by this Agreement or required
by the Supplemental Indenture, no action may be taken by the Exchange Agent with
respect to the Exchange Property without the prior written consent of the
Company.
SECTION 4. Representations and Warranties of the Company. The
Company represents and warrants that it has and will have full legal right,
power and authority to transfer and deliver the Exchange Property in the manner
provided in this Agreement and the Supplemental Indenture.
SECTION 5. Covenants of the Exchange Agent. The Exchange Agent
covenants and agrees that it will perform all of the undertakings, duties and
obligations described in the Supplemental Indenture as the undertakings, duties
or obligations of the Exchange Agent. The Exchange Agent covenants and agrees
that the Exchange Property received by it pursuant to this Agreement shall be
held for and applied only in conformity with the purposes and upon the terms and
conditions set forth in this Agreement.
SECTION 6. Voting. With respect to each matter that is voted upon by
securities included within the Exchange Property, the Company shall be entitled
to cast all votes to which the securities included within the Exchange Property
are entitled, or to execute any written consent with respect thereto, so long as
such securities included within the Exchange Property, on the Stock Record Date,
shall not have been registered in the name of a holder other than the Company or
the Exchange Agent or a nominee of either of them.
If the Exchange Agent or its nominee is the record owner of any
securities included within the Exchange Property as of the Stock Record Date,
the Exchange Agent shall from time to time deliver, or cause to be delivered, to
the Company such proxies, duly executed and in the form required by applicable
law, as may be necessary or appropriate to permit the Company to vote on each
matter submitted to the holder of the securities included within the Exchange
Property so deposited.
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<PAGE>
SECTION 7. Exchanges and Adjustment of the Chevron Common Stock and
the Cash Apportioned Thereto. (a) The Company will notify the Exchange Agent in
an Officers' Certificate of any adjustment of the Exchange Rate or the Exchange
Property or of the cash apportioned thereto pursuant to the Supplemental
Indenture which is deliverable upon exchange of a Debenture. The Company will,
upon request, notify the Exchange Agent in writing of the amount of cash
adjustments to be paid upon exchanges in lieu of fractional shares.
(b) Subject to the terms and conditions of this Agreement and the
Supplemental Indenture, upon proper surrender to the Exchange Agent of any
Debenture (or any portion of the principal amount thereof in the amount of
$1,000 or integral multiples) for exchange by the Holder thereof in accordance
with the terms thereof and of the Supplemental Indenture, the Exchange Agent
shall promptly accept the same for exchange, subject to subsection (c) of this
Section, and upon such acceptance promptly (unless the Company shall have
elected, pursuant to Section 216 of the Supplemental Indenture, to pay to the
Holder an amount in cash equal to the value of the Exchange Property, in which
case the provisions of Section 216 of the Supplemental Indenture shall be
followed): (i) present a certificate or certificates representing at least the
number of whole securities included within the Exchange Property which the
Holder of such Debenture shall be entitled to receive, in accordance with the
terms thereof and the Supplemental Indenture, to the transfer agent or agents
for the Exchange Property and deliver or cause to be delivered, to or on the
order of the Holder of such Debenture (or portion thereof), a certificate or
certificates representing such number of whole securities included within the
Exchange Property, together with a check in payment of any cash adjustment in
lieu of fractional shares or units computed by the Company in accordance with
the Supplemental Indenture and such additional cash or property as may have been
apportioned under the Supplemental Indenture to the Exchange Property which the
Holder or Holders of such Debenture (or portion thereof) shall be entitled to
receive in accordance with the terms thereof and of the Supplemental Indenture,
(ii) deliver to the Trustee the Debenture so exchanged, and (iii) if only a
portion of said Debenture is exchanged, obtain from the Trustee and deliver to
or on the order of the Holder of the Debenture surrendered for exchange a new
Debenture or Debentures for the principal amount thereof not exchanged.
(c) If the Company shall deliver an Officers' Certificate to the
effect that, in connection with a specific exchange or a category of exchanges
or all exchanges by the Exchange Agent, the transfer and delivery of any
Exchange Property upon the exchange of any Debenture would (in the opinion of
counsel for the Company) violate any applicable law (including, without
limitation, the Securities Act of 1933, as amended, the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, or any successors thereto), then
the Exchange Agent shall not, and shall not be required to, accept such
Debenture for exchange or effect the exchange of such Debenture and shall so
notify the Holder surrendering such Debenture; provided, however, that the
provisions of this subsection (c) shall not relieve the Company of any of its
obligations under the Indenture.
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SECTION 8. Covenants of the Company. The Company hereby authorizes
the Exchange Agent to apply to any transfer agent of the Exchange Property for
any division of share certificates which may be required in connection with
exchanges of Debentures. The Company covenants and agrees to pay (i) any and
all documentary, stamp, transfer or other similar taxes that may be payable to
the United States of America or any state thereof or political subdivision
thereof in respect of the deposit of Exchange Property hereunder, or the
delivery of Exchange Property upon exchange of Debentures; (ii) any income or
other taxes incurred by the Exchange Agent as a result of its acting in its
capacity as such under this Agreement (except for any such taxes incurred by
reason of the payment or accrual of its own fees); and (iii) all reasonable fees
or charges of the Exchange Agent (including reasonable fees and expenses of its
agents and counsel) in connection with or arising out of this Agreement or any
exchange of Debentures in accordance with the terms hereof. The Company further
covenants and agrees to deposit with the Exchange Agent from time to time (i)
cash in an amount equal to the amount necessary to make payments in lieu of
fractional securities included within the Exchange Property (after the Exchange
Agent shall have applied to such payments any other monies held by the Exchange
Agent and not needed for the exchange of Debentures) and (ii) cash in an amount
equal to any losses on investments made pursuant to Section 11 of this Agreement
to the extent necessary to maintain on deposit with the Exchange Agent funds
(investment securities held pursuant to such Section being valued as funds at
the outstanding principal balance thereof) equal from time to time to the
aggregate amount of cash apportioned to all Exchange Property at each such time
deliverable upon exchange by the Exchange Agent of all Debentures then
outstanding. Notwithstanding the foregoing provisions of this Section, the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the delivery of Exchange Property in a name other than
that in which the Debentures so exchanged were registered, and no such transfer
or delivery shall be made unless and until the person requesting such transfer
has paid to the Company the amount of any such tax or has established, to the
satisfaction of the Company, that such tax has been paid.
SECTION 9. Withdrawals of Exchange Property. The Company may demand
(which demand must be in writing), at its election, that the Exchange Agent
release to the Company any Exchange Property held by the Exchange Agent. Upon
receipt of such written demand, the Exchange Agent shall, as promptly as
possible, forthwith deliver to the Company the kind and amount of Exchange
Property requested to be withdrawn as specified in such written demand.
SECTION 10. Cash Dividends. The Company shall be entitled to all
Cash Dividends, other than Cash Dividends after an exchange of Debentures or
Exchange Property has been deemed effected under Section 202 of the Supplemental
Indenture.
SECTION 11. Investments. All money apportioned to Exchange Property
pursuant to the Supplemental Indenture and this Agreement or otherwise held
pursuant to this Agreement shall be invested by the Exchange Agent from time to
time in accordance with the written instructions of the Company in U.S.
Government Obligations (as defined in the Indenture)
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<PAGE>
with maturity dates of twelve months or less. Any interest or gain on such
investments shall be for the sole account of the Company and shall be paid over
to the Company by the Exchange Agent on demand by the Company. Any loss on such
investments shall be for the account of the Company. The Company shall have the
option either to furnish to the Exchange Agent all money payable to Holders upon
any exchange of Debentures or to require the Exchange Agent to sell investment
securities in an amount necessary to permit the Exchange Agent to make such
payments.
SECTION 12. Merger, etc., of the Company. (a) Nothing contained in
this Agreement, the Indenture, the Supplemental Indenture or any of the
Debentures shall prevent any merger, liquidation or consolidation of the Company
with or into another corporation or corporations, or successive consolidations
or mergers in which the Company or its successor or successors shall be a party
or parties, or any sale or other conveyance of all or substantially all the
property of the Company to another corporation; provided, however, and the
Company hereby covenants and agrees, that upon any such merger, liquidation,
consolidation or merger in which the Company is not the continuing corporation,
the rights and obligations of the Company under this Agreement shall be
expressly assumed, by a supplemental agreement satisfactory in form to the
Exchange Agent, executed and delivered to the Exchange Agent by the corporation
formed by such consolidation, or into which the Company shall have merged, or to
which the assets of the Company shall have been distributed in liquidation, or
which shall have acquired such property.
(b) In the case of any consolidation, merger, sale or conveyance of or
by the Company referred to in subsection (a) hereof, and upon the execution and
delivery to the Exchange Agent of the supplemental agreement referred to therein
by the successor or acquiring corporation and the delivery to the Exchange Agent
of an Officers' Certificate and an Opinion of Counsel stating that such
transaction complies with this Section, such successor or acquiring corporation
shall succeed to the rights and obligations of and be substituted for the
Company under this Agreement, with the same effect as if such corporation had
been named herein as the Company, and in the event of any such sale or
conveyance, the Company (which term shall for this purpose mean the corporation
named as the "Company" in the first paragraph of this Agreement or any successor
corporation which shall theretofore have become such in the manner described in
this Section) shall be discharged from all obligations and covenants under this
Agreement and may (but need not) be dissolved and liquidated.
(c) The Exchange Agent may rely on an Officers' Certificate and an
Opinion of Counsel as conclusive evidence that any such consolidation, merger,
sale or conveyance of or by the Company complies with the provisions of this
Section 12.
SECTION 13. Reliance on Information Supplied. The Exchange Agent may
rely on the contents of any Officers' Certificate furnished hereunder and, in
delivering any such certificate, the Company may rely on information furnished
to the Company by the Exchange Agent as to the quantity and identity of Exchange
Property held by the Exchange Agents and the
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quantity and identity of Exchange Property delivered to Holders of Debentures
upon exchange thereof and on published information as of no earlier than the end
of the preceding year as to matters concerning Exchange Property and Chevron.
The Exchange Agent will furnish on request to the Company such information as to
the Exchange Agent's holdings hereunder and as to the Exchange Property
delivered to Holders of Debentures on exchange.
SECTION 14. Expenses and Indemnification of the Exchange Agent. The
Company covenants and agrees to pay to the Exchange Agent from time to time, and
the Exchange Agent shall be entitled to, reasonable compensation, and the
Company will pay or reimburse the Exchange Agent upon its request for all
reasonable expenses, disbursements and advances incurred or made by the Exchange
Agent in connection with any of the provisions of this Agreement (including the
reasonable compensation and the expenses and disbursements of its counsel,
dealers engaged pursuant to Section 22 hereof and of all persons not regularly
in its employ) except any such expense, disbursement or advance as may arise
from its gross negligence or willful misconduct. The Company also covenants to
indemnify the Exchange Agent for, and to hold it harmless against, any loss,
liability or expense incurred without gross negligence or willful misconduct on
the part of the Exchange Agent and arising out of or in connection with its
duties under this Agreement including the costs and expenses of defending itself
against any claim of liability in the premises. The obligations of the Company
pursuant to this Section 14 will survive the resignation or removal of the
Exchange Agent and the termination of this Agreement.
Promptly after receipt by the Exchange Agent of notice of the
commencement of any action, the Exchange Agent shall, if a claim in respect
thereof is to be made against the Company under the preceding paragraph, notify
the Company in writing of the commencement thereof. In case any such action
shall be brought against the Exchange Agent, it shall notify the Company of the
commencement thereof.
SECTION 15. Resignation and Removal of the Exchange Agent. (a) The
Exchange Agent may at any time resign by giving written notice of such
resignation to the Company and by mailing notice thereof to the Holders of
Debentures at their addresses as they shall appear on the Security Register (as
defined in the Indenture). Upon such resignation, a successor Exchange Agent
shall be appointed in any manner provided in the Indenture for the appointment
of a successor Trustee thereunder. If at any time the Exchange Agent resigns
hereunder, it shall also resign in its capacity as Trustee under the Indenture.
The Exchange Agent may be removed as Exchange Agent hereunder in any manner
provided in the Indenture for the removal of the Trustee thereunder.
(b) Any resignation or removal of the Exchange Agent and any
appointment of a successor Exchange Agent pursuant to any of the provisions of
the Indenture shall become effective upon acceptance of appointment by the
successor as provided in Section 16 hereof. In the event of any resignation of
the Exchange Agent, the Company shall appoint a successor Exchange Agent.
7
<PAGE>
SECTION 16. Acceptance by Successor Exchange Agent. Any successor
Exchange Agent appointed as provided above shall execute, acknowledge and
deliver to the Company and to its predecessor Exchange Agent an instrument
accepting such appointment hereunder, and thereupon the resignation or removal
of the predecessor Exchange Agent shall become effective and such successor
Exchange Agent, without any further act, deed or conveyance shall become vested
with all the right, title and interest of its predecessor to all property held
hereunder, and all other rights, powers, duties and obligations of such
predecessor Exchange Agent hereunder; but nevertheless such predecessor Exchange
Agent shall forthwith deliver to such successor Exchange Agent physical
possession of the certificates evidencing the Chevron Common Stock deposited
hereunder and of all other Exchange Property, and such predecessor Exchange
Agent shall, on the written request of the Company or such successor Exchange
Agent and upon payment of any amounts then due it pursuant to the provisions of
Section 8 and 15 hereof, execute and deliver to such successor Exchange Agent an
instrument transferring to such successor Exchange Agent all right, title and
interest hereunder in and to the Chevron Common Stock deposited hereunder and
the other Exchange Property, and all other rights and powers of such predecessor
Exchange Agent hereunder. The Company shall give written notice of (i) the
identity and address of any successor Exchange Agent or (ii) an effective
resignation or removal of the Exchange Agent pursuant to the last sentence of
Section 15(b) hereof, by mailing notice thereof to the Holders of Debentures at
their addresses as they shall appear on the Security Register (as defined in the
Indenture).
SECTION 17. Succession by Merger, etc. Any Person into which the
Exchange Agent may be merged or converted or with which it may be consolidated,
or any Person resulting from any merger, conversion or consolidation to which
the Exchange Agent shall be a party, or any corporation succeeding to the
business of the Exchange Agent, shall be the successor of the Exchange Agent
hereunder without the execution or filing of any paper or any further act on the
part of any of the parties hereto; provided, however, that such corporation
shall be eligible under Section 18 hereof and shall comply with Section 16
hereof.
SECTION 18. Eligibility of Exchange Agent. The Exchange Agent
hereunder shall at all times be the Trustee under the Indenture. In case at any
time the Exchange Agent shall cease to be eligible in accordance with the
provisions of this Section, the Exchange Agent shall resign immediately in the
manner and with the effect specified in Section 15.
SECTION 19. Amendments. (a) The Company and the Exchange Agent may
by mutual accord enter into supplemental agreements, all without the consent of
the Holders of any of the Debentures, notwithstanding the further provisions of
this Section 19 (i) to cure any ambiguity or correct or otherwise amend any
provision contained herein which may be defective or inconsistent with any other
provision contained herein or in the Indenture, the Supplemental Indenture or
any additional supplemental indenture; or (ii) to evidence the succession of
another corporation to the Company or the Exchange Agent, or successive
successions and the assumption by such successor corporation of the covenants,
agreements and obligations of the Company or the Exchange Agent pursuant to
Section 12 hereof as applicable; or (iii) to make such other
8
<PAGE>
provisions in regard to matters or questions arising under this Agreement which
shall not adversely affect the interests of the Holders of the Debentures in any
material respect.
(b) With the consent of the Holders of not less than a majority in
aggregate principal amount at maturity of the Debentures at the time
outstanding, the Company and the Exchange Agent may from time to time and at any
time enter into an amendment or amendments hereof for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of any amendment hereof or of modifying in any manner the
rights of the Holders of the Debentures hereunder or revoking any or all of the
powers of the Exchange Agent under this Agreement; provided, however, that
without the consent of the Holder of each Debenture so affected no such
amendment or modification or revocation shall (i) affect adversely the right to
exchange any Debenture for Exchange Property at the rate and upon the terms set
forth in the Indenture Supplement or (ii) reduce the aforesaid percentage of
Debentures the Holders of which are required to consent to any such amendment or
modification or revocation.
(c) This Agreement may be amended or supplemented without the consent
of Chevron.
(d) The Exchange Agent shall be entitled to receive and rely on an
Officer's Certificate to the effect that any amendment is authorized or
permitted by this Section 19.
SECTION 20. Termination of Agreement. This Agreement shall terminate
when the rights of all Holders under the Supplemental Indenture to surrender
Debentures for exchange pursuant to Article Two of the Supplemental Indenture
shall have expired or been terminated, which termination or expiration shall be
evidenced by an Officers' Certificate of the Company to that effect, and all
other obligations of the Company hereunder shall have been satisfied. Upon
termination of this Agreement, any Exchange Property remaining in the hands of
either Exchange Agent hereunder shall be delivered to the Company, free and
clear of any and all interests of the Exchange Agent, the Trustee and the
Holders of the Debentures, or any of them.
SECTION 21. Rights and Duties of the Exchange Agent. (a) The
Exchange Agent in performing its duties as such pursuant to this Agreement is
not acting as a fiduciary for the Company or the Holders. The Exchange Agent
shall be obligated to perform only such duties as are herein specifically set
forth and no duties or obligations shall be implied against the Exchange Agent.
The Exchange Agent shall not be liable for any action taken, omitted or suffered
by it in good faith and believed by it to be authorized or within the discretion
or rights or powers conferred upon it by this Agreement, and may conclusively
rely and shall be protected in acting or refraining from acting in reliance upon
an Opinion of Counsel or upon any certificate, request or other document
reasonably believed by it to be genuine and to have been signed or presented by
the proper party or parties. Without limiting the generality of the foregoing,
it is expressly agreed that the Exchange Agent shall not be responsible for any
governmental approvals which may be required in connection with the issuance or
delivery of Exchange Property and further that
9
<PAGE>
the Exchange Agent shall be entitled to rely upon an Opinion of Counsel. The
Exchange Agent shall not be required to take any action hereunder which, in the
opinion of its counsel, will be contrary to law. The Exchange Agent shall not
be responsible for any failure of the Company to comply with any covenants of
the Company contained in this Agreement or the Indenture or Supplemental
Indenture.
(b) The Exchange Agent shall not be under any duty to give the
Exchange Property held by it hereunder any greater degree of care than it gives
its own similar property. The Exchange Agent shall in no event be liable for any
loss incurred in connection with any investment of money in accordance with
Section 11 hereof or in connection with any sale of Exchange Property pursuant
to Section 9 hereof, including without limitation any liability for any delays
(not resulting from its gross negligence or willful misconduct) in making such
investment or sale.
SECTION 22. Use of Dealer by Domestic Exchange Agent. The Company
and the Exchange Agent agree that the Exchange Agent shall use a registered
securities dealer in effecting exchanges of the Chevron Common Stock or any
other Exchange Property that is a security.
SECTION 23. No Lien Created Hereby. Nothing in this Agreement, the
Indenture, the Supplemental Indenture or any of the Debentures shall grant, and
the Exchange Agent shall not assert, any lien, pledge or mortgage on or of the
Exchange Property as security for any indebtedness for money borrowed.
SECTION 24. Benefits of Agreement. Nothing in this Agreement or the
Debentures, express or implied, shall give or be construed to give any person,
firm or corporation, other than the parties hereto, the Holders of Debentures as
such and the Trustee as such Holders' representative, any legal or equitable
right, remedy or claim under any covenant, condition or provisions contained in
this Agreement being for the sole benefit of the parties hereto, the Holders of
the Debentures as such and the Trustee as such Holders' representative.
SECTION 25. Headings. The headings contained in this Agreement are
for convenience of reference only and shall have no effect on the interpretation
or operation of this Agreement.
SECTION 26. Choice of Law. This Agreement shall be construed in
accordance with the law of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by duly authorized officers as of the day and year first above
written.
10
<PAGE>
PENNZOIL COMPANY
By:
------------------------------------------
David P. Alderson, II
Group Vice President - Finance and Accounting
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
By:
------------------------------------------
11
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF BAKER & BOTTS, L.L.P. APPEARS HERE]
June 30, 1998
Pennzoil Company
Pennzoil Place
P.O. Box 2967
Houston, Texas 77252-2967
Gentlemen:
As set forth in Amendment No. 3 to the Registration Statement on Form
S-4 to be filed with the Securities and Exchange Commission on June 30, 1998
(the "Registration Statement") by Pennzoil Company, a Delaware corporation (the
"Company"), under the Securities Act of 1933, as amended, relating
to the issuance of (i) the Company's new 4.90% exchangeable senior debentures
due August 15, 2008 (the "New 4.90% Debentures") in exchange for a portion of
its outstanding 6 1/2% exchangeable senior debentures due 2003 and (ii) the
Company's new 4.95% exchangeable senior debentures due August 15, 2008 (the "New
4.95% Debentures", and together with the New 4.90% Debentures, the "New
Debentures") in exchange for a portion of its outstanding 4 3/4% exchangeable
senior debentures due 2003, certain legal matters in connection with the New
Debentures are being passed upon for you by us.
In our capacity as your counsel in the connection referred to above, we
have examined (i) the Restated Certificate of Incorporation and By-laws of the
Company, each as amended to date, (ii) the Indenture dated as of December 15,
1992 between the Company and Chase Bank of Texas, National Association,
as trustee (the "Indenture") pursuant to which the New Debentures will be
issued, (iii) the form of Third Supplemental Indenture to be executed by the
Company and Chase Bank of Texas, National Association, as trustee (the "Third
Supplemental Indenture"), pursuant to which the New 4.90% Debentures will be
issued, (iv) the form of Fourth Supplemental Indenture to be executed by the
Company and Chase Bank of Texas, National Association, as trustee (the "Fourth
Supplemental Indenture"), pursuant to which the New 4.95% Debentures will be
issued, and (v) the originals, or copies certified or otherwise identified, of
corporate records of the Company, certificates of public officials and of
representatives of the Company, statutes and other instruments and documents, as
a basis for the opinions hereinafter expressed.
<PAGE>
Pennzoil Company -2- June 30, 1998
Based upon our examination as aforesaid, we are of the opinion that:
1. The Company is a corporation duly organized and validly existing in
good standing under the laws of the State of Delaware.
2. Assuming the due authorization, execution and delivery of the Third
Supplemental Indenture, the New 4.90% Debentures, when duly authorized,
executed, authenticated and delivered in accordance with the terms of the
Indenture and the Third Supplemental Indenture, and upon the terms and subject
to the conditions described in the Registration Statement, will be legally
issued and will constitute valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except as such
enforcement is subject to (i) any applicable bankruptcy, insolvency,
reorganization or other law relating to or affecting creditors' rights generally
and (ii) general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law).
3. Assuming the due authorization, execution and delivery of the Fourth
Supplemental Indenture, the New 4.95% Debentures, when duly authorized,
executed, authenticated and delivered in accordance with the terms of the
Indenture and the Fourth Supplemental Indenture, and upon the terms and subject
to the conditions described in the Registration Statement, will be legally
issued and will constitute valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except as such
enforcement is subject to (i) any applicable bankruptcy, insolvency,
reorganization or other law relating to or affecting creditors' rights generally
and (ii) general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law).
<PAGE>
Pennzoil Company -3- June 30, 1998
We hereby consent to the filing of this opinion of counsel as Exhibit 5
to the Registration Statement and to the reference to us under "Legal Matters"
in the prospectus forming a part of the Registration Statement.
Very truly yours,
BAKER & BOTTS, L.L.P.
<PAGE>
EXHIBIT 8.1
June 30, 1998
002276.1269,1
Pennzoil Company
Pennzoil Place
P.O. Box 2967
Houston, TX 77252-2967
Dear Gentlemen:
As set forth in the Prospectus included in the Registration Statement on
Form S-4 (Registration No. 333-43003), as amended (the "Registration
Statement"), filed by you under the Securities Act of 1933, as amended,
relating to an Offer to Exchange Newly Issued 4.90% Exchangeable Senior
Debentures Due 2008 For a Portion of Outstanding 6 1/2% Exchangeable Senior
Debentures Due 2003 and an Offer to Exchange Newly Issued 4.95% Exchangeable
Senior Debentures For a Portion of Outstanding 4 3/4% Exchangeable Senior
Debentures Due 2003, certain legal matters in connection with the offering are
being passed upon for you by us. At your request, this opinion of counsel is
being furnished to you for filing as Exhibit 8.1 to the Registration
Statement. Defined terms used in this Prospectus have the same meaning when
used herein.
We hereby confirm, based on the assumptions and subject to the
qualifications and limitations set forth therein, that the statements
contained in the section of the Prospectus captioned "MATERIAL FEDERAL INCOME
TAX CONSEQUENCES," to the extent that such statements constitute statements of
law or legal conclusions, reflect our opinion, as of the date hereof, with
respect to the matters set forth therein. No opinion is expressed on matters
other than those specifically referred to herein.
Pursuant to the provisions of Rule 436(a) of the Rules and Regulations of
the Securities and Exchange Commission under the Securities Act of 1933, as
amended, we hereby consent to the inclusion as aforesaid of our opinion of
counsel under the caption "MATERIAL FEDERAL INCOME TAX CONSEQUENCES" in the
Prospectus which is included in the Registration Statement.
Very truly yours,
BAKER & BOTTS, L.L.P.
/s/ Stuart F. Schaffer
By___________________________________
<PAGE>
EXHIBIT 12.3
PENNZOIL COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS--PRO FORMA
<TABLE>
<CAPTION>
FOR THE THREE FOR THE TWELVE
MONTHS ENDED MONTHS ENDED
MARCH 31, DECEMBER 31,
1998 1997
------------- --------------
(DOLLAR AMOUNT EXPRESSED IN
THOUSANDS)
<S> <C> <C>
Income from continuing operations........................................................ $ 9,658 $ 180,255
Income tax provision..................................................................... 2,300 124,140
Interest charges......................................................................... 48,346 187,271
-------- ---------
Income before income tax provision and interest charges.................................. $ 60,304 $ 491,666
======== =========
Fixed charges............................................................................ $ 50,377 $ 200,356
======== =========
DETAIL OF INTEREST AND FIXED CHARGES:
Interest charges per Consolidated Statement of Income which includes amortization
of debt discount, expense and premium.................................................. $ 43,911 $ 176,891
Add: portion of rental expense representative of interest factor (1)..................... 6,466 23,465
-------- ---------
Total fixed charges................................................................. $ 50,377 $ 200,356
Less interest capitalized per Consolidated Statement of Income........................... 2,031 13,085
-------- ---------
Total interest charges.............................................................. $ 48,346 $ 187,271
======== =========
PRO FORMA ADJUSTMENTS--
PREFERRED STOCK--
Preferred dividends................................................................. $ 3,931 $ 15,726
Decrease in interest charges........................................................ 2,205 8,820
REFINANCING OF EXCHANGEABLE DEBENTURES--
Decrease in interest charges........................................................ 4,574 18,658
DISCONTINUED OPERATIONS--
Decrease in income from continuing operations....................................... 5,848 22,756
Decrease in income tax.............................................................. 5,149 20,536
Decrease in portion of rental expense representative of interest factor (1)......... 4,929 18,387
Decrease in net interest charges per Consolidated Statement of Income which
includes amortization of debt discount, expense and premium....................... 8,538 31,584
Decrease in capitalized interest.................................................... 255 7,441
RATIO OF EARNINGS TO FIXED CHARGES:
HISTORICAL--
Ratio of earnings to fixed charges.................................................. 1.20 2.45
======== =========
PRO FORMA PREFERRED STOCK AND REFINANCING OF EXCHANGEABLE DEBENTURES--
Ratio of earnings to fixed charges.................................................. 1.27 2.61
======== =========
PRO FORMA DISCONTINUED OPERATIONS--
Ratio of earnings to fixed charges.................................................. -- 2.70
======== =========
Amount by which fixed charges exceed earnings....................................... $ 815 --
======== =========
PRO FORMA PREFERRED STOCK, REFINANCING OF EXCHANGEABLE DEBENTURES AND
DISCONTINUED OPERATIONS--
Ratio of earnings to fixed charges.................................................. 1.06 2.93
======== =========
(1) Interest factor based on management's estimates and approximates one-third of rental expenses.
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Amendment No. 3 to Form S-4 Registration Statement (No. 333-
43003) of our report dated February 27, 1998 included in Pennzoil Company's
Annual Report on Form 10-K for the year ended December 31, 1997 and to all
references to our Firm included in this registration statement.
ARTHUR ANDERSEN LLP
Houston, Texas
June 30, 1998
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
TO ACCOMPANY 6 1/2% EXCHANGEABLE SENIOR DEBENTURES DUE 2003
OF
PENNZOIL COMPANY
TENDERED PURSUANT TO THE OFFER TO EXCHANGE
DATED JULY 1, 1998
THE 6 1/2% EXCHANGE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON FRIDAY, JULY 31, UNLESS THE 6
1/2% EXCHANGE OFFER IS EXTENDED.
TO: CHASE BANK OF TEXAS NATIONAL ASSOCIATION, EXCHANGE AGENT
By Mail: By Facsimile: By Hand or Overnight
(registered or certified (214) 672-5746 Courier:
mail recommended) c/o Chase Bank of Texas,
Chase Bank of Texas, Confirm by telephone to: National Association,
National (214) 672-5678 Corporate Trust Services
Association, Corporate 1201 Main, 18th Floor
Trust Services Dallas, Texas 75202
P.O. Box 2320 or
Dallas, Texas 75221-2320 Chase Texas Trust Company
55 Water Street, North
Building
Room 234, Windows 20 & 21
New York, New York 10041
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A NUMBER
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus, dated July 1, 1998
(the "Prospectus"), of Pennzoil Company, a Delaware corporation ("Pennzoil" or
the "Company"), which, together with this Letter of Transmittal (the "Letter
of Transmittal"), describes the Company's offer (the "6 1/2% Exchange Offer")
to issue its new 4.90% exchangeable senior debentures due 2008 (the "New 4.90%
Debentures") in exchange for a portion of its outstanding 6 1/2% exchangeable
senior debentures due 2003 (the "6 1/2% Debentures") and the Company's offer
to issue its new 4.95% exchangeable senior debentures due 2008 in exchange for
a portion of its outstanding 4 3/4% exchangeable senior debentures due 2003.
The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the 6 1/2% Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY
BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR ANY ADDITIONAL COPIES OF THE
PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE
AGENT.
<PAGE>
List below the aggregate principal amount of 6 1/2% Debentures to which this
Letter of Transmittal relates. If the space below is inadequate, the
certificate number(s), aggregate principal amount of 6 1/2% Debentures and the
principal amount of 6 1/2% Debentures tendered should be listed on a separate
signed schedule affixed hereto.
DESCRIPTION OF 6 1/2% DEBENTURES TENDERED
(SEE INSTRUCTION 8)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME(S) AND
ADDRESS(ES) OF
REGISTERED
HOLDER(S)
(PLEASE FILL IN AGGREGATE PRINCIPAL
EXACTLY AS PRINCIPAL AMOUNT OF 6
NAME(S) AMOUNT OF 6 1/2%
APPEAR(S) ON CERTIFICATE 1/2% DEBENTURES
CERTIFICATE(S)) NUMBER(S)* DEBENTURE(S) TENDERED**
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
TOTAL 6 1/2%
DEBENTURES.
- -------------------------------------------------------------------------------
Indicate in this box the order (by certificate number) in which 6 1/2%
Debentures are to be purchased in the event of proration.*** (Attach
additional signed list if necessary.)
</TABLE>
See Instruction 9.
1st: 2nd: 3rd: 4th: 5th:
* Need not be completed by holders tendering 6 1/2% Debentures by book-entry
transfer.
** Unless otherwise indicated in this column, a holder will be deemed to have
tendered the aggregate principal amount of all of the 6 1/2% Debentures
represented by the tendered certificates. See Instruction 2.
*** If you do not designate an order, then in the event less than all 6 1/2%
Debentures tendered are accepted due to proration, 6 1/2% Debentures will
be selected for acceptance by the Exchange Agent.
This Letter of Transmittal is to be used if certificates for 6 1/2%
Debentures are to be forwarded herewith. If delivery of 6 1/2% Debentures is
to be made through book-entry transfer into the Exchange Agent's account at
The Depository Trust Company ("DTC"), this Letter of Transmittal need not be
delivered; provided, however, that tenders of 6 1/2% Debentures must be
effected in accordance with DTC's Automated Tender Offer Program ("ATOP")
procedures and the procedures set forth in the Prospectus under the caption
"The Exchange Offers--Book-Entry Transfer."
Unless the context requires otherwise, the term "holder" for purposes of
this Letter of Transmittal means any person in whose name 6 1/2% Debentures
are registered, or any other person who has obtained a properly completed bond
power from the registered holder or any person whose 6 1/2% Debentures are
held of record by DTC who desires to deliver such 6 1/2% Debentures by book-
entry transfer at DTC.
Holders whose 6 1/2% Debentures are not immediately available or who cannot
deliver their 6 1/2% Debentures and all other documents required hereby to the
Exchange Agent prior to the Expiration Date may tender their 6 1/2% Debentures
according to the guaranteed delivery procedure set forth in the Prospectus
under the caption "The Exchange Offers--Guaranteed Delivery."
2
<PAGE>
(BOXES BELOW FOR USE BY ELIGIBLE INSTITUTIONS ONLY)
[_] CHECK HERE IF TENDERED DEBENTURES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE
THE FOLLOWING:
Name of Tendering Institution:_______________________________________________
Account Number:______________________________________________________________
Transaction Code Number:_____________________________________________________
[_] CHECK HERE IF TENDERED 6 1/2% DEBENTURES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s):_____________________________________________
Date of Execution of Notice of Guaranteed Delivery:__________________________
Name of Institution that Guaranteed Delivery:________________________________
If delivery is by book-entry transfer:_______________________________________
Name of Tendering Institution:_______________________________________________
Account Number:______________________________________________________________
Transaction Code Number:_____________________________________________________
3
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS SET FORTH
IN THIS LETTER OF TRANSMITTAL CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the 6 1/2% Exchange Offer,
the undersigned hereby tenders to the Company the above-described 6 1/2%
Debentures.
Subject to, and effective upon, acceptance for exchange of the 6 1/2%
Debentures tendered herewith in accordance with the terms and subject to the
conditions of the 6 1/2% Exchange Offer (including, if the 6 1/2% Exchange
Offer is extended or amended, the terms and conditions of any such extension
or amendment), the undersigned hereby exchanges, assigns and transfers to, or
upon the order of, the Company all right, title and interest in and to all the
6 1/2% Debentures. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent the true and lawful agent and attorney-in-fact of the
undersigned with respect to such 6 1/2% Debentures, with full power of
substitution and resubstitution (such power of attorney being deemed to be an
irrevocable power coupled with an interest), to:
(a) deliver certificates for such 6 1/2% Debentures, or transfer
ownership of such 6 1/2% Debentures on the account books maintained by DTC,
together, in any such case, with all accompanying evidences of transfer and
authenticity, to or upon the order of the Company upon receipt by the
Exchange Agent, as the undersigned's agent, of the New 4.90% Debentures for
which the 6 1/2% Debentures are exchanged;
(b) present certificates for such 6 1/2% Debentures for cancellation and
transfer on the books of the Company; and
(c) receive all benefits and otherwise exercise all rights of beneficial
ownership of such 6 1/2% Debentures, all in accordance with the terms of
the 6 1/2% Exchange Offer.
The undersigned hereby represents and warrants to the Company that:
(a) the undersigned has full power and authority to tender, exchange,
assign and transfer the 6 1/2% Debentures tendered hereby and to acquire
the New 4.90% Debentures issuable upon the exchange of such tendered 6 1/2%
Debentures;
(b) when and to the extent the Company accepts such 6 1/2% Debentures for
exchange, the Company will acquire good, marketable and unencumbered title
to the tendered 6 1/2% Debentures, free and clear of all security
interests, liens, restrictions, charges, encumbrances, conditional sales
agreements or other obligations relating to their sale or transfer, and not
subject to any adverse claim;
(c) upon request, the undersigned will execute and deliver any additional
document that the Exchange Agent or the Company deems necessary or
desirable to complete the assignment, transfer and exchange of the 6 1/2%
Debentures tendered hereby or transfer ownership of such 6 1/2% Debentures
on the account books maintained by DTC;
(d) the undersigned understands that tenders of 6 1/2% Debentures
pursuant to any one of the procedures described in the 6 1/2% Exchange
Offer and in the instructions hereto will constitute the undersigned's
acceptance of the terms and conditions of the 6 1/2% Exchange Offer,
including the undersigned's representation and warranty that:
(i) the undersigned has a net long position in 6 1/2% Debentures or
equivalent securities at least equal to the 6 1/2% Debentures tendered
within the meaning of Rule 14e-4 under the Securities Exchange Act of
1934, as amended (the "Exchange Act"); and
(ii) such tender of 6 1/2% Debentures otherwise complies with Rule
14e-4 of the Exchange Act; and
(e) the undersigned has read and agrees to all of the terms of the 6 1/2%
Exchange Offer.
4
<PAGE>
All authorities conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned, and
every obligation of the undersigned hereunder shall be binding upon the heirs,
personal representatives, successors, assigns, trustees in bankruptcy and
legal representatives of the undersigned. Except as stated in the 6 1/2%
Exchange Offer, this tender is irrevocable.
The undersigned understands that the 6 1/2% Exchange Offer will be for a
principal amount of 6 1/2% Debentures (the "6 1/2% Target Amount") that is
exchangeable into between 4.76 million and 6.00 million shares of Chevron
Stock under the Existing Exchange Rights. The 6 1/2% Target Amount will be
determined by reference to the Average Chevron Stock Price (as defined below).
See "The Exchange Offers--Target Amounts." The "Average Chevron Stock Price"
will be the average of the closing prices of Chevron Stock on the NYSE on the
two trading days ending immediately preceding the second trading day prior to
the 6 1/2% Expiration Date. The Company will not accept for exchange any 6
1/2% Debentures if the 6 1/2% Exchange Offer would result in less than $100
million in principal amount of New 4.90% Debentures being issued, which
condition may be waived by the Company.
The undersigned understands that the principal amount of New 4.90%
Debentures to be issued in exchange for 6 1/2% Debentures will be equal to the
product of (i) 103% of the Average Chevron Stock Price and (ii) the aggregate
number of shares of Chevron Stock for which the 6 1/2% Debentures tendered by
a holder are exchangeable as of the date that the Company accepts 6 1/2%
Debentures pursuant to the 6 1/2% Exchange Offer (the "6 1/2% Acceptance
Date").
Unless otherwise indicated under "Special Issuance Instructions," please
issue the certificate for the New 4.90% Debentures for any 6 1/2% Debentures
exchanged, and/or return the certificate(s) for any 6 1/2% Debentures not
exchanged, and issue checks in payment of the cash to be paid in lieu of
principal amounts of New 4.90% Debentures of less than $1,000 in the name(s)
of the undersigned (and, in the case of 6 1/2% Debentures tendered by book-
entry transfer, by credit to the account at DTC). Similarly, unless otherwise
indicated under "Special Delivery Instructions," please mail the certificate
for the New 4.90% Debentures, and/or any certificate(s) for 6 1/2% Debentures
not tendered or not exchanged (and accompanying documents, as appropriate),
and any checks to the undersigned at the address shown below the undersigned's
signatures. In the event that both "Special Issuance Instructions" and
"Special Delivery Instructions" are completed, please issue the certificate
for the New 4.90% Debentures for any 6 1/2% Debentures exchanged, and/or
return any 6 1/2% Debentures not exchanged in the name(s) of, and mail such
check and/or any certificates to, the person(s) so indicated. The undersigned
recognizes that the Company has no obligation, pursuant to the "Special
Issuance Instructions," to transfer any 6 1/2% Debentures from the name of the
registered holder(s) thereof if the Company does not accept for exchange any
of the 6 1/2% Debentures so tendered.
5
<PAGE>
THE UNDERSIGNED UNDERSTANDS THAT ACCEPTANCE OF 6 1/2% DEBENTURES
BY THE COMPANY FOR EXCHANGE WILL CONSTITUTE A BINDING AGREEMENT
BETWEEN THE UNDERSIGNED AND THE COMPANY UPON THE TERMS AND
SUBJECT TO THE CONDITIONS OF THE 6 1/2% EXCHANGE OFFER.
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 4, 6 AND 9)
(SEE INSTRUCTIONS 1, 4, 6 AND 9)
To be completed ONLY if the To be completed ONLY if the
certificate for the New 4.90% certificate for the New 4.90%
Debentures, and/or the Debentures, and/or the
certificate(s) for 6 1/2% certificate(s) for 6 1/2%
Debentures not accepted for Debentures not accepted for
exchange, and any check issued in exchange, and any check issued in
payment of the cash to be paid in payment of the cash to be paid in
lieu of principal amounts of New lieu of principal amounts of New
4.90% Debentures of less than 4.90% Debentures of less than
$1,000, are to be issued or paid $1,000, are to be mailed to
to or credited to the account of someone other than the
someone other than the undersigned, or to the undersigned
undersigned. at an address other than that
shown above.
Issue [_] Check and/or [_]
Certificate(s) to:
Deliver [_] Check and/or [_]
Certificates to:
Name(s)____________________________
(Please Print) Name(s)____________________________
(Please Print)
Address____________________________
Address____________________________
-----------------------------------
(Zip Code) -----------------------------------
----------------------------------- (Zip Code)
(Tax Identification or Social -----------------------------------
Security No.) (Tax Identification or Social
(complete accompanying Substitute Security No.)
Form W-9) (complete accompanying Substitute
Form W-9)
[_] Credit 6 1/2% Debentures
delivered by book-entry transfer
and not accepted for exchange to
the account set forth below:
Account Number:____________________
6
<PAGE>
IMPORTANT
TENDERING HOLDER(S) SIGN HERE
(PLEASE COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9)
------------------------------------------
------------------------------------------
SIGNATURE(S) OF HOLDER(S)
Dated: , 1998
If the holder is tendering any 6 1/2% Debentures, the Letter of Transmittal
must be signed by the registered holder(s) exactly as the name(s) appear(s)
on certificate(s) for the 6 1/2% Debentures or by any person(s) authorized
to become registered holder(s) by endorsements and documents transmitted
herewith or, if the 6 1/2% Debentures are held of record by DTC, the person
in whose name such 6 1/2% Debentures are registered on the books of DTC. If
signature is by a trustee, executor, administrator, guardian, attorney-in-
fact, officer of a corporation, or other person acting in a fiduciary or
representative capacity, please set forth the full title of such person. See
Instruction 3.
Name(s):_____________________________________________________________________
_____________________________________________________________________________
(Please Print)
Capacity (full title):_______________________________________________________
Address:_____________________________________________________________________
(Include Zip Code)
Area Code and Telephone No.:_________________________________________________
Tax Identification or Social Security No.:___________________________________
(SEE ACCOMPANYING SUBSTITUTE FORM W-9)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 6)
Name of Firm:________________________________________________________________
Authorized Signature:________________________________________________________
Name:________________________________________________________________________
_____________________________________________________________________________
(Please Print)
Title:_______________________________________________________________________
Address:_____________________________________________________________________
_____________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number:______________________________________________
Dated _________________________________________________________________, 1998
7
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE 6 1/2% EXCHANGE OFFER
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. Only a holder of the 6 1/2% Debentures may tender such 6 1/2%
Debentures in the 6 1/2% Exchange Offer. A holder who wishes to tender any 6
1/2% Debentures for exchange pursuant to the 6 1/2% Exchange Offer must
transmit a properly completed and duly executed Letter of Transmittal, or a
facsimile thereof, including any other required documents, to the Exchange
Agent prior to 5:00 p.m., New York City time, on the 6 1/2% Expiration Date.
In addition, either (i) certificates for such 6 1/2% Debentures must be
received by the Exchange Agent along with the Letter of Transmittal or (ii) a
timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of
such 6 1/2% Debentures, if such procedure is available, into the Exchange
Agent's account at DTC pursuant to the procedure for book-entry transfer
described below must be received by the Exchange Agent prior to the 6 1/2%
Expiration Date or (iii) the holder must comply with the guaranteed delivery
procedures described below. To be tendered effectively, the 6 1/2% Debentures,
Letter of Transmittal (or an Agent's Message) and other required documents
must be received by the Exchange Agent at the address set forth on the cover
under Exchange Agent prior to 5:00 p.m., New York City time, on the 6 1/2%
Expiration Date.
The term "Agent's Message" means a message transmitted by DTC and received
by the Exchange Agent and forming a part of a Book-Entry Confirmation, which
states that DTC has received an express acknowledgment from the participant
tendering 6 1/2% Debentures that is the subject of such Book-Entry
Confirmation that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that the Company may enforce such
agreement against such participant.
This Letter of Transmittal is to be used only if certificates for 6 1/2%
Debentures are delivered with it to the Exchange Agent (or such certificates
will be delivered pursuant to a Notice of Guaranteed Delivery previously sent
to the Exchange Agent) or if a tender for 6 1/2% Debentures is being made
concurrently pursuant to the procedure for tender by book-entry transfer set
forth in the 6 1/2% Exchange Offer. Certificates for all physically tendered 6
1/2% Debentures or confirmation of a book-entry transfer into the Exchange
Agent's account at DTC of 6 1/2% Debentures tendered electronically, together
in each case with a properly completed and duly executed Letter of Transmittal
or duly executed and manually signed photocopy of the Letter of Transmittal,
and any other documents required by this Letter of Transmittal, should be
mailed or delivered to the Exchange Agent at the appropriate address set forth
on the front page of this Letter of Transmittal and must be delivered to the
Exchange Agent on or before the 6 1/2% Expiration Date (as defined in the 6
1/2% Exchange Offer). DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE
DELIVERY TO THE EXCHANGE AGENT.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE 6 1/2% DEBENTURES,
AND ANY OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER
AND, EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY
WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY MAIL, IT
IS SUGGESTED THAT REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, BE USED.
If a holder desires to accept the 6 1/2% Exchange Offer and time will not
permit a Letter of Transmittal or 6 1/2% Debentures to reach the Exchange
Agent before the 6 1/2% Expiration Date or the procedure for book-entry
transfer cannot be completed on a timely basis, a tender may be effected if
the Exchange Agent has received at its office, prior to the 6 1/2% Expiration
Date, a letter, a telegram, or facsimile transmission from an Eligible
Institution setting forth the name and address of the tendering holder, the
name(s) in which the 6 1/2% Debentures are registered and, if the 6 1/2%
Debentures are held in certificated form, the certificate number of the 6 1/2%
Debentures to be tendered, and stating that the tender is being made thereby
and guaranteeing that within three trading days after the date of execution of
such letter, telegram, or facsimile transmission by the Eligible Institution,
the 6 1/2% Debentures, in proper form for transfer together with a properly
completed and duly executed Letter of Transmittal (and any other required
documents), or a confirmation of book-entry transfer of such 6 1/2% Debentures
into the Exchange Agent's account at DTC, will be delivered by such Eligible
Institution.
8
<PAGE>
Unless the 6 1/2% Debentures being tendered by the above-described method are
deposited with the Exchange Agent within the time period set forth above
(accompanied or preceded by a properly completed Letter of Transmittal and any
other required documents) or a confirmation of book-entry transfer of such 6
1/2% Debentures in the Exchange Agent's account at DTC in accordance with
DTC's ATOP procedures is received, the Company may, at its option, reject the
tender. Copies of a Notice of Guaranteed Delivery which may be used by
Eligible Institutions for the purposes described in this paragraph are
available from the Exchange Agent and the Information Agent.
No alternative, conditional, irregular, or contingent tenders will be
accepted. All tendering holders, by execution of this Letter of Transmittal
(or facsimile thereof), shall waive any right to receive notice of the
acceptance of the 6 1/2% Debentures for exchange.
2. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER); WITHDRAWALS. If less than all of the 6 1/2% Debentures evidenced by
a submitted certificate are to be tendered, the tendering holder(s) must fill
in the aggregate principal amount at maturity of 6 1/2% Debentures tendered in
the box above entitled "Principal Amount of 6 1/2% Debentures Tendered." A
newly issued certificate for 6 1/2% Debentures submitted but not tendered will
be sent to such tendering holder as soon as practicable after the 6 1/2%
Expiration Date, unless otherwise indicated in the appropriate box in this
Letter of Transmittal. The entire aggregate principal amount at maturity of 6
1/2% Debentures evidenced by certificates delivered to the Exchange Agent will
be deemed to have been tendered unless otherwise indicated.
Tenders of 6 1/2% Debentures pursuant to the 6 1/2% Exchange Offer may be
withdrawn at any time prior to the 6 1/2% Expiration Date and, unless accepted
for exchange by the Company, may be withdrawn at any time after 40 business
days after the date of the Prospectus. To be effective, a written,
telegraphic, telex, or facsimile transmission notice of withdrawal must be
timely received by the Exchange Agent. Any such notice of withdrawal must
specify the person(s) named in the Letter of Transmittal as having tendered 6
1/2% Debentures to be withdrawn, the certificate number(s) of the 6 1/2%
Debentures to be withdrawn, the aggregate principal amount at maturity of the
6 1/2% Debentures delivered for exchange, a statement that such holder(s) is
withdrawing its election to have such 6 1/2% Debentures exchanged and the
name(s) of the registered holder(s) of such 6 1/2% Debentures, and must be
signed by the holder(s) in the same manner as the original signature(s) on the
Letter of Transmittal (including any required signature guarantees) or be
accompanied by evidence satisfactory to the Company that the person
withdrawing the tender has succeeded to the beneficial ownership of the 6 1/2%
Debentures being withdrawn. The Exchange Agent will return properly withdrawn
6 1/2% Debentures promptly following receipt of notice of withdrawal. If 6
1/2% Debentures have been tendered pursuant to the procedure for book-entry
transfer, any notice of withdrawal must specify the name and number of the
account at DTC to be credited with the withdrawn 6 1/2% Debentures or
otherwise comply with DTC's procedures. All questions as to the validity of a
notice of withdrawal, including the time of receipt, will be determined by the
Company, and such determination will be final and binding on all parties.
Withdrawals of tenders of 6 1/2% Debentures may not be rescinded and any 6
1/2% Debentures withdrawn will thereafter be deemed not validly tendered for
purposes of the 6 1/2% Exchange Offer. Properly withdrawn 6 1/2% Debentures,
however, may be retendered by following the procedures therefor at any time
prior to the 6 1/2% Expiration Date.
3. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS. If this Letter of Transmittal is signed by the registered
holder(s) of the 6 1/2% Debentures tendered hereby, the signature must
correspond with the name(s) as written on the face of the certificates without
alteration, enlargement, or any change whatsoever.
If any of the 6 1/2% Debentures tendered hereby are owned of record by two
or more joint owners, all such owners must sign this Letter of Transmittal. If
any of the 6 1/2% Debentures tendered hereby are registered in different names
on different certificates, it will be necessary to complete, sign, and submit
as many separate copies of this Letter of Transmittal as there are different
registrations of 6 1/2% Debentures.
9
<PAGE>
When this Letter of Transmittal is signed by the registered holder(s) of 6
1/2% Debentures listed and tendered hereby, no endorsements of certificates or
separate written instruments of transfer or exchange are required. If this
Letter of Transmittal is signed by a person other than the registered
holder(s) of the 6 1/2% Debentures listed, such 6 1/2% Debentures must be
endorsed or accompanied by separate written instruments of transfer or
exchange in form satisfactory to the Company and duly executed by the
registered holder(s), signed exactly as the name(s) of the registered
holder(s) appear(s) on the 6 1/2% Debentures. If this Letter of Transmittal,
any certificates or separate written instruments of transfer or exchange are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such person should so indicate when signing, and, unless waived by
the Company, proper evidence satisfactory to the Company of their authority so
to act must be submitted. Endorsements on certificates or signatures on
separate written instruments of transfer or exchange required by this
Instruction 3 must be guaranteed by an Eligible Institution (as defined in
Instruction 4).
If the Letter of Transmittal is signed by a person other than the registered
holder of any 6 1/2% Debentures listed therein, such 6 1/2% Debentures must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such 6 1/2%
Debentures.
If this Letter of Transmittal or any certificate(s) or bond power(s) are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and must submit proper
evidence satisfactory to the Company of their authority so to act. If the
certificate has been issued in the fiduciary or representative capacity, no
additional documentation will be required.
4. GUARANTEE OF SIGNATURE. No signature guarantee is required if either:
(a) this Letter of Transmittal is signed by the registered holder of the
6 1/2% Debentures (which term, for purposes of this document, shall include
any participant of DTC whose name appears on a security position listing as
the owner of such 6 1/2% Debentures) exactly as the name of the registered
holder appears on the certificate tendered with this Letter of Transmittal
and payment and delivery are to be made directly to such owner unless such
owner has completed either the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" above; or
(b) such 6 1/2% Debentures are tendered for the account of a financial
institution (including most banks, savings and loan associations and
brokerage houses) that is a participant in the Security Transfer Agents
Medallion Program or The New York Stock Exchange Medallion Program or the
Stock Exchange Medallion Program (each such entity, an "Eligible
Institution").
In all other cases, an Eligible Institution must guarantee all signatures on
this Letter of Transmittal. See Instruction 3.
5. TRANSFER TAXES. The Company shall pay all transfer taxes, if any,
applicable to the transfer and exchange of 6 1/2% Debentures to it or its
order pursuant to the 6 1/2% Exchange Offer. If, however, certificates
representing 6 1/2% Debentures are not tendered or accepted for exchange, are
to be delivered to, or are to be registered or issued in the name of, any
person other than the registered holder(s) of such 6 1/2% Debentures tendered
hereby, or if a transfer tax is imposed for any reason other than the exchange
of 6 1/2% Debentures to the Company or its order pursuant to the 6 1/2%
Exchange Offer, the amount of any such transfer taxes (whether imposed on the
registered holder(s) or any other person) will be payable by the tendering
holder(s). If satisfactory evidence of payment of such taxes or exception
therefrom in not submitted herewith, the amount of such transfer taxes will be
billed directly to such tendering holder.
Except as provided in this Instruction 5, it will not be necessary for
transfer tax stamps to be affixed to the New Debentures listed in this Letter
of Transmittal.
10
<PAGE>
6. EXTENSIONS, AMENDMENTS AND TERMINATION. The Company expressly reserves
the right to (i) withdraw or terminate the 6 1/2% Exchange Offer and promptly
return the 6 1/2% Debentures, at any time, (a) if the 6 1/2% Exchange Offer
would result in less than $100 million in principal amount of the respective
series of New 4.90% Debentures being issued or upon the failure of any of the
conditions specified in "The Exchange Offers--Procedures for Tendering," (b)
if the Average Chevron Stock Price is less than $76.00 per share or is more
than $89.00 per share or (c) upon the occurrence of any of the other events
listed in "The Exchange Offers--Conditions of the Exchange Offers," (ii) waive
any condition to the 6 1/2% Exchange Offer and accept all the 6 1/2%
Debentures previously tendered, (iii) extend the 6 1/2% Expiration Date for
any reason and retain all 6 1/2% Debentures tendered until the 6 1/2%
Expiration Date, subject, however, to all withdrawal rights of holders (see
"The Exchange Offers--Withdrawal of Tenders") or (iv) amend or modify the
terms of the 6 1/2% Exchange Offer in any manner for any reason, including
(without limitation) the form of the consideration, the formula for
calculating the amount of the consideration to be paid pursuant to the 6 1/2%
Exchange Offer.
7. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. Any holder whose
certificates for 6 1/2% Debentures have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated on the
cover for further instructions.
8. INADEQUATE SPACE. If the space provided in the box captioned "Description
of 6 1/2% Debentures Tendered" is inadequate, the certificate numbers, the
aggregate principal amount of 6 1/2% Debentures represented by certificate(s)
and/or the principal amount of 6 1/2% Debentures tendered should be listed on
a separate signed schedule and attached to this Letter of Transmittal.
9. ORDER OF ACCEPTANCE FOR EXCHANGE IN EVENT OF PRORATION. Holders may
designate in the box on page 2 of this Letter of Transmittal the order in
which their 6 1/2% Debentures are to be accepted for exchange in the event the
order of exchange may have an effect on the federal income tax classification
of any gain.
10. BENEFICIAL OWNERS. Any beneficial owner whose 6 1/2% Debentures are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such beneficial owner's behalf, such
beneficial owner must, prior to completing and executing the Letter of
Transmittal (or delivering an Agent's Message) and delivering such beneficial
owner's 6 1/2% Debentures, either make appropriate arrangements to register
ownership of the 6 1/2% Debentures in such beneficial owner's name or obtain a
properly completed bond power from the registered holder. The transfer of
registered ownership may take considerable time and may not be able to be
completed prior to the 6 1/2% Expiration Date.
11. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS. If the certificate for
New Debentures, and/or the certificate(s) for 6 1/2% Debentures not tendered
or not purchased, and any check issued in payment of cash to be paid in lieu
of fractional amounts of New Debentures are to be issued in the name of a
person other than the signer of the Letter of Transmittal or if such
certificates or check are to be sent to someone other than the person signing
the Letter of Transmittal or to the signer at a different address, the boxes
captioned "Special Issuance Instructions" and/or "Special Delivery
Instructions" on this Letter of Transmittal should be completed as applicable,
and signatures must be guaranteed as described in Instruction 4. Holders
tendering 6 1/2% Debentures by book-entry transfer will have any 6 1/2%
Debentures not accepted for payment returned by crediting the account
maintained by such holder at DTC.
12. IRREGULARITIES. All questions as to the validity, form, eligibility
(including time of receipt), acceptance and withdrawal of tendered 6 1/2%
Debentures will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute
right to reject any and all 6 1/2% Debentures not properly tendered or any 6
1/2% Debentures the Company's acceptance of which would, in the opinion of
counsel for the Company, be unlawful. The Company also reserves the right to
waive any defects, irregularities or conditions of tender as to particular 6
1/2% Debentures. The Company's interpretation
11
<PAGE>
of the terms and conditions of the 6 1/2% Exchange Offer (including the
instructions in the Letter of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with
tenders of 6 1/2% Debentures must be cured within such time as the Company
shall determine. Although the Company intends to notify holders of defects or
irregularities with respect to tenders of 6 1/2% Debentures, neither the
Company, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of 6 1/2% Debentures will not be
deemed to have been made until such defects or irregularities have been cured
or waived. Any 6 1/2% Debentures received by the Exchange Agent that the
Company determines are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holders, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the 6 1/2% Expiration Date.
13. QUESTIONS AND REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions
and requests for assistance may be directed to, or additional copies of the 6
1/2% Exchange Offer, the Notice of Delivery and this Letter of Transmittal may
be obtained from, the Information Agent at the addresses and telephone numbers
set forth at the end of this Letter of Transmittal or from your broker,
dealer, commercial bank or trust company.
14. SUBSTITUTE FORM W-9. Except as described below under "Important Tax
Information," federal income tax laws require each tendering holder to provide
the Company, with a correct taxpayer identification number ("TIN") on the
Substitute Form W-9 which is provided below and to indicate whether the holder
is subject to backup withholding by crossing out Part 2 of the Substitute Form
W-9 if the holder is currently subject to backup withholding. Failure to
provide the information on such Form or to cross out Part 2 of such form if
applicable may subject the tendering holder to 31% federal income tax
withholding on payments made to the holder with respect to the New 4.90%
Debentures or in lieu of a fractional New 4.90% Debenture. The box in Part 3
of such Form may be checked if the tendering holder has not been issued a TIN
and has applied for a TIN or intends to apply for a TIN in the near future. If
the box in Part 3 is checked and the holder is not provided with a TIN within
sixty (60) days, the Company will withhold 31% on all such payments thereafter
until a TIN is provided to it.
15. DEFINITIONS. Capitalized terms used in this Letter of Transmittal and
not otherwise defined have the meanings given in the Prospectus.
12
<PAGE>
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A PHOTOCOPY THEREOF) TOGETHER WITH
6 1/2% DEBENTURE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL
OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT, OR THE NOTICE
OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT, PRIOR TO THE 6
1/2% EXPIRATION DATE (AS DEFINED IN THE 6 1/2% EXCHANGE OFFER).
IMPORTANT TAX INFORMATION
Under federal income tax law, a holder whose tendered 6 1/2% Debentures are
accepted for exchange is required to provide the Company with such holder's
correct taxpayer identification number ("TIN") on a Substitute Form W-9. If a
holder is an individual, the TIN is the holder's social security number. If
the Company is not provided with the correct TIN, the holder may be subject to
a penalty imposed by the Internal Revenue Service ("IRS"). In addition,
payments that are made to such holder with respect to New 4.90% Debentures
acquired pursuant to the 6 1/2% Exchange Offer, or in lieu of a fractional New
4.90% Debenture, may be subject to backup withholding.
If backup withholding applies, the Company is required to withhold 31% of
all payments with respect to the New 4.90% Debentures, or in lieu of a
fractional New 4.90% Debenture, made to a holder. Backup withholding is not an
additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained.
To prevent backup withholding on payments that are made to a holder with
respect to New 4.90% Debentures, or in lieu of a fractional New 4.90%
Debenture, the holder is required to notify the Company of his, her or its
correct TIN by completing the Substitute Form W-9 below, certifying that the
TIN provided on such Form is correct (or that such holder is awaiting a TIN)
and whether (i) the holder has been notified by the IRS that the holder is
subject to backup withholding as a result of a failure to report all interest
or dividends or (ii) the IRS has notified the holder that the holder is no
longer subject to backup withholding.
Certain holders (including, among others, corporations) are not subject to
these backup withholding requirements. A corporation must, however, complete
the Substitute Form W-9, including providing its TIN and indicating that it is
exempt from backup withholding, in order to establish its exemption from
backup withholding.
See the enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 for additional instructions.
13
<PAGE>
- -------------------------------------------------------------------------------
PAYER'S NAME:
PART I--Taxpayer ----------------------
Identification Number-- Social Security
Enter taxpayer Number
SUBSTITUTE identification number in OR
FORM W-9 the box at right. (For most ----------------------
individuals, this is your Employer
social security number. If Identification Number
you do not have a number,
see Obtaining a Number in
the enclosed Guidelines.)
Certify by signing and
dating below.
DEPARTMENT OF THE
TREASURY
INTERNAL REVENUE (If awaiting TIN write
SERVICE "Applied For"
and complete the
Certificate of
Awaiting
Taxpayer
Identification Number
below)
PAYER'S REQUEST FOR NOTE: If the account is in more than one name, see
TAXPAYER the chart in the enclosed Guidelines to determine
which number to give the payer.
IDENTIFICATION
NUMBER (TIN)
--------------------------------------------------------
PART II--For Payees Exempt From Backup Withholding,
see the enclosed Guidelines and complete as
instructed therein.
--------------------------------------------------------
- -------------------------------------------------------------------------------
CERTIFICATION--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me), and
(2) I am not subject to backup withholding either because I have not been
notified by the Internal Revenue Service (the "IRS") that I am subject to
backup withholding as a result of failure to report all interest or
dividends, or the IRS has notified me that I am no longer subject to
backup withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have
been notified by the IRS that you are subject to backup withholding because
of underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding you
receive another notification from the IRS that you are no longer subject to
backup withholding, do not cross out item (2). (Also see instructions in the
enclosed Guidelines.)
- -------------------------------------------------------------------------------
Signature ______________________________________ Date: ________________, 1998
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU WITH RESPECT TO THE NEW
4.90% DEBENTURES, OR IN LIEU OF A FRACTIONAL 4.90% DEBENTURE. FOR
ADDITIONAL DETAILS, PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ENTERED "APPLIED FOR"
INSTEAD OF SUPPLYING A TAXPAYER IDENTIFICATION NUMBER ABOVE
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number to the
payor (a) prior to the acceptance date, 31% of any cash paid to me in lieu of
a fractional New 4.90% Debenture will be withheld and (b) within 60 days, 31%
of all reportable payments made to me thereafter will be withheld until I
provide a number.
---------------------------- __________________1998
Signature Date
14
<PAGE>
The Exchange Agent:
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
By Mail: By Facsimile: By Hand or Overnight
(registered or certified (214) 672-5746 Courier:
mail recommended) c/o Chase Bank of Texas,
Chase Bank of Texas, Confirm by telephone to: National Association,
National (214) 672-5678 Corporate Trust Services
Association, Corporate 1201 Main, 18th Floor
Trust Services Dallas, Texas 75202
P.O. Box 2320 or
Dallas, Texas 75221-2320 Chase Texas Trust Company
55 Water Street, North
Building
Room 234, Windows 20 & 21
New York, New York 10041
The Information Agent:
D. F. KING & CO., INC.
CALL TOLL FREE 1-800-735-3591
77 Water Street Royex House
New York, New York 10005 Aldermanbury Square
(212) 269-5550 London EC2V 7HR
(Call Collect) 011-44-171-600-5005
(Call Collect)
The Dealer Manager is:
PAINEWEBBER INCORPORATED
1285 Avenue of the Americas
13th Floor
New York, New York 10019
Telephone: (800) 894-0094 (toll free)
Important: This Letter of Transmittal or a photocopy hereof or, in the case of
a book-entry transfer, an Agent's Message in lieu of the Letter of
Transmittal (together with certificates for the 6 1/2% Debentures
being tendered and all other required documents), or a Notice of
Guaranteed Delivery must be received by the Exchange Agent prior to
5:00 p.m., New York City Time, on the 6 1/2% Expiration Date.
15
<PAGE>
EXHIBIT 99.2
LETTER OF TRANSMITTAL
TO ACCOMPANY 4 3/4% EXCHANGEABLE SENIOR DEBENTURES DUE 2003
OF
PENNZOIL COMPANY
TENDERED PURSUANT TO THE OFFER TO EXCHANGE
DATED JULY 1, 1998
THE 4 3/4% EXCHANGE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON FRIDAY, JULY 31, UNLESS THE 4
3/4% EXCHANGE OFFER IS EXTENDED.
TO: CHASE BANK OF TEXAS NATIONAL ASSOCIATION, EXCHANGE AGENT
By Mail: By Facsimile: By Hand or Overnight
(registered or certified (214) 672-5746 Courier:
mail recommended) c/o Chase Bank of Texas,
Chase Bank of Texas, National Association,
National Confirm by telephone to: Corporate Trust Services
Association, Corporate (214) 672-5678 1201 Main, 18th Floor
Trust Services Dallas, Texas 75202
P.O. Box 2320 or
Dallas, Texas 75221-2320 Chase Texas Trust Company
55 Water Street, North
Building
Room 234, Windows 20 & 21
New York, New York 10041
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A NUMBER
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
Deliveries to the Book-entry Transfer Facility will not constitute valid
Delivery to the Depository.
The undersigned acknowledges receipt of the Prospectus, dated July 1, (the
"Prospectus"), of Pennzoil Company, a Delaware corporation ("Pennzoil" or the
"Company"), which, together with this Letter of Transmittal (the "Letter of
Transmittal"), describes the Company's offer to issue its new 4.90%
exchangeable senior debentures due 2008 in exchange for a portion of its
outstanding 6 1/2% exchangeable senior debentures due 2003 and the Company's
offer (the "4 3/4% Exchange Offer") to issue its new 4.95% exchangeable senior
debentures due 2008 (the "New 4.95% Debentures") in exchange for a portion of
its outstanding 4 3/4% exchangeable senior debentures due 2003 (the "4 3/4%
Debentures").
The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the 4 3/4% Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY
BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR ANY ADDITIONAL COPIES OF THE
PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE
AGENT.
<PAGE>
List below the aggregate principal amount of 4 3/4% Debentures to which this
Letter of Transmittal relates. If the space below is inadequate, the
certificate number(s), aggregate principal amount of 4 3/4% Debentures and the
principal amount of 4 3/4% Debentures tendered should be listed on a separate
signed schedule affixed hereto.
DESCRIPTION OF 4 3/4% DEBENTURES TENDERED
(SEE INSTRUCTION 8)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME(S) AND
ADDRESS(ES) OF
REGISTERED
HOLDER(S)
(PLEASE FILL IN AGGREGATE PRINCIPAL
EXACTLY AS PRINCIPAL AMOUNT OF 4
NAME(S) AMOUNT OF 4 3/4%
APPEAR(S) ON CERTIFICATE 3/4% DEBENTURES
CERTIFICATE(S)) NUMBER(S)* DEBENTURE(S) TENDERED**
- -------------------------------------------
<S> <C> <C> <C>
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
TOTAL 4 3/4%
DEBENTURES.
- -------------------------------------------------------------------------------
Indicate in this box the order (by certificate number) in which 4 3/4%
Debentures are to be purchased in the event of proration.*** (Attach
additional signed list if necessary.)
</TABLE>
See Instruction 9.
1st: 2nd: 3rd: 4th: 5th:
* Need not be completed by holders tendering 4 3/4% Debentures by book-entry
transfer.
** Unless otherwise indicated in this column, a holder will be deemed to have
tendered the aggregate principal amount of all of the 4 3/4% Debentures
represented by the tendered certificates. See Instruction 2.
*** If you do not designate an order, then in the event less than all 4 3/4%
Debentures tendered are accepted due to proration, 4 3/4% Debentures will
be selected for acceptance by the Exchange Agent.
This Letter of Transmittal is to be used if certificates for 4 3/4%
Debentures are to be forwarded herewith. If delivery of 4 3/4% Debentures is
to be made through book-entry transfer into the Exchange Agent's account at
The Depository Trust Company ("DTC"), this Letter of Transmittal need not be
delivered; provided, however, that tenders of 4 3/4% Debentures must be
effected in accordance with DTC's Automated Tender Offer Program ("ATOP")
procedures and the procedures set forth in the Prospectus under the caption
"The Exchange Offers--Book-Entry Transfer."
Unless the context requires otherwise, the term "holder" for purposes of
this Letter of Transmittal means any person in whose name 4 3/4% Debentures
are registered, or any other person who has obtained a properly completed bond
power from the registered holder or any person whose 4 3/4% Debentures are
held of record by DTC who desires to deliver such 4 3/4% Debentures by book-
entry transfer at DTC.
Holders whose 4 3/4% Debentures are not immediately available or who cannot
deliver their 4 3/4% Debentures and all other documents required hereby to the
Exchange Agent prior to the Expiration Date may tender their 4 3/4% Debentures
according to the guaranteed delivery procedure set forth in the Prospectus
under the caption "The Exchange Offers--Guaranteed Delivery."
2
<PAGE>
(BOXES BELOW FOR USE BY ELIGIBLE INSTITUTIONS ONLY)
[_] CHECK HERE IF TENDERED DEBENTURES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE
THE FOLLOWING:
Name of Tendering Institution:_______________________________________________
Account Number:______________________________________________________________
Transaction Code Number:_____________________________________________________
[_] CHECK HERE IF TENDERED 4 3/4% DEBENTURES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s):_____________________________________________
Date of Execution of Notice of Guaranteed Delivery:__________________________
Name of Institution that Guaranteed Delivery:________________________________
If delivery is by book-entry transfer:_______________________________________
Name of Tendering Institution:_______________________________________________
Account Number:______________________________________________________________
Transaction Code Number:_____________________________________________________
3
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS SET FORTH
IN THIS LETTER OF TRANSMITTAL CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the 4 3/4% Exchange Offer,
the undersigned hereby tenders to the Company the above-described 4 3/4%
Debentures.
Subject to, and effective upon, acceptance for exchange of the 4 3/4%
Debentures tendered herewith in accordance with the terms and subject to the
conditions of the 4 3/4% Exchange Offer (including, if the 4 3/4% Exchange
Offer is extended or amended, the terms and conditions of any such extension
or amendment), the undersigned hereby exchanges, assigns and transfers to, or
upon the order of, the Company all right, title and interest in and to all the
4 3/4% Debentures. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent the true and lawful agent and attorney-in-fact of the
undersigned with respect to such 4 3/4% Debentures, with full power of
substitution and resubstitution (such power of attorney being deemed to be an
irrevocable power coupled with an interest), to:
(a) deliver certificates for such 4 3/4% Debentures, or transfer
ownership of such 4 3/4% Debentures on the account books maintained by DTC,
together, in any such case, with all accompanying evidences of transfer and
authenticity, to or upon the order of the Company upon receipt by the
Exchange Agent, as the undersigned's agent, of the New 4.95% Debentures for
which the 4 3/4% Debentures are exchanged;
(b) present certificates for such 4 3/4% Debentures for cancellation and
transfer on the books of the Company; and
(c) receive all benefits and otherwise exercise all rights of beneficial
ownership of such 4 3/4% Debentures, all in accordance with the terms of
the 4 3/4% Exchange Offer.
The undersigned hereby represents and warrants to the Company that:
(a) the undersigned has full power and authority to tender, exchange,
assign and transfer the 4 3/4% Debentures tendered hereby and to acquire
the New 4.95% Debentures issuable upon the exchange of such tendered 4 3/4%
Debentures;
(b) when and to the extent the Company accepts such 4 3/4% Debentures for
exchange, the Company will acquire good, marketable and unencumbered title
to the tendered 4 3/4% Debentures, free and clear of all security
interests, liens, restrictions, charges, encumbrances, conditional sales
agreements or other obligations relating to their sale or transfer, and not
subject to any adverse claim;
(c) upon request, the undersigned will execute and deliver any additional
document that the Exchange Agent or the Company deems necessary or
desirable to complete the assignment, transfer and exchange of the 4 3/4%
Debentures tendered hereby or transfer ownership of such 4 3/4% Debentures
on the account books maintained by DTC;
(d) the undersigned understands that tenders of 4 3/4% Debentures
pursuant to any one of the procedures described in the 4 3/4% Exchange
Offer and in the instructions hereto will constitute the undersigned's
acceptance of the terms and conditions of the 4 3/4% Exchange Offer,
including the undersigned's representation and warranty that:
(i) the undersigned has a net long position in 4 3/4% Debentures or
equivalent securities at least equal to the 4 3/4% Debentures tendered
within the meaning of Rule 14e-4 under the Securities Exchange Act of
1934, as amended (the "Exchange Act"); and
(ii) such tender of 4 3/4% Debentures otherwise complies with Rule
14e-4 of the Exchange Act; and
(e) the undersigned has read and agrees to all of the terms of the 4 3/4%
Exchange Offer.
4
<PAGE>
All authorities conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned, and
every obligation of the undersigned hereunder shall be binding upon the heirs,
personal representatives, successors, assigns, trustees in bankruptcy and
legal representatives of the undersigned. Except as stated in the 4 3/4%
Exchange Offer, this tender is irrevocable.
The undersigned understands that the 4 3/4% Exchange Offer will be for a
principal amount of 4 3/4% Debentures (the "4 3/4% Target Amount") that is
exchangeable into between 3.40 million and 4.29 million shares of Chevron
Stock under the Existing Exchange Rights. The 4 3/4% Target Amount will be
determined by reference to the Average Chevron Stock Price (as defined below).
See "The Exchange Offers--Target Amounts." The "Average Chevron Stock Price"
will be the average of the closing prices of Chevron Stock on the NYSE on the
two trading days ending immediately preceding the second trading day prior to
the 4 3/4% Expiration Date. The Company will not accept for exchange any 4
3/4% Debentures if the 4 3/4% Exchange Offer would result in less than $100
million in principal amount of New 4.95% Debentures being issued, which
condition may be waived by the Company.
The undersigned understands that the principal amount of New 4.95%
Debentures to be issued in exchange for 4 3/4% Debentures will be equal to the
product of (i) 103% of the Average Chevron Stock Price and (ii) the aggregate
number of shares of Chevron Stock for which the 4 3/4% Debentures tendered by
a holder are exchangeable as of the date that the Company accepts 4 3/4%
Debentures pursuant to the 4 3/4% Exchange Offer (the "4 3/4% Acceptance
Date").
Unless otherwise indicated under "Special Issuance Instructions," please
issue the certificate for the New 4.95% Debentures for any 4 3/4% Debentures
exchanged, and/or return the certificate(s) for any 4 3/4% Debentures not
exchanged, and issue checks in payment of the cash to be paid in lieu of
principal amounts of New 4.95% Debentures of less than $1,000 in the name(s)
of the undersigned (and, in the case of 4 3/4% Debentures tendered by book-
entry transfer, by credit to the account at DTC). Similarly, unless otherwise
indicated under "Special Delivery Instructions," please mail the certificate
for the New 4.95% Debentures, and/or any certificate(s) for 4 3/4% Debentures
not tendered or not exchanged (and accompanying documents, as appropriate),
and any checks to the undersigned at the address shown below the undersigned's
signatures. In the event that both "Special Issuance Instructions" and
"Special Delivery Instructions" are completed, please issue the certificate
for the New 4.95% Debentures for any 4 3/4% Debentures exchanged, and/or
return any 4 3/4% Debentures not exchanged in the name(s) of, and mail such
check and/or any certificates to, the person(s) so indicated. The undersigned
recognizes that the Company has no obligation, pursuant to the "Special
Issuance Instructions," to transfer any 4 3/4% Debentures from the name of the
registered holder(s) thereof if the Company does not accept for exchange any
of the 4 3/4% Debentures so tendered.
5
<PAGE>
THE UNDERSIGNED UNDERSTANDS THAT ACCEPTANCE OF 4 3/4% DEBENTURES
BY THE COMPANY FOR EXCHANGE WILL CONSTITUTE A BINDING AGREEMENT
BETWEEN THE UNDERSIGNED AND THE COMPANY UPON THE TERMS AND
SUBJECT TO THE CONDITIONS OF THE 4 3/4% EXCHANGE OFFER.
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 4, 6 AND 9)
(SEE INSTRUCTIONS 1, 4, 6 AND 9)
To be completed ONLY if the To be completed ONLY if the
certificate for the New 4.95% certificate for the New 4.95%
Debentures, and/or the Debentures, and/or the
certificate(s) for 4 3/4% certificate(s) for 4 3/4%
Debentures not accepted for Debentures not accepted for
exchange, and any check issued in exchange, and any check issued in
payment of the cash to be paid in payment of the cash to be paid in
lieu of principal amounts of New lieu of principal amounts of New
4.95% Debentures of less than 4.95% Debentures of less than
$1,000, are to be issued or paid $1,000, are to be mailed to
to or credited to the account of someone other than the
someone other than the undersigned, or to the undersigned
undersigned. at an address other than that
shown above.
Issue [_] Check and/or [_]
Certificate(s) to:
Deliver [_] Check and/or [_]
Certificates to:
Name(s)____________________________
(Please Print) Name(s)____________________________
(Please Print)
Address____________________________
Address____________________________
-----------------------------------
(Zip Code) -----------------------------------
----------------------------------- (Zip Code)
(Tax Identification or Social -----------------------------------
Security No.) (Tax Identification or Social
(complete accompanying Substitute Security No.)
Form W-9)
[_] Credit4 3/4% Debentures (complete accompanying Substitute
delivered by book-entry transfer Form W-9)
and not accepted for exchange to
the account set forth below:
Account Number:____________________
6
<PAGE>
IMPORTANT
TENDERING HOLDER(S) SIGN HERE
(PLEASE COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9)
------------------------------------------
------------------------------------------
SIGNATURE(S) OF HOLDER(S)
Dated: _______________, 1998
If the holder is tendering any 4 3/4% Debentures, the Letter of Transmittal
must be signed by the registered holder(s) exactly as the name(s) appear(s)
on certificate(s) for the 4 3/4% Debentures or by any person(s) authorized
to become registered holder(s) by endorsements and documents transmitted
herewith or, if the 4 3/4% Debentures are held of record by DTC, the person
in whose name such 4 3/4% Debentures are registered on the books of DTC. If
signature is by a trustee, executor, administrator, guardian, attorney-in-
fact, officer of a corporation, or other person acting in a fiduciary or
representative capacity, please set forth the full title of such person. See
Instruction 3.
Name(s):_____________________________________________________________________
_____________________________________________________________________________
(Please Print)
Capacity (full title):_______________________________________________________
Address:_____________________________________________________________________
(Include Zip Code)
Area Code and Telephone No.:_________________________________________________
Tax Identification or Social Security No.:___________________________________
(SEE ACCOMPANYING SUBSTITUTE FORM W-9)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 6)
Name of Firm:________________________________________________________________
Authorized Signature:________________________________________________________
Name:________________________________________________________________________
(Please Print)
Title:_______________________________________________________________________
Address:_____________________________________________________________________
_____________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number:______________________________________________
Dated _________________________________________________________________, 1998
7
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE 4 3/4% EXCHANGE OFFER
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. Only a holder of the 4 3/4% Debentures may tender such 4 3/4%
Debentures in the 4 3/4% Exchange Offer. A holder who wishes to tender any 4
3/4% Debentures for exchange pursuant to the 4 3/4% Exchange Offer must
transmit a properly completed and duly executed Letter of Transmittal, or a
facsimile thereof, including any other required documents, to the Exchange
Agent prior to 5:00 p.m., New York City time, on the 4 3/4% Expiration Date.
In addition, either (i) certificates for such 4 3/4% Debentures must be
received by the Exchange Agent along with the Letter of Transmittal or (ii) a
timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of
such 4 3/4% Debentures, if such procedure is available, into the Exchange
Agent's account at DTC pursuant to the procedure for book-entry transfer
described below must be received by the Exchange Agent prior to the 4 3/4%
Expiration Date or (iii) the holder must comply with the guaranteed delivery
procedures described below. To be tendered effectively, the 4 3/4% Debentures,
Letter of Transmittal (or an Agent's Message) and other required documents
must be received by the Exchange Agent at the address set forth on the cover
under Exchange Agent prior to 5:00 p.m., New York City time, on the 4 3/4%
Expiration Date.
The term "Agent's Message" means a message transmitted by DTC and received
by the Exchange Agent and forming a part of a Book-Entry Confirmation, which
states that DTC has received an express acknowledgment from the participant
tendering 4 3/4% Debentures that is the subject of such Book-Entry
Confirmation that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that the Company may enforce such
agreement against such participant.
This Letter of Transmittal is to be used only if certificates for 4 3/4%
Debentures are delivered with it to the Exchange Agent (or such certificates
will be delivered pursuant to a Notice of Guaranteed Delivery previously sent
to the Exchange Agent) or if a tender for 4 3/4% Debentures is being made
concurrently pursuant to the procedure for tender by book-entry transfer set
forth in the 4 3/4% Exchange Offer. Certificates for all physically tendered 4
3/4% Debentures or confirmation of a book-entry transfer into the Exchange
Agent's account at DTC of 4 3/4% Debentures tendered electronically, together
in each case with a properly completed and duly executed Letter of Transmittal
or duly executed and manually signed photocopy of the Letter of Transmittal,
and any other documents required by this Letter of Transmittal, should be
mailed or delivered to the Exchange Agent at the appropriate address set forth
on the front page of this Letter of Transmittal and must be delivered to the
Exchange Agent on or before the 4 3/4% Expiration Date (as defined in the 4
3/4% Exchange Offer). DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE
DELIVERY TO THE EXCHANGE AGENT.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE 4 3/4% DEBENTURES,
AND ANY OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER
AND, EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY
WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY MAIL, IT
IS SUGGESTED THAT REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, BE USED.
If a holder desires to accept the 4 3/4% Exchange Offer and time will not
permit a Letter of Transmittal or 4 3/4% Debentures to reach the Exchange
Agent before the 4 3/4% Expiration Date or the procedure for book-entry
transfer cannot be completed on a timely basis, a tender may be effected if
the Exchange Agent has received at its office, prior to the 4 3/4% Expiration
Date, a letter, a telegram, or facsimile transmission from an Eligible
Institution setting forth the name and address of the tendering holder, the
name(s) in which the 4 3/4% Debentures are registered and, if the 4 3/4%
Debentures are held in certificated form, the certificate number of the 4 3/4%
Debentures to be tendered, and stating that the tender is being made thereby
and guaranteeing that within three trading days after the date of execution of
such letter, telegram, or facsimile transmission by the Eligible Institution,
the 4 3/4% Debentures, in proper form for transfer together with a properly
completed and duly executed Letter of Transmittal (and any other required
documents), or a confirmation of book-entry transfer of such 4 3/4% Debentures
into the Exchange Agent's account at DTC, will be delivered by such Eligible
Institution.
8
<PAGE>
Unless the 4 3/4% Debentures being tendered by the above-described method are
deposited with the Exchange Agent within the time period set forth above
(accompanied or preceded by a properly completed Letter of Transmittal and any
other required documents) or a confirmation of book-entry transfer of such 4
3/4% Debentures in the Exchange Agent's account at DTC in accordance with
DTC's ATOP procedures is received, the Company may, at its option, reject the
tender. Copies of a Notice of Guaranteed Delivery which may be used by
Eligible Institutions for the purposes described in this paragraph are
available from the Exchange Agent and the Information Agent.
No alternative, conditional, irregular, or contingent tenders will be
accepted. All tendering holders, by execution of this Letter of Transmittal
(or facsimile thereof), shall waive any right to receive notice of the
acceptance of the 4 3/4% Debentures for exchange.
2. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER); WITHDRAWALS. If less than all of the 4 3/4% Debentures evidenced by
a submitted certificate are to be tendered, the tendering holder(s) must fill
in the aggregate principal amount at maturity of 4 3/4% Debentures tendered in
the box above entitled "Principal Amount of 4 3/4% Debentures Tendered." A
newly issued certificate for 4 3/4% Debentures submitted but not tendered will
be sent to such tendering holder as soon as practicable after the 4 3/4%
Expiration Date, unless otherwise indicated in the appropriate box in this
Letter of Transmittal. The entire aggregate principal amount at maturity of 4
3/4% Debentures evidenced by certificates delivered to the Exchange Agent will
be deemed to have been tendered unless otherwise indicated.
Tenders of 4 3/4% Debentures pursuant to the 4 3/4% Exchange Offer may be
withdrawn at any time prior to the 4 3/4% Expiration Date and, unless accepted
for exchange by the Company, may be withdrawn at any time after 40 business
days after the date of the Prospectus. To be effective, a written,
telegraphic, telex, or facsimile transmission notice of withdrawal must be
timely received by the Exchange Agent. Any such notice of withdrawal must
specify the person(s) named in the Letter of Transmittal as having tendered 4
3/4% Debentures to be withdrawn, the certificate number(s) of the 4 3/4%
Debentures to be withdrawn, the aggregate principal amount at maturity of the
4 3/4% Debentures delivered for exchange, a statement that such holder(s) is
withdrawing its election to have such 4 3/4% Debentures exchanged and the
name(s) of the registered holder(s) of such 4 3/4% Debentures, and must be
signed by the holder(s) in the same manner as the original signature(s) on the
Letter of Transmittal (including any required signature guarantees) or be
accompanied by evidence satisfactory to the Company that the person
withdrawing the tender has succeeded to the beneficial ownership of the 4 3/4%
Debentures being withdrawn. The Exchange Agent will return properly withdrawn
4 3/4% Debentures promptly following receipt of notice of withdrawal. If 4
3/4% Debentures have been tendered pursuant to the procedure for book-entry
transfer, any notice of withdrawal must specify the name and number of the
account at DTC to be credited with the withdrawn 4 3/4% Debentures or
otherwise comply with DTC's procedures. All questions as to the validity of a
notice of withdrawal, including the time of receipt, will be determined by the
Company, and such determination will be final and binding on all parties.
Withdrawals of tenders of 4 3/4% Debentures may not be rescinded and any 4
3/4% Debentures withdrawn will thereafter be deemed not validly tendered for
purposes of the 4 3/4% Exchange Offer. Properly withdrawn 4 3/4% Debentures,
however, may be retendered by following the procedures therefor at any time
prior to the 4 3/4% Expiration Date.
3. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS. If this Letter of Transmittal is signed by the registered
holder(s) of the 4 3/4% Debentures tendered hereby, the signature must
correspond with the name(s) as written on the face of the certificates without
alteration, enlargement, or any change whatsoever.
If any of the 4 3/4% Debentures tendered hereby are owned of record by two
or more joint owners, all such owners must sign this Letter of Transmittal. If
any of the 4 3/4% Debentures tendered hereby are registered in different names
on different certificates, it will be necessary to complete, sign, and submit
as many separate copies of this Letter of Transmittal as there are different
registrations of 4 3/4% Debentures.
When this Letter of Transmittal is signed by the registered holder(s) of 4
3/4% Debentures listed and tendered hereby, no endorsements of certificates or
separate written instruments of transfer or exchange are required. If
9
<PAGE>
this Letter of Transmittal is signed by a person other than the registered
holder(s) of the 4 3/4% Debentures listed, such 4 3/4% Debentures must be
endorsed or accompanied by separate written instruments of transfer or
exchange in form satisfactory to the Company and duly executed by the
registered holder(s), signed exactly as the name(s) of the registered
holder(s) appear(s) on the 4 3/4% Debentures. If this Letter of Transmittal,
any certificates or separate written instruments of transfer or exchange are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such person should so indicate when signing, and, unless waived by
the Company, proper evidence satisfactory to the Company of their authority so
to act must be submitted. Endorsements on certificates or signatures on
separate written instruments of transfer or exchange required by this
Instruction 3 must be guaranteed by an Eligible Institution (as defined in
Instruction 4).
If the Letter of Transmittal is signed by a person other than the registered
holder of any 4 3/4% Debentures listed therein, such 4 3/4% Debentures must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such 4 3/4%
Debentures.
If this Letter of Transmittal or any certificate(s) or bond power(s) are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and must submit proper
evidence satisfactory to the Company of their authority so to act. If the
certificate has been issued in the fiduciary or representative capacity, no
additional documentation will be required.
4. GUARANTEE OF SIGNATURE. No signature guarantee is required if either:
(a) this Letter of Transmittal is signed by the registered holder of the
4 3/4% Debentures (which term, for purposes of this document, shall include
any participant of DTC whose name appears on a security position listing as
the owner of such 4 3/4% Debentures) exactly as the name of the registered
holder appears on the certificate tendered with this Letter of Transmittal
and payment and delivery are to be made directly to such owner unless such
owner has completed either the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" above; or
(b) such 4 3/4% Debentures are tendered for the account of a financial
institution (including most banks, savings and loan associations and
brokerage houses) that is a participant in the Security Transfer Agents
Medallion Program or The New York Stock Exchange Medallion Program or the
Stock Exchange Medallion Program (each such entity, an "Eligible
Institution").
In all other cases, an Eligible Institution must guarantee all signatures on
this Letter of Transmittal. See Instruction 3.
5. TRANSFER TAXES. The Company shall pay all transfer taxes, if any,
applicable to the transfer and exchange of 4 3/4% Debentures to it or its
order pursuant to the 4 3/4% Exchange Offer. If, however, certificates
representing 4 3/4% Debentures are not tendered or accepted for exchange, are
to be delivered to, or are to be registered or issued in the name of, any
person other than the registered holder(s) of such 4 3/4% Debentures tendered
hereby, or if a transfer tax is imposed for any reason other than the exchange
of 4 3/4% Debentures to the Company or its order pursuant to the 4 3/4%
Exchange Offer, the amount of any such transfer taxes (whether imposed on the
registered holder(s) or any other person) will be payable by the tendering
holder(s). If satisfactory evidence of payment of such taxes or exception
therefrom in not submitted herewith, the amount of such transfer taxes will be
billed directly to such tendering holder.
Except as provided in this Instruction 5, it will not be necessary for
transfer tax stamps to be affixed to the New Debentures listed in this Letter
of Transmittal.
6. EXTENSIONS, AMENDMENTS AND TERMINATION. The Company expressly reserves
the right to (i) withdraw or terminate the 4 3/4% Exchange Offer and promptly
return the 4 3/4% Debentures, at any time, (a) if the 4 3/4% Exchange Offer
would result in less than $100 million in principal amount of the respective
series
10
<PAGE>
of New 4.95% Debentures being issued or upon the failure of any of the
conditions specified in "The Exchange Offers--Procedures for Tendering," (b)
if the Average Chevron Stock Price is less than $76.00 per share or is more
than $89.00 per share or (c) upon the occurrence of any of the other events
listed in "The Exchange Offers--Conditions of the Exchange Offers," (ii) waive
any condition to the 4 3/4% Exchange Offer and accept all the 4 3/4%
Debentures previously tendered, (iii) extend the 4 3/4% Expiration Date for
any reason and retain all 4 3/4% Debentures tendered until the 4 3/4%
Expiration Date, subject, however, to all withdrawal rights of holders (see
"The Exchange Offers--Withdrawal of Tenders") or (iv) amend or modify the
terms of the 4 3/4% Exchange Offer in any manner for any reason, including
(without limitation) the form of the consideration, the formula for
calculating the amount of the consideration to be paid pursuant to the 4 3/4%
Exchange Offer.
7. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. Any holder whose
certificates for 4 3/4% Debentures have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated on the
cover for further instructions.
8. INADEQUATE SPACE. If the space provided in the box captioned "Description
of 4 3/4% Debentures Tendered" is inadequate, the certificate numbers, the
aggregate principal amount of 4 3/4% Debentures represented by certificate(s)
and/or the principal amount of 4 3/4% Debentures tendered should be listed on
a separate signed schedule and attached to this Letter of Transmittal.
9. ORDER OF ACCEPTANCE FOR EXCHANGE IN EVENT OF PRORATION. Holders may
designate in the box on page 2 of this Letter of Transmittal the order in
which their 4 3/4% Debentures are to be accepted for exchange in the event the
order of exchange may have an effect on the federal income tax classification
of any gain.
10. BENEFICIAL OWNERS. Any beneficial owner whose 4 3/4% Debentures are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such beneficial owner's behalf, such
beneficial owner must, prior to completing and executing the Letter of
Transmittal (or delivering an Agent's Message) and delivering such beneficial
owner's 4 3/4% Debentures, either make appropriate arrangements to register
ownership of the 4 3/4% Debentures in such beneficial owner's name or obtain a
properly completed bond power from the registered holder. The transfer of
registered ownership may take considerable time and may not be able to be
completed prior to the 4 3/4% Expiration Date.
11. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS. If the certificate for
New Debentures, and/or the certificate(s) for 4 3/4% Debentures not tendered
or not purchased, and any check issued in payment of cash to be paid in lieu
of fractional amounts of New Debentures are to be issued in the name of a
person other than the signer of the Letter of Transmittal or if such
certificates or check are to be sent to someone other than the person signing
the Letter of Transmittal or to the signer at a different address, the boxes
captioned "Special Issuance Instructions" and/or "Special Delivery
Instructions" on this Letter of Transmittal should be completed as applicable,
and signatures must be guaranteed as described in Instruction 4. Holders
tendering 4 3/4% Debentures by book-entry transfer will have any 4 3/4%
Debentures not accepted for payment returned by crediting the account
maintained by such holder at DTC.
12. IRREGULARITIES. All questions as to the validity, form, eligibility
(including time of receipt), acceptance and withdrawal of tendered 4 3/4%
Debentures will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute
right to reject any and all 4 3/4% Debentures not properly tendered or any 4
3/4% Debentures the Company's acceptance of which would, in the opinion of
counsel for the Company, be unlawful. The Company also reserves the right to
waive any defects, irregularities or conditions of tender as to particular 4
3/4% Debentures. The Company's interpretation of the terms and conditions of
the 4 3/4% Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of 4 3/4% Debentures must
be cured within such time as the Company shall determine. Although the Company
11
<PAGE>
intends to notify holders of defects or irregularities with respect to tenders
of 4 3/4% Debentures, neither the Company, the Exchange Agent nor any other
person shall incur any liability for failure to give such notification.
Tenders of 4 3/4% Debentures will not be deemed to have been made until such
defects or irregularities have been cured or waived. Any 4 3/4% Debentures
received by the Exchange Agent that the Company determines are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the Exchange Agent to the tendering holders, unless
otherwise provided in the Letter of Transmittal, as soon as practicable
following the 4 3/4% Expiration Date.
13. QUESTIONS AND REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions
and requests for assistance may be directed to, or additional copies of the 4
3/4% Exchange Offer, the Notice of Delivery and this Letter of Transmittal may
be obtained from, the Information Agent at the addresses and telephone numbers
set forth at the end of this Letter of Transmittal or from your broker,
dealer, commercial bank or trust company.
14. SUBSTITUTE FORM W-9. Except as described below under "Important Tax
Information," federal income tax laws require each tendering holder to provide
the Company, with a correct taxpayer identification number ("TIN") on the
Substitute Form W-9 which is provided below and to indicate whether the holder
is subject to backup withholding by crossing out Part 2 of the Substitute Form
W-9 if the holder is currently subject to backup withholding. Failure to
provide the information on such Form or to cross out Part 2 of such form if
applicable may subject the tendering holder to 31% federal income tax
withholding on payments made to the holder with respect to the New 4.95%
Debentures or in lieu of a fractional New 4.95% Debenture. The box in Part 3
of such Form may be checked if the tendering holder has not been issued a TIN
and has applied for a TIN or intends to apply for a TIN in the near future. If
the box in Part 3 is checked and the holder is not provided with a TIN within
sixty (60) days, the Company will withhold 31% on all such payments thereafter
until a TIN is provided to it.
15. DEFINITIONS. Capitalized terms used in this Letter of Transmittal and
not otherwise defined have the meanings given in the Prospectus.
12
<PAGE>
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A PHOTOCOPY THEREOF) TOGETHER WITH
4 3/4% DEBENTURE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL
OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT, OR THE NOTICE
OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT, PRIOR TO THE 4
3/4% EXPIRATION DATE (AS DEFINED IN THE 4 3/4% EXCHANGE OFFER).
IMPORTANT TAX INFORMATION
Under federal income tax law, a holder whose tendered 4 3/4% Debentures are
accepted for exchange is required to provide the Company with such holder's
correct taxpayer identification number ("TIN") on a Substitute Form W-9. If a
holder is an individual, the TIN is the holder's social security number. If
the Company is not provided with the correct TIN, the holder may be subject to
a penalty imposed by the Internal Revenue Service ("IRS"). In addition,
payments that are made to such holder with respect to New 4.95% Debentures
acquired pursuant to the 4 3/4% Exchange Offer, or in lieu of a fractional New
4.95% Debenture, may be subject to backup withholding.
If backup withholding applies, the Company is required to withhold 31% of
all payments with respect to the New 4.95% Debentures, or in lieu of a
fractional New 4.95% Debenture, made to a holder. Backup withholding is not an
additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained.
To prevent backup withholding on payments that are made to a holder with
respect to New 4.95% Debentures, or in lieu of a fractional New 4.95%
Debenture, the holder is required to notify the Company of his, her or its
correct TIN by completing the Substitute Form W-9 below, certifying that the
TIN provided on such Form is correct (or that such holder is awaiting a TIN)
and whether (i) the holder has been notified by the IRS that the holder is
subject to backup withholding as a result of a failure to report all interest
or dividends or (ii) the IRS has notified the holder that the holder is no
longer subject to backup withholding.
Certain holders (including, among others, corporations) are not subject to
these backup withholding requirements. A corporation must, however, complete
the Substitute Form W-9, including providing its TIN and indicating that it is
exempt from backup withholding, in order to establish its exemption from
backup withholding.
See the enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 for additional instructions.
13
<PAGE>
- -------------------------------------------------------------------------------
PAYER'S NAME:
----------------------
PART I--Taxpayer Social Security
Identification Number-- Number
SUBSTITUTE Enter taxpayer OR
FORM W-9 identification number in ----------------------
the box at right. (For most Employer
individuals, this is your Identification Number
social security number. If
you do not have a number,
see Obtaining a Number in
the enclosed Guidelines.)
Certify by signing and
dating below.
DEPARTMENT OF THE
TREASURY
INTERNAL REVENUE (If awaiting TIN write
SERVICE "Applied For"
and complete the
Certificate of Awaiting
PAYER'S REQUEST FOR NOTE: If the account is in more than one name, see
TAXPAYER the chart in the enclosed Guidelines to determine
which number to give the payer.
IDENTIFICATION
NUMBER (TIN) Taxpayer Identification
Number below)
--------------------------------------------------------
PART II--For Payees Exempt From Backup Withholding,
see the enclosed Guidelines and complete as
instructed therein.
--------------------------------------------------------
- -------------------------------------------------------------------------------
CERTIFICATION--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me), and
(2) I am not subject to backup withholding either because I have not been
notified by the Internal Revenue Service (the "IRS") that I am subject to
backup withholding as a result of failure to report all interest or
dividends, or the IRS has notified me that I am no longer subject to
backup withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have
been notified by the IRS that you are subject to backup withholding because
of underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding you
receive another notification from the IRS that you are no longer subject to
backup withholding, do not cross out item (2). (Also see instructions in the
enclosed Guidelines.)
- -------------------------------------------------------------------------------
Signature _______________________________________________________ Date: , 1998
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU WITH RESPECT TO THE NEW
4.95% DEBENTURES, OR IN LIEU OF A FRACTIONAL 4.95% DEBENTURE, FOR
ADDITIONAL DETAILS, PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ENTERED "APPLIED FOR"
INSTEAD OF SUPPLYING A TAXPAYER IDENTIFICATION NUMBER ABOVE
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number to the
payor (a) prior to the acceptance date, 31% of any cash paid to me in lieu of
a fractional New 4.95% Debenture will be withheld and (b) within 60 days, 31%
of all reportable payments made to me thereafter will be withheld until I
provide a number.
---------------------------- _______________, 1998
Signature Date
14
<PAGE>
The Exchange Agent:
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
By Mail: By Facsimile: By Hand or Overnight
(registered or certified (214) 672-5746 Courier:
mail recommended) c/o Chase Bank of Texas,
Chase Bank of Texas, National Association,
National Confirm by telephone to: Corporate Trust Services
Association, Corporate (214) 672-5678 1201 Main, 18th Floor
Trust Services Dallas, Texas 75202
P.O. Box 2320 or
Dallas, Texas 75221-2320 Chase Texas Trust Company
55 Water Street, North
Building
Room 234, Windows 20 & 21
New York, New York 10041
The Information Agent:
D. F. KING & CO., INC.
CALL TOLL FREE 1-800-735-3591
77 Water Street Royex House
New York, New York 10005 Aldermanbury Square
(212) 269-5550 London EC2V 7HR
(Call Collect) 011-44-171-600-5005
(Call Collect)
The Dealer Manager is:
PAINEWEBBER INCORPORATED
1285 Avenue of the Americas
13th Floor
New York, New York 10019
Telephone: (800) 894-0094 (toll free)
Important: This Letter of Transmittal or a photocopy hereof or, in the case of
a book-entry transfer, an Agent's Message in lieu of the Letter of
Transmittal (together with certificates for the 4 3/4% Debentures
being tendered and all other required documents), or a Notice of
Guaranteed Delivery must be received by the Exchange Agent prior to
5:00 p.m., New York City Time, on the 4 3/4% Expiration Date.
15
<PAGE>
EXHIBIT 99.3
NOTICE OF GUARANTEED DELIVERY FOR
OFFER TO EXCHANGE NEWLY ISSUED OFFER TO EXCHANGE NEWLY ISSUED
4.90% EXCHANGEABLE SENIOR 4.95% EXCHANGEABLE SENIOR
DEBENTURES DUE 2008 DEBENTURES DUE 2008
OF OF
PENNZOIL COMPANY PENNZOIL COMPANY
FOR A PORTION OF OUTSTANDING FOR A PORTION OF OUTSTANDING
6 1/2% EXCHANGEABLE SENIOR 4 3/4% EXCHANGEABLE SENIOR
DEBENTURES DUE 2003 DEBENTURES DUE 2003
Registered holders of 6 1/2% exchangeable senior debentures due 2003 (the "6
1/2% Debentures") of Pennzoil Company, a Delaware corporation (the "Company"
or "Pennzoil") who wish to tender any such 6 1/2% Debentures in exchange for
new 4.90% exchangeable senior debentures due 2008 of the Company (the "New
4.90% Debentures") and registered holders of 4 3/4% exchangeable senior
debentures due 2003 (the "4 3/4% Debentures" and, together with the 6 1/2%
Debentures, the "Old Debentures"), who wish to tender any such 4 3/4%
Debentures in exchange for new 4.95% exchangeable senior debentures due 2008
(the "New 4.95% Debentures") of the Company, on the terms and subject to the
conditions set forth in the Prospectus of the Company, dated July 1, 1998 (the
"Prospectus"), and the related Letters of Transmittal, and whose Old
Debentures are not immediately available or who cannot deliver their Old
Debentures and the respective Letters of Transmittal (and any other documents
required by the Letters of Transmittal) to Chase Bank of Texas, National
Association (the "Exchange Agent") prior to the Expiration Dates (as defined
in the Prospectus), may use this Notice of Guaranteed Delivery or one
substantially equivalent hereto. This Notice of Guaranteed Delivery may be
delivered by hand or sent by facsimile transmission (receipt confirmed by
telephone and an original delivered by guaranteed overnight delivery) or
mailed to the Exchange Agent. See "The Exchange Offers--Procedures for
Tendering" in the Prospectus.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER:
CHASE BANK OF TEXAS NATIONAL ASSOCIATION
By Hand or Overnight By Mail:
Courier: (registered or certified
c/o Chase Bank of Chase Texas Trust Company mail recommended)
Texas, 55 Water Street, North Chase Bank of Texas,
National Association, Building National Association,
Corporate Trust Room 234, Windows 20 & 21 Corporate Trust Services
Service or New York, New York 10041 P.O. Box 2320
1201 Main, 18th Floor Dallas, Texas 75221-2320
Dallas, Texas 75202
Facsimile Number:
(For Eligible Institutions Only)
(214) 672-5746
Confirm by Telephone:
(214) 672-5678
Delivery of this Notice of Guaranteed Delivery to an address other than as
set forth above or transmission of instructions via a facsimile transmission
to a number other than as set forth above will not constitute a valid
delivery.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution, such signature guarantee must appear in
the applicable space provided in the Letters of Transmittal for the guarantee
of signatures.
<PAGE>
The undersigned hereby tenders the aggregate principal amount at maturity of
Old Debentures indicated below, upon the terms and subject to the conditions
contained in the Prospectus, dated July 1, 1998, of the Company, receipt of
which is hereby acknowledged.
DESCRIPTION OF OLD DEBENTURES TENDERED
Aggregate Principal Amount at Maturity of 6 1/2% Debentures:$
Aggregate Principal Amount at Maturity of 4 3/4% Debentures:$
Certificate Number(s) (if available): ___________________
-------------------------------
Unless otherwise indicated, the undersigned will be deemed to have tendered
the entire aggregate principal amount at maturity of Old Debentures held for
the account of the undersigned.
Address(es):_____________________________________________
------------------------------------------------
Area Code and Telephone Number: _________________________
Signature(s):____________________________________________
------------------------------------------------
If Old Debentures will be delivered by book-
entry transfer to The Depository Trust
Company, provide account number.
Account Number:_________________________________________
The undersigned has a net long position in Old Debentures or equivalent
securities at least equal to the Old Debentures described above (that will be
delivered within three New York Stock Exchange, Inc. trading days after the
date of execution of this Notice of Guaranteed Delivery) within the meaning of
Rule 14e-4 under the Securities Exchange Act of 1934, as amended.
2
<PAGE>
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a member of a registered national securities
exchange or a member of the National Association of Securities Dealers, Inc.
or a commercial bank or trust company having an office, branch, agency, or
correspondent in the United States, hereby guarantees to deliver to the
Exchange Agent at one of its addresses set forth above, the certificates
representing the Old Debentures, together with a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, and any other documents required by the Letter of
Transmittal, within three New York Stock Exchange, Inc. trading days after the
date of execution of this Notice of Guaranteed Delivery.
Name of Firm:________________________ -------------------------------------
Address:_____________________________ (Authorized Signature)
------------------------------- -------------------------------------
------------------------------- Name: _______________________________
(Include Zip Code) (Please type or print)
Area Code and Telephone Number: _____ Title: ______________________________
Date: _______________________________
NOTE: DO NOT SEND CERTIFICATES OF OLD DEBENTURES WITH THIS NOTICE OF
GUARANTEED DELIVERY. CERTIFICATES OF OLD DEBENTURES SHOULD BE SENT WITH YOUR
LETTERS OF TRANSMITTAL.
3
<PAGE>
EXHIBIT 99.4
OFFER TO EXCHANGE NEWLY ISSUED OFFER TO EXCHANGE NEWLY ISSUED
4.90% EXCHANGEABLE SENIOR 4.95% EXCHANGEABLE SENIOR
DEBENTURES DUE 2008 DEBENTURES DUE 2008
OF OF
PENNZOIL COMPANY PENNZOIL COMPANY
FOR A PORTION OF OUTSTANDING FOR A PORTION OF OUTSTANDING
6 1/2% EXCHANGEABLE SENIOR 4 3/4% EXCHANGEABLE SENIOR
DEBENTURES DUE 2003 DEBENTURES DUE 2003
To Registered Holders and Depository Trust Company Participants:
We are enclosing herewith the material listed below relating to the Exchange
Offers (as defined herein) by Pennzoil Company, a Delaware corporation (the
"Company"), to exchange its new 4.90% exchangeable senior debentures due 2008
(the "New 4.90% Debentures") for a portion of its outstanding 6 1/2%
exchangeable senior debentures due 2003 (the "6 1/2% Debentures") or to
exchange its new 4.95% exchangeable senior debentures due 2008 (the "New 4.95%
Debentures") for a portion of its outstanding 4 3/4% exchangeable senior
debentures due 2003 (the "4 3/4% Debentures" and, together with the 6 1/2%
Debentures, the "Old Debentures") of the Company.
The 6 1/2% Exchange Offer will be for a principal amount of 6 1/2%
Debentures (the "6 1/2% Target Amount") that is exchangeable into between 4.76
million and 6.00 million shares of common stock of Chevron Corporation under
the existing exchange rights, and upon the terms and subject the conditions
set forth in the Prospectus, dated July 1, 1997 (the "Prospectus"), of the
Company, and the related 6 1/2% Letter of Transmittal (which, together with
the Prospectus, constitutes the "6 1/2% Exchange Offer"). New 4.90% Debentures
will not be issued in denominations of less than $1,000, and the Company will
pay cash in lieu of issuing New 4.90% Debentures in a principal amount of less
than $1,000.
The 4 3/4% Exchange Offer will be for a principal amount of 4 3/4%
Debentures (the "4 3/4% Target Amount") that is exchangeable into between 3.40
million and 4.29 million shares of common stock of Chevron Corporation under
existing exchange rights, and upon the terms and conditions set forth in the
Prospectus and the related 4 3/4% Letter of Transmittal (which, together with
the Prospectus, constitutes the "4 3/4% Exchange Offer"). The New 4.95%
Debentures will not be issued in denominations of less than $1,000, and the
Company will pay cash in lieu of issuing New 4.95% Debentures in a principal
amount of less than $1,000.
Enclosed herewith are copies of the following documents:
1. Prospectus, dated July 1, 1998;
2. 6 1/2% Letter of Transmittal (together with accompanying Substitute Form
W-9 Guidelines);
3. 4 3/4% Letter of Transmittal (together with accompanying Substitute Form
W-9 Guidelines);
4. Notice of Guaranteed Delivery; and
5. A form of letter which may be sent to your clients for whose account you
hold Old Debentures in your name or in the name of your nominee, with
space provided for obtaining such client's instruction with regard to
the Exchange Offers.
WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE EXCHANGE
OFFERS WILL EXPIRE AT 5:00 P.M. MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, JULY
31, 1998, UNLESS EXTENDED BY THE COMPANY, IN WHICH CASE THE TERM "6 1/2%
EXPIRATION DATE" MEANS THE LATEST DATE AND TIME TO WHICH THE 6 1/2% EXCHANGE
OFFER IS EXTENDED, AND THE TERM "4 3/4% EXPIRATION DATE" MEANS THE LATEST DATE
AND TIME TO WHICH THE 4 3/4% EXCHANGE OFFER IS EXTENDED.
<PAGE>
The Company expressly reserves the right (i) to withdraw or terminate either
or both of the Exchange Offers, and promptly return all Old Debentures, at any
time, (a) if either or both of the Exchange Offers would result in less than
$100 million in principal amount of the respective series of New Debentures
being issued or upon the failure of certain other conditions described in the
Prospectus, (b) if the Average Chevron Stock Price is less than $76.00 per
share or is more than $89.00 per share or (c) upon the occurrence of any of
the other events listed in the Prospectus. Each holder of Old Debentures who
desires to accept either or both of the Exchange Offers and tender Old
Debentures for exchange and whose Old Debentures are not immediately
available, or who cannot comply in a timely manner with the procedure for
book-entry transfer, should tender such Old Debentures by following the
procedures for guaranteed delivery set forth under "The Exchange Offers--
Guaranteed Delivery Procedures."
D. F. King & Co., Inc. is serving as Information Agent in connection with
the Exchange Offers. All questions relating to the Exchange Offers, as well as
requests for assistance or additional copies of the Prospectus or the Letters
of Transmittal, may be directed to D. F. King & Co., Inc., New York, New York,
telephone (800) 735-3591 (toll-free).
The Company will not pay any fee or commission to any broker or dealer or to
any other persons (other than the Dealer Manager and the Exchange Agent) in
connection with the solicitation of tenders of Old Debentures pursuant to the
Exchange Offers. The Company will pay or cause to be paid any transfer taxes
payable on the transfer of Old Debentures to it, except as otherwise provided
in Instruction 4 of the enclosed Letters of Transmittal.
Very truly yours,
PENNZOIL COMPANY
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
AS THE AGENT OF PENNZOIL COMPANY OR CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
OR AUTHORIZE YOU TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON THEIR BEHALF IN
CONNECTION WITH THE EXCHANGE OFFERS OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH
AND THE STATEMENTS CONTAINED THEREIN.
.
<PAGE>
EXHIBIT 99.5
OFFER TO EXCHANGE NEWLY ISSUED OFFER TO EXCHANGE NEWLY ISSUED
4.90% EXCHANGEABLE SENIOR DEBENTURES 4.95% EXCHANGEABLE SENIOR DEBENTURES
DUE 2008 DUE 2008
OF OF
PENNZOIL COMPANY PENNZOIL COMPANY
FOR A PORTION OF OUTSTANDING FOR A PORTION OF OUTSTANDING
6 1/2% EXCHANGEABLE SENIOR 4 3/4% EXCHANGEABLE SENIOR
DEBENTURES DUE 2003 DEBENTURES DUE 2003
To Our Clients:
Enclosed for your consideration is a Prospectus, dated July 1, 1998 (the
"Prospectus"), of Pennzoil Company, a Delaware corporation (the "Company"), and
related Letters of Transmittal (which, together with the Prospectus,
constitutes the "Exchange Offers") relating to the offer by the Company to
issue its new 4.90% exchangeable senior debentures due 2008 (the "New 4.90%
Debentures") in exchange for a portion of its outstanding 6 1/2% exchangeable
senior debentures due 2003 (the "6 1/2% Debentures") and the offer by the
Company to issue its new 4.95% exchangeable senior debentures due 2008 (the
"New 4.95% Debentures) in exchange for a portion of its outstanding 4 3/4%
exchangeable senior debentures due 2003 (the "4 3/4% Debentures" and, together
with the 6 1/2% Debentures, the "Old Debentures") of the Company, upon the
terms and subject to the conditions set forth in the Prospectus. This material
is being forwarded to you as the beneficial owner of the Old Debentures held by
us in your account but not registered in your name.
The 6 1/2% Exchange Offer will be for a principal amount of 6 1/2% Debentures
(the "6 1/2% Target Amount") that is exchangeable into between 4.76 million and
6.00 million shares of common stock of Chevron Corporation under the existing
exchange rights, and upon the terms and conditions set forth in the Prospectus
and the related 6 1/2% Letter of Transmittal (which, together with the
Prospectus, constitutes the "4 3/4% Exchange Offer"). The New 4.90% Debentures
will not be issued in denominations of less than $1,000, and the Company will
pay cash in lieu of issuing New 4.90% Debentures in principal amounts of less
than $1,000.
The 4 3/4% Exchange Offer will be for a principal amount of 4 3/4% Debentures
(the "4 3/4% Target Amount") that is exchangeable into between 3.40 million and
4.29 million shares of Chevron Stock under existing exchange rights, and upon
the terms and conditions set forth in the Prospectus and the related 4 3/4%
Letter of Transmittal (which, together with the Prospectus, constitutes the "4
3/4% Exchange Offer"). The New 4.95% Debentures will not be issued in
denominations of less than $1,000, and the Company will pay cash in lieu of
issuing New 4.95% Debentures in a principal amount of less than $1,000.
PLEASE NOTE THAT THE EXCHANGE OFFERS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON FRIDAY, JULY 31, 1998, UNLESS EXTENDED BY THE COMPANY, IN WHICH CASE
THE TERM "6 1/2% EXPIRATION DATE" MEANS THE LATEST DATE AND TIME TO WHICH THE 6
1/2% EXCHANGE OFFER IS EXTENDED, AND THE TERM "4 3/4% EXPIRATION DATE" MEANS
THE LATEST DATE AND TIME TO WHICH THE 4 3/4% EXCHANGE OFFER IS EXTENDED.
The Company expressly reserves the right to withdraw or terminate either or
both of the Exchange Offers and promptly return all Old Debentures, at any
time, (a) if either or both of the Exchange Offers would result in less than
$100 million in principal amount of the respective series of New Debentures
being issued or upon the failure of certain other conditions described in the
Prospectus (b) if the Average Chevron Stock Price is less than $76.00 per share
or is more than $89.00 per share or (c) upon the occurrence of any of the other
events listed in the Prospectus.
<PAGE>
We are the holder of record of Old Debentures held by us for your account. A
tender of such Old Debentures can be made only by us as the record holder and
pursuant to your instructions. THE LETTERS OF TRANSMITTAL ARE FURNISHED TO YOU
FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER THE OLD
DEBENTURES HELD BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish to tender any or all of the
Old Debentures held by us for your account pursuant to the terms and
conditions of either or both of the Exchange Offers. Please so instruct us by
completing, executing, detaching, and returning to us the instruction form on
the detachable part hereof. An envelope to return your instructions to us is
enclosed. If you authorize tender of your Old Debentures, please forward to us
your instructions in ample time to permit us to submit a tender on your behalf
prior to either or both of the Expiration Dates. Unless otherwise indicated on
the instruction form, you will be deemed to have tendered the entire aggregate
principal amount at maturity of Old Debentures held by us for your account.
Very truly yours,
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO EXCHANGE NEWLY ISSUED OFFER TO EXCHANGE NEWLY ISSUED
4.90% EXCHANGEABLE SENIOR DEBENTURES 4.95% EXCHANGEABLE SENIOR DEBENTURES
DUE 2008 DUE 2008
OF OF
PENNZOIL COMPANY PENNZOIL COMPANY
FOR A PORTION OF OUTSTANDING FOR A PORTION OF OUTSTANDING
6 1/2% EXCHANGEABLE SENIOR 4 3/4% EXCHANGEABLE SENIOR
DEBENTURES DUE 2003 DEBENTURES DUE 2003
The undersigned acknowledges receipt of your letter enclosing the
Prospectus, dated July 1, 1997, of Pennzoil and the related Letters of
Transmittal relating to the respective Exchange Offers. This will instruct you
to tender the principal amount at maturity of Old Debentures indicated below
held by you for the account of the undersigned, pursuant to the terms and
subject to the conditions of the respective Exchange Offers, and confirm that
you may make the representations contained in the respective Letters of
Transmittal on behalf of the undersigned.
- -------------------------------------------------------------------------------
DESCRIPTION OF OLD DEBENTURES TO BE TENDERED
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Aggregate Principal Aggregate Principal
Amount Amount
of 6 1/2% of 6 1/2% Debentures
Debentures Tendered
Held by You for the
Account
of the Undersigned
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Aggregate Principal Aggregate Principal
Amount Amount
of 4 3/4% of 4 3/4% Debentures
Debentures Tendered
Held by You for the
Account
of the Undersigned
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
3
<PAGE>
Unless otherwise indicated, the undersigned will be deemed to have tendered
the entire aggregate principal amount at maturity of Old Debentures held for
the account of the undersigned.
Signature(s): ____________________________
_________________________________________
Please print name(s): ____________________
_________________________________________
Date: , 1998
4
